High oil prices weren't a problem during the stock bubble of 2001, or even the housing bubble of 2004. The reason that oil prices are skyrocketing, is simply that traders (mostly hedge funds) are putting all their money into commodities instead of, stocks, real estate or bonds. All that regulation will accomplish is forcing the collapse of the commodities bubble, and we'll end up with a bubble elsewhere.
It wouldn't collapse [all of] the financial industry. Any banks which may already be insolvent without FRB loans would have to declare bankruptcy. There are probably a couple solvent banks out there. Failure seems to be a fair and natural outcome for businesses that are poorly managed or choose unsustainable business models.
The FRB can remove the slosh by not rolling over loans to primaries when they come due, and by putting back the trash securities they took as collateral through the TAF and TSLF.
There weren't high oil prices in 2000 because there wasn't global demand for oil.
Oil is skyrocketing because we are consuming more oil than producing. On a daily basis.
I won't deny that there's a commodities bubble going on right now. But it's not just hedge funds. You have new ETFs opening up for individual investors that grant exposure to other asset classes, which isn't necessarily a bad thing but it's giving the smart money the opportunity to bail before the pop.
Bubbles happen. It's part of the market. Regulation or not, they will still occur.
"Oil is skyrocketing because we are consuming more oil than producing. On a daily basis."
Oil has been fluctuating by as much as 10% per barrel in a single day. That's not due to changing global demand. Global demand for oil can't even be measured that precisely.
Right now, the oil futures market is overreacting to everything -- up to and including speculation that the market might overreact next week. The overall trend is correct, but there's no rational argument for the ~$50 gain per barrel we've seen since the beginning of the year.
If speculation is pushing up the price, why are futures prices less than spot, and why is there no inventory buildup? And why are iron ore prices, for which there aren't futures, up so much?
