Saturday, July 19, 2008

Letter to Senator Chuck Schumer Concerning Commodities Regulation

I oppose your recent proposal to regulate commodities speculation. The reason for the recent run up in oil prices is ultimately due to Federal Reserve Bank monetary policy, which since 1932 has been inflationary. The US Senate has oversight authority over the Fed, and you have chosen to do nothing. Hence, you are part of the problem, Senator Schumer. Now, rather than tell the truth, specifically, that the sub-prime crisis, oil and food price run ups and the stock market bubbles of the past 10 years are all due to policies about which the Senate, including yourself, has remained silent, you posture with an incompetently conceived, joke solution.

Common sense suggests that commodities speculation can have only a temporary effect on prices because futures contracts have 3 or 6 month terms, and if the speculators are bidding up prices excessively there will be reductions in end-user demand upon delivery, causing a fall in prices.

On the other hand, stupidly conceived regulation (and I do not believe that the Senate is capable of any other kind) can have crippling effects by misleading economic actors, causing waste and favoring specific economic interests, such as Wall Street, to which I have no doubt you are especially beholden.

As a result of these considerations, I assure you that I consider you to be bad at representing the public and I do not hope for your reelection.

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