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What if you could get away with skimming a tenth of a cent for yourself from every pop can made....would you be interested? So is Goldman Sachs.
Goldman Sachs purchased one of the nation's largest warehousers of metals, Metro International Trade Services, in order to accommodate their commodity "investors" who wanted to own aluminum as an "investment." Goldman now houses one quarter of all aluminum on the market....from which Goldman collects monthly rental fees.
Though declawed in 2000, there actually are some rules to keep schemers and skimmers from doing what comes natural in the commodities trading and skimming business.....
Metro International holds nearly 1.5 million tons of aluminum in its Detroit facilities, but 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.
Those rules are there to prevent companies...like Goldman.....from hoarding, thus, manipulating the price of the commodity. But Goldman is not your typical skimming outfit. Goldman is THE skimming outfit of the U.S. economy and they've come up with a method to bypass any pesky rules.....after all, rules are for the little people.
Tyler Clay, a forklift driver who worked at the Goldman warehouses until early this year, called the process “a merry-go-round of metal.”
At least 3,000 tons of that metal must be moved out each day. But nearly all of the metal that Metro moves is not delivered to customers, according to the interviews. Instead, it is shuttled from one warehouse to another.
"nearly all the metal that Metro moves"....."nearly all"....."is shuttled from one warehouse to another."
Should we call this the 'mysterious but divine invisible hand of the market?' Or should we call this what it is....a scheme which increases the prices of commodities to consumers but which enriches a select handful of 'players' in the process.
By controlling warehouses, pipelines and ports, banks gain valuable market intelligence, investment analysts say. That, in turn, can give them an edge when trading commodities. In the stock market, such an arrangement might be seen as a conflict of interest — or even insider trading. But in the commodities market, it is perfectly legal.
“Information is worth money in the trading world and in commodities, the only way you get it is by being in the physical market,” said Jason Schenker, president and chief economist at Prestige Economics in Austin, Tex. “So financial institutions that engage in commodities trading have a huge advantage because their ownership of physical assets gives them insight in physical flows of commodities.”
And so, Goldman buys a metals warehousing company to collect skimmer rents from investors and then orders forklift operators to move skids of aluminum bars from one warehouse to the next, gaming the rules and the system in the process, all so the skimmer-investment bank can "earn" rent monies and gain an insider trading advantage from which even more profits can be skimmed.
In the process....American consumers pay the freight....and the rent...in this case with higher aluminum prices. Commodities-trading manipulations increase the costs to consumers while enriching a few skimmer-trader-investor types. Goldman Sachs even admits it......
In 2011....an internal Goldman memo suggested that speculation by investors accounted for about a third of the price of a barrel of oil. A commissioner at the Commodity Futures Trading Commission, the federal regulator, subsequently used that estimate to calculate that speculation added about $10 per fill-up for the average American driver.
By all means....read the entire NY Times article. Find out how a tiny band of skimmers and schemers, who add no value to our economy, dictate the price of virtually everything we buy.