The economic chronicle of. Speculation Takes Water – Pledge Times

The Chicago Mercantile Exchange (CME) and Nasdaq, two of the largest financial markets in the United States, to launch water futures in California by the end of this year is another step in financialization. This creates the possibility of speculating on a natural product essential for life and for humanity.

What is a futures contract? It is a contract between a buyer and a seller. One, the seller, agrees to sell and the other, the buyer, to buy an underlying asset – water in this case – at a price set today but for delivery and settlement at a future date. The underlying asset is in this case a common good, but it can also consist of stocks, bonds, interest rates, exchange rates. The seller tries to protect himself from a possible drop in prices, the buyer from an increase. One might think that this device helps protect against excessive price volatility, but it is usually the other way around. Given the vital role of water for California, a highly populated state and major agricultural producer, and the threat posed to the resource by global warming, speculators will be able to push prices down with this futures market. high, trying to sell more for what they paid the least, thus putting farmers, municipalities and their inhabitants in difficulty, whose water bills risk boiling. California is certainly not the only territory on the planet to suffer from this obstinacy in offering finance to new playing fields. The so-called carbon market that allows companies to buy a right to pollution is a bad precedent. What can we oppose to this? As for water, we can invoke a moral principle, the decision of the United Nations in 2010 to recognize it “The right to drinking water and sanitation is a fundamental right, essential for the full enjoyment of life and for the exercise of all human rights”.

But speculators don’t care about morality, so the most effective decision to counter these financial offensives against the common goods of humanity would certainly be to create real public services in different countries that could cooperate up to a global level. in order to implement real solutions to climate change.