Tuesday, April 22, 2008

High prices of commodities

The prices of oil, gold, rice and other commodities have shot through the roof. The large increases are due to:

a) Shortage
b) Financial speculation

The actual shortage may be small and temporary. But the financial speculators, e.g. hedge funds, have taken advantage of the situation to push up prices beyond the fundamentals. Even ordinary people have jumped into the bandwagon.

These extreme price movements are a function of the free market. It is bad for the global economy and is hurting many poor people. It a weakness of the market mechanism.

I hope that there will be some measures to prevent the excessive speculation.
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1 comment:

Anonymous said...

I share the same sentiments as you. It is an obvious phenomenon that oil producing countries are manipulating and have the whole world under their thumbs. Now, they are laughing and enjoying the game they have been playing in the past two years. They will continue to increase the price of oil unless the world cut down on depending their crude oil. "Greed" is apparently marked on their faces.
To combat the price of gold, just don't buy it. Is it a basic need? Without it, can you survive?
As for rice, no matter how expensive, it is a necessity. Eat less! And keep this phrase, "Waste not, want not!"

April 22, 2008 8:37 AM

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