http://www.reasonforliberty.com/anarcho-capitalism/why-speculation-is-indespensible.html Because everything has a reason! Sat, 14 Jan 2012 17:52:12 +0000 hourly 1 http://wordpress.org/?v=3.3.1 http://www.reasonforliberty.com/anarcho-capitalism/why-speculation-is-indespensible.html#comment-180157 mike Wed, 26 Oct 2011 13:28:14 +0000 http://www.reasonforliberty.com/?p=1867#comment-180157 First, I would sincerely suggest that you invest some time in improving your writing in regard to your spelling,your syntax and sentence structure, and your grammar(in particular, your subject/verb agreement). With that being said, your scenarios do rightly suggest that speculation is not always a bad thing, but can indeed be quite beneficial. However, your scenarios are misleading as they fail to correlate with one of the main premises of speculation, especially regarding derivatives, and that is the fact that a speculator can essentially bet that a stock index or commidity will fail or succeed (through call and and put options, respectively) WITHOUT technically owning any tangible product relating to said option. It is true that the speculator may provide investors with a viable outlook on the future value of a commidity or index, increase market liquidity, and reduce bid/ask spreads by exploiting the difference in the spread(through competition with other speculators), thereby creating a more efficient market. But it is equally true that, as more and more speculators participate in a market (or speculation is carried out on an obscenely large scale by a few very wealthy speculators), real supply and demand can become diminishingly small compared to actual supply and demand, which inturn as a result of said speculation may cause prices to become distorted and dangerous market bubbles to appear. First, I would sincerely suggest that you invest some time in improving your writing in regard to your spelling,your syntax and sentence structure, and your grammar(in particular, your subject/verb agreement). With that being said, your scenarios do rightly suggest that speculation is not always a bad thing, but can indeed be quite beneficial. However, your scenarios are misleading as they fail to correlate with one of the main premises of speculation, especially regarding derivatives, and that is the fact that a speculator can essentially bet that a stock index or commidity will fail or succeed (through call and and put options, respectively) WITHOUT technically owning any tangible product relating to said option.
It is true that the speculator may provide investors with a viable outlook on the future value of a commidity or index, increase market liquidity, and reduce bid/ask spreads by exploiting the difference in the spread(through competition with other speculators), thereby creating a more efficient market.
But it is equally true that, as more and more speculators participate in a market (or speculation is carried out on an obscenely large scale by a few very wealthy speculators), real supply and demand can become diminishingly small compared to actual supply and demand, which inturn as a result of said speculation may cause prices to become distorted and dangerous market bubbles to appear.

]]> http://www.reasonforliberty.com/anarcho-capitalism/why-speculation-is-indespensible.html#comment-1851 Belvendarn Thu, 05 Mar 2009 14:41:37 +0000 http://www.reasonforliberty.com/?p=1867#comment-1851 There is obviously a lot to know about this. I think you made some good points in Features also. There is obviously a lot to know about this. I think you made some good points in Features also.

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