VISIBLE PRICES ALIGN MARKETS NOT 'INVISIBLE HANDS'

Jerry Klasson manager of the Canadian office for Swiss-based grain trader GAP SA Grains and Produits, posts (9 August) in Manitoba Co-operator HERE

“In east-central Alberta, steers weighing between 900 and 950 lbs., averaging 919 lbs., sold for a mean price of $180; at the same sale, 800- to 850-lb. steers moved at an average of $191. Feedlot operators were watching prices south of the border, where 917-lb. steers sold for US$150 in Nebraska, slightly above the feeder cattle futures. This may be a sign that the feeder futures have overextended to the downside, but it will take a couple of weeks for the invisible hand to align market forces. Alberta fed cattle prices were relatively unchanged from last week, but values in the U.S. southern Plains were $1-$3 higher. Wholesale beef prices are holding value and this will be key to sustaining the price structure.”

Comment

Jetty Klasson knows the cattle market for sure. He predicts that “market forces” will “align” in a “couple of weeks”. I am sure he is right. But how will he and everybody else know?

Because prices are always VISIBLE and have to be for markets to work.

So what does the so-called “invisible hand” do? I suggest absolutely nothing because it does not exist. And I agree with Adam Smith. He said nothing about “an invisible hand” of the market. He referred to VISIBLE prices. 

His metaphoric reference to “an invisible hand” referred to something else entirely, in particular the unintential consequence of a risk averse merchant investing locally because he did not trust the probity of mercants in distant foreign countires or their legal systems, which benefitted the public interest by adding to 'domestic revenue and employment.