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Derivatives don't so much reduce pricing volatility as allow people who don't want to be exposed to the risk to exit the market and leave it to the daytraders.
by bcoates 14y ago
Derivatives don't so much reduce pricing volatility as allow people who don't want to be exposed to the risk to exit the market and leave it to the daytraders.
Everyone in the food industry, by definition, is speculating on food prices, there is no reason to think the farmers are any more altruistic than the banks, and somebody has to make the market.
- apk17 14y agoThat would mean that everyone is in speculation, as everyone is in some industry, and we are all at the receiving end of the food industry. The difference being, that farmers as well as consuments have an interest in sustained prices and in the product itself while banks are actually speculating - trying to convert money into more money without care for the consequences. (For consuments the sustained interest is obvious, but farmers are also interested in stability since they can't shift their investments around as easily and lossless as speculants can.)