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katastrofa
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Ethical aspects of commodities trading

August 30th, 2008, 11:16 am

Do you think that increasing interest in commodities speculation could lead to more people being unable to feed themselves?
 
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Traden4Alpha
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Ethical aspects of commodities trading

August 30th, 2008, 12:16 pm

QuoteOriginally posted by: katastrofaDo you think that increasing interest in commodities speculation could lead to more people being unable to feed themselves?No. I don't think speculation is the ultimate cause of the price rise because the commodities markets are balanced -- for every person speculating or hedging a price rise, there is a counterparty speculating or hedging a price drop. Instead, speculators have anticipated future supply/demand imbalances (due to a combination of rising BRIC affluence, biofuel production, and fears of global warming's impact of food production) and speculators have shifted a potential severe future price spike into the present.In fact, one could argue that speculators may have averted a much larger crisis by smoothing this future price spike. It is plausible than speculators have: 1) encouraged more development of more resources (planting more acreage) and 2) inflated the prices now to reduce demand for meat and to encourage conservation.My point is that there is a much much deeper problem here with regard to supply/demand of food and the ability of the next 2.5 billion middle class people (i.e., BRIC) to outbid the last 2-3 billion poor people on Earth for food. The growing participation of speculators is a symptom of this developing imbalance, not a cause.
 
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TraderJoe
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Ethical aspects of commodities trading

August 30th, 2008, 2:01 pm

Betting on someone elses food poverty is hardly ethical now is it?
 
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Traden4Alpha
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Ethical aspects of commodities trading

August 30th, 2008, 6:35 pm

If one believes that speculation improves market functioning and reduces people's long-term chance of starvation, then NOT speculating would be unethical.
 
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Cuchulainn
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Ethical aspects of commodities trading

August 30th, 2008, 6:55 pm

QuoteOriginally posted by: Traden4AlphaIf one believes that speculation improves market functioning and reduces people's long-term chance of starvation, then NOT speculating would be unethical.This shortage might also stimulate countries to pay more attention to agriculture, and install new systems...
 
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katastrofa
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Ethical aspects of commodities trading

August 30th, 2008, 10:23 pm

In the long term, this might all be true. However, what about the short term?
 
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migalley
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Ethical aspects of commodities trading

August 31st, 2008, 11:52 am

QuoteOriginally posted by: TraderJoeBetting on someone elses food poverty is hardly ethical now is it?Neither is posting pictures of naked men's butts, but you like to do it.
 
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Traden4Alpha
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Ethical aspects of commodities trading

August 31st, 2008, 12:05 pm

QuoteOriginally posted by: katastrofaIn the long term, this might all be true. However, what about the short term?I don't see how you can separate them? If you made ethical decisions to avoid short-term harm regardless of long-term consequences, then no doctor or parent would ever vaccinate a child because of the short-term pain of the needle jab.The unavoidable delays in food production -- one can't double the acreage today to have more food tomorrow -- means that speculation plays a critical role in price discovery and supply/demand balancing.
 
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Cuchulainn
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Ethical aspects of commodities trading

August 31st, 2008, 12:49 pm

QuoteOriginally posted by: katastrofaIn the long term, this might all be true. However, what about the short term?Never postpone anything until tomorrow that you cannot delegate to someone else today.
 
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katastrofa
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Ethical aspects of commodities trading

August 31st, 2008, 2:26 pm

Like, dying of hunger?
 
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Cuchulainn
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Ethical aspects of commodities trading

August 31st, 2008, 3:08 pm

QuoteOriginally posted by: katastrofaLike, dying of hunger?No, by acting on those laudable words that politicians are fond of. There is no reason why you can't install good irrigation system in the countries that need it. Just make sure the right people are in charge. And make sure WTO agrees.
Last edited by Cuchulainn on August 30th, 2008, 10:00 pm, edited 1 time in total.
 
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katastrofa
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Ethical aspects of commodities trading

August 31st, 2008, 4:16 pm

Let us assume that the politicians remain as they were and consider the actions of speculators ceteris paribus. Do you think they will make the situation of hungry people better, worse, or have no impact on it (on average)?
 
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Traden4Alpha
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Ethical aspects of commodities trading

August 31st, 2008, 7:38 pm

QuoteOriginally posted by: katastrofaLet us assume that the politicians remain as they were and consider the actions of speculators ceteris paribus. Do you think they will make the situation of hungry people better, worse, or have no impact on it (on average)?If speculators have had any impact, it has been to cause a smaller number to starve now rather than a much larger number to starve later.Speculation on food shortages is the canary in the coal mine and one doesn't blame the canary when the coal mine explodes. Speculators would not be flocking to commodities if there were not solid fundamental reasons to expect a serious future supply/demand imbalance (e.g., BRIC affluence, global warming, etc.) And by increasing food prices now in response to the long-term threat of shortages, people have the motivation to take the steps that Cuchulainn recommends. Thus, I would conclude that speculation improves the resiliency of the food system, improves price elasticity, and reduces the long-term death toll from starvation.
 
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katastrofa
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Ethical aspects of commodities trading

August 31st, 2008, 9:28 pm

"They would starve anyway" is a piss-poor defense.
 
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Traden4Alpha
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Ethical aspects of commodities trading

September 1st, 2008, 12:29 pm

QuoteOriginally posted by: katastrofa"They would starve anyway" is a piss-poor defense.I would disagree that it is "piss poor" because this decision making rule is the basis for medical triage. What is the proper ethical decision if taking action A leads to N1 people starving at time t1 and taking action B leads to N2 people starving at time t2? If N1=N2, then we'd probably pick the action that delays the starvation. And if t1=t2, then we'd pick the action that minimizes the number killed. But the general case in which N1>N2 and t1>t2 is not clear. (And we'll ignore the nasty ethic case in which the N1 includes family members and N2 only includes people in another country).We also seem to be ignoring the ethical responsibilities of others. First, a population's demand for food is predictable over very long time horizons. It's no surprise that people will want to eat next year, next decade, etc. Second, the variability of food production and food prices has been known for millennia. Third, contract-based trading of commodities (e.g. futures and forwards contracts) is not some new invention that has been sprung on an unsuspecting populace. These instruments have been used for centuries because the first and second facts are so well known. Isn't it highly unethical that governments have failed to hedge food prices on behalf of their citizens?