Wednesday, October 19, 2011

Phil Flynn: A Sad Day For Freedom And The Free Markets

The CFTC took a dangerous step towards damaging the credibility of our nation's energy markets and may have harmed the economy and the average American. The commission's view that speculators are guilty until proven innocent is just another step in the Dodd-Frank regulatory overreach that is freezing our economy and stagnating job growth. This witch hunt against this elusive ghost called "excessive speculation" culminated in a 3 to 2 party line vote that will help drive trading in oil into a less transparent marketplace and will eventually lead to a less liquid and more volatile market.

You think trading is volatile now, well folks you haven't seen anything yet. In fact forget about volatility. I predict that the implantation of these new regulations will create shortages the next time the market is challenged by the type of economic crisis that we saw in 2008.
The spike up in oil to the all time high in 2008 was the catalyst for this damaging regulation and it was based on the false assumption that "excessive speculation" was driving the price of oil to record highs. Of course we now all know that the prices of oil and all other commodities were a relief valve as the market sought safe haven from the greatest economic crisis of modern times. If money was restricted from entering the futures markets at that time, the global economic crisis would have had much more severe consequences. We would have seen hording of supply and the freezing of commodity movement as the big players would have refused to sell to each other because of the lack of real true price discovery. In other words, the global commodity markets would have frozen more than the banks.

Read the entire article "A Sad Day For Freedom And The Free Markets"

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