Have The Commodity Markets Just Felt The Lead Fist Of Government?

It is passing strange that a week or so after the Obama administration declared it would be taking a tough line on speculation and shortly after the Fed was roundly abused for a lackluster performance in its 1st press conference and for not taking any responsibility for the run-up in commodities due to its outrageously loose monetary policy, several of the strongest commodity markets have gone tits up. On Friday, April 29th, July Silver closed at 48.5990. Over the next 5 days it proceeded to drop into the 33 handle. In 5 sessions it dropped from its highs near 50 to nearly 33 or about 16 dollars. That’s $80,000 per contract. Why? Because the CME had raised margins massively which caused enough individuals and funds to come up short on margin requirements, thus forcing them to close out their positions, by selling. On Thursday of that weekthe EUR took a bath after Jean-Claude Trichet failed to use his magic language about “vigilance” that signals further rate hikes. In his press conference he talked up a strong dollar with this weird grin on his face like he was in on some huge joke. The press put it down as a challenge to the Fed, but I wonder if he wasn’t in cahoots with the Fed or the Obama administration to lift the dollar and kill commodities. Kill commodities it did as Crude Oil, also subject to margin hikes by the CME dropped more than $10 in a single day, a truly stunning move. Gasoline dropped by 25 cents in a day. Today the USDA came out with a bearish crop report that has grain market players scratching their heads in consternation as their is little likelihood the numbers are correct.

So the question is, did someone on the Obama team or at the Fed apply pressure to the CME or conspire with the ECB or pressure the USDA to achieve these drops in commodities to spike the commodity inflation the Fed has engineered? In other words did they use the fist of government to move markets to overcome the effects of their other wrong-headed policies? A couple of years ago few would have taken this idea seriously. But now that the Fed has acknowledged it is outright manipulating stocks and bonds, why not commodities? If so, it is both sad and dangerous. Markets need to function freely. They undershoot and overshoot, but for the government to manipulate them openly as they seem to be doing would be a further signal of the tragic demise of American leadership and culture. It would or should also be grounds for impeachment or dismissal. Though we will likely never know if it is the case, I would not put it past the statists now in control.

One Response to “Have The Commodity Markets Just Felt The Lead Fist Of Government?”

  1. commodities market Says:

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