AS costs for energy and food rise, the impact that speculators have on commodity prices is being debated by politicians and the public. The recent volatility in crude oil prices — increasing to nearly $150 per barrel and then falling to below $130 — has only heightened these concerns.
It is commonly asserted that speculative buying in futures markets has created a “bubble,” in which market prices far exceed fundamental values. As a result, members of Congress are proposing to limit speculation in commodity futures markets by, among other things, requiring bigger margins (increasing the initial “good faith” deposits required to trade futures contracts).
The history of United States futures markets is riddled with confrontations between politicians and speculators. Just after World War II, soaring grain futures prices, especially for wheat, attracted political attention. President Harry Truman proclaimed that “the cost of living in this country must not be a football to be kicked about by gamblers,” and ordered the Commodity Exchange Authority (precursor to the federal body that oversees futures markets, the Commodity Futures Trading Commission) to require futures exchanges to raise margins on all speculative positions to the extraordinary level of 33 percent. In a statement hauntingly similar to those emanating from the halls of Congress today, Truman declared, “If the grain exchanges refuse, the government may find it necessary to limit the amount of trading.”
From 1972 to 1975, United States and international commodity markets experienced rapid price increases, setting records across a broad range of markets. The increases were widely attributed to speculators and the growing futures industry, and public and political pressure to curb speculation resulted in regulatory proposals and an increase in futures margin requirements. These changes were accompanied by even more drastic measures, like federal price controls and a prohibition of soybean exports, aimed at lowering commodity prices.
http://www.nytimes.com/2008/07/20/opinion/20irwinsanders.html?th&emc=th
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