# The Manipulation of Commodity (cotton, gas) Prices



## kid.twist (Jan 7, 2010)

There is a very interesting article I read on the internet. The author was tired of his dumbass friends who were decrying Libya for the rising price of gasoline on Facebook.

I'm posting it here (along with a quick summary from my point of view) because I think we're all struggling with the price of cotton especially and this may help explain the dimensions and source of the problem.

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He set about to show that oil prices are being manipulated in a most un-free-market-way by money-making inventions of large Wall Street banks (sound familiar?).


Shady bankers lurking in the background make great boogey-men, and I for one am inclined to listen to such tales with wider eyes and ears than I know I ought. If you can refute his premise – please do. (I hear natural gas is a good place to start.)


It's along article. It ends up covering much more than gas prices. I think everyone should read it. If you buy gas. If you buy bread. If you buy cotton. You know the price has been recently ever rising. (I know this fact has been mostly ignored – but it was food prices and subsequent rioting that has been fueling the riots that have been overthrowing Middle Eastern dictators.) Would you not like to know why?


There are the reasons bandied about often. They are not untrue, they are not not affecting things. But I don't believe any of them fully covers what is happening:
China (and elsewhere) is growing, developing at an incredible rate, consuming amazing amounts of raw materials.
Wars (Tsunamis, etc) cause disruptions in the farming and mining of commodities, leading to shortages that cause price spikes.
Oil companies, Agricultural giants are only driven by profit and their oligopoly allows them to squeeze the consumer to no end.
Quantitative Easing (the Fed printing/lending money to unstick the economy) has led to inflation.


Basic premise – commodities are real things. No one entity should have the ability to control the market. To prevent this (cornering of a market) the Commodities Exchange Act was introduced by FDR. It allowed for speculators (to provide immediate market liquidity) but limited them in time and quantity to prevent influences outside of the market itself.
In 1990 Goldman Sachs received permission from the government to act as a speculator, even though they had nothing to do with growing, buying, transporting any of the actual stuff. Then they had the regulatory limits reduced. 
Here I get fuzzy – the banks only need to see the price of the commodity to go up to make money. They have the ability to mess with markets by buying, always buying, to make that price go up. This messes with the “market reality” price of any given thing. But we consumers _need_ gas and corn and wheat and cotton. It's hard to get by as a business or individual without. So we keep buying at prices that are artificially high based on Wall Streets need to have ever-new places to put money that will make money.


This is the original post. Very hard to read, long article, white on black:
Why Gas Is So Expensive Today (Hint: It’s Not Libya) - Chris Peterson


This is the original post, posted to the Something Awful forum, much more readable:
Why Is Gas So ****ing Expensive ?!? The Answer May Surprise You. [effort] - The Something Awful Forums




Discussion on the original post, by well spoken and sometimes intelligent individuals:
Hacker News | Why Gas Is So Expensive Today (Hint: It


Metafilter discusses the article. But Metafilter discussions are not. It's a fest of cleverness and snark, best to be avoided:
So therefore, OPEC felt justified in raising the price of oil. To 45 dollars a barrel. At the height of the commodities boom, oil was trading for three times that amount. | MetaFilter


This is the link to one of the heavily quoted sources. It's a long article from Harper's Magazine, unreachable without a subscription or cheating:
The food bubble: How Wall Street starved millions and got away with it?By Frederick Kaufman (Harper's Magazine)


This is the link to the heavily quoted book, Griftopia by Matt Taibbi:
Amazon.com: Griftopia: Bubble Machines, Vampire Squids, and the Long Con That Is Breaking America (9780385529952): Matt Taibbi: Books


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## rawbhaze (Jan 29, 2011)

Thank you for the links. I will look at them when feeling, frankly, less depressed about it. You make it much further than I before getting fuzzy brained about it. It is a complex issue just by itself and the reality is that there are many outside factors that play a role as well.

I've typed and deleted a lot since it inevitably ends up turning political. This isn't the place for that. I do want to say that, IMO, so long as it is a two party system it doesn't really matter which is in control of what. The two party system will be around for a very, very long time for a handful of reasons:
1.) The huge amount of the population that does not care nor vote to begin with. This alone is very sad.
2.) Equally as sad is the number of people who can't vote if they wanted to due to be felons. Roughly 8 million people. I don't have an opinion one way or the other as to whether felons should be allowed to vote or not... I'm still astonished at the 8 million number! It is odd to me that a felon can't vote based on the reasoning that they have shown poor judgment and it is not the right of someone who has broken the law to potentially decide law for others... yet felons can run for office... Alrighty then...
3.) The two party system has America stuck in an Us -vs.- Them rut. So long as the nation is around 40/60 in either of the party's favor a third party doesn't have a chance. Inevitably the third party will be more like one than the other. Whichever party that is then views themselves as screwed because their votes will now be split. Such a defeatist attitude is rather unAmerican. Rather than pout about it, go rally up even a fraction of the 45+% of American that don't vote and win the election. Same can be said for wannabe third parties that pop up out of nowhere and then pout about not having the resources. That may have been valid in the past but with today's technology and communication?
4.) Too much power, too much incentive to abuse it and no one to change that but the people who have it. Why do politicians spend 10x, 20x+ on their campaign than what the position itself pays?
5.) Even if you lose power, you still win money. And lots of it.
6.) Regardless of the R or D that follows their last name, they're all in bed with the majority of the same banks, corporations and entities.

Which is why I have come to the conclusion that natural gas, coal, electric, solar, hydro, wind and on and on doesn't really matter. It will always be something. Each one of those options has their own lobbyists with agendas.

It just baffles me as to why Americans put up with "them" screwing with the necessities of "us". We're not talking about the debatable luxury and sin taxes. We're talking about food, clothing and transportation. And in a down economy, no less.

A commodity that gets overlooked is rare earth metals. China controls 90-95% of it.

Enough rambling by me.


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## evetteB (May 12, 2011)

Commodity costs over the last couple of weeks have been falling. Some of probably the most essential commodities have dropped in price. Most consumers can be impacted by the change in commodity prices. The extent to which prices may change based on this investment news is yet to be seen. Plunging commodity prices leaving investors jittery. This can most easily seen in the pairing of oil and gas prices. This has caused many investors to buy into the market, expecting that the price would continue to move up, a classic action that creates a bubble. This bubble in prices seems to be deflating, creating a bear market situation.


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## BroJames (Jul 8, 2008)

The problem with fundamentals is that there is always a reason for everything that has happened, is happening and is about to happen. Anyone who strongly believes that there is manipulation should long cotton and crude oil futures, and maybe diversify across all commodities that may be affected. Or, short them if they believe that the rise has been excessive and therefore unsustainable.

I am not saying manipulation does not happen. However, we really do not know any better.


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