Is speculation harmful?

[rov1200]

Whether they are dealing in commodities, exchange rates or oil the speculators push up the prices which can cause inflation. Do they have a useful purpose? Would the world be better off if they never existed?

[youngmafbog]

But how do you stop it? Any business transaction is speculation

They are still driven by what the market will ultimatley pay of course and many speccies get their fingers burnt.

[fredpuli47]

Speculation is not really any business transaction. My late father used to define 'speculator' as ' a man who buys something that does not yet exist, which he doesn't want, with money he hasn't got, which he never sees, to sell to someone who may or may not want it (same as him), for someone who does want to use it in the future to buy'' Not all those elements exist in every case, but it describes many speculators, and it certainly identifies elements which make some speculation bad for us all. He explained further that a speculator can make money whichever way the prices go, up or down That's the key to its benefits. Oddly, the parties cause a balance in the market., in the course of everyday trading. The commodity markets depend on it. It enables big users to know what price they'll pay in future for their cocoa beans or their copper and they'll try to time their orders so that the best price for a given time is obtained. The daft results for oil have been the result of speculators, as above, going mad and dealing with yet more speculators who catch, and may talk up, the mood.It's very doubtful whether, in fact, much of the commodity is actually bought by users at those very high prices. You'd need to be desperately short of it, at that moment. The people who get hurt are the last speculators in the line because they've been landed with something which nobody wants at the price paid by the speculator,

[R1Geezer]

they don't only push up prices, essentially they are betting on the movement of prices either way.

[rov1200]

Yes are they not gamblers by any other name. We know that the money markets have given these huge bonuses to these speculators who bet on whether the currency goes up or down. Geo Sorus was well known for bringing the £ down just a few years ago.

But is any of it in the public interest?

To keep the inflated oil price to a maximum we have scores of ships sitting of our coast waiting for the right moment. Is that in our interest?

How do you stop it? Difficult! With the advent in computer trade a deal can be done in seconds. This is the main problem. It can cause instability in a very short time. The solution is therefore to slow down the process. In the past you could do a deal unless you had a share certificate, now they are no longer needed. Ownership is not necessary as dealers operate hedge funds. Option trading does not require full payment but only an option to buy or sell in future.

Forward trading is essential in todays world for the reasons you mention fred but you need to separate these deals from the deals that take place nowadays.

To suggest that no solution is available against the speculators can be put on the same par as saying banker's bonuses could not be tackled and as we know the problem has been confronted.

[R1Geezer]

The basic problem is our politicians are so lowly paid that you get numpties against the pro's. The Soros example is a good illustration. It's like Manu v the local school U16's no contest! You can't stop speculation but you could have politicians with mora ability to make it tougher for them. The seed of the process is a red herring.