http://hsgac.senate.gov/public/_files/052008Masters.pdfhttp://globaleconomicanalysis.blogspot.com/2008/05/quantifying-commodities-speculation.html
Chart One shows Assets allocated to commodity index trading strategies have risen from $13 billion at the end of 2003 to $260 billion as of March 2008, and the prices of the 25 commodities that compose these indices have risen by an average of 183% in those five years!
Solutions:
Number One:Congress has closely regulated pension funds, recognizing that they serve a public purpose. Congress should modify ERISA regulations to prohibit commodity index replication strategies as unsuitable pension investments because of the damage that they do to the commodities futures markets and to Americans as a whole.
Number Two:Congress should act immediately to close the Swaps Loophole. Speculative position limits must “look-through” the swaps transaction to the ultimate counterparty and hold that counterparty to the speculative position limits. This would curtail Index Speculation and it would force ALL Speculators to face position limits.
Number Three:Congress should further compel the CFTC to reclassify all the positions in the Commercial category of the Commitments of Traders Reports to distinguish those positions that are controlled by “Bona Fide” Physical Hedgers from those controlled by Wall Street banks. The positions of Wall Street banks should be further broken down based on their OTC swaps counter-party into “Bona Fide” Physical Hedgers and Speculators.
The problem with Masters' solution is that commodity speculation is "A" problem, not "THE" problem. A still better way of looking at it is that commodities speculation is symptom of a much larger set of problems:
Fractional Reserve Lending
Past monetary inflation
The Fed's willingness to blow bubble after bubble
Loose lending standards by the Fed
Carry trades in Japan
Runaway spending by Congress
...
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