by Mark Thoma, University of Oregon (Department of Economics)

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Speculative Nonsense, Once Again

Posted on June 23, 2008

I think it would be fair to describe Paul Krugman as frustrated:Speculative nonsense, once again, by Paul Krugman: OK, one more try. ...[T]he mysticism over how speculation is supposed to drive prices drives me crazy, professionally.So here's my latest attempt to talk it through.Imagine that Joe Shmoe and Harriet Who, neither of whom has any direct involvement in the production of oil, make a bet: Joe says oil is going to $150, Harriet says it won't. What direct effect does this have on the spot price of oil - the actual price people pay to have a barrel of black gunk delivered?The answer, sur...

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futures , spot price