The Commodity Futures Trading Commission voted 3-2 yesterday in favor of a position-limit rule that, according to a new IATP press release, is too weak to protect consumers and producers from the wild price swings that make traders rich while increasing hunger and decreasing food access the world over.
In essence, a position limit is a cap on how much of a particular commodity a trader, or financial entiry, can control for a given trading period. Without strong and well-enforced limits, a few big Wall Street players can drive prices to their benefit at the expense of producers and consumers. The limits set today—too high and lacking provisions to revise the limits during commodity price emergencies—will further allow food prices to be distorted through speculation, having international consequences. Developing countries, for instance, often use U.S. commodity contract prices as benchmarks for import prices, where high and volatile prices often lead to increased hunger when countries cannot pay the increased import bills.
Thinking back to the 2008 price crisis and near collapse of the financial system, yesterday's decision to allow financial speculators to control commodity markets is startling. Wall Street's behemoth lobbying power and its support of congressional allies opposed to regulation have paid off again.
Read the press release, Weak CFTC position-limit rule ineffective, unsound says IATP, for the full story or see more of IATP's work on market speculation.
