CFTC recently engaged in a massive regulatory overhaul of the
commodity markets, targeting limited positions and increasing margins in commodities, in particular, in energy.
This affects exchange traded funds such as UNG (Natural Gas) and USO (oil). In their view, commodity speculators drove
oil and gas to unreasonable levels in the Summer of 2008, in part, triggering the current crisis.
While limited trading in any derivatives is a welcome step, this is, of course, ridiculous.
The run in commodities was triggered by the Fed drastically lowering interest rates and printing money to
save the literally huge derivative Ponzi scheme that our global financial system has become.
“Gaming” free markets is not the way to go. We did that for quite some time now, and that’s why
the financial crisis happened. The Free market broke free from all this derivative model manipulation
and this resulted in a Black Swan. As long as OTC derivative bubble is inflating further,
chances of another, deeper systemic crisis are increasing. If the current
policy of bailing out too big to fail counterparties continues, there is a chance the derivative
Ponzi scheme will eventually blow up and take down entire countries – including, possibly, USA.
Regulate what matters – OTC interest rate derivatives and credit derivatives!
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