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Edited on Mon Nov-07-11 10:29 AM by roseBudd
You bet it’s another bubblehttp://www.washingtonpost.com/business/economy/steven-pearlstein-you-bet-its-another-bubble/2011/10/31/gIQAKOtxnM_story_1.htmltoday, because of a sudden desire to earn higher returns and diversify investment portfolios, there are more people wanting to invest in corn and copper and oil than there is corn and copper and natural gas produced and consumed. But no problem. The financial wizards on Wall Street have magically conjured up synthetic corn and copper and West Texas oil so that speculators can provide hedging opportunities for other speculators. Instead of 30 percent of the market, these “passive investors” typically account for 70 percent or more....
The strong demand for commodities futures also put upward pressure on the actual prices paid for those commodities by real producers and consumers, if for no other reason than many private sales contracts are settled at a price linked directly or indirectly to futures prices....
What’s clear from this tale is how little the financial services industry has really changed since the crisis of 2008. The financialization of the economy continues undeterred, creating a bubble in commodities just as it did with houses and office buildings. The industry is still engaged in clever games to circumvent regulation, increase risk and find the cracks between one regulatory agency and another. And when regulators step in to try to restore some sanity to the markets, they inevitably run into a political buzz saw created by the industry and its Republican allies...
Now you can bet what’s left in your 401(k) that there’s about to be a commodities bubble — one that will generate big fees for Wall Street and leave a mess for everyone else.
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