Monday, May 26, 2008

Lieberman Says Index Speculators Responsible for Increase in Commodity Prices

Last week saw a Senate Committee hearing on financial speculation in commodity markets. WASHINGTON WEEKLY reports:

Senate Committee on Homeland Security and Governmental Affairs Chairman Joe Lieberman (I-CT) said index speculators are responsible for a significant part of commodity price increases and the Committee should see if there is something that can be done. During the Committee’s hearing on financial speculation in the commodity markets, Lieberman said he would consider drafting legislation that would limit the role of institutional investors in the commodity markets and to prohibit large investors from circumventing commodity position limits. The two provisions were recommended during the hearing by Michael Masters, Managing Member and Portfolio Manager, Masters Capital Management, LLC. Masters said the recent migration of investments from other asset groups are driving commodity prices higher and are essentially causing a disservice to the public in the short-term. He recommended Congress modify ERISA regulations to prohibit commodity index replication strategies as unsuitable pension investments. Jeffrey Harris, chief economist, Commodity Futures Trading Commission (CFTC), said the CFTC has the statutory authority to monitor and if necessary take enforcement action against speculation. Benn Steil, director of international economics, Council on Foreign Relations, said there was little evidence that speculation was having a manipulative effect on futures markets. Lieberman said the Committee would hold another hearing on the issue and would invite the Chairman of the CFTC and members of the administration’s economic policy team.

source: Lieberman Says Index Speculators Responsible for Increase in Commodity Prices

read also: Senate panel hearing testimony about bubbilicious commodity prices

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