Trying to Outlaw Speculation

Michel-1

In Switzerland, it is a far more democratic process than in the USA. You need 100,000 signatures to create a proposition to alter the Constitution that then is put to a general vote for the people. What is going on is that the Socialists have gathered about 130,000 signatures to ban speculation in commodities. We have weighed in of this one with Michel writing a piece in German explaining the markets and the absurdity of trying to outlaw speculation (see piece: nzz__Mi_20131023_KPLBF_16.00) , which has now been picked up by Reuters.

This is the great problem we face. As the world falls deeper into debt, the socialists will be urging to shut down the free markets and create their Utopian world. These people have an agenda. There is no real debate with them – they know all the answers. If the world falls to their hands, communism will return. They want the free markets shut down and have convinced themselves that “paper” contract make prices higher. Of course the Goldbugs claim the opposite that they suppress the price of gold. Both have targeted the futures “paper” contracts to support their particular view. The Goldbugs argue eliminate futures and prices will soar. The Socialist claim eliminate futures and prices will decline. Eliminating the futures markets will destroy production and introduce greater risk while creating the incentive to not produce at all.

1896-Campaign

The Socialists in Switzerland are making the same mistake about the markets as did the Silver Democrats. All markets are really international and thus the USA used a 16:1 ratio of silver to gold that was out of line with the free markets. This created massive unsound finance.

Cleveland

These types of manipulations up or down only lead to economic disaster. They see the world capital as a pretty Butterfly. They fail to realize they must compete internationally.

Wheat Vol 5 & 10 Years

Here is a chart of the volatility in wheat back to the 13th century. As markets expanded volatility declined. Volatility rose only when we began to see World War I and II devastate the European economy. Expanding markets reduces volatility creating stable prices.