I don't see your point and the authors point being completely contradictory.
The purported role of the commodities futures markets is to 'provide liquidity' to commodities producers and consumers and allow them to sell the production (and buy their needs) forward.
In fact the futures markets are completely dominated by speculation and leverage. Relatively few buyers and sellers of futures contracts either possess the underlying commodity or have a need for it in the future. Almost all futures contracts are rolled forward. There is much more 'paper' trading than actual commodities exist to back. When leverage is this cheap and loose, (i.e. you have more dollars being constantly created through various borrowing mechanisms) futures tend to be very choppy and whip the spot prices around.
The price you pay at the pump is being driven higher by people who neither own nor need oil, but rather have access to cheap leverage and do it because they can and it makes them money. (This is happening in almost every tradable commodity right now)
You seem to think that this is just the way the world works. But please realize that these are synthetic contracts that are being traded around: works of legal fiction. If the reason society allows people to trade in these contracts is supposedly due to help the market function more smoothly, why should we not consider alternatives to the current state of affairs?
Imagine if there was a futures clearing house and futures contracts could only be originated by commodity producers. (and then only in a decaying relationship to their forward production) The set of all futures contracts in existence would actually have some relationship to the forward production of the commodity. Imagine then that in order to purchase a futures contract you had to demonstrate that a) you had facilities available to take delivery of the commodity and b) that your business wasn't just to trade. (Note: the above will never happen) Do you really think commodities prices would be as volatile as they are today?
The poor and middle classes are more affected by rising commodity prices. Even if the bubble will eventually contract (which is what you seem to be saying) Why should they be they be subjected to this just so a hedge fund can make a killing for its customers?
The purported role of the commodities futures markets is to 'provide liquidity' to commodities producers and consumers and allow them to sell the production (and buy their needs) forward.
In fact the futures markets are completely dominated by speculation and leverage. Relatively few buyers and sellers of futures contracts either possess the underlying commodity or have a need for it in the future. Almost all futures contracts are rolled forward. There is much more 'paper' trading than actual commodities exist to back. When leverage is this cheap and loose, (i.e. you have more dollars being constantly created through various borrowing mechanisms) futures tend to be very choppy and whip the spot prices around.
The price you pay at the pump is being driven higher by people who neither own nor need oil, but rather have access to cheap leverage and do it because they can and it makes them money. (This is happening in almost every tradable commodity right now)
You seem to think that this is just the way the world works. But please realize that these are synthetic contracts that are being traded around: works of legal fiction. If the reason society allows people to trade in these contracts is supposedly due to help the market function more smoothly, why should we not consider alternatives to the current state of affairs?
Imagine if there was a futures clearing house and futures contracts could only be originated by commodity producers. (and then only in a decaying relationship to their forward production) The set of all futures contracts in existence would actually have some relationship to the forward production of the commodity. Imagine then that in order to purchase a futures contract you had to demonstrate that a) you had facilities available to take delivery of the commodity and b) that your business wasn't just to trade. (Note: the above will never happen) Do you really think commodities prices would be as volatile as they are today?
The poor and middle classes are more affected by rising commodity prices. Even if the bubble will eventually contract (which is what you seem to be saying) Why should they be they be subjected to this just so a hedge fund can make a killing for its customers?