Quotes of the day

Sadly, of course, not everyone gets out early, and a lot of innocent, if silly, people get caught up in these games. All I can say is, only suckers play games where they don't quite understand the rules and the percentage seems to be running strongly to the house. If you suspect you're the sucker, no matter how much fun you think you're having, it's time to cash out your chips and close your house account.--Megan McArdle, on dating games

First, on speculation remember that demand and supply are both very inelastic so relatively small changes in either can make a big differrence. That means that speculation, if that is what you want to call it, can shift prices a lot without being very significant in total demand. Because of this point Krugman's analysis is quite right for iron ore but a little off for oil - indeed Krugman's analysis of oil is difficult to square with his analysis of the California electricity crisis ... Finally, on oil - who really cares what the price is? The issue is energy, not oil. I am confident that the long run price of energy will fall. --Alex Tabarrok