CFTC Commissioner Giancarlo Withdraws EEMAC Report on Position Limits

The withdrawal of the EEMAC report is a disturbing development on two levels. It is a statement about current levels of tolerance for dissent. It is also a development regarding the substance of a proposed policy that simply refuses to conform to real world facts. 

First, notwithstanding Senator Warren's assertions, there does not seem to be anything either legally or substantively defective in the report. The Senator could not blot the report out of existence. It had been made public. Nor was there anything in the Senator's remarks that detracted substantially from the views expressed in the report (i.e., the Senator's quote of a single study did not serve to discredit it. Numerous economic studies supported it.) So the Senator's ability to have this report "withdrawn" suggests that she has the ability not only to refute those who dissent from her views, but to silence them.  This is very, very not good.*  

Second, turning to the underlying policy issue, "position limits" are inherently difficult to justify from the standpoint of economic theory. Given events in the energy markets during the last several years, the argument that there is a need for position limits on energy (at least past the spot month) seems a remarkable stretch. Just think of all the countries that have massive surpluses of oil: the United States, Russia, Iran, Venezuela, Saudi Arabia, and so on. Despite these facts, Senator Warren's policy prescription rests on the notion that there could be "speculators" out there able to buy up such huge amounts of oil that these countries want to produce and sell that the speculators are able to drive up the price to an "uneconomic" [whatever that means?] level. This is nonsense.  

A position limit system is wasteful and expensive for both the government and the private sector which must adopt, comply with, and enforce meaningless and unnecessary rules. Such cost is not free and comes at the expense of other potential priorities. For example, if the government is looking for places to spend money and save energy, perhaps subsidizing the construction of mass transit systems might be a better, more practical thing to do. Such a choice might even create jobs and save energy. In short, building accounting systems to track who holds how much of an asset that is immensely oversupplied is a waste of the government's resources; it is a burden to the economy; and it ignores the current reality that the world is currently drowning in oil.

*Let us not forget that the silencing of dissenting or unpopular views is not new nor is it likely to succeed. Despite the bans by Boston courts, Molly Bloom found eventual happiness. (See James Joyce, Ulysses.)