When you study complexity and chaos you begin to realize that many systems are self-sustaining, close looped, and end up solving their own problems. Any large complex system which is ongoing generally has these characteristics. In fact, we see them all the time in nature. In fact, I've often considered this whole issue of global warming, climate change, ice ages, and warming periods as part of the Earth's cycles. If things move too far in one direction, the pendulum shifts, and things go back the other way. In other words there's nothing to be alarmed about, it is the nature of things.
What type of things you ask? Well, perhaps many more things than you've ever considered. For instance our economy, the jobs market, the stock market, and all sorts of other things as well. How about commodity markets? Okay so, let's talk about that for a moment shall we?
There was an interesting article in the Wall Street Journal on October 4, 2012 titled; "Recent Rise in Natural Gas May Be Smoke," by Spencer Jakab which had an interesting bit of insight;
"Whenever consumers complain about the cost of heating their homes, feeding their families, or driving their cars, commodity traders love to remark that 'it takes high prices to cure high prices'. The same thing works in reverse."
Of course in reverse he was speaking to the glut of natural gas on the market causing low prices due to the new fracking technologies creating abundance, and Matt Damon's new movie aside, these new fracking techniques are astounding at freeing up this energy. Now then, when the prices are too low, producers see no profits, thus, some stop producing and through supply and demand things equal out, and the price comes back to meet the demand curve. So, it seems that the Ying-Yang of commodities and free-markets need little intervention to work their magic.
Since free-markets solve their own problems based on willing buyers and sellers, it seems rather ridiculous for lawmakers, regulators, or consumer groups to demand more price scrutiny. After all, these problems will be solved without intervention, and perhaps much faster as well. Further, price intervention for whatever reason or by whatever scheme only seems to exacerbate the volatility causing even more unintended consequences.
For instance, propping up prices in any way creates a bubble, while scarcity creates a run on that product or service, creating artificial scarcity isn't wise either, nor does it prop up prices long if the market allows new entrants. Price limits or price controls also cause shortages as fewer producers find it worth their while to enter the market to provide those goods and services.
Perhaps, we ought to think twice about voting for any politician who suggests big time intervention in commodity, stock, or free markets. Please consider all this and think on it.
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