Eden Hill Journal

Comments, dreams, stories, and rantings from a middle-aged native of Maine living on a shoestring and a prayer in the woods of Maine. My portion of the family farm is to be known as Eden Hill Farm just because I want to call it that and because that's the closest thing to the truth that I could come up with. If you enjoy what I write, email me or make a comment. If you enjoy Eden Hill, come visit.

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Location: Maine, United States

Friday, January 08, 2010

Self Destruct Mode

I've come to the conclusion that Wall Street has a built-in self destruct mechanism that nobody seems to be paying attention to even though it nearly destroyed our economy over the past two years. What I am referring to is the commodities trading market which in recent years has come to include things our entire economy depends on like energy, food, and water. These commodities are traded by investors looking for good gains in short-term investments. There are other ways to get such gains, such as milking the cream off the top of the stock market by buying stocks when they dip and selling as soon as there is significant increase in the stock price. Lots of investors make money doing that at the expense many times of long-term investors.

But the commodities market is a different story. Commodities can look good even when the economy and the stock market aren't looking so good. A good example is when the Dow started dropping from its October 2007 high. Investors shaken by the fall of the Dow went looking for something that would hold steady or even go up. They found it in oil and food futures. For awhile there, the first half of 2008, oil was looking like a really good investment so a lot of money went chasing its tail into the oil futures market. The result, as the whole world noticed, was that fuel and food prices headed for the roof.

For the investors - Wall Street - this was seen as a good thing. Money was being made even while the Dow was dropping.

For the rest of the country - Main Street - it was bad. It was inflationary. It devalued the dollar. It was beginning to convince us that suburbia, long commutes, giant houses, and gas-guzzling American-made SUVs were all a bad dream.

The result, driven by this investment in commodities futures, this casino-like mania to make money in a falling economy, drove the whole world's economy into the ditch. And this system still stands waiting for the occasion to rear its head and do the same thing again. I'm no Wall Street expert, but I'd wager that nobody is going to pass laws to prevent commodities speculation the next time the economy takes a dip.