Debt Rattle Jun 8 2014: The ECB Negative Rate Is A Dud
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Office of War Information Watching D Day news line on New York Times building June 6, 1944 Much ado about nothing. That about sums up the real story b
[See the full post at: Debt Rattle Jun 8 2014: The ECB Negative Rate Is A Dud]Raleigh – Yesterday you asked, “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?”
Indeed they were:
Quoting from the middle of the article: “In other words, the only limit on the amount of leverage, aka rehypothecation of copper, was limited only by letter of credit logistics (i.e. corrupt bank back office administrator efficiency), as there was absolutely no regulatory oversight and limitation on how many times the underlying commodity can be recirculated in a CCFD…. And gold is orders of magnitude higher!”
The ZH analysis, though, describes a different possible price consequence for gold than for all the other involved commodities if the shadowy Chinese Commodity Funding Deals are forced to unwind. But even as the CCFD’s unwind, it sounds like the price of gold will still be determined by the futures (paper) market that China participates heavily in. (I hope I said that right – – technical finance is well above my pay grade.)
Diogenes – thank you for that very good article. I’ll have a better look at it tomorrow (out all day) and try to digest what it’s saying.
“…technical finance is well above my pay grade.” I know the feeling. Drowning in mumbo jumbo, acronyms. I swear they’re making this stuff up as they go along. Thank you.
Gold is not like copper, guys. Even if when it comes to rehypothecation you can do a lot of the same things with it. Zero Hedge is stuck in the gold bug mode, and though that must be a tough spot to be in with gold at $1250, I don’t see them getting out of it anytime soon. Which in turn makes objective analysis a hard thing to do. I don’t see any reason to doubt that rehypothecation, using assets as collateral, is widespread and a fully accepted business model in China. I wonder how many of the empty apartments have been put up as collateral at an $x value to procure loans for more empty apartment development. And what that will mean when prices fall to $x-1.
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