Trading FX is ethical, trading commodities isn't

[scose-no-doubt]

What this guy was talking about was subsidies to large scale producers in non ec dev countries not your average farmer. Maybe crossed wired here.

 

[wackypete2]

Would we all be happy for the very trustworthy Goldman Sachs....

Stop right there. I have an issue with the premise (trustworthy??) therefore I can't form an intelligent answer, however, if pressed I would say no. Perhaps this isn't what you were looking for but Goldman was one of the many large corporation that helped put the current state of the economy where it is. Of course it's possible a futures exchange run by a corporation could be more efficient than one with SEC/NFA/CFTC as an overseer?

Peter

 

[Black Swan]

this article fails to mention the hedge funds that have got Ivory Coast's Cocoa production/price in a rear naked choke...or so they thought..

Ivory Coast worries drive cocoa to five-month high

Cocoa prices are expected to surge today after the Ivory Coast’s president-elect, Alassane Ouattara, imposed an export ban on the commodity.

The price last week rose almost 8pc to $2,150 (£1,340) per tonne in London – a five-month high – on concerns about political unrest in the country, the world’s largest grower of beans.

There has been turmoil in the West African country since a disputed election in late November, but the supply of cocoa has not yet been affected. However, traders will now be expecting a jump in the cocoa price after Mr Ouattara, the internationally recognised winner of the elections, sent a letter to leading cocoa exporters yesterday ordering them to stop overseas shipments until February 23 in an attempt to oust incumbent Laurent Gbagbo.

According to forecasts by Macquarie, Ivory Coast’s harvests will be up 1.9pc from last year, so the market was expecting to be well supplied.

Traders had said there were no fundamental cocoa supply problems and believed a rush of fund buying had boosted the price.

Now, any reduction in supply is likely to push the price towards a 33-year high, since the Ivory Coast accounts for about 40pc of global cocoa exports.

http://www.telegraph.co.uk/finance/...ina-is-a-danger-to-the-economic-recovery.html

 

[DionysusToast]

What this guy was talking about was subsidies to large scale producers in non ec dev countries not your average farmer. Maybe crossed wired here.

Nope - it's EU & US farmers getting subsidised that kills the farmers in developing nations.

English farmers very often get paid to grow nothing. In fact, this pays a lot more than growing something.

Back to school with you, young whipper snapper !

 

[wackypete2]

Nope - it's EU & US farmers getting subsidised that kills the farmers in developing nations.

In the US, corn has been heavily subsidized for years keeping the price low because of a glut of corn. Since ethanol was mandated for use in gasoline some time ago the price of corn rose. Also the gov't banned certain imports of corn or corn based products that could affect ethanol production thereby increasing the price of corn and shutting out farmers in developing nations. The farmers here are still getting huge subsidies AND making $$ on the high price of corn.

English farmers very often get paid to grow nothing. In fact, this pays a lot more than growing something.

Happens in the US too.

Peter

 

[scose-no-doubt]

http://www.imf.org/external/pubs/ft/wp/2002/wp02173.pdf

A part of section F alludes to subsidising farmers and ginners.

The Fin Min was saying that the economic aid was used to subsidise producers to basically keep the corrupt businessmen sweet - similar to the way the west put puppet government officials in place. They don't want anyone to stop playing ball.

 

[DionysusToast]

If you want to know a bit more about "Free Markets" - you should watch a documentary/movie called "Black Gold".

The main guy in it is an Ethiopian who runs a co-operative to help cut out all the middle-men in the coffee trade. He's also setting up direct deals with buyers so as to avoid the prices set by the Coffee Futures markets. His argument is that he doesn't see why he should accept prices set by some guy in a suit in New York.

There is also a few scenes in there from the WTO meetings - Europe and the US sent thousands of delegates and the African countries only a handful - they cant possible even cover all the meetings or get their voices heard. In the end, they just get the shaft

 

[scose-no-doubt]

For now anyway. You seen the FDI for commods deals that China is snapping up accross the east coast? India is on the up too and only time will tell how much of a grudge these guys are going to hold in regards to colonialism.

Will look at that dvd.

 

[spreader_legger]

The answer to this question is I suppose it depends. Would you consider a run on a country's currency ethical? The impact regarding the country's future debt repayments may prove injurious hurting the poorest in that society the most. From a moral standpoint, I see no difference between trading commodities & FX, and I suspect neither Dr Mahatir of Malaysia

 

[DionysusToast]

Aaaaah - takes me back to post 1997 debacle and 6 Ringgits to the dollar for years afterwards!

 

[Pazienza]

Sigh.....

Supply & demand will set prices in the absence of a futures market. Your argument appears to be that there are 2 choices - price fixing and futures markets.

It wasn't my argument at all.

If you look at Walter Swan's original proposition, it was that trading currencies was ethical, but trading commodities isn't. I didn't mention futures at all and neither did he - he merely proposed (later clarified) that trading in basic commodities upon which people depend to live was unethical. I think that this is an absurd proposition, reminiscent of something a spotty teenager would spout shortly after reading the Manifesto for the first time.

I mentioned the CME in passing merely to pour ridicule on his suggestion, I did not say that futures were a good thing or a bad thing. It is my opinion that a free market is efficient and good for humanity as a whole. The absence of trading commodities (since this is unethical apparently) suggests that there will be some other mechanism - supply and demand would not come into it. Which sort of contradicts your point doesn't it? I would ask again (and this has nothing to do with futures): if commodities are not traded, how is their price to be determined?

The theory of futures markets is that they create price stability. In actual fact, there is plenty of evidence that they do the reverse. Look at oil price fluctuations. They fluctuate because of 'supply & demand' for futures contracts (although strictly speaking there is infinite supply), not supply & demand for oil itself.

As futures markets create price instability, they cause the problem they are supposed to resolve. Hedging becomes necessary because of the instability created. Futures markets are a tax on the underlying commodity. It is a huge money spinner for the people running the markets. Sure - people that hedge lose less money than if they didn't - is that what constitutes a free market nowadays?

Here is a question I posed on the forum a while back:

"Would we all be happy for the very trustworthy Goldman Sachs to run a futures market to which the price of future home supply would effectively be pegged ?"



Still - they tried to bring it back in...



The more markets created, the more money the people running the markets skim off the top.



More here : http://www.trade2win.com/boards/general-trading-chat/86726-minus-sum-game-mk-ii-derivatives.html

I was taking his proposition as a general or theoretical discussion on a point of principle, rather than an examination of one specific mechanism for trading commodities as you appear to be doing. Are there negatives to the futures markets as they exist today? Of course. Are there benefits? I certainly believe so. But I don't think that an examination of the futures markets as currently constituted was the aim of the thread. That was certainly not how the original proposition was worded.

 

[DionysusToast]

Pazienza - there are lots of commodities that trade just fine without a futures market.

"The absence of trading commodities (since this is unethical apparently) suggests that there will be some other mechanism - supply and demand would not come into it."

No - if there is no futures market there doesn't need to be any other mechanism because supply & demand sets prices perfectly well. Economics 101.

Futures markets no longer do what they were intended to do and there is plenty of evidence that they never did.

 

[Pazienza]

Pazienza - there are lots of commodities that trade just fine without a futures market.

"The absence of trading commodities (since this is unethical apparently) suggests that there will be some other mechanism - supply and demand would not come into it."

No - if there is no futures market there doesn't need to be any other mechanism because supply & demand sets prices perfectly well. Economics 101.

Futures markets no longer do what they were intended to do and there is plenty of evidence that they never did.

DT, I did not speak about futures at all. You assumed that I was talking about futures, but I wasn't. I did point this out in my last post (and I only mentioned futures in that post to point out that I had not previously mentioned futures.

Walter Swan didn't mention futures either, he just suggested that trading commodities was bad. This doesn't require a futures market as you correctly point out. Once again, you're talking about futures, I am not (and neither was he, at least when he first made his proposition). He was talking about trading commodities full stop, whether via futures or some other means. Very well, we will have no trading in commodities, for such a thing is unethical. How then will the price be set?

NB This has nothing to do with futures, we are talking about - by some means - two people trading commodities, that is agreeing a price between them that is acceptable to both parties.

 

[DionysusToast]

Pazienze - I don't understand the point of your argument.

If 2 people cannot transact to exchange money for goods, the economy stops. What has that to do with whether futures transactions based on the commodity are good or bad? It certainly has nothing to do with fx either.

If two people can't transact, you asked "what would set price". Well - why would there be a price if people cant buy or sell a commodity? There wouldnt be a price as there wouldn't be any selling. Just rotten veg.

 

[Pazienza]

Pazienze - I don't understand the point of your argument.

If 2 people cannot transact to exchange money for goods, the economy stops. What has that to do with whether futures transactions based on the commodity are good or bad? It certainly has nothing to do with fx either.

If two people can't transact, you asked "what would set price". Well - why would there be a price if people cant buy or sell a commodity? There wouldnt be a price as there wouldn't be any selling. Just rotten veg.

LOL

DT, I think we're talking about two different things. I agree about the economy stopping, and never wanted to discuss the futures markets LOL. As long as people trade commodities in some way, that's fine. What I disagree with is the statement:

"Trading FX ie ethical, trading commodities isn't".

 

[Chartsy]

I wanna bump this; does higher commodity prices not help farmers make more money from exports,whilst lower prices does the reverse? Surely if anyone is sufferring from more export earnings/higher prices then that obviously means the country's corrupt and not the fault of traders? Similarly if prices fall then buyers might do all right, but farmers fook up?

 

[wackypete2]

I wanna bump this; does higher commodity prices not help farmers make more money from exports,whilst lower prices does the reverse? Surely if anyone is sufferring from more export earnings/higher prices then that obviously means the country's corrupt and not the fault of traders? Similarly if prices fall then buyers might do all right, but farmers fook up?

That depends on the particular commodity. Both myself and DT have stated that some farmers are given subsidies to NOT grow a particular commodity. In that case the subsidy remains constant regardless of the commodity price in the market.

(The politics of that could generate vast pages of threads here, but it's not relevant in answering your question in simple terms)

Peter

 

[Mr Soros]

Higher commodity prices have also effected the poor in many parts of the world. Food was always in short supply now things are ven harder with rising costs. In some parts of the world, prices for vegatables have quadrupled in the last few years.

Yes it is all business but this industry isnt really concerned with the effects of its activities outside of the arena. Just take a look at the recent banking fiasco as a prime example.

Are some of the food produce 'really' worth four times as much ? Or is it just the markets and speculation creating another artificial bubble that goes by unnoticed by governements who dont understand enough about markets to intervene.

Then again is anything about capitalism ethical ?

 

[new_trader]

creating another artificial bubble that goes by unnoticed by governements who dont understand enough about markets to intervene?

Governments are too stupid to understand that they create artificial bubbles.

 

[JRP2891]

Governments are too stupid to understand that they create artificial bubbles.

How many times do governments need to screw up using Keynes' style intervention policies, until they realise they need to let the 'free markets' decide prices.