Austria: short sell commodities? Bubble

I am going to install the new Mavericks Apple OSX operating system after I send this mail. Hope it does not kill my year old iMac.

I am not so sure about short selling commodities. Commodities have become a rigged game. Rich 1% fat cats bought up a lot of gold, silver, oil,… starting about 10 years ago, creating a bubble. Then they started selling short sale contracts on those commodities that they own while continuing to buy commodities driving prices higher. Of course they cannot lose on this strategy.

But eventually prices will decline, but maybe not enough to trigger the short contract so the rich will still continue to make money off the short contracts they sold.

If it is a big sell off, bubble burst that drives price down substantially then the rich can make physical delivery and get rid of the sinking asset. Thus sticking the sucker who bought the short contract with a physical asset that they have to pay storage at the same time that prices are sinking. If they dump the sinking commodity then that will only drive prices lower. A downward spiral. While the rich are laughing all the way to the bank.

I think that the huge derivatives contracts written on commodities are a big part of the inflation we have seen in commodities prices. In addition to new demand from countries such as India where billions of people living on $4 per day now make $5 per day that many writers allude to. (But can’t buy a lot of gold or oil on that at today’s prices).

There are lots of academic articles on this subject such as the attached article from Austria. It is clear from looking at the first graph in this article that commodities prices are closely tied to the state of the financial system. Those prices collapsed in 2008 but sharply rebounded as the financial system returned to normal. China, India and other countries did not evaporate during the crash. The commodities inflation is probably a financial derivatives phenomenon. (Despite protestations to the contrary by the fat cat conspirators).

As long as they can profitably write short contracts they will not sell their oil, gold,… But if they get outlawed or otherwise run into trouble then watch out below! Big price crash! Commodity prices will fall but consumers will benefit — cheap gas, cheap jewelry, cheap heat, more money for everything else. The economy may boom!
WP30_financial_markets.pdf

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2 thoughts on “Austria: short sell commodities? Bubble

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