I thinking that if the government just stopped the use of margin accounts in the investing markets that there would be a whole lot less speculation...if you have to use only the money that you actually own, then there wouldn't be so much volatility in the commodities...

I'm not so sure that would work. Small traders tend to use margin (and get wiped out because of it) whereas the large players are more accustomed to using spreads: eg. short US dollar, long oil, where the short position pays for the long position. No margin involved.

The whole thing strikes me as ridiculous and just serves to illustrate how ignorant these politicians are. If they stop margin trading in NY, it will just spring up somewhere else: London, Tokyo, Dubai, etc. It doesn't even need a floor. An electronic exchange works just as well.

There would be another unintended consequence. Right now you can put up US treasuries as security against your position. If the foreign markets won't accept that, then what happens to demand for US treasuries?

The speculation argument is nonsense anyway. Markets are forward looking. All the futures market does is anticipate prices. It doesn't create them. The real price drivers are inflation and scarcity.

I maintain that in the long term the market, not government or central banks, is the stronger force. We are starting to see the truth of that, after many years of interference and manipulation. You can control the market in the short term, but it will always win out in the long term. That's what war and revolution are: the market asserting itself.

I would go so far as to say the market is the underlying force which drives the universe. Protons are in the market for electrons. Grizzly bears are in the market for salmon. It's only a matter of semantics. The fundamental driver is always the supply of whatever discrete entities have a demand for.

ebear