Reinstate Physical Hedger rules for commodities

[joel.a.berger]

--see note at the end for a comment on the location of the protest in the context of this post--

As well described by author and Rolling Stone correspondent Matt Taibbi in his book Griftopia, starting in 1991 large investment companies had themselves declared "physical hedgers" by the CFTC. These exemptions allowed these select few companies to obey the set of rules that true "physical hedgers" follow on the commodities market. This must end and be prevented in the future. 

Physical Hedgers are commodities producers or commodities consumers who are protecting themselves against price swings by taking a guaranteed price of a commodity when it comes to buy/sell in the future, rather than chancing that it will move either in your favor or otherwise. Farmers may be willing to settle for a set price on corn, so they can be sure to profit from a crop rather than risk that the price will go up and make extra or price go down and not make ends meet. Airline companies are willing to buy needed fuel at a set price for similar reasons.

These "Physical Hedgers" have an interest in a stable commodities market and as such are granted a certain set of rules specifically about the amount of involvement they may have in the process (nearly unlimited). However to make sure there is enough liquidity in the market, speculators have always been able to be involved in a limited quantity. Speculators profit when the market moves and especially when prices increase. The limitation is necessary because rather that Wall Street market movement, commodities change prices on products at the consumer level. There is no better example than the oil market. As the price of crude oil on the commodities exchange increases so does the price at the pump.

By allowing speculators to be declared "physical hedgers" they have been allow to (and they have) moved the market, netting large profits and DIRECTLY impacting the lives of all people who depend on commodities (like food and gas) in their daily lives. This MUST be stopped, not only ethically, but to help the common man and allow his disposable income to flow back into the broader economy to help end this recession!

Note also that being in Chicago, the home of the Chicago Mercantile Exchange, the site of this corruption, I submit that protests should be held at that facility rather than at the Chicago branch of the Federal Reserve, which has no specific relevance to our current market problem.

[mcfuzz]

I love the post and agree wholeheartedly!

So many of the legal privileges these financial corporations enjoy are laughable lies. They are gamblers, not physical hedgers! This reminds me of corporate personhood, which was granted by the supreme court clearly misinterpreting the 13th amendment meant to give civil liberties to slaves. Clearly these institutions are hurting commodities markets, not providing the necessary services depending on them. And clearly, corporations ARE NOT PEOPLE!

On the last point, do you mean we should move all our protests to the merc from the fed? Because we have more problems than just the merc and physical hedging!

Are you wanting to organize a specific protest for this grievance? I'm sure lots of occupiers would support it as they support other rallies in downtown--and the merc is very close to the fed, is it not?

[joel.a.berger]

What was the rationale behind being at the Chi Fed? Other than being a part of the Federal Reserve system, I can't think of anything the Chicago Fed has been a major part of. The New York Fed and the Washington Fed have contributed to the financial crisis, but I don't know if the Chicago branch has been a major player.

[joel.a.berger]

I should reiterate, I really am asking and not trying to sound haughty. I also am not saying that you should abandon the Fed, but I think that Merc is such a major site of the current situation, it would be a shame to not use that option.