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| I believe I do understand economic theory.
Here's the rub in my simple way of looking at this entire deal.
Economists, being restricted to math oriented explanations, present their thoughts always with the provision the particants, in this case people, are logical to some extent.
Our commodity markets represent free markets & each price transaction represents a variety of emotion and goals. Some logical & some not logical. All depends upon the information available to the player & his/her decision based upon the information....seldom purely logical as well.
Every person whose traded...let's use corn as an example, is familiar with margin calls.
Our politicians and a variety of other people refuse to put in a stop loss and accept their loss.
Our economy is carrying a huge loss.....we have papered over this loss.
Imagine a corn trader --out of cash--lugging a horrible loss--somehow convinces the clearing member to accept his note instead of cash...at some point...the loss must be taken.....If our loser is trading July corn for example, when June 30, the first notice day arrives, the seller may deliver, the buyer may accept or re-tender. Problem. If the seller is the person who has the loss and extended the note...he has no corn....nor the ability to buy any corn to make delivery....if the buyer is the person with the loss, he cannot accept delivery because he cannot pay for the corn.....
At some point, in our capitalistic system, losses must be taken or the price of the commodity has to recover...in order for prices to recover,,,the environment for business must favor growth....In my view, we have a bunch of financial amateurs thinking it can all be papered over and no one will notice..
I fear we are in for a series of one term presidents, a lot of political turmoil, as none of them will want to recognize this loss. The two parties, both of them, need to be purged of the idiots...Quite frankly, an intelligent, capable person at this juncture would be a total fool to run for public office....and that my friends is what I believe we face....a ship of fools racing from one side of the boat to the other.
What I am trying to determine, and this is VERY IMPORTANT...in my illustration is it the seller whose a problem or the buyer? There will be a huge difference in economic response, eventually.
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A Real Simple View
