Is it ethical to speculate with rice and other staple food futures (I think that Soros recently said that commodities are in the first stages of a bubble - he learnt his lesson about market timing with the internet bubble I think :D), when you know that your actions are causing people to starve or be unable to eat?
My thinking is no, absolutely not if these price increases are a symptom of a bubble. If not a bubble (i.e. these prices make sense on a fundamentals basis) then I would see less of a problem.
So to answer this question please assume that rice is in a bubble and the prices are irrational.
It matters not one jot to this hypothetical whether the bubble viewpoint is correct or not.
I fail to see the basis for one part of your hypothetical: “when you know that your actions are causing people to starve or be unable to eat?”
Individuals’ actions in futures markets do not cause those outcomes and in fact may help prevent those outcomes to some significant degree by shifting some element of risk from producers and consumers to those who wish to take on the risk. Producers and consumers protect themselves from risk by “hedging”: if they know they will be selling in the future then they short the futures market; opposite on the other side of the fence. That process allows producers to produce knowing that they have no fear that the bubble will suddenly burst and buyers to plan knowing they are somewhat protected from higher prices because in each case they will make on the futures market somewhat proportionally to what they lose in their real commodity price shifts and of course visa versa. They lose potential for greater gain in order to avoid risk of future losses. Others want that risk of loss in return for the potential gain.
So no, it matters not one jot whether the bubble viewpoint is correct or not, speculators in the futures markets add stability not volatility to the system. Or, if anything, their role is more critical under the bubble hypothetical as the risk of sudden burst vs sudden rise weighs more heavily on those who will need to purchase and sell in the future and are needfully risk adverse.
I think this thread is a load of crap, so I’ve started one that makes the issue much clearer.
Now, we could debate whether futures really lead to efficient price discovery (except in tautilogical terms) but personall I think this thread is better locked
The Hunt brothers were not speculators, they were market manipulators who attempted to corner a market and control the price shifts rather than risk loss in return for potential profit. They ended up owning a third of the world’s supply and suffered when prices dropped despite their manipulations. Do you believe that any current players are doing the same in today’s grains markets? If not then it has nothing to do with the hypothetical.
