How Will Obama Protect Us From Onion Speculators?

President Obama last week pledged to end the speculation in oil futures that even he doesn’t claim has made the price of gas more expensive. According to Obama’s politics – which amount to a stubborn belief that Americans are as ignorant of the law and easily propagandized as they were in 1935 – this is a smart move. But it's a vacuous proposal that will not stop price swings in oil, and it could even make oil pricing more erratic.

Mark J. Perry, redoubtable AEI scholar and professor of business and finance at University of Michigan Flint, put together this chart to show how oil pricing stacks up against pricing of a product so common we tend to ignore it even though, unlike oil, it can easily move us to tears.

By law, there is no speculation in onions, and yet the price of the kitchen staple goes up and down with enough energy to make Marlon Brando in The Formula chortle with piggy glee. Says CNN

The bulbous root is the only commodity for which futures trading is banned. Back in 1958, onion growers convinced themselves that futures traders (and not the new farms sprouting up in Wisconsin) were responsible for falling onion prices, so they lobbied an up-and-coming Michigan Congressman named Gerald Ford to push through a law banning all futures trading in onions. The law still stands.

And yet even with no traders to blame, the volatility in onion prices makes the swings in oil and corn look tame, reinforcing academics' belief that futures trading diminishes extreme price swings. Since 2006, oil prices have risen 100%, and corn is up 300%. But onion prices soared 400% between October 2006 and April 2007, when weather reduced crops, according to the U.S. Department of Agriculture, only to crash 96% by March 2008 on overproduction and then rebound 300% by this past April.

The volatility has been so extreme that the son of one of the original onion growers who lobbied Congress for the trading ban now thinks the onion market would operate more smoothly if a futures contract were in place.

"There probably has been more volatility since the ban," says Bob Debruyn of Debruyn Produce, a Michigan-based grower and wholesaler. 

While there’s no reason to regulate futures speculation in anything, I don’t see why Debruyn’s special pleading deserves credit here. Do people understand that rapid up-and-down price swings are a sign that a market is working the way it’s supposed to? Does America need to move away from the prix fixe and adopt Arab-style haggling to get this very basic economic point? Have these people ever been to a yard sale? Trying to maintain price stability is like expecting to remain the same age for the rest of your life. 

 

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  • sarcasmic||

    Mandolins give me the heebie jeebies.

  • Night Elf Mohawk||

    People who use them bare-handed give me the heebie-jeebies.

  • sarcasmic||

    People who wear kevlar gloves give me the heebie jeebies.

  • anon||

    People that use the phrase heebie jeebies give me the heebie jeebies.

  • sarcasmic||

    People give me the heebie jeebies.

  • Night Elf Mohawk||

    People who don't hyphenate heebie-jeebies give me the heebie-jeebies. Also, Bruce Hornsby gives me the heebie-jeebies.

  • anon||

    Ok guys, seriously. I have a bad case of the heebie jeebies.

  • sarcasmic||

    Bruce Hornsby and Ricky Skaggs do a killer cover of Superfreak.

    I shit you not.

    Look it up.

    It's so good it will give you the heebie jeebies.

  • Killazontherun||

    I had a high school friend that was in a bluegrass band in the 80's. Oddly enough, though popular in Scotland they were unknown here. He taught himself every lick in both Skaggs and Tony Rice's repertoire up to that time, as well as being a decent soloist on his own terms. Jaw droppingly gifted player.

  • John Thacker||

    I like how we worked our way back to mandolins of a different sort.

  • Brandon||

    Is that even a mandolin? I thought mandolins were the ones with a single horizontal blade that you ran the veggies through repeatedly. That looks more like just a slicer. And it would be difficult to flay yourself on that thing, with or without kevlar.

  • Pro Libertate||

    So we're going to get rid of the commodities exchanges? Does he realize there's a big one in Chicago?

  • ||

    "My God! The Dukes are going to corner the entire frozen orange juice market!"

  • ||

    "Y'all are nothing more than a coupla bookies!"

  • Pro Libertate||

    As a Floridian, I have felt the pain caused by speculators in FCOJ. The pain. The pain!

  • ||

    "Though, of course, gold doesn't grow on trees like oranges."

  • ||

    Here, put your hand in this box.

  • ||

    "Monkey? Monkey??? I'm a fucking gorilla, you clown!"

  • Pro Libertate||

    Jim Belushi's greatest hour.

  • ||

    And, arguably, Al Franken's.

  • rts||

    As much as I love that movie, it has done irreparable harm in perpetuating the myth that markets are zero-sum games, even if indirectly.

  • ||

    "No more goddamn jerky beef!"

  • BakedPenguin||

    "It gives me the wind, something fierce."

  • Brandon||

    What movie? I saw Dukes, I thought it was something from Dukes of Hazzard. Which I've never seen either, except some highlights on Youtube and Family Guy spoofs.

  • rts||

    This is it. The last bastion of pure capitalism left on earth. Here in New York they trade everything, gold, silver, platinum, heating oil, propane, cocoa and sugar and, of course, frozen, concentrated orange juice.

  • plu1959||

    Please tell me you guys are not coming up with all these quotes solely from memory.

  • T||

    Sadly, they probably are. The collective brainpower wasted on this board alone by memorizing obscure bits of pop culture probably could have ushered in a libertarain rennaissance had it been better applied.

  • anon||

    I think you're viewing it from a glass half-empty approach.

    See, we memorized the quotes because we have to spend so much time watching bullshit to take our minds off of the ass-raping we've been on the receiving end of for the past 100 years.

  • Concerned Citizen||

    Don't get started on Glengarry Glen Ross quotes. Another great capitalism movie.

  • Restoras||

    "Coffee is for closers"

  • Death Rock and Skull||

    You look like the better part of you dripped down your mother's asscrack and brown stained the mattress.

  • ||

    "Those men wanted to have sex with me!"

  • Pro Libertate||

    I least I can spell Renaissance.

  • Scarecrow Repair||

    Everyone can spell it. Some just have enough imagination and freedom to spell it differently. Andrew Jackson did have some good thoughts.

  • NAR||

    Those spikes look like they happen during the same period of every year, indicating it's a time when production is low.

    That said, it's funny.

  • anon||

    Man, who would figure that a vegetable has a peak growing season!

  • anon||

    Oh, and of course, nobody could *ever* anticipate when that lull in growth is going to occur. Not unless it's government!

  • wareagle||

    how did people manage to grow crops before there was a Dept of Ag?

  • anon||

    They didn't, obviously. Agriculture couldn't have existed before there was regulation for it.

  • $öç íñδ√ Sparky||

    Well, according to he who shall not be named, agriculture IS destroying humanity.

  • Restoras||

    I thought He Who Must Not Be Named beleived that airlines are destroying humanity?

  • KDN||

    HERCULE believes cats and their piss are destroying the Earth. I read his full essay and agree wholeheartedly. His logic is unassailable.

  • fish||

    He is magic with the English language as well!

  • Death Rock and Skull||

    He is right that cat piss is highly destructive.

  • BakedPenguin||

    "... and bacon. Which you might find in a bacon, lettuce and tomato sandwich."

  • Pro Libertate||

    "Hey, we're losing all our damn money, and Christmas is around the corner, and I ain't gonna have no money to buy my son the G.I. Joe with the kung-fu grip!"

  • ||

    "Of course there's something wrong with him. He's a Negro!"

  • ||

    "Fifty bucks? No, no, no. This is a Rouchefoucauld. The thinnest water-resistant watch in the world. Singularly unique, sculptured in design, hand-crafted in Switzerland, and water resistant to three atmospheres. This is *the* sports watch of the '80s. Six thousand, nine hundred and fifty five dollars retail!"

  • ||

    Man, burn my fingers!

  • Restoras||

    "In Philadelphia, it's worth fifty bucks"

  • ||

    "How much for the gun?"

  • Heroic Mulatto||

    Have these people ever been to a yard sale? Trying to maintain price stability is like expecting to remain the same age for the rest of your life.

    These are the same people who expect weather/climate (a dynamic, chaotic system) to stay the same FOREVER!

  • Bee Tagger||

    Trying to maintain price stability is like expecting to remain the same age for the rest of your life.

    Or passing laws expecting conditions like income (both definition and value of the dollar) or lifespan to remain the same.

  • $öç íñδ√ Sparky||

    a product so common we tend to ignore it even though, unlike oil, it can easily move us to tears.

    Careful Tim, some people here think puns are only used by those of lesser mind...

    On second thought, you might be safe.

  • Hugh Akston||

    Once again you're on the side of the obstructionist nihilists, Tim. Ford helped ban onion speculation and thus indisputably staved off Peak Onion. Now onions are available at any local supermarket at a price that anyone can afford. All thanks to the forward thinking efforts of our benevolent governing class.

  • anon||

    Well obviously the only thing Ford did wrong was neglect to implement actual price controls on Onions ala FDR.

    Because if we make it illegal to sell onions at a profit those spikes wouldn't occur!

    /sic

  • wareagle||

    Tim,
    Obama is not suffering from a stubborn belief that Americans are ignorant of the law and easily propagandized, he is counting on it as cold, hard reality. Without a massively uninformed population, liberalism would have long since died.

    He tried the oil speculators gambit to cover his lack of initiative on energy that is not green. It's always someone else's fault when bad things happen and oil companies are an easy boogeyman.

  • Pro Libertate||

    You know, we're collectively stupid, but I think he stepped over into "Who cares what the dude says?" some time ago. None of this stuff seems to have legs, which his people should be very concerned about. I think it's clear that even some leftists are counting the days until he's gone, realizing that being a parasite on a dead host isn't good for business.

  • ||

    I posted my last quote too early, didn't I?

    "Of course there's something wrong with him! He's a Negro!"

  • ||

    "I had the most absurd nightmare. I was poor and no one liked me. I lost my job, I lost my house, Penelope hated me and it was all because of this terrible, awful Negro."

  • ||

    "That man is a product of a poor environment!"

  • ||

    "You IDIOT! You and your Nobel Prize!"

  • Pro Libertate||

    Whoa. Prescience.

  • ||

    I think we've demonstrated conclusively that Trading Places was not a movie, but actually a warning from the ancients. We didn't listen!

  • anon||

    Meh, I liked the movie, but didn't like how it portrayed insider trading as a bad thing.

  • wareagle||

    Hollywood, dude. Has business ever been portrayed in a positive light in a movie?

  • Pro Libertate||

    Well, there's Rick's Café Américain.

  • Marshall Gill||

    Other People's Money?

  • anon||

    I think it's clear that even some leftists are counting the days until he's gone, realizing that being a parasite on a dead host isn't good for business.

    I think the parasites might finally realize that killing their hosts necessarily means killing their way of life.

  • sarcasmic||

    Not if history is any guide.

    Government is the great fiction through which everybody endeavors to live at the expense of everybody else.
    --Bastiat
    http://bastiat.org/en/government.html
  • ||

    Why do you think donations from corporate big wigs are slow to materialize? Even the lefty ones?

  • wareagle||

    even the lefty ones are guided by profit. Yes, they were more likely to buy the Hopium in '08 but a good many who tilt right sopped it up, too.

  • wef||

    The Secret Service should have made use of the whore futures market in Colombia. It would have locked in the price and have hedged against unpleasant spot-market ups and downs, so to speak.

  • sarcasmic||

    The first lesson of economics is scarcity: There is never enough of anything to satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics.
    --Thomas Sowell
  • Concerned Citizen||

    One of my favorite Thomas Sowell quotes.

  • ||

    Also:

    SPECULATORS!!!!

  • anon||

    Ok, time for a serious question:

    How can it be possible for a man educated at Harvard to have no clue on how speculation in a commodity's prices helps stabilize that commodity's price?

    Isn't this supposed to be the "best" university in the world or something? Or at least second best?

    What the fuck do they teach there? "How do do a line off a hooker's ass 101?"

  • wareagle||

    How can it be possible for a man educated at Harvard to have no clue on...

    it's a question that answers itself. It's why Buckley was more comfortable with the thought of hte first 50 folks in the phone book making decisions instead of the Harvard faculty.

    A more serious answer is in his own words, in his book: look at the folks with whom he spent time. They were not scientists or inventors or future tycoons. They were agitators-in-training. Obama has no clue because he has never sought one on how business works. To him, it is an evil to be punished.

  • Brandon||

    Don't you dare use the "A" word as a pejorative!

  • ||

    "He was wearing my Harvard tie. Can you believe it? My Harvard tie. Like oh, sure he went to Harvard."

  • ||

    They're a very musical people, aren't they?

  • ||

    "Look at that Ess...Car...Go! Aha ha ha aha!"

  • Concerned Citizen||

    That movie didn't feature Jamie Lee Curtis' ass. Why have her in a movie without at least one good shot of her ass?

  • Restoras||

    I beleive it did feature her rack.

  • Concerned Citizen||

    That's all well and good, but they had her in a bikini, and tight jeans, and not one shot of her backside.

  • Pro Libertate||

    Please, a little respect. That's the Lady Haden-Guest you're talking about.

  • leviramsey||

    She definitely got her tits out in that film... I distinctly remember finding the issue of Playboy with the 1983 review of Sex in the Cinema with a screenshot of a topless Miss Curtis standing over Mr. Aykroyd lying in bed.

    Surely that must count for something!

  • sarcasmic||

    You mistakenly believe that his goal is to stabilize prices.

    His goal is to expand government power.

    If that means ignoring basic economics, so be it.

    It's not like the average voter has a clue.

  • anon||

    True, I do take him at his word. When the rationale provided for banning speculation is to stabilize prices, my first response is merely "Wow, that's stupid" rather than "Wow, he's an evil fuck."

  • sarcasmic||

    Never let a crisis go to waste.

  • wareagle||

    It's not like the average voter has a clue.

    Game, set, match. That is what he counts on; an informed population would never have even considered Obama, let alone elected him POTUS.

  • Brandon||

    "It's not like the average voter has a clue."

    For more on this, check the comments on any given story at HuffPo.

  • KDN||

    How can it be possible for a man educated at Harvard to have no clue on [insert topic here]?

    My MBA intro to corporate finance course consisted of 2.5 - 3.5 hrs per week of this statement repeated over and over again. It's fortunate I already knew all the material heading into the class or I might have been annoyed at such a waste of money. Instead, I was just entertained by the old coot.

  • ||

    I wasn't educated at Harvard, but I suspect it's because he was taught law, not economics. Admittedly, I have not looked at the core curriculum for Harvard Law. Or the core curriculum for Occidental College either. So he may have taken the requisite econ classes, but absorbed or adsorbed nothing.

    Another way of putting is, Medical School teaches one to DX and TX disease, not how to run a business (also a lesson to be had there).

  • ||

    That's why my groinocologist had an MBA and an MD.

  • R C Dean||

    I did take a class with Lucien Bebchuk on, I believe, corporate finance, where we at least nodded in passing at such econ issues as liquidity, valuation, and so forth.

    But I would be shocked to learn that Barack took anything so, so, bourgeois as a corporate finance class. Of course, if we had his fucking transcripts we could just a take look and find out.

  • Gray Ghost||

    Relating to Obama's coursework, something John posted awhile back puzzled me. How does the first black EiC of the Harvard Law Review not have a judicial clerkship? You'd have thought that any of the SCOTUS Justices would have dragged him in at gunpoint, but he doesn't even have a district court clerkship, AFAIK.

    Weird, and I've never heard of a good answer as to why he didn't.

  • ||

    You know, relative price stability is desirable. I need to know that if my electric bill is $200 this month, it isn't going to be $2,000 next month given the same usage.

    That said, futures markets are the best way to ensure that happens.

  • anon||

    Not to mention that speculation helps ensure the availability at *any* price.

    I'd rather pay 8 bucks a gallon than not be able to buy oil because it wasn't worth it for anyone to drill it.

  • anon||

    So he may have taken the requisite econ classes, but absorbed or adsorbed nothing.

    I understand your premise but find it faulty. Economics is pretty much the basis for civilization; hence, the reason Law exists in the first place.

    One would think that to have an understanding of law you would have to have a *tiny* bit of understanding of economics.

  • sarcasmic||

    sarcasmic|4.23.12 @ 12:32PM|#

    The first lesson of economics is scarcity: There is never enough of anything to satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics.
    --Thomas Sowell

  • Brandon||

    And Obama is probably a much better politician than he ever was a lawyer.

  • Phil Perspective||

    Quoting Thomas Sowell just shows how much of an idiot you are.

  • ||

    One would think that to have an understanding of law you would have to have a *tiny* bit of understanding of economics.

    I never said he didn't understand it, I'm he woefully and willingly disregards it, as Dr. Sowell states more pithy than me.

  • ||

    "...I'm saying he..."

  • ||

    My father was a fucking farmer and he got it. And he was a liberal democrat too. But that didn't stop him from using the futures markets to protect him from volatility. Sheesh.

  • ||

    SPECULATORS!

  • ||

    ^^^T'was in response to Jim^^^

  • anon||

    Appropriate anyway.

  • NotSure||

    I am guessing that most people here see this only as a joke, but in India they have had real issues with governments controlling onion prices, and the predictable problems when the it no longer was possible to sustain the onion subsidies.

  • Ex Nihilo||

    Holy crap Ganesh.

    The price for a kilo (2.2 pounds) of onions at the vegetable market has jumped to about 70 rupees ($1.55), almost five times the usual price and roughly the same price as the more upmarket mango.

    Hopefully this will induce farmers to enter the onion market. Or importers:

    On Wednesday, it extended that ban indefinitely (exporting onions) and scrapped customs duties on imports of onions, asking state-run trading agencies to import them.

    Food and food prices just may be the thing that brings many governments down. Wasn't this what kicked off the Arab spring?

  • wareagle||

    these things are funny precisely because they are true. But the central planners in this country are so much smarter than the ones in other countries. If only we didn't stand in their way.

  • ||

    Now where was I... oh yeah. The important thing was that I had an onion tied to my belt, which was the style at the time. You couldn't get white onions, because of the war. The only thing you could get was those big yellow ones...

  • Phil Perspective||

    Rapid moves up and down are no reason to regulate anything? Do you have any idea why something would move up and down so rapidly? Yeah, didn't think so!! Will you acknowledge that higher oil prices help the sugar daddy you all seem to hate now?

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