Earlier quoted context omitted.
Trading in commodities futures has a point, but it has gotten absolutely ridiculous in scope. The market participants used to be farm collectives, mining companies on the one and large wholesalers and consumers on the other side as a way for both to hedge against price swings... but that's no longer the case. Hell even if you just look at the last 10 years, trading volume has exploded by ~3x (futures) / ~5x (options)…
There's a lot to be said for this position. Here's an NBER study from 2014 on the financialization of commodity prices. There is substantially more volatility in commodity prices than in the underlying production and consumption. Sometimes, what's happening in markets is going in the opposite direction as the real world commodity. Another related study.[2] Studies agree that the tail is wagging the dog, but there is…
Thanks. JFC, that one was mind blowing:
> Last year, production increased to 30.2 billion barrels, but these futures markets alone swelled to 541.6 billion barrels, becoming eighteen times bigger than the global physical output.
So, to put it clear: on average, before reaching a refinery, each barrel of oil that ends up there changed hands eighteen times, with each step extracting wealth (in the form of buy/sell price spread) along the way - for zero gain for both the producers and the consumers of the oil. And yet, everyone seems happy with it.
> but there is no agreement on what to do about it.
If you ask me personally, the answer is easy: burn the entire thing down and restrict the rebuilt one to actually legitimate market participants (producers, wholesalers and consumers of commodities). The current system serves no real purpose other than to enrich a very few people at the expense of everyone else, which is also the reason why this won't ever happen - the financial incentives and thus the amount of money flowing into corruption and its legal friend lobbying is just too much.
The problem is, you won't get that kind of clear-cut answer from any academic studies or even most political parties outside of the far-left (like me) who criticize it on the very real effort this looting has on poor people and the far-right who tends to focus more on the conspiratorial part. It's in the end a question of political ideology and of how independent science, journalism and politics can actually be when faced with billions if not trillions of dollars of financial interests.