Letters to the Editor
Selling Us Short
Your recount of the Hunts’ abuse by the Fed and inside traders of the financial world, “Nelson Bunker Hunt and the Scheme ‘to Corner the Silver Market’” (December 1, 2014 issue), reminded me of a similar episode involving potatoes about 20 or 30 years ago. Some financial wizards were selling short to the point that the price of potatoes was quite depressed when it came time to harvest. (Selling short involves selling futures contracts on goods that you do not own in the hopes that prices will decline, enabling the purchase of the commodities at a lower price to make a profit.)
As I recall, there were two or three major potato producers who stood to lose quite a bit on their harvest. Their response was to just store their potatoes and not send them to market. When the potato contracts became due, there were no potatoes to be had to cover the short market. This resulted in similar screams for the Fed to do something.
I have no sympathy for these gamblers who want to sell short. While it has a purpose in some cases, such as a farmer trying to lock in a price on his future production, it is an unnatural way to do business, and anyone who gets caught deserves no respite. I feel that it is this type of artificial trading with no value added that causes much of the undesirable fluctuation in the economy. Somebody, somewhere pays for the paper profit reaped by these thieves and usually it is JQ Public in the form of higher prices.
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