Friday, August 28, 2009

Should We Regulate Speculation?

It's probably no surprise to my fellow OccObs'ers that I'm generally against any kind of government regulation, but the implications of this one intrigue me. This article from Reuters is about regulating oil speculation. It's been reported recently (although I don't know why it took so long), that oil speculation was and is the main cause for the dramatic increases and fluctuations in oil (and therefore gas) prices in the last few years. This may be the shred of politics I picked up from my maternal grandfathers, but what do speculators actually contribute to anyone? It's basically gambling that has adverse effects on the whole country. The draw to regulation is that it is likely to reduce the price of oil by $30/barrell, which will help pay off some of the stimulus (the article explains it better).

Along the same lines, should we regulate high-frequency trading? This is basically computer programs that buy and sell securities very quickly, trying to eek out small gains, which aggregate to large gains over the course of time. These HFT programs accounts for some ridiculously large percentage of trading volume (something like 70%).

Fredo, you know more about this stuff than I, so please enlighten me if I'm erroneously straying from my libertarian ways.

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Always sniffing for the truth

Always sniffing for the truth

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