The first music video ever shown by MTV back in 1981 was of course, Video killed the Radio Star, and it was a microcosm of how everything in respect to consumer demands and technology changes or replaces the old with the new over time in nearly every industry.
The commodity market is the same way, and it has progressed from a time when cowboys and ranchers would wrangle their herds to the two great cattle markets in Chicago and Kansas City, and where prices were determined by individual negotiations or by auctions.
The buying and selling of commodities has even changed in scope over just the past 30 years, where images of pit traders (like in the movie Trading Places) would mirror the 19th century ‘Stock Markets’, only on a much wider scale, and were later to be replaced today by electronic futures markets where anyone with a brokerage account and a couple dollars can speculate on their prices even if they have no skin (commodities to buy or sell) in the game.
Yet perhaps the greatest change to commodity markets came in 1999 when Wall Street bribed Congress into passing the Graham-Leach-Bliley Financial Services Modernization Act, and opened the door to where every market could be fully manipulated, and ‘weaponized’ through instruments known as derivatives.
Fast forwarding to 2016 and we are perhaps seeing the final days of legitimate trading in the commodity futures markets, as Wall Street manipulation, along with central bank policies, have created an environment where the actual sellers of commodities no longer even want to participate in the markets.
The cattle markets aren’t the only ones seeing sellers leave the game to sell directly to manufacturers and wholesalers. Earlier this year several silver producers discussed keeping their mined metals out of the commodity markets due to the incredible amount of shorting and other manipulations which have kept the price from appropriately moving upward.
Sadly however, this game has a potential cost, and one that Wall Street never seems to analyze in their never-ending pursuit for every last nickel and dime. By cutting off commodity companies and farming interests from participating in a legitimate market, they opened the door for someone else to buy these properties and resources on the cheap, and over the past decade the entity that has prospered the most from commodity financialization is China.
Wall Street is infamous for continuously killing the golden gooses for a quick buck at the expense of long-term reasonable returns and a stable market system. And besides the destruction that financialization has caused to all manners of retirement funds, pensions, the bond markets, and of course housing, it appears now that their locust-like behavior has also destroyed the commodity markets, and has opened the door for foreigners to come in and gladly fill the gap created from their greed and corruption.