Local view for "http://purl.org/linkedpolitics/eu/plenary/2008-09-24-Speech-3-283"
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"en.20080924.32.3-283"2
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"Mr President, on 2 January 2008 Richard Arens, who is a trader at Nymex, offered USD 100 000 for a consignment of one thousand barrels of oil. The price of a barrel of oil had reached USD 100 for the first time. The trader laid out some USD 5 000 for this transaction. He sold it on immediately and in doing so accepted a loss of USD 800. It was a small loss that he fittingly celebrated with his colleagues as being the first to break the psychological barrier of USD 100 a barrel.
New York traders were frequently to celebrate new records in the months that followed. On 14 July oil reached USD 148 a barrel. Even if prices are now falling again the damage has been done. The explosion in oil prices has triggered an orgy of speculation in raw materials, including foodstuffs.
The global economy cannot do without markets, but it is unacceptable for the financial world to be indulging in wild commercial gambles more worthy of a gaming casino. With a lever of a mere USD 5 000 the New York trader had succeeded in triggering a wave of speculation on oil that was to wreak havoc throughout the world economy. The stock-market authorities finally put the brakes on this unadulterated speculation by prohibiting traders, at least temporarily, from selling shares they did not hold, a process known as ‘naked short selling’. If we are to curb this unhealthy practice it is not temporary rules that we need but absolutely strict regulations. We therefore have to be more consistent in the way we control the gambles being made by the speculators. The US Senate is now debating a proposal aimed at increasing to a minimum of 25% the actual stake being put up by traders for each transaction. This would prevent many of the risky gambles that at the moment are based on nothing more than small change.
The amount of money invested in the US raw materials market alone has increased tenfold in the course of the last four years. The price index for the 25 main commodities has exploded by more than 200%. Price levels are no longer being determined by physical supply and effective demand for raw materials but by the speculative mechanisms of the financial markets. During the first six months of this year 60% of the deals being done on the American oil market were for virtual oil that was repeatedly sold and re-sold. The stock exchange is no longer being used as a means for adjusting the complex interplay between available supply and actual demand but has become a venue where bets are being placed on financial products whose complexity is even too much for those in charge of the finance companies to understand. The only thing that matters to the traders and their bosses is the bonus. All these ‘golden boys’ from this global casino have pocketed millions while losing billions belonging to their clients. The profits were cashed in while the losses have now been nationalised. American taxpayers are going to have to fork out more than USD 1 000 billion to pay off the bad credits of the financial world. This is equivalent to seven times the total EU budget.
In Europe, too, purchasing power is down, credit has become more expensive and recession is looming. The Commission and the national governments have always refused to introduce too much regulation to the financial markets, which were renowned for their efficiency. However, with the total demise of these financial geniuses the public authorities now have to act quickly by imposing stricter rules and by introducing effective measures to prevent the wild speculation running through the markets, including the oil market."@en1
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