Wednesday, July 23, 2014

IF A MARKET CAN RE RIGGED, IT WILL BE RIGGED

That should be the 1st Law of Capitalism and even Adam Smith recognized this flaw almost 250 years ago:
People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.
The Wealth of Nations, Book I, Chapter X
Today we have investment banks taking the place of individual traders, as Matt Taibbi pointed out last February:
The Vampire Squid Strikes Again: The Mega Banks' Most Devious Scam Yet
By Matt Taibbi
February 12, 2014 11:00 AM ET
ROLLING STONE

Today, banks like Morgan Stanley, JPMorgan Chase and Goldman Sachs own oil tankers, run airports and control huge quantities of coal, natural gas, heating oil, electric power and precious metals. They likewise can now be found exerting direct control over the supply of a whole galaxy of raw materials crucial to world industry and to society in general, including everything from food products to metals like zinc, copper, tin, nickel and, most infamously thanks to a recent high-profile scandal, aluminum.
The aluminum rigging was almost child's play for the banksters:
A Shuffle of Aluminum, but to Banks, Pure Gold

By DAVID KOCIENIEWSKI
Published: July 20, 2013
NY Times

MOUNT CLEMENS, Mich. — Hundreds of millions of times a day, thirsty Americans open a can of soda, beer or juice. And every time they do it, they pay a fraction of a penny more because of a shrewd maneuver by Goldman Sachs and other financial players that ultimately costs consumers billions of dollars.

The story of how this works begins in 27 industrial warehouses in the Detroit area where a Goldman subsidiary stores customers’ aluminum. Each day, a fleet of trucks shuffles 1,500-pound bars of the metal among the warehouses. Two or three times a day, sometimes more, the drivers make the same circuits. They load in one warehouse. They unload in another. And then they do it again.

The back-and-forth lengthens the storage time. And that adds many millions a year to the coffers of Goldman, which owns the warehouses and charges rent to store the metal. It also increases prices paid by manufacturers and consumers across the country.

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