Recently I wrote a blog about how trading stocks for the sake of doing so damaged the economy because it was a non-productive way to make money. The same is true for commodities trading - only in this case the consequences for the general population are worse - far worse….
A couple of weeks ago I was in running my dogs in the park and an acquaintance of mine came in with her two dogs. I mentioned the stock market and she started asking about commodities prices. For about half a second I wondered why this was a concern. Then it hit me - she is the owner of a coffee shop which is also a roasting establishment. Commodities prices have a massive impact on her life and profit margins - and coffee has gone crazy over the past year. Admittedly some of this was due to weather issues - but much of it was sheer speculation.
The same holds true from the oil speculation that was one extra nail in our fiscal coffin in 2008. High oil prices drove the cost of living sky high in the middle of recession in 2008 and helped lead the country off a financial cliff. But the impact goes even further than that. People die from commodities speculation. When food products are involved - such as wheat death and malnurishment result. In poor countries such speculation driving prices sky high can mean the difference of eating or not. Indeed, the high price of wheat was a big factor in rebellion in Tunisia and in Egypt.
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