Free markets are great. Free markets on steroids—not so much.
Momentum trading in stocks is all the rage. Instead of buying low when everyone is scared, and selling high when everyone is greedy, the game plan now is to ride, or push, a trend. Get in and get out before the music stops.
The price of oil acts as a tax on the People. A free market should allow investors to find the "right" price for oil. But huge numbers of traders going into the margin, borrowing against their portfolio to "juice" returns and exaggerate the moves, is abusing the public.
If you want to trade in oil related stocks do so with your own money. Not leveraged against your portfolio and our fellow citizens.*
This should be a worldwide effort with the U.S. showing leadership by going first. Oil price volatility will be reduced, not eliminated, as will pressure on the family budget.
In essence, if this were not to pass, traders will continue to have the ability to "tax" the American People. That can't be what the founders had in mind.
*This would also ban double and triple, long and short ETFs in the oil market.
I'm dubious about the idea of singling one commodity market out for this treatment. Why oil, for instance, but not the sugar, market. Traders speculating there affect the price of most food we buy. We don't all drive, but we all eat.
Why not silver or gold? Surely speculation in these markets has long enriched traders at the expense of everyday Americans.
For that matter, why not currency speculation? Is there a market where trader-induced volitility has benefitted the haves, to the detriment of the have-nots, more than in currency speculation?
At least higher-priced oil encourages conservation and the development of alternative energy sources.
I'm persuadable. But, at first blush, this proposal does not seem like a good idea to me.
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