Skip to main content

Commoditizing the world

Let's discuss commodities; With the latest Enron situation, it is important to understand the way things work. A commodity is anything useful, especially a transportable agricultural product or mining product. This comes from the Latin word "commoditas" meaning roughly advantage, convenience. So then what is a commodity? Well we consider Gold, Silver, wheat, corn, pork bellies, coffee, etc all commodities. If you look in the back of the WSJ or Investors Business Daily you will see a listing of all the commodities traded on the commodities exchange. Enron made some errors no doubt, but let's not judge all commodity markets in haste.

Commodity trading works best when there is a stable instrument of trade. Sometimes the instrument of trade is actually the commodity. If you looked most countries of the world today you would find that there are three basic instruments of trade; money, as in currency, precious metals and gems, drugs; like cocaine, opium, and arms, like grenade launchers, RPGs, bullets, machine guns, WMD, tanks, and surface to air handheld rockets. Yes, this can have horrible human rights issues, but we are discussing this from a theoretical standpoint, not condemning the obvious problems with mankind.

Many countries without a stabilized currency are trading everything in arms and drugs. Even human sex slaves and other unfortunate means; a travesty, which cannot be argued. The commodity trading of cultural products is of necessity to stabilize prices and to feed the world and help in the planning and allocation of funds for future needs. If a farmer cannot make an honest living farming a field then microeconomics tells us that eventually he'll exit the marketplace. When there is a need for a product such as corn, sugar, oil, etc. and that need is so important to the people buying it, then they will be willing to pay in advance a certain price for it, so they can guarantee they will get it. For instance Kellogg's needs sugar to fulfill the needs of their customers who will buy pop tarts. If they do not get the sugar the cannot produce the pop tarts. Everyone loves pop tarts, but if Kellogg has sugar than they cannot make the pop tarts to sell you at Wal-Mart. Kelloggs can due to commodities markets buy in advance and at a known price prior to the harvest of the sugar necessary to produce my Brown Sugar Cinamon Pop Tarts. Think about it.




Source by Lance Winslow

Popular posts from this blog

Distinguishing Traits Of Successful Traders That Can Help You Join The Winning Club

Even the most successful traders do not win on each of their trade entries. What it means is that you will also lose money, before maturing into a seasoned trader. By studying the distinguishing traits of those who are making money on trading literally everyday, you can learn a lot of things. It still does not mean that they do not lose money, but they have learnt to manage the wins and losses with different trade strategies. Studying them can possibly cut a year or 2 from your learning curve. Traits of Professional Traders Planned approach - They have planned their trading strategy in advance. They know - The entry cues Their risk per trade in dollars Trade management techniques Money Management Their exit plan Stick to a premeditated approach - Each move you make should be according to your strategies. Without proper planning, you can easily stumble into pitfalls like overtrading, mismanaging trades, not taking in profits when you should, taking too much

Virtual Currency Games

Every little boy's (and many grown men's) dream of making a living by playing video games is edging closer to reality. The recent release of HunterCoin and the in-development VoidSpace, games which reward players in digital currency rather than virtual princesses or gold stars point towards a future where one's ranking on a scoreboard could be rewarded in dollars, and sterling, euros and yen. The story of the millionaire (virtual) real estate agent... Digital currencies have been slowly gaining in maturity both in terms of their functionality and the financial infrastructure that enables them to be used as a credible alternative to non-virtual fiat currency. Though Bitcoin, the 1st and most well known of the crypto-currencies was created in 2009 there have been forms of virtual currencies used in video games for more than 15 years. 1997's Ultima Online was the first notable attempt to incorporate a large scale virtual economy in a game. Players could collect gold coins