The King is Naked.1

Doesn't it make you wonder when occasionally we hear "oil prices are rising out of fear of...." or "corn prices are rising out of fear of a shortage caused by ethanol".  Why do we allow a situation where prices are determined by emotion?  At this point most anti-anything people start into the conspiracy theory often including black helicopters, the illuminati and such.  I won't go there because what I glean from history is that the only thing that really resembles a conspiracy is loose, often unspoken, agreements of greed and power.  Our country and economy were founded on the free market system based on supply and demand.  This system works well as long as nobody can manipulate supply.  Now a bit of history.  A long time ago when rum was the king of beverages, growing sugar cane (the main raw ingredient to rum) was a pretty good business.  A few growers realized that if they held off selling their crop until the market was not glutted with it just at harvest, they could get a better price.  The rum makers didn't like this because they were used to strong arming lower prices trying to only buy when there was a surplus, but that was now not providing enough cane.  So they cooked up a scheme to buy part or all of a crop before harvest for a discounted rate, calling it futures.  The enough of cane raisers thought it was a good idea, because their whole income was not once a year, to make it work.  Then the rum makers started trading futures and the market price started following futures making later sold futures less and less and the market price even less at harvest time.  Then they started trading futures for 300% more product than ever existed, destroying the balance between supply and demand.  That was the birth of the commodities market and it operates much the same way today except that they trade almost every raw material.  Fast forward to the start of paying subsidies to farmers.  Why did this have to happen?  Well because of the commodities market, the price of corn stayed the same to the farmer through the 30's, 40's 50's 60's 70's and 80's.  The government had two choices along the way.  Stop the commodities market from selling more product than ever would exist or subsidize farmers.  Which makes more sense and which did they do?  Of course they provided a vehicle for people unconnected with the processing of commodities the opportunity to make a big profit from it.  You think I'm wrong?  Lets say someone that has nothing to do with growing or processing food... say a the president of the united states' wife, makes several hundred thousand dollars trading beef futures.  Where did that money come from?  There is only so many dollars of profit available from the time that beef is born until it is eaten.  Who lost their profit?  Hormel? doubtful. Cub foods? No way.  The only person in the chain that had their profit cut into was the farmer, because the trading of non-existing supply determined what he was paid for his product and he was the only one that had to just take what they gave him.   Much of his profit ended up in the pocket of someone who had no useful part in providing that product.  So how do we fix this?  I understand we can't just come in and say that's it the market is closed.  BUT we can pass a law that a future can be traded one time and then not traded again until physical delivery is taken.  Then people not connected with the supply chain in any way could not gamble with the profits of our raw material producers.  The market should only be allowed to trade 90% of what will ever exist, not 300%.  THE KING IS NAKED!

The King is Naked