Ending Speculation?
The NYT reports: US Considers Curbing Speculation on Oil.
That’s a bad move if we give it the go ahead. My prediction is that, if enacted, the price of oil becomes more volatile as a result of this decree. Meaning higher prices at the gas pumps.
On page 184 of Hidden Order, David Friedman outlines what speculation really does:
Speculators, if successful, smooth out price movements, buying goods when they are below their long-run price and selling them when they are above it, raising the price toward equilibrium in the one case and lowering it toward equilibrium in the other. They do what governmental “price stabilization” schemes claim to do– reduce short-run fluctuations in prices. In the process, they frequently interfere with such price-stabilization schemes, most of which are run by producing countries and designed to “stabilize” prices as high as possible.
Tags: David Friedman, New York Times, oil, speculators
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