The latest Goldman scandal - stockpiling raw materials

[deminks]

http://www.americablog.com/2011/07/latest-goldman-scandal-stockpiling-raw.html

There used to be laws that blocked excessive profits from raw materials trading dating back to the Great Depression. Like a lot of common sense policies that were created back during that crisis, they were dismantled in recent years. Goldman was the first trading company to receive an exemption but they pretty much all do it today. What they are doing may be legal (now that they destroyed the law) but it should be reviewed and changed. How is it in the best interest of the country to allow stockpiling of any critical raw material and then trading it?

(end snip)

Reuters article:

http://news.yahoo.com/special-report-goldmans-money-machine-warehouses-090810768.html

A string of warehouses in Detroit, most of them operated by Goldman, has stockpiled more than a million tonnes of the industrial metal aluminum, about a quarter of global reported inventories.

Simply storing all that metal generates tens of millions of dollars in rental revenues for Goldman every year.

There's just one problem: only a trickle of the aluminum is leaving the depots, creating a supply pinch for manufacturers of everything from soft drink cans to aircraft.

The resulting spike in prices has sparked a clash between companies forced to pay more for their aluminum and wait months for it to be delivered, Goldman, which is keen to keep its cash machines humming and the London Metal Exchange (LME), the world's benchmark industrial metals market, which critics accuse of lax oversight.

(snip)

I know the banksters bought up oil tankers, parked them offshore around the world, and stored huge amounts of oil a few years ago. We're not even in capitalism anymore, Toto.

[Cool Logic]

1. In related news: The De Beers family stockpiles a lot of diamonds.

[denbot]

3. Aluminum is a critical commodity..

Diamonds aren't. Enjoy your stay.

[rbixby]

12. Also DeBeers is forbidden from doing business in the US

because of that exact thing.

[Wilms]

2. .

[PATRICK]

4. More material than

my notion that all the stockpiled trillions amounted to taking jobs and human potential hostage. Not surprised that within the stash they are protecting, i.e. large bubbles of actually valueless wealth that only exists as it has power over real value, they need their own Fort Knox of "reality" in the form of further blackmail and power over civil governments. Of course it is not gold but the building blocks of society itself. Some of this speaks to fear and protectionism of their economic leech system, just as slave owners structured their world to prevent revolts, human progress among slaves, far beyond the actual danger even when it cost them profits and systemic health.

Now creating bubbles of overvalued metals means creating shortages and never letting that value fall. Our jobs are similarly trapped in this dance of greed among the big guys. So are all human activities. Any ptofit at risk means more escalating devices like this in an ongoing spiral with only disaster at its end.

[xchrom]

5. recommend

[saras]

6. This IS capitalism - we've just been stripping off the cultural constraints

Same thing they did with copper a few years ago.

Capitalism is all about "all the market can bear". Obviously this is meaningless concept unless you are big enough to dominate the entire market. There's no money in happy, contented people - they have no motivation to either produce nor consume.

[indurancevile]

7. in my opinion, if the "free market" were actually operating, we'd be in a deflationary

spiral, much like the great depression.

the main reason we're not is because multinationals & folks like goldman have quasi-monopolistic power to set prices, stockpile, etc. -- by virtue of market concentration or capital concentration.

it is interesting to hear that goldman has been stockpiling aluminum.

Goldman Sachs Upgrades Alcoa To Buy, Raises Price Target (AA)
By Jonathan Chen
Benzinga Staff Writer
May 02, 2011 10:03 AM

http://www.benzinga.com/analyst-ratings/analyst-color/11/05/1048206/goldman-sachs-upgrades-alcoa-to-buy-raises-price-target-


doesn't that mean they can put out a "buy", jack up prices of aluminum so that everyone thinks aluminum corps are great buys, then release their stockpiles & drive prices down -- then collect the bets they've made on the other side?


also interesting that coca-cola blew the whistle. jp morgan & others have these warehouses too. it's called price-rigging.

Goldman Sachs Group Inc. and other owners of large metals warehouses are being scrutinized by the London Metal Exchange after being accused by users like Coca-Cola Co. of restricting the amount of metal they release to customers, inflating prices.

The board of the LME met on Thursday to discuss complaints from aluminum users and market traders, who say operators of warehouses, which also include J.P. Morgan Chase & Co. and Glencore International PLC, should be forced to allow the metal out more quickly to meet demand.

Here is the real shocker:

Goldman, through its Metro International Trade Services unit, owns the biggest warehouse complex in the LME system, a series of 19 buildings in Detroit that house about a quarter of the aluminum stored in LME facilities.

http://www.goldmansachs666.com/2011/06/goldman-sachs-controls-aluminum-market.html


another interesting thing: these warehouses are in DETROIT. In a "derelict" section of detroit. I wonder what they're paying in the way of property taxes there? I'd bet good money it's not much. I'd even bet they got some kind of tax break.

LONDON/DETROIT (Reuters) - In a rundown patch of Detroit, enclosed by a cyclone fence and barbed wire, stands an unremarkable warehouse that investment bank Goldman Sachs has transformed into a money-making machine.

The derelict neighborhood off Michigan Avenue is a sharp contrast to Goldman's bustling skyscraper headquarters near Wall Street, but the two operations share one important element: management by the bank's savvy financial professionals.

Simply storing all that metal generates tens of millions of dollars in rental revenues for Goldman every year.

http://news.yahoo.com/special-report-goldmans-money-machine-warehouses-090810768.html

Tens of millions in income per year, how much goes to property taxes in a city with a failing tax base?

[girl gone mad]

8. I think we are in the midst of debt deflation..

but we've also got various speculative bubbles, particularly in commodities and tech start-ups. This has been fueled in large part by the Wall Street bailouts, including the quantitative easing programs.

[indurancevile]

9. when you say debt deflation, i don't quite understand what you mean by that?

[girl gone mad]

10. Irving Fisher first developed the theory of debt-deflation..

after the Great Depression. It would encompass the deflationary spiral to which you referred. From http://en.wikipedia.org/wiki/Irving_Fisher#Debt-Deflation">wikipedia:

According to the debt deflation theory, a sequence of effects of the debt bubble bursting occurs:

1. Debt liquidation and distress selling.
2. Contraction of the money supply as bank loans are paid off.
3. A fall in the level of asset prices.
4. A still greater fall in the net worth of businesses, precipitating bankruptcies.
5. A fall in profits.
6. A reduction in output, in trade and in employment.
7. Pessimism and loss of confidence.
8. Hoarding of money.
9. A fall in nominal interest rates and a rise in deflation adjusted interest rates.

This theory was ignored in favor of Keynesian economics, partly due to the damage to Fisher's reputation from his sanguine attitude prior to the crash, but has experienced a revival of mainstream interest since the 1980s.

Economist Steve Keen has contributed the best analysis on debt deflation post-2008 crisis, imo.

http://www.debtdeflation.com/blogs

[indurancevile]

11. ok, i see. we're pretty much on the same page then.