Article

2013-06-20 China-Japan-Koreas

Here Is What's Going On In China: The Bronze Swan Redux

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Posted by tipper 2013-06-20 11:54|| || Front Page|| [3 views ] Top

#1 I'm no sort of economist, but I think these are the high points:

1) Both Chinese and International-Finance Types have been raiding the accumulating Chinese foreign-exchange reserves via a nasty little arbitrage engine based on immobile, unused, "banked" copper supplies sitting in bonded warehouses somewhere. The article isn't clear on who's been footing the bill for the arbitrage, but it *must* be Chinese central bankers defending their arbitrary yuan peg given the structure of the copper arbitrage engine.

2) Chinese regulators have either noticed the scam, or they knew about it all along, and the central bankers have decided that it was hurting their bottom line too much, and decided to end the party by calling the cops on their own shin-dig. The bankers acting as the cut-outs in this little game have just had their cookie jar privileges revoked.

3) The amount of immobile copper tied up in these arbitrage engines is significant, and the cost of storing it, which was easily covered by the profits of the scam up to now, is now more than it's worth to keep them in warehouse. All that copper's about to crash the working copper market in a big way.

4) The money being made on the arbitrage is now gone, that's a big chunk of profit that's no longer propping up the international finance people and their Chinese partners.

5) What function was the arbitrage serving the greater Chinese economy? Was it keeping the Chinese central bankers from repeating the 1930 US Federal Reserve sterilization error? I dunno, at this point my limited capacity for parsing High Economic Bullshit runs into a brick wall.

Posted by Mitch H. 2013-06-20 16:55|| http://blogfonte.blogspot.com/ 2013-06-20 16:55|| Front Page Top

#2 Sometimes the warehouses that held the collateral copper were empty too.

Posted by dk70 the scantily clad 2013-06-20 17:23|| 2013-06-20 17:23|| Front Page Top

#3 All that copper's about to crash the working copper market in a big way.

Does this mean we won't have copper thieves stealing telephone wires, light pole wires, AC coils and generator coils anymore?

Posted by Ebbang Uluque6305 2013-06-20 17:40|| 2013-06-20 17:40|| Front Page Top

#4 No, I doubt it - but the thieves will find that their larceny isn't paying off like it used to. In a year or two, they'll have learned their lesson. But in the short-term, they'll have not yet received the signal. Unless I'm seriously under-estimating the efficiency of the black market communication network.

Posted by Mitch H. 2013-06-20 20:41|| http://blogfonte.blogspot.com/ 2013-06-20 20:41|| Front Page Top

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