For instance, one notable example where specula- tors did arguably distort prices involved the Hunt brothers in the silver market in 1979-1980. ese speculators bought large quantities of silver futures, but to keep prices up they also had to take owner- ship of vast quantities of silver (Williams, 1995). Indian brides in their thousands melted down the silver in their dowries, whence it was shipped to Switzerland, Britain, and the US for delivery to the Hunts. Buried in an avalanche of silver, even the fabulously wealthy Hunts were unable to pay for it all, and when at the end of their nancial rope they sold their silver, prices plummeted.
is example shows that speculators can distort
prices, but it also illustrates that quantity distor- tions are the tell-tale sign of such a distortion. Such quantity distortions have been notably ab- sent in other episodes of speculative excess, most notably in the energy (and other commodity mar- kets) in the summer of 2008. Although specu- lation was widely blamed for the rise in energy prices, as well as for the prices of other commodi- ties in 2008, these markets did not exhibit the in-
ation of inventories that are an important symp-
tom of price distortions.
C A p - A N d -T R A d E :
E f f I C I E N T LY R E G U L AT I N G T h E C A R b o N d E R I VAT I V E S M A R k E T