Debt Rattle Jun 6 2014: Multiple Claims To Underlying Chinese Wealth
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Arthur Rothstein Drought refugees; North Dakota farm family moving to Idaho July 1936 At the Automatic Earth, the phrase ‘Multiple Claims To Underlyin
[See the full post at: Debt Rattle Jun 6 2014: Multiple Claims To Underlying Chinese Wealth]Another factor affecting copper stockpiles:
Mining is not an easy business. Too often it moves up and down like the fast end of a bull whip. It’s “eureka” one year and lay-offs the next, then “eureka” again the next. Metals prices determine ore grade cut-offs. With higher prices, lower grade ores are profitable to mine and process, also resulting in higher stated reserves. With lower prices, only higher grade ores are profitable, resulting in a smaller calculated reserve base. When low grade ores are re-classified as waste due to falling prices, they’ll probably remain as waste for perpetuity because of peak oil and increasing energy costs. That has an impact on what’s called stewardship of a nation’s resources. Falling prices mean poor stewardship because deposits yield less of the contained resource.
This closely resembles how TAE has assessed remaining petroleum resources.
Sometimes, when metals prices are low for a sustained period, it becomes uneconomic to wait for better times. Open pits and underground mines are allowed to flood, experienced workers move away, and when prices finally rise again, the mines remain abandoned.
Most of the time I lament growing old, but occasionally I thank my lucky stars that I’m not young like my kids. It’s possible that the pieces are going to be just incredibly hard to pick up after this world economy gets done shattering.
Pieces will indeed be very difficult to pick up. Depressions are long and drawn out affairs precisely because picking up the pieces of a broken complex whole is so hard. The world will look very different in a few years.
A little ironic that the banks are getting upset about multiple claims on inventory, when their entire ‘fractional reserve’ business model is exactly that..?
I don’t think there’s a simpler way to put this:
ANY form of debt is an extra claim on the existing wealth.
The corollary is even simpler: Debt is always of the “fractional reserve” type.Excellent writing, Ilargi.
This is an great article on Putin, written by an American woman who’s spent many years in Russia. Gives you a different perspective from the U.S. media spin.
That article by Matt Stoller on Geithner, the “con-artist” is quite the piece too. Great read!
“Geithner is at heart a grifter, a petty con artist with the right manners and breeding to lie at the top echelons of American finance at a moment when the government and financial services industry needed someone to be the face of their multi-trillion dollar three card monte. He’s going to make his money, now that he’s done living his life of fantastic power after his upbringing of remarkable mysterious privilege. After reading this book and documenting lie after lie after lie, I’m convinced that there’s more here than just a self-serving corrupt official.”
Yes and yes.
Ilargi – “And sweet Jesus: “such deals accounted for one third of China’s money supply growth in 2013.”(!) See, now you have me wondering if the government wasn’t simply in on it too. Which might point to a pretty ordinary fight for money and power between Beijing and the shadow banks, something I’ve often said must be going on behind the scene given the size of the shadows.”
Copper, aluminum, iron ore, steel. And what about gold? I remember everybody saying China was buying all the gold. Hmmm, could it just be they were doing the same thing with gold?
What do you mean, Ilargi, when you say “now you have me wondering if the government wasn’t simply in on it too”? Do you mean members of government might have been profiting from this themselves, and that’s why they want to stop the shadow banks? Could you please explain. Thanks.
What schemes! Like having your own printing presses. No wonder they’re able to buy up expensive houses all over the world.
Raleigh, it’s the sheer size of it. For reasons of credibility, Beijing needed to raise reserve ratios and cut some forms of lending, but behind the curtain the shadow banks filled in the gaps. Profitable for everyone until the double digit growth stats vanished. Then it easily turns to cats in a sack. And consequences Beijing certainly never intended: they find their control is far less strong than they thought, since running an economy based on unbridled growth is very different from a communist total control one. To get that growth, they had to give up part of the control, and they never thought that through. Now they find that cracking down is only possible at the severe risk of halting growth. There have undoubtedly been gold schemes too, and a lot of false demand, but I’d look more at actual commodities, metals obviously, but also timber, palm oil etc.
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