The former, says Richard Posner, in this excerpt from his post:
There is also an echo of the traditional but erroneous suspicion of speculation as an activity that does not create social wealth but merely shifts it around. That is incorrect. Speculation aligns prices (whether commodity prices or the prices of companies) with values and so creates more accurate signals for production and investment. It is a vital economic service. That is not to say that speculators "deserve" higher incomes than ditch diggers. Desert doesn’t enter. Incomes are determined by supply and demand.
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You might be interested in this from the Financial Times:
So long as speculative instruments remain legitimate hedging tools of immediate price risk in the hands of actual dealers in that commodity, Posner theory holds. But often speculators mostly are financial punters that have no interest in the underlying asset, abuse the tools to take `naked’ positions (without any intention to take/give actual delivery of underlying asset) that results in irrational price discovery that is entirely unrelated to `value’-because the transactions are cash settled and they thrive on that arbitrage opportunity.
Take a random check of open interest on any commodity futures on a given day – they will add up to several times the day’s global production of that commodity. Now, if actual delivery is insisted upon maturity of that contract instead of cash settlement of the difference, how many speculators will want it? Definitely Goldman Sachs or Merryl Lynch will be confounded with a million barrels of oil (that they had bet on in futures market) if it lands up in front of their glasshouses!