Why do lawmakers think speculators are driving up food and energy prices?
It all has to do with what’s been going on in commodities futures markets. Traditionally, these markets were used by players such as farmers, miners or refineries — who either produce the commodities being traded, or rely on them to do business. Activity on futures markets helps set the benchmark global price for food and energy. In recent years, however, commodities markets have seen a flood of new money from institutional investors — such as hedge funds, pension funds and index funds linked to commodities. Investment from commodities-linked indices jumped from $13 billion in 2003 to $260 billion today, according to Michael Masters, the head of Master Capital Management LLC, a hedge fund. These investors aren’t in commodities because their business depends on it; they’re simply looking to make a profit from fluctuations in prices (that’s the classic definition of speculation, and it’s perfectly legal). But many lawmakers and other critics blame these new investors for driving up price
