China vs. Speculators
In life when you play with fire you usually are going to get burned. China is learning that in a market system if you play with the market the market will send speculators on you, which is much worse then getting burned.
In a complicated story that is yet to be fully uncovered a known commodities trader for the Chinese government, Liu Qibing, has disappeared after he set a short position on copper (also meaning he bet that copper prices would fall). The reason why he disappeared is that instead of falling, copper prices have hit all time highs. To tell the full story here I would have to do another post and I don't think anyone is interested in reading the details.
In short, the reason why prices rose is that speculators knowing that Liu was an agent for the PRC felt like he was bluffing, and took on China's bluff. The results are that the Chinese State Reserve Bureau, the country's metal stockpiling agency, has had to open up about previously undisclosed numbers of reserves of copper it is holding. Even more interesting is that the reserve bureau is responsible for setting Chinas market policy and then executing it through its own bought market traders.
The result of PRC's meddling in the copper market has been major financial loss for China, and even more importantly we now openly see how the communist government is manipulating the free market. This is the reason why we should not have let it enter the market system, and why we should either remove them from the WTO or fight them on their terms (I mean defensive tariffs).
However, I know this will not happen because most economists will say you can't use tariffs in an open market system. What they should realize is that the country we are fighting does not play fair, but plays on their own terms and uses the market only when it is advantageous to them.
In a complicated story that is yet to be fully uncovered a known commodities trader for the Chinese government, Liu Qibing, has disappeared after he set a short position on copper (also meaning he bet that copper prices would fall). The reason why he disappeared is that instead of falling, copper prices have hit all time highs. To tell the full story here I would have to do another post and I don't think anyone is interested in reading the details.
In short, the reason why prices rose is that speculators knowing that Liu was an agent for the PRC felt like he was bluffing, and took on China's bluff. The results are that the Chinese State Reserve Bureau, the country's metal stockpiling agency, has had to open up about previously undisclosed numbers of reserves of copper it is holding. Even more interesting is that the reserve bureau is responsible for setting Chinas market policy and then executing it through its own bought market traders.
The result of PRC's meddling in the copper market has been major financial loss for China, and even more importantly we now openly see how the communist government is manipulating the free market. This is the reason why we should not have let it enter the market system, and why we should either remove them from the WTO or fight them on their terms (I mean defensive tariffs).
However, I know this will not happen because most economists will say you can't use tariffs in an open market system. What they should realize is that the country we are fighting does not play fair, but plays on their own terms and uses the market only when it is advantageous to them.
posted by Aleksandr at 9:31 PM
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