Too much speculation

[MoonShadow]

[This is third time I hear this nonsense ... how do speculators "smooth the market"?

In a number of ways, actually.  First, they smooth out market extremes by their collective 'wisdom of the crowd' creating a predictive market that producers can use to judge future profitability.  In other words, farmers often use the futures market to determine if they will plant soybeans or corn, or something else entirely, the following season because they also wish to maximize their profits. 

Second, the futures markets themselves, which are entirely speculative in nature, provide funding for many of those same farmers to buy the seed to begin with.  This market favoring of productive uses of capital is what evens out the markets later, not now.

Third, speculation increases the costs of things in times of plenty in expectation of times of scarcity.  The pork bellies speculator may expect that the cost of pork will increase sharply in the Northern winter (perhaps he has knowledge of poor conditions for pork in the Southern hemisphere?) so he bets (buys futures contracts) for pork in the winter.  He provides the market signals to the pork farmers to produce more, while also increasing current demand of the lower level (in order to increase pork production, fewer current breeding age pigs may be slaughtered in order to sell now).  When his contracts come due, he sells those contracts to companies that need pork for their products.  It is the successful speculator that provides for nearly all of the "working" capital in many commodities markets.

None of this applies directly to Bitcoin, per se, but speculation is not evil and it is not the root cause of the current crisis.

[grondilu]

Seriously, Macho, you should reconsider what you are writing.

If someone thinks that for some reason the price of rice will rise, buying it when the price is low is a way to allocate capital in a way to predict future, thus preventing future shortage.  If he's right, he's allowed the rice market to have a good foresight of coming difficulties.  Which is good.  If he's wrong, then he just gave up some money for no reason to rice procucers.  Do you complain when people give you money ??

I think this is the point you are missing with speculation.  The speculator is never alone.  There is a second party.  THe spectulator buys or sell something to someone.  If Alice trades something with Bob, even if you consider that Alice is a shamefull speculator, the thing is that she helped Bob to fullfill his needs.  And Bob could very well be an honnest, productive person, according to you.  If Bob is also a spectulator, then those two persons have just exchanged some stuffs :  it doesn't change anything to the rest of the economic picture.  One of them will lose, the other one will gain.

I keep thinking that speculation is globally neutral, economically.

When people say that speculation has risen food prices, for instance, this is just non-sense.  Why exactly, suddenly, has speculation arosen ??  Did people, suddenly, become more greedy and more gambled-minded ??  The truth is most probably that a central bank or some other centralised finantial institution has flowded the market with money.  That is the real event that triggered the rise of prices.  Not speculation.  Speculation existed before the buble, and will exist after.  Speculation alone doesn't explain a buble, for it is a human character such as courage, greed, fear and such.  It doesn't appear suddenly to create bubbles out of nothing.

[sirius]

My views on speculation:

1. It's based on voluntary trade, hence not immoral. Banning speculation means to make a threat of violence against voluntary traders. That's also hypocrisy; you need to make an economical speculation yourself if you are to condemn someone as a speculator.

2. Speculation is economically beneficial, as pointed out by others. When speculators see a shortage is coming, their action drives up the prices and adds to the incentive to increase production, smoothing or even preventing the forthcoming crisis. Similarly it helps decrease excess production before it starts causing problems. Speculation, along with other phenomena of the free market, is a beautiful organic and emergent process that channels future expectations and information into the structure of production. Doesn't bother me if someone makes a profit out of it. Also greatly improves liquidity.

I think speculation has been entirely positive for the Bitcoin project. It's fascinating how Bitcoin got its initial value when the real economy didn't exist yet, out of the expectation that it would be more valuable later on.

[BrightAnarchist]

You have no idea do you? The current system is not capitalistic it is closer to fascism. That means business and government corporations are one and the same. It is the GOVERNMENT which allows their friends in business  get away with these atrocities. The GOVERNMENT steals your money and gives it to the corporations and bails them out. The GOVERNMENT accepts cash from lobbyists involved in corporations to let them skirt the laws that prevent a small business from competing and creates gigantic monopolies without competition.

A speculator without the backing of the GOVERNMENT will succeed or fail on their own terms, a speculator with the GOVERNMENT in their back pocket will make YOU pay for their mistakes. It becomes pure moral hazard which you are too blind to see.

Open your eyes and see the real culprits.

+1

Government is pure evil.

The more I use Bitcoin the more the idea of using fiat money makes me physically sick. Honestly one day I hope I can completely get out of the government's coercion-based money system and solely use something like Bitcoin.

It is the most freedom I have ever experienced... quite a rush, really, to do business in Bitcoin. Nothing quite like listening to the QE2 talks on CNBC, the taxation talks, the national debt, etc etc... and knowing... some small part of me is now safe from all that violence, safe from the majority and their whims of fancy, safe from the predation of government goons... such an amazing feeling.

It's small but it's something. Bitcoin is precious.

[grondilu]

My views on speculation:

1. It's based on voluntary trade, hence not immoral. Banning speculation means to make a threat of violence against voluntary traders. That's also hypocrisy; you need to make an economical speculation yourself if you are to condemn someone as a speculator.

2. Speculation is economically beneficial, as pointed out by others. When speculators see a shortage is coming, their action drives up the prices and adds to the incentive to increase production, smoothing or even preventing the forthcoming crisis. Similarly it helps decrease excess production before it starts causing problems. Speculation, along with other phenomena of the free market, is a beautiful organic and emergent process that channels future expectations and information into the structure of production. Doesn't bother me if someone makes a profit out of it. Also greatly improves liquidity.

I think speculation has been entirely positive for the Bitcoin project. It's fascinating how Bitcoin got its initial value when the real economy didn't exist yet, out of the expectation that it would be more valuable later on.

Read those wise words, Macho.

[Anonymous]

*wishes he had an ignore button.

Forgive him for he knows not the bullshit he speaks.

[MoonShadow]

It's seems that I sent our resident 'soph more' on a wild goose chase.  Searching for the phase, "The Two Laws of Civilization" does not bring up the relevant text.

For those who are interested, or simply annoyed by my error, here is the relevant text...

"Mr. Maybury bases his work on common law, namely

1)Do all you have agreed to do
2)Do not encroach on other persons or their property.

The first law is related to contract law. A contract is an agreement between two or more parties, in which they promise to perform certain actions for and recognize certain rights of the other parties. The second law is related to some criminal law and tort law. Violators of these types of laws have committed acts like theft or violence against other people. (When referencing these two laws, Maybury has at times requested they be known as "Maybury's Laws," and stated exactly as above.) He has also mentioned that there may be an other (or others) undiscovered law related to the subjects of law that the two he shows don't cover. He also thinks that if the world would have used these two fundamental laws for a longer period of time, with out the British corrupting them and making them useless, we might have discovered the other fundamental law (or laws) that he mentioned."

http://en.wikipedia.org/wiki/Richard_J._Maybury#Maybury.27s_Two_Laws

[MoonShadow]

*wishes he had an ignore button.

Forgive him for he knows not the bullshit he speaks.

No button, but there is an "ignorelist" in your profile.

[JohnDoe]

lol

First rule of the internet is don't feed the troll. Or even if he is for real, you guys still shouldn't waste your time on him. People who are dead set on feeling morally superior won't be convinced by any amount of reason and logic.

[asdf]

It was a fascinating debate, in any case. I really enjoyed the articulate posts detailing the role of speculators in the market. It was Educational for me. Hopefully Macho learned something too.

[Macho]

lol

First rule of the internet is don't feed the troll. Or even if he is for real, you guys still shouldn't waste your time on him. People who are dead set on feeling morally superior won't be convinced by any amount of reason and logic.

I do not think it is "morally superior" to care about exploited or starved to death people, do you? The problem is many people just ignore it, they do not think about it because it is too painful and overwhelming to think about. They think, what am I going to do about it? So then they also do not think about the causes of it. There are very specific causes for that suffering and it's not because they are lazy, stupid or wouldn't have resources. They are being held back by other forces ... but that is just the most extreme example where the kind of economic thinking leads. It affects everybody, the current crisis is also just a symptom of this kind of thinking ... we've been listening to the kind of fairytales recited in this thread for at least a decade, it's like broken record and it has nothing to do with reality. The only ones advocating these theories are those at the top because they give them power and a tool to exploit other people. The simple truth is that speculation is harmful and serves no purpose, you can make up all kinds of abstract complex "reasons" detached from reality of why not admit it but in the end it's just excuses. It does nobody any good when someone is just shuffling numbers up and down, left and right just to make profit. It's just so obvious to realize with simple common sense. But some are trying to confuse it with some fairytales that are so tangled up that they ultimately do not even make sense.

Like speculators "smooth out" prices, what does that even mean and even if it was true why would it be a good thing? We are just expected to accept all this assertions without basis. If the market price of some commodity it supposed to go down because of lower demand, then it should go down - otherwise the price is not reflection of a true market, smoothing out, swinging it, or whatever else done by speculation is bad, very bad ... it introduces "fog" so that it's impossible to say what the real price is ... we do not need high price, we do not need low price or smoothed out price, we need *real* price. The only ones who can see trough the fog are the speculators themselves as they are closer (insiders), they use this advantage of course to make money - taking it from everybody else. They are parasites. The bigger/denser the fog, the more people are confused and misinformed, the more money they make ... so they ultimately make a huge mess out of the economy. I'm not making this up people, turn on the TV! What do you see? How do you think that happened? Someone waving a magic wand? Think, think!

I would encourage everybody reciting these theories to actually independently think about it. Something is not true just because Friedman or Mises says it. Someone here was quoting Mises as if it automatically mean he is right. There was nothing in that quote except unsubstantiated assertions. These theories can not survive the confrontation with reality ... simply said, they are wrong. They are completely idealizing things, it's not reality. It's virtual fantasy world and a belief in it serves only those at the top of the ponzi scheme pyramid which they inevitably create.

Our worldwide economy is a giant ponzi scheme right now and it is already collapsing with its base loosing everything, if we do not realize this, we are all going to work in sweatshops soon. Then you can sing the theories of Mises and celebrate the speculators as you work 16 hours a day for 2$. As somebody said, you are going to be thankful for those 2$ for 16 hours of work because otherwise you would be dead so there is really nothing to complain about, is there?

[grondilu]

I do not think it is "morally superior" to care about exploited or starved to death people, do you?

I think I've never ever seen a starving person with my own eyes.  And as far as "exploitation" is concerned, this is very much a subjective judgement.  We talked about that already.

[Macho]

I think I've never ever seen a starving person with my own eyes.  Why should I even believe there are such people ??  Because television and hippies like you tell me so ?

Is this supposed to be a joke? I do not know what to think about this ... do you others here identify with such thinking? Is this who you are? I'm trying to identify the species I'm talking to because it doesn't appear to be human ...

[grondilu]

I think I've never ever seen a starving person with my own eyes.  Why should I even believe there are such people ??  Because television and hippies like you tell me so ?

Is this supposed to be a joke? I do not know what to think about this ... do you others here identify with such thinking? Is this who you are? I'm trying to identify the species I'm talking to because it doesn't appear to be human ...

Well, when is the last time you saved someone's life just by giving him some food ?

If you never did, then where does your concern about starving people comes from ?   If it can't come from personnal experience, then where can it come from, apart from television and other medias, i.e.  mass propaganda ? 

[kiba]

5 Ways How to Not Persuade Your Audience The Macho Way:

1. DO NOT build rapport with your audience. You must insult, call them names, and so on.

2. Always argue against strawman version of the audience.

3. Claim every logical argument the audience made as a construct of authority figures regardless or not if the argument in question is true.

4. Call your audience EVIL.

5. Always claim morality superiority.

[Macho]

Well, when is the last time you saved someone's life just by giving him some food ?

If you never did, then where does your concern about starving people comes from ?   If it can't come from personnal experience, then where can it come from, apart from television and other medias, i.e.  mass propaganda ? 

I'm very hungry person, if I can't get something to eat it's like torture! I wouldn't wish something like to onto my worst enemy! And those starving people are not even my enemies ...

Anyway, is there any point to these questions?

Are you saying I shouldn't care? Well maybe I really don't, it's actually probably self-interest because I see what caused their starvation and I see the same thing coming everywhere else in the world ... to be honest, I do not want to join them in their starvation nor do I want to work in sweatshop. The only way to save myself from that is to remove the root cause which made starve also them - the religious economic theories.

It is the only way for you also, do *you* want to starve and work in sweatshop? It already is coming to the US, 22% real unemployment (not gov cooked numbers 10% which is high enough by itself), 41 million Americans are on the foodstamps, 1.5 million lives in poverty and this is accelerating ... it is on the way to become a third world country. But this is happening all over the world ... so where is all the wealth going? Are you going to guess it? I've been talking about it for quite some time

We are all going to be "poor Africans" you see on the TV soon if we do not realize root causes of this. Of which some I've been describing here.

[Macho]

5 Ways How to Not Persuade Your Audience The Macho Way:

1. DO NOT build rapport with your audience. You must insult, call them names, and so on.

2. Always argue against strawman version of the audience.

3. Claim every logical argument the audience made as a construct of authority figures regardless or not if the argument in question is true.

4. Call your audience EVIL.

5. Always claim morality superiority.

How to not understand something that could save you life of trouble:

1. focus on everything else BUT the arguments

[grondilu]

I'm very hungry person, if I can't get something to eat it's like torture! I wouldn't wish something like to onto my worst enemy! And those starving people are not even my enemies ...

Anyway, is there any point to these questions?

It's just that, as I was reading your post, when you were talking about exploited and starving to death people, it seemed to be very very far away from the reality of the society I live in.  There are problems in our society, but ... starvation ?  Hum, I don't think so.

[kiba]

It's just that, as I was reading your post, when you were talking about exploited and starving to death people, it seemed to be very very far away from the reality of the society I live in.  There are problems in our society, but ... starvation ?  Hum, I don't think so.

I can get two large french fries and a coke for 5-6 bucks. Yummy.

It's not exactly the most healthy thing in the world, though.

I think the 3 hot dogs a day diet with drinks are a far cheaper diet, yet far more unhealthy diet.

The problem is not the lack of food, but the lack of cheap, healthy food in our society.

[Macho]

I can get two large french fries and a coke for 5-6 bucks. Yummy.

It's not exactly the most healthy thing in the world, though.

I think the 3 hot dogs a day diet with drinks are a far cheaper diet, yet far more unhealthy diet.

The problem is not the lack of food, but the lack of cheap, healthy food in our society.

that's true ... there is a lot of things to eat, I just wouldn't call food most of it

And it is not far away, as I said there are 41 million people on foodstamps in the US! That's supposed to be "the wealthiest nation"? (or one of the wealthiest). Do not assume it does not affect you ... because when it does, you are going to have bigger problems than chatting about it on the Internet - that may be why starving people (yes also in the US and elsewhere) are kind of under-represented on the net?

Millions of people found themselves on the street because of mortgage scam, is that also far away? Several trillions dollars were stolen from the economy by FED printing and "borrowing" money, it that far away? Are all those bankruptcies, closing industries, record unemployment far away? I do not think so ... it is far more possible that you've been living in a bubble not noticing or caring about these things ... maybe you'll start to care only after you're on the street. But then ... then it will be late and other people on the Internet will be saying that you do not exist and that they do not care how you ended up that way.