Wednesday, July 31, 2013

Cornering markets fleeces consumers


   Whether it’s pork bellies or potatoes, copper or chocolate, anyone able to create an artificial shortage of a commodity can drive up the price. Corner the market and fleece the consumer.
    Manipulating commodities markets isn’t new. During the 19th-century era of robber barons, speculators Jay Gould and Jim Fisk tried to corner the gold market, triggered an economic panic and came close to crashing the American economy.
    In 1979, the billionaire Hunt brothers, Nelson Bunker and William Herbert, of Texas, along with a group of wealthy Arabs, set out to corner the silver market. At one point they controlled 50 percent of the world’s silver. Northern Idaho cities like Kellogg and Wallace boomed as silver prices rose from $1.50 to $50 an ounce.
    Booms always burst, even those artificially created. Even the Hunt brothers couldn’t handle the overheated market they helped to create. They failed to meet a $135 million margin call and in 1988 were convicted of conspiring to manipulate the market. The Spokesman Review of Spokane, Wash., described what happened to Idaho’s silver country: “Thudding silver prices took their toll on the Silver Valley. Mines closed as silver entered a long period of depressed prices.”
    Manipulation of commodities markets on a grand scale has seemingly unrelated but often far-reaching consequences. For example, in the late 1990s, traders at Enron, an energy company, drove up electricity prices and forced an artificial power crisis in California. According to internal Enron documents released by federal regulators, these questionable techniques not only cost California consumers higher than necessary power bills, they led to the recall of Gov. Gray Davis.
    In 1999, Glass-Steagall, aka the federal Banking Act of 1933 that kept banks from investing in speculative ventures, was eliminated by Congress. Suddenly, the race for obscene returns was on and the country, in fact the world, has been left with banks too big to fail, but not too big to engage in commodities manipulation.
    The bank Goldman Sachs was recently accused of cornering the aluminum warehouse market. Why is this a problem?
    When The New York Times discovered and analyzed Goldman’s practices in a monopoly situation, it found artificially higher prices allegedly cost U.S. consumers $5 billion in the past three years.
    A bipartisan group including Sens. Elizabeth Warren, D-Mass.; Maria Cantwell, D-Wash.; John McCain, R-Ariz.; and Agnes King, I-Maine; are all pushing for reinstatement of Glass-Steagall.
    The big banks and their legion of lobbyists will fight to keep regulators at bay. Voters must be equally adamant about stopping them.
    Gold, silver, energy, and now the price of a can of Coca-Cola, are clear demonstrations of why transparent and fair commodities markets count.




About Comments

Comments with content that seeks to incite or inflame may be removed.

Comments that are in ALL CAPS may be removed.

Comments that are off-topic or that include profanity or personal attacks, libelous or other inappropriate material may be removed from the site. Entries that are unsigned or contain signatures by someone other than the actual author may be removed. We will take steps to block users who violate any of our posting standards, terms of use or any other policies governing this site. Use of this system denotes full acceptance of these conditions. Please review the full rules governing commentaries and discussions. You are fully responsible for the content that you post.

The comments below are from the readers of mtexpress.com and in no way represent the views of Express Publishing, Inc.

You may flag individual comments. You may also report an inappropriate or offensive comment by clicking here.

Flagging Comments: Flagging a comment tells a site administrator that a comment is inappropriate. You can find the flag option by pointing the mouse over the comment and clicking the 'Flag' link.

Flagging a comment is only counted once per person, and you won't need to do it multiple times.

Proper Flagging Guidelines: Every site has a different commenting policy - be sure to review the policy for this site before flagging comments. In general these types of comments should be flagged:

  • Spam
  • Ones violating this site's commenting policy
  • Clearly unrelated
  • Personal attacks on others
Comments should not be flagged for:
  • Disagreeing with the content
  • Being in a dispute with the commenter

Popular Comment Threads





Copyright © 2014 Express Publishing Inc.   Terms of Use   Privacy Policy
All Rights reserved. Reproduction in whole or in part in any form or medium without express written permission of Express Publishing Inc. is prohibited. 

The Idaho Mountain Express is distributed free to residents and guests throughout the Sun Valley, Idaho resort area community. Subscribers to the Idaho Mountain Express will read these stories and others in this week's issue.