What are your thoughts about speculation?

Question

I've been hearing some opinions about speculation. Some blame it for the current economic crisis. Others I've heard say that it should not be regulated. What do you think? Should speculation be regulated? And how much do you think it has hurt our economy? Just want to hear what you think and to learn more about this issue.

Answer 1

Speculation is just another word for gambling.  People like to gamble.  It makes little sense to regulate it, beyond assuring that people really understand the risks they take.  It does not appear that speculation is the cause of the current mess.  The problem with mortgages has been the agents were being paid to produce anything and so they produced anything, instead of good investment grade securities.  As for oil, it is pure supply and demand issue.  Speculation has probably lowered the cost of oil, not the other way around.  It provides liquidity in what would otherwise be an illiquid market.  Liquidity lowers prices, but you cannot see the lowering because you have to see a liquidity crisis to see the alternative.  The banking crisis is from the drying up of liquidity.  The speculators have left and there are not enough investors to pick up the slack.

Answer 2

I don't if speculation itself is to blame. I think the "sub prime" lenders are just as much to blame. I have come to the conclusion that some things need to be regulated and some do not. I'm not so sure that speculation should be regulated. What good would it do. This is a "Free Country" so to speak. I would like to see less regulation in everything. I think the market will eventually determine what can and can't be done. If someone wants to speculate, they should know that they could win or lose. We're talking about the housing market here. But, it's the same with the stock and commodities markets. There is no difference in the speculation aspect. People know what they are getting into when they invest. If people can not afford to lose maybe they should not speculate. lol. Of course that's like saying don't go gambling you might lose your shirt or your house. Just as simple as that.