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The Commodities Market Bubble: Money Manager Capitalism and the Financialization of Commodities

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  • L. Randall Wray

Abstract

Money manager capitalism--characterized by highly leveraged funds seeking maximum returns in an environment that systematically underprices risk--has resulted in a series of boom-and-bust cycles in equities, real estate, and commodities. Because subsequent cycles have been increasingly damaging to the broader economy, we are now at the point where we are experiencing the most severe financial crisis since the Great Depression. Hasty interventions (bailouts) by Congress, the Treasury, and the Federal Reserve are attempting to keep the financial industry solvent, in the belief that government inaction would result in a prolonged recession. In this new public policy brief, Senior Scholar L. Randall Wray shows how money manager capitalism (financialization) has destabilized one asset class after another. He concludes that policymakers must fundamentally change the structure of our economic system, break the cycle of booms and busts, and reduce the influence of managed money--as well as prevent the next speculative boom in yet another asset class.

Suggested Citation

  • L. Randall Wray, 2008. "The Commodities Market Bubble: Money Manager Capitalism and the Financialization of Commodities," Economics Public Policy Brief Archive ppb_96, Levy Economics Institute.
  • Handle: RePEc:lev:levppb:ppb_96
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    File URL: http://www.levyinstitute.org/pubs/ppb_96.pdf
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    References listed on IDEAS

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    1. Edward E. Leamer, 2007. "Housing is the business cycle," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 149-233.
    2. L. Randall Wray, 2008. "Financial Markets Meltdown: What Can We Learn from Minsky," Economics Public Policy Brief Archive ppb_94, Levy Economics Institute.
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    Cited by:

    1. Baffes, John & Haniotis, Tassos, 2010. "Placing the 2006/08 commodity price boom into perspective," Policy Research Working Paper Series 5371, The World Bank.
    2. van der Mensbrugghe, Dominique & Osorio Rodarte, Israel & Burns, Andrew & Baffes, John, 2009. "How to feed the world in 2050: Macroeconomic environment, commodity markets - A longer temr outlook," MPRA Paper 19019, University Library of Munich, Germany.
    3. Vijay Kumar Varadi, 2012. "An evidence of speculation in Indian commodity markets," EconStor Preprints 57430, ZBW - German National Library of Economics.
    4. Yeva Nersisyan & L. Randall Wray, 2010. "The Trouble with Pensions: Toward an Alternative Public Policy to Support Retirement," Economics Public Policy Brief Archive ppb_109, Levy Economics Institute.
    5. Marshall Auerback & L. Randall Wray, 2010. "Toward True Health Care Reform: More Care, Less Insurance," Economics Public Policy Brief Archive ppb_110, Levy Economics Institute.
    6. Yeva Nersisyan & L. Randall Wray, 2011. "Public Policy to Support Retirement: An Alternative to Financialization," Chapters,in: Heterodox Analysis of Financial Crisis and Reform, chapter 2 Edward Elgar Publishing.

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