If Half of this is True...Here is your Evidence to Push Inventories Higher!

Hat tip to Mark Warren...since I never read mainstream papers anymore; pleased to share with you this little investigative gem from the NY Times:


Essentially, here we have a story of regulatory pricing rules that are being exploited by a bank subsidiary. Rather than focus on the sickening nature of crony capitalism gone wild here...because it is predictable...I'd like to share my lean lesson learned from this.

It starts with a quote from Tyler Clay, "a forklift driver who worked at the Goldman warehouses until early this year. He calls the process 'a merry-go-round of metal.'"

What could he mean by this? That the banks new to warehousing metal don't have the experience to effectively and efficiently add value to the warehousing of metal commodities? No, what he means by merry-go-round is the deliberate movement of metal to effectively shift inventories from one warehouse to another, increasing the values of inventory through storage costs...intentionally, to raise prices. And they are about to get permission to do this with copper, which is already at high prices - to the point where local substations in Vermont have reported thefts of copper in there supply stations. So, expect copper to move higher in the coming months.

I'm pretty sure that if this were in an unregulated market, I wouldn't have the perverse incentive to hoard materials and move them around on asset sheets just to artificially raise my prices. It wouldn't be illegal, but it sure would be immoral and the market would pressure me to lower my prices somehow. But the regulatory permissions and rule sets here provide many lessons learned that make all of this, unfortunately, vilely, sickeningly LEGAL. First, increase your inventories - you can raise your prices this way! Second, become a bank. You can lobby the Fed and get weird accounting laws made that let you pretend you are adding value but treat durable materials and goods like fiat money and leverage the hell out of it in immoral and illogical ways. Third, the fight to behave and think lean is beginning to look like a broader economic and political fight where not only are Wall St. cronies are leveraging your dollar against you, but now the materials in which you require the lowest prices to compete in a global market. Good luck!


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