Geoff Styles: Speculation Witch Hunt?
He says he thinks “the CFTC and its supporters in Congress and the administration are barking up the wrong tree, altogether, based on a fundamental misunderstanding of the markets.”
the current determination to clamp down on speculation appears to be based on two hypotheses that are … probably entirely false: First, that in the absence of speculation, oil prices would not have spiked to nearly the degree they did last year and would be much lower today than they are, and second, that a market without speculators–or indeed without any futures trading at all–would be inherently less volatile than one in which those factors are present.
The latter point is easier to dispose of, Styles suggests, but both points are relevant to the current political concerns. He elaborates on both issues.
UPDATE: Here is Craig Pirrong on the same topic, “Now I know how Sisyphus felt.”