Following hearings earlier this week, the chairman of a US Senate committee said that legislation to limit the influence of investment funds in commodity markets might be considered. This follows mounting concern about soaring energy and food prices worldwide.
“We may need to limit the opportunity people have to maximize their profits because a lot of the rest of us are paying through the nose, including some who can’t afford it,” said Joseph Lieberman, chairman of the Senate Homeland Security and Government Affairs Committee, according to Bloomberg News.
Experts giving evidence to the committee offered opposing views on the role of the investment funds in commodity markets. Jeffrey Harris, the chief economist for the Commodity Futures Trading Commission, said it was clear that there were more institutional investors in commodities, but argued that prices “are being driven by powerful fundamental market forces and the laws of supply and demand”. On the other hand fund manager Michael Masters told the committee that “Institutional investors are one of, if not the primary, factors affecting commodities today. As money pours into the markets, two things happen concurrently: the markets expand and prices rise.” Amongst other measures, Masters proposed that the US government prohibit commodity index investing as a vehicle for pension funds.
