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willbeurdaddy -> RE: Independance Day Is For Conservatives (7/2/2011 10:07:09 AM)
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ORIGINAL: Hillwilliam
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ORIGINAL: willbeurdaddy
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ORIGINAL: Hillwilliam
Theoretical question wilbur. What would prevent the government from acting as a speculator?
Release oil from the reserve when the price is high to depress prices and then refill the reserve when prices are low?
There is nothing to prevent it, although the word "speculator" can be misconstrued in this context. When talking about "speculation" in oil, youre usually talking about futures contracts that are settled in cash, not delivery, and which do not affect supply and demand, and therefore dont effect delviery prices (other than minimal ancillary effects). The kind of speculation you are talking about is actual delivery, and does affect supply and demand and therefore prices. So that raises the question of "should" it be prevented. The purpose of the SOR is emergency supply, not market manipulation, but if the reserve got big enough then that could be the result. Its somewhat analagous to investing Social Security Trust funds in the stock market. At the end of 2010 there was something like 2.5 trillion in surplus, invested in special Treasuries. If the SS administrators were permitted to invested that much money in the stock market they could easily manipulate prices of companies, sectors or the entire market.
I was talking about speculation the way I do it. When I buy land, it is typically leveraged but I DO take actual delivery and take posession. Then when I sell, likewise.
Another question wilbur. Could the US (as I mentioned in an earlier post) fuck with the Chinese in this manner?
Yes, as i said there is nothing to prevent that kind of speculation, though carrying it through to its policy implications it may be considered inappropriate. "Fucking with the Chinese" isnt so easy. When you manipulate prices via supply and demand you impact the total market, so the first thing you would have to do is sell to favored buyers more cheaply than to the Chinese. But if you do that you are increasing the supply available to China from other suppliers. In the long run all you are really doing is subsidizing your favored purchasers. Tariffs are a much easier way to fuck with another country's economy, but ultimtately we just pay for that through higher prices. Damned if you do and damned if you dont.
The best way to (at least semi) permanently fuck with another country without totally screwing yourself is through domestic subsidies that allow predatory pricing in key global markets, to the extent that you actually drive that business out of the market enough that retooling for them is difficult once prices return to normal. And that of course is very hard to do. The Chinese have done that to us in solar, though its hard to tell how much of the global dive in solar company's stocks is due to Chinese manipulation vs the fact that there is no demand, because the product just isnt all that.
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