Government wants to increase regulation on commodities

In response to high commodity prices Congress is working on laws to tighten regulations. They believe prices may be caused by speculation and not demand. This plan has two major flaws. Increases in Tax and regulations generally cause a product price to increase. The second problem is future trading. At one time commodity trading was of physical commodities. If the commodity is apples there are so many apples currently on the market. During growing season there are also apples in the trees. These may or may not make it to market and represent future product. The government allowed trading of these future commodities, but had strict limits. Commodity prices during the 90’s and early 00’s stayed low because the government expanded the years futures can be traded and relaxed the trading rules. Some oil companies found themselves trapped in contract for oil at a much lower price then the market. Courts decided this was not fair, and let the oil companies out of these contracts. The result is oil no longer trading for as many future years, reduced supply, and higher price. For commodities like silver there are now more futures trading than physical silver in the world. So the Democrats face the possibility of creating a commodity crash much like the housing market. Only in this crash prices go both up and down. The value of futures declines while the price of physical commodities skyrocket and are in short supply. This is even more complicated by Berkshire Hathaway. Realizing that silver futures are now unrealistic the company bought a billion dollars in physical silver. The government response is a law that limits the amount of physical commodities that can be traded in a single month. China has a trillion dollars and has used some of that money to buy futures for things such as wheat. China is exempt from the government limits. So they are currently first in line.