Why Trading Onions on Financial Markets is Illegal - YouTube

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Today’s episode is about the future of onions.

Now, I’m no expert on where onions are headed, but here are my top 50 theories.

One: Wi-fi.

Two: new hairdos.

Three: gunions—onions that looks like guns.

Four: munnions—onions that look like Olivia Munn.

Five: lemons get rebranded as “sour onions.”

Six—oh wait sorry I’m being flagged by one of my Junior Interim Executive Researchers

in Training for the EMEA region.

It seems that this video isn’t about the future of onions, it’s about onion futures.

My bad.

Let’s try again.

Meet Vincent Kasuga.

He’s known by many names: his fans call him the Onion King, onion farmers call him

a cheater, friends call him Vinny, and his wife calls him cuddlebuns, but that’s only

in private.

In the 1950s, cuddlebuns had a brilliant idea: what if we took shorts, but made them longer?

It turned out that was called pants, and it had already been invented, but then he had

another idea: he was going to corner the onion market.

Now, in theory, cornering a market is simple: Step one: buy all of a commodity.

Step two: stonks.

Step three: profit.

In practice, though, cornering a market is nearly impossible: not only would Vince need

to buy almost every onion in America, he would also need to do it without anybody noticing,

because if the market realized what he was up to, prices would spike before he could

finish.

Somehow, though, by the winter of 1955, using a combination of quiet investors, ramshackle

warehouses, and the god-like high of abusing capitalism, he managed to secure 98% of America’s

smelly apples that make you cry.

But that was just the beginning.

You see, Vince wasn’t content just to own all the onions that currently existed—he

also wanted to own all the onions that would be grown in the future.

While buying onions from the future may sound like ramblings of a coked-up Hamburglar, it’s

actually totally possible, through something called a futures contract, which is, in simple

terms, an agreement to buy something in the future at a price that you set now.

So, Vinny bought up all the onion futures, making him the owner of all current and future

onions, a position commonly called Total Onion Domination.

Now you might be wondering: okay, so what?

He owns all the onions, what’s the worst he could do: make fajitas?

But the thing is, when someone owns the entire supply of a given market, they have complete

control over the price.

It all comes down to basic supply and demand—if you’ve ever taken an Econ 101 class, you’ll

remember supply and demand as the system that helped determine the price of Econ 101 Exam

Answers on your uni’s black market.

The concept is simple: when there’s less supply of something, prices go up, and when

there’s more supply, prices go down.

In a well-functioning free market, supply is determined by a combination of competing

firms, but in this case, thanks to his Total Onion Domination, onion supply was set by

one person: Vincent “Cuddlebuns” Kasuga.

Simply by changing how many onions he was willing to sell, Vincent could make the price

whatever he wanted it to be: 4 dollars and 20 cents, sixty-nine dollars, or probably

other numbers, too.

The first part of Vince’s scheme was exactly what you’d expect: he artificially raised

the price of onions, and then sold them for a profit.

In late 1955, he gathered all the big players in the onion game—onion buyers, onion growers,

even Charles P. Onion himself—in a conference room in Chicago, and basically gave the following

presentation: “Good afternoon, idiots.

I own all the onions.

Buy them for the price I want or have fun trying to sell grapefruits.”

And it worked: he sold 9 million of his onions at the high price he had set.

But much like an onion, Kasuga’s plan had layers—and for his second scheme, he quietly

began to short onion futures.

To explain what a short is, here’s Margot Robbie—I mean, Thomas Frank—in a bathtub:

“Hi Sam.

Basically, when Vincent Kasuga shorted onions futures, he was betting against them, meaning

that if the price of onions went down, he would make money.

But of course, it wasn’t really a bet, because Vince knew the price of onions would go down,

because as the owner of all of America’s onions, he controlled the price.

Got it?

Good.

Now get out of my bathroom.”

Thanks Thomas.

Once Vince had solidified his short position, he flooded the market, increasing the onion

supply so much that the prices for a 50-pound bag of onions fell from about $2.45 to 10

cents, which if my math is correct is… carry the one, move the decimal, math math math…

way less.

In fact, the onions cost less than the 20-cent bags they were put in.

In other words, onions became more worthless than my joke-making abilities—they were

valued so little that traders literally couldn’t give them away, which they actually tried

to do, handing onions to orphanages, hospitals, and schools, until eventually they were forced

to dump the remaining ones in the Chicago river, finally getting rid of them while also

setting the world record for the largest and worst French onion soup ever.

Thanks to his shorts on onion futures, when prices tanked in 1956, Vincent Kasuga made

$8.5 million, which today would be $83 million—an amount accountants refer to as “much.”

But the onion price cut led to tears from onion farmers, who ultimately managed to lobby

then-congressman, later-president, and man who looks like an oil barren trying to steal

the Muppets’ theatre, Gerald Ford, to introduce the Onion Futures Act, which Congress passed

in 1958, banning onion futures from ever being sold in the United States.

Today, onions remain the only agricultural commodity on which futures are banned, which

actually has real implications for onion farmers, who can no longer sell their future crops

now at a guaranteed price, which leads to a more volatile market, and more price uncertainty.

But I do have good news for them: if they’re looking for price certainty, I can guarantee

that an HAI sticker costs three dollars now and will cost three dollars tomorrow, and

if you buy one, you can try out Nebula for free.

You probably know by now that Nebula is a streaming service that I started with my other

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