Continuing on the subject of precious metals and the financial situation part 2

15 Jan

So when we look at the size of the world derivatives market and then compare it with say the oil market or any other physical asset class the digits clearly outnumber the commodities. After all 639 trillion dollars is quite a lot wouldn’t you say ? Thus I think its a fair conclusion to state that IF one wanted to adjust prices then its only a question of how many digital currency units it takes to move the price to the preferred target.

One of the best examples I can find about this occurring is the case of Yasuo Hamanaka. Yes another Japanese connection 🙂 He is better known as Mr Copper as he worked for Sumitomo Corporation a huge Japanese multinational where he speculated in all kinds of commodities.

Copper as indeed all commodities are traded globally and thus subject to market conditions and fluctuations in prices. Spoilage and thus inventory is not a major issue other than storage costs when it comes to the Copper market.

Hamanaka was able to utilitize the vastly deep pockets of the Sumitomo corporation to move or keep the price of Copper within a fixed range for years. Obviously he had help but this example clearly indicates that prices can be engineered and indeed ARE done so. Even George Soros another deep pocketed investor apparently attempted to profit from challenging the Hamanaka fix without success.

A critic would be quick to point out that Hamanaka did eventually lose his corner on the market and thus caused large losses to his company. I think this may have more to do with the traders acceptance as a business as usual approach instead of accepting that at some point every ride must come to and end. Rather than move out of some losing positions Hamanaka tried to stay in and ride yet another Sumitomo backed wave of price “control”. This has more to do with a flaw in the traders working model than a failure to move prices in the way a deep pocketed investor wishes it to move.

So with the above mentioned example we can clearly see that under the right circumstances prices are subject to outside forces that are able to and indeed wish to attempt control of a commodity. Who is to say if a price is or isn’t subject to price-fixing ? I want to be careful about throwing out the word conspiracy because I think that while they do exist they are far less common than most who use the label think they are.

I simply want to point out that not only is it possible,but in fact probable under the right conditions. With ZIRP (zero interest rate policy) in effect those with the financing are able to access an unlimited amount of digital dollars. If approached with a proper working model or perhaps if you prefer having learned the lessons from Mr Copper why not seek to keep prices in a certain range ? If you or I can conceive of the idea, then I humbly submit that just about anyone can.

Manipulation is a term that is throw around a lot especially it seems when a price is knocked down, but I suspect it works both ways. Its a disturbing thought but I suppose we are along for the ride, hopefully it doesn’t get too bumpy.


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