I am looking for good source material that illustrates the important role that speculators play in markets.
I vaguely recall reading on the subject in HA or MES...
Here are a couple of nice sources I have found...
http://www.washingtontimes.com/news/2008/jul/10/scapegoating-speculators/?page=1 http://www.sfu.ca/~djacks/papers/publications/populists.pdf
Search on YouTube for any video featuring Hugh Hendry.
Here is an example
http://www.youtube.com/watch?feature=player_detailpage&v=5Ms5mGTL2FE#t=226s
Though it'd be child's play to show how "speculators play a good role for society", I prefer to nip this argument right in the bud before even getting there. The whole concept of someone's "role in society" is bogus and absurd. Two parties should be left to voluntarily transact for whatever reason they choose. The reasons are purely theirs and are, frankly, none of anyone else's business. A third (uninvolved) party, or even a whole bunch of them, have no business being for or against it, or demanding that such transaction be "beneficial" for them or play a "good role".
The whole presumption that the reality and other actors exist and "perform" for one's benefit is bordering on psychotic.
Inflation is a way to funnel money to speculators.
Speculators correct market prices, and help smooth out wild swings in price. Here is a Bob Murphy article entitled "The Social Function of Stock Speculators":
http://mises.org/daily/2381
Got just what you're looking for friend
http://www.economist.com/node/17465323?story_id=17465323&CFID=160861164&CFTOKEN=35804515
"As the sums devoted to commodities have grown, so have complaints about the damage that speculative cash causes. Investors came under heavy fire in 2008 as the price of oil and food raced upward. More recently they have been knocked for rises in wheat and corn prices. Yet the benefits that investors bring—the liquidity and price information that make for efficient markets—barely get a hearing.
In fact there is little empirical evidence that investors cause more than fleeting distortions to commodity prices. The most persuasive explanation for the rises and falls of commodities is demand and supply. In 2008 a still-growing rich world and a boom in developing countries pushed demand for oil and food up against the limits of supply. Wheat prices spiked this August after a drought and fires in Russia, an important supplier, prompted an export ban. The recent surge in sugar prices comes after a bad harvest, that of corn after official warnings of a lower-than-expected crop."
"Commodities markets have always been volatile. Harvests are dependent on the weather, and short-term changes in demand are out of kilter with the long-term investments needed to boost supplies of metals and oil. Research published in June by the OECD shows no difference in volatility between agricultural commodities traded on exchanges and those (like onions) that are not. Indeed, the OECD found a “consistent tendency” for greater volumes of index-fund trading to sit alongside declining volatility"