Even if speculators did play a role, what McCain apparently doesn't understand is that speculators perform a valuable service. Most people don't realize this because on the surface speculators don't seem productive. They buy what already exists and resell it. How does that help society?
In fact, the hated speculator is a good guy because his buying and selling reduce volatility and uncertainty in an unpredictable world. He may only be out for his own profit, but that doesn't matter. As Adam Smith wrote, "It is not from the benevolence of the butcher, the brewer or the baker that we expect our dinner, but from their regard to their own interest".
The prices of commodities often change unexpectedly, making business risky. The speculator brings a degree of certainty to otherwise risky ventures. When supplies of a commodity are plentiful and prices low -- but speculators expect the price to rise later -- they buy -- cushioning the collapse of prices. When supplies become scarcer and prices rise, they sell -- easing the shortage and lowering the price. Also, speculators may agree to buy a commodity in the future for a price locked in today. This reduces the risk for an oil producer or farmer who fears investing because he doesn't know what price his product will sell for next year.
As a result of these activities, volatile supplies and prices are evened out over time. Occasionally, speculators increase volatility. Markets are never perfect. (Although they are better than government regulation.) But in general, speculators increase liquidity and keep the market on a more even keel. This makes long-term planning easier for everyone.
It would be nice if McCain would finally learn some economics.
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