What is 100% certain is that as a result of this revelation, the GDP number of the country, which is and always has been a derivative of credit formation and expansion (and heaven forbid contraction), is massively overrepresenting what it is in reality, and that the Chinese economy has been expanding at a far slower pace
I’m not surprised. During the Cold War, the CIA repeatedly produced analyses that showed the rapid growth of the Soviet economy would soon overtake the US. Somehow, it never did. Somehow, the CIA never learned.
I stand by my prediction that the first Chinese astronaut to walk on the Moon will be a Chinese American, who will be landed there by private enterprise.
This seems kind of bad to me.
The disease is the cure. What’s going on here is a bunch of naive people who should have been checking more diligently on the collateral. We’ll probably find that a number of public officials were in on the scams. The real question is what else has been going on. If you have widespread fraud of this sort, then that usually means that there’s a lot more problems skittering about in the walls, like cockroaches. Gullible,, risk ignorant people with lots of money is IMHO a symptom of a bubble having formed.
Now that I think about it, some of the people giving out loans were probably in on the scam too. I don’t consider the ghost steel enough in itself to kill off any economies. But it does indicate that there’s whole industries that are going off the rails to some degree.
IMHO, the real failure is going to be in the highly leveraged areas (for China I wouldn’t have a clue what they would be). Using the same metal, especially if it doesn’t exist, for multiple loans is fairly high leverage, but it can get worse than that. At least the bank has some sort of reserve in which to sink those losses and to put towards any bank runs or other upsets that might happen. I bet however there’s worse out there, banks or other big players operating without a net. My inner cynic tells me there’s worse out there, but we might not see it for a few years.
I think we will discover that a lot of the ETF funds, most especially GLD and SLV have the same problem. In testimony before the CFTC one of the LMBA exchange traders said that the un-allocated gold and silver stocks have been sold 100x and the LMBA un-allocated precious metals exchange is basically operating as a 100:1 fractional reserve metals bank…. this is going to come as real shock to people that thought they bought Gold and Silver as a risk hedge only to discover that they bought themselves a seat at the table for the bankruptcy proceeding… The large trading banks can not be trusted when the LMBA Nickel market failed there was no real penalty for those that sold metal they did not have, I believe that the penalty was a few percent of the contract value, meanwhile those using the exchange to hedge real production were SOL…. buyer beware the next 5 years are going to be risky.
These shenanigans are not going to stop until the purps are prosecuted and jailed…. but in the present system these guys are above the law…. the system is broken.
WTF Paul?! I owned GLD shares until recently and then I sold them and jumped back into gold mining stock. Are you telling me I was buying a percentage of a phantom gold?
wow, and Bernake probably knows all of this…..
Now that’s what I call de-leveraging…
This is just another sign of how far astray we’ve gone. This house of cards involves the entire world economy. It’s all coming down and we are living in that lucky time. Goody for us.
It all could have been avoided if we kept to sound principles. Too late now.
What is 100% certain is that as a result of this revelation, the GDP number of the country, which is and always has been a derivative of credit formation and expansion (and heaven forbid contraction), is massively overrepresenting what it is in reality, and that the Chinese economy has been expanding at a far slower pace
I’m not surprised. During the Cold War, the CIA repeatedly produced analyses that showed the rapid growth of the Soviet economy would soon overtake the US. Somehow, it never did. Somehow, the CIA never learned.
I stand by my prediction that the first Chinese astronaut to walk on the Moon will be a Chinese American, who will be landed there by private enterprise.
This seems kind of bad to me.
The disease is the cure. What’s going on here is a bunch of naive people who should have been checking more diligently on the collateral. We’ll probably find that a number of public officials were in on the scams. The real question is what else has been going on. If you have widespread fraud of this sort, then that usually means that there’s a lot more problems skittering about in the walls, like cockroaches. Gullible,, risk ignorant people with lots of money is IMHO a symptom of a bubble having formed.
Now that I think about it, some of the people giving out loans were probably in on the scam too. I don’t consider the ghost steel enough in itself to kill off any economies. But it does indicate that there’s whole industries that are going off the rails to some degree.
IMHO, the real failure is going to be in the highly leveraged areas (for China I wouldn’t have a clue what they would be). Using the same metal, especially if it doesn’t exist, for multiple loans is fairly high leverage, but it can get worse than that. At least the bank has some sort of reserve in which to sink those losses and to put towards any bank runs or other upsets that might happen. I bet however there’s worse out there, banks or other big players operating without a net. My inner cynic tells me there’s worse out there, but we might not see it for a few years.
I think we will discover that a lot of the ETF funds, most especially GLD and SLV have the same problem. In testimony before the CFTC one of the LMBA exchange traders said that the un-allocated gold and silver stocks have been sold 100x and the LMBA un-allocated precious metals exchange is basically operating as a 100:1 fractional reserve metals bank…. this is going to come as real shock to people that thought they bought Gold and Silver as a risk hedge only to discover that they bought themselves a seat at the table for the bankruptcy proceeding… The large trading banks can not be trusted when the LMBA Nickel market failed there was no real penalty for those that sold metal they did not have, I believe that the penalty was a few percent of the contract value, meanwhile those using the exchange to hedge real production were SOL…. buyer beware the next 5 years are going to be risky.
These shenanigans are not going to stop until the purps are prosecuted and jailed…. but in the present system these guys are above the law…. the system is broken.
WTF Paul?! I owned GLD shares until recently and then I sold them and jumped back into gold mining stock. Are you telling me I was buying a percentage of a phantom gold?
wow, and Bernake probably knows all of this…..
Now that’s what I call de-leveraging…
This is just another sign of how far astray we’ve gone. This house of cards involves the entire world economy. It’s all coming down and we are living in that lucky time. Goody for us.
It all could have been avoided if we kept to sound principles. Too late now.
Not surprised. It matches their ghost towns
http://www.bbc.co.uk/news/magazine-19049254
3 August 2012 Last updated at 19:34 ET
China’s ghost towns and phantom malls
By Robin Banerji & Patrick Jackson BBC News
I guess they are hitting a speed bump in terms of displacing the U.S. as the world’ top economy.
As growth slows, China’s huge investment in infrastructure is looking ever harder to sustain
There seems to be a lesson here for NASA. Can’t quite put my finger on it….