modities during 2009, placing the 2009 total estimate to $230‐240 billion, margi‐ nally lower from 2008 due to weaker commodity prices. Although these amounts of money represent about one percent of the global value of pension and sove‐ reign wealth fund holdings (both key contributors to index funds, with the glob‐ al value of these two groups estimated at $20 and $4 trillion, respectively) they are large compared to the size of commodity markets.<sup>**6**</sup> The effect of the “new” money on commodity prices has been associated with speculation that might have led to a price bubble. The views on the subject, however, have been, for the most part, extreme. For example, Krugman in a se‐ ries of _New York Times_ blogs and editorials, not only rejected the view that specu‐ lation fueled the boom but also dismissed the idea that commodity trading activ‐ ity in futures exchanges may have affected commodity prices at all, arguing that “a futures contract is a bet about the future price. It has no, zero, nada direct ef‐ fect on the spot price” ( _New York Times_ , June 23, 2008). Others too have argued that speculation played no role. Wolf is of the opinion that “if speculation were raising prices above the warranted level, one would expect to see inventories pil‐ ing up rapidly, as supply exceeds the rate at which oil is burned. Yet there is no evidence of such a spike in inventories” ( _Financial Times,_ May 13, 2008). Frankel cited the Congressional testimony by the chief economist of the Commodities Fu‐ tures Trading Commission (CFTC) on April 3, 2008 to support in his weblog (Ju‐ ly 25, 2008) that “The evidence does not support the claim that speculation has been the source of, or has exacerbated the price increases.” Verleger (2009), based on IEA (2009) analysis, concluded at his CFTC testimony that the increase in crude oil price between 2007 and 2008 was caused by the incompatibility of envi‐ ronmental regulations and speculation had nothing to do with the price rise.<sup>**7**</sup> The IOSCO Task Force (2009), formed at the request of G‐8 to examine the issue of speculation in commodity markets, found that economic fundamentals, not spe‐ culative activity, are the possible explanation for recent price changes in com‐ modities.<sup>**8**</sup> Wright (2009) echoed similar views by noting that if long futures posi‐ tions were behind the grain price spike of 2008, stocks would have increased.

At the other end of the spectrum, Soros (2008) called commodity index trading at his US congressional testimony intellectually unsound, potentially des‐ tabilizing, and distinctly harmful in its economic consequences. Eckaus (2008) and Khan (2009) authored papers entitled “The Oil Price Is Really a Speculative Bubble” and “The 2008 Oil Price Bubble”, respectively. Calvo (2008) noted that speculation and low inventories are not necessarily inconsistent with each other and concluded that “... [increases in] commodity prices are the result of portfolio shift against liquid assets by sovereign investors, sovereign wealth funds, partly triggered by lax monetary policy, especially in the US.” Roubini (2009) said this on the early 2009 crude oil price increase: “... improving fundamentals ... justify

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