Wall Street banks know all about leveraging. They need to bring back the huge quantity of money they stole from the U.S. economy that they have secreted around the world (without paying a dime in taxes). The strategy they adopted was to bring the money from the shadow banking sector into the real banking world by “investing” in natural resources. The reason for the choice is obvious — high demand for the raw materials, high liquidity in the marketplace for both the products and the futures and related contracts for “trading profits” (like the “trading profits they created with investor money in the mortgage bond market before any loans were made), and an opportunity for virtually unlimited “leverage” where they could control prices and bet against the very same investments they were selling to their customers.
The leverage comes from a primary investment in the warehousing and transport of raw materials and secondarily taking positions in the ownership of natural resources. This allows them to manipulate the cost of raw materials — like copper and aluminum (see articles below), manipulate the politics in our country so that infrastructure repairs and rebuilding is out off until there is a tragedy of a large collapsing bridge killing thousands, and manipulate the bidding process for natural resources (like the Iraq and Afghanistan wars) so that there is a level of panic that causes the nation to send ten times the price of rebuilding now. The natural resources market is basically the only game they can play because it is the only marketplace that is large enough to absorb trillions of dollars stolen from Americans and people all over the world in the securitization scam.
Just as securitization was an illusion, making the base investment (mortgage loans) non existent at the same moment they were created or acquired, so will be the exotic investment vehicles now being prepared for both institutional and ordinary investors that will cover the multiple sales of the same bundle of commodities. Here we go again! Another boom and bust.
Tue, Aug 13
CFTC subpoenas metal warehouse companies • The Commodity Futures Trading Commission has reportedly subpoenaed Goldman Sachs (GS), JPMorgan (JPM), Glencore Xstrata (GLCNF.PK) and their subsidiaries for documents relating to warehouses they operate for aluminum and other metals. • The agency has requested information dating back to January 2010; it also wants documents relevant to the companies’ relationships with the London Metals Exchange. • The CFTC’s investigation follows allegations that the activities of warehousing companies have artificially boosted the price of metals, particularly aluminum. • Earlier speculation said the CFTC had sent subpoenas to an unnamed metals warehousing firm.
Filed under: bubble, CORRUPTION, currency, foreclosure, investment banking, Investor Tagged: | and raw materials, Commodity Futures Trading Commission, Goldman Sachs, JP Morgan Chase, London Metals Exchange, natural resources