3min chapter

SmarterMarkets™ cover image

Days of Futures Past Episode 1 | Scott Irwin, Professor, University of Illinois and Author of “Back to the Futures”

SmarterMarkets™

CHAPTER

The Importance of Markets in the Future

Holberg: Markets are more delicate than most people understand, that they can be thrown off kilter easier than I believe is commonly understood. Holberg: It's so easy to basically mess up these markets and I would be remiss to not at least mention the self-inflicted wound of the London Metal Exchange with the nickel futures contract. You can kill these markets fairly easily if you get them out of balance and out of culture. They're incredibly important, but they're more delicate animals than people realize.

00:00
Speaker 2
Well, and it's important that there are thoughtful people like yourself who understand these markets that are understanding the importance that they bring to the economy and that the roles of those who often are taken as the antagonists in the story of markets are well understood as for the positive things that are bringing to the marketplace. And I wanted to ask you, as we wrap up, carrying on in this tradition of a Holberg working in Roger Gray and others, I believe that writing your book is part of that tradition of trying to preserve the lessons of the past on how we can keep our commodity futures markets thriving and remaining vibrant and innovative. So the last question I wanted to ask you was, what do you think are the lessons that are the most important that we should be remembering for the future?
Speaker 1
That markets are more delicate than most people understand, that they can be thrown off kilter easier than I believe is commonly understood, you know, kind of going back to our first part of our conversation. They're delicate balances of commercial interests that allow them to flourish and function. And when you kind of get in there and hack away at the rules in a very crude fashion, you can have, you can profoundly harm those valuable functions of the marketplace. And so I'm not, I don't want to come across as saying the markets never have problems, trust me, they have problems. But kind of just going in there and hacking away with severe rules or restrictions rarely is helpful. That, you know, you have to think about it, you have to understand at a really deep level how the markets work and the balancing of these contract terms and get in there and if some fiddling and messing with the dials and switches needs to happen, that can happen. But, you know, it's so easy to basically mess up these markets and I would be remiss to not at least mention, you know, the self-inflicted wound of the London Metal Exchange with the nickel futures contract. Classic example of a part of that market experiencing extreme pain from extraordinarily high prices in the immediate aftermath of the outbreak of the Russia Ukraine war. And that exchange made some, the decisions wouldn't make the front page, but they favored the short side of the market. They committed the cardinal sin of managing these kind of contracts. And as far as I can tell, they, they killed the market. So that's the lesson. You can kill these markets fairly easily if you get them out of balance and out of culture. They're incredibly important, but they're more delicate animals than people realize.

Get the Snipd
podcast app

Unlock the knowledge in podcasts with the podcast player of the future.
App store bannerPlay store banner

AI-powered
podcast player

Listen to all your favourite podcasts with AI-powered features

AI-powered
podcast player

Listen to all your favourite podcasts with AI-powered features

Discover
highlights

Listen to the best highlights from the podcasts you love and dive into the full episode

Discover
highlights

Listen to the best highlights from the podcasts you love and dive into the full episode

Save any
moment

Hear something you like? Tap your headphones to save it with AI-generated key takeaways

Save any
moment

Hear something you like? Tap your headphones to save it with AI-generated key takeaways

Share
& Export

Send highlights to Twitter, WhatsApp or export them to Notion, Readwise & more

Share
& Export

Send highlights to Twitter, WhatsApp or export them to Notion, Readwise & more

AI-powered
podcast player

Listen to all your favourite podcasts with AI-powered features

AI-powered
podcast player

Listen to all your favourite podcasts with AI-powered features

Discover
highlights

Listen to the best highlights from the podcasts you love and dive into the full episode

Discover
highlights

Listen to the best highlights from the podcasts you love and dive into the full episode