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A Shuffle of Aluminum, but to Banks, Pure Gold

nytimes.com

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Re: A Shuffle of Aluminum, but to Banks, Pure Gold

#4

Post by ParanoidFrank »

guard-of-terra wrote: post #3

Could not figure out what is going on from reading the page one, can somebody explain using simple terms?

Goldman and others lobby for regulations that allow them to inflate the real price of a commodity without actually doing anything with it.

Taxpayers pay representatives to represent Goldman while paying billions upon billions in extra costs for nearly every function in life.

Re: A Shuffle of Aluminum, but to Banks, Pure Gold

#5

Post by ParanoidFrank »

guard-of-terra wrote: post #3

Could not figure out what is going on from reading the page one, can somebody explain using simple terms?

I forgot to mention, when busted they are allowed to pay a fine that is less than the damage done. Enabling them to continue on.

Re: A Shuffle of Aluminum, but to Banks, Pure Gold

#6

Post by berlin45 »

guard-of-terra wrote: post #3

Could not figure out what is going on from reading the page one, can somebody explain using simple terms?

TL;DR (From what I understood): Banks work around regulations to artificially increase the time they are allowed to store metal for - essentially shipping it to each other, back and forth, for a very long time. As they charge for storage, this increases the price of the metal for all manufacturers who use it, who then pass it on to consumers.

Re: A Shuffle of Aluminum, but to Banks, Pure Gold

#7

Post by pasbesoin »

guard-of-terra wrote: post #3

Could not figure out what is going on from reading the page one, can somebody explain using simple terms?

I did not read too far into the article, but I read far enough to gather that this is one instance of something I've been reading about elsewhere. Even the specific commodity, aluminium, sounds familiar.

Goldman is one of the largest -- and therefore, most effective -- players, but basically Goldman and its ilk have been using their financial (and legal) clout to essentially corner commodity markets. They are creating effective monopolies for themselves -- or sufficient control to significantly influence availability and therefore pricing.

In this particular instance, as far as I read, they are using their control of aluminium stocks and warehousing to jack up the prices they receive. This may abut regulatory and other concerns, resulting in a "shuffling exercise" to place their price increases within boundaries and definition of an established market mechanism and regulation.

Still in the process of being converted from a public resource to a private commodity -- in the U.S. and some other countries, at least -- but another one to keep an eye on is water, including potable water. There are companies working to privatize supplies, with an eye to charging you whatever the market will bear. And if and when they control said market? And given that most communities are single sourced for local, bulk delivery?

Re: A Shuffle of Aluminum, but to Banks, Pure Gold

#9

Post by cobrausn »

ParanoidFrank wrote: post #5
guard-of-terra wrote: post #3

Could not figure out what is going on from reading the page one, can somebody explain using simple terms?

I forgot to mention, when busted they are allowed to pay a fine that is less than the damage done. Enabling them to continue on.

You can edit your previous post instead of making a new one with the 'edit' link.

Re: A Shuffle of Aluminum, but to Banks, Pure Gold

#10

Post by temphn »

The only way that Goldman could possibly make more money by artificially delaying shipments would be because of a market-distorting regulation. And sure enough, here it is:

  industry rules require that all that metal cannot simply 
  sit in a warehouse forever. At least 3,000 tons of that 
  metal must be moved out each day.
Without looking I'd bet this is some kind of "anti-hoarding" provision, probably intended to prevent single manufacturers from cornering the market. As is typical, it caused exactly the opposite of the desired consequence.

Moreover, said rule means (among other things) that no manufacturer can hold a strategic reserve of aluminum for unexpected spikes in demand without playing the games that Goldman is playing. Naturally, the response of the New York Times is that we need more such rules and regulations, that next time we'll anticipate their consequences, that the only failing is that they haven't been "strict" enough.

But the "stricter" the rule, the more that little guys get hit with it while Goldman uses teams of lawyers to define and then exploit a safe harbor.[1] In this sense, Goldman and the NYT are in cahoots: "strict" regulations directly benefit big companies.

[1] http://en.wikipedia.org/wiki/Safe_harbor_(law)

  A safe harbor is a provision of a statute or a regulation 
  that reduces or eliminates a party's liability under the 
  law, on the condition that the party performed its actions 
  in good faith or in compliance with defined standards. 
  Legislators may include safe-harbor provisions to protect 
  legitimate or excusable violations, or to incentivize the 
  adoption of desirable practices.
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