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It's also based on false premises. For instance, the part that says "Suddenly, these contracts were turned into 'derivatives'" is wrong, since forward contracts
by nandemo 16y ago
It's also based on false premises. For instance, the part that says "Suddenly, these contracts were turned into 'derivatives'" is wrong, since forward contracts are already derivatives, and also exchange-traded futures contracts appeared much earlier than the 1990s. Traders cannot simply "jack up" prices at will since futures can be short-sold, etc.
- cynicalkane 16y agoIt's dumber than that. People have been speculating on food derivatives for centuries. They were the first derivatives. Exchange-traded financial derivatives weren't even invented until the 70s. For example, see http://en.wikipedia.org/wiki/Onion_Futures_Act http://en.wikipedia.org/wiki/Onion_Futures_Act , where speculation on onions was banned in 1953. It probably increased volatility, and more probably made pricing less efficient.
- barrkel 16y agoIndeed, agriculture is one of the original reasons for inventing futures - Chicago Mercantile Exchange starting out as Chicago Butter and Egg board in the 19th century etc. Wikipedia says the first futures contracts were for rice in Japan in the 18th century.