You might recall that earlier this year President Obama fulminated at length against the eeeeevil oil speculators who he claimed were responsible for the surge in oil and gasoline prices. Needless to say, the informed among us (i.e., conservatives) knew that other market forces were responsible and scratched our heads in wonderment until we remembered that Barack Obama is a statist ideologue who never worked an honest day in the private sector and knows precisely dick about the free market and how it works.
Dr. Walter E. Williams – Professor of Economics at George Mason University, syndicated columnist and one-time substitute host for Rush Limbaugh – explains it all for you in the breezy, easy-to-read style that is all his own.
Here’s a non-rocket science question: If you expect a reduced harvest of wheat, corn, rice or any other commodity some time in the future, what would be the wise thing to do about your consumption today? I bet that the average person would answer: Consume less now so that more will be available in the future.
But how in the world can people be encouraged to consume less now? Enter the futures market, which consists of a worldwide group of millions upon millions of traders, often called speculators. Speculators, betting on a future shortage, buy up wheat, corn and rice today in the hopes of making money selling it for a higher price when the bad harvest hits. As speculators buy more and more wheat, corn and rice, they drive up today’s prices. As today’s price gets higher, people consume less, but more importantly, people do the intelligent thing without bureaucratic edicts. The vital role of the futures trader, or speculator, is to allocate goods over different time periods. And, it’s not just wheat, corn and rice that must be allocated over time but all commodities including oil.
You can read the rest of Dr. Williams’ article here. By all means, forward the link to liberal friends and acquaintances in need of an education and remind them that if the Obama administration ever gained control over the Sahara Desert, there would be a sand shortage in less than a year.