The House Edge: A Shuffle of Aluminum, but to Banks, Pure Gold
[Via NYT > NYTimes.com Home]
Regulators have allowed banks to buy companies that trade in commodities, resulting in huge profits for the banks and higher prices for consumers.
Letting banks control commodities is simply stupid. Yet we now routinely allow banks to control non-financial markets.
Goldman Sachs owns warehouses that hold 25% of all the aluminum in the US. And what they have done is increase the amount of time for the delivery of that aluminum to customers from 6 weeks to 16 months!!
The cost of aluminum has doubled.
All so they can collect more rent!
They skirt the law so they can make more money.Not by creating anything. NOt by making anything. Just being rent collectors.
This has cost us over $5 billon in 3 years. Yep, Goldman Sachs made an extra $5 billion not doing anything.
It used to be that banks and financial situations were prevented from these sorts of things. BUt deregulation in the 90s now lets them become a part of the free market even as they finance it.
So they simply move 3000 TONS of aluminum around every day to make their extra $5 billion. All at our expense.
This is not the creation of wealth. This is rent-seeking and should be tightly regulated in a free market economy.
A sign that we are on a good path is re-regulation of these attempts at rent-seeking by banks. I do not expect this to happen, especially given this penultimate paragraph:
After a sustained lobbying effort, the Securities and Exchange Commission late last year approved a plan that will allow JPMorgan Chase, Goldman and BlackRock to buy up to 80 percent of the copper available on the market.
The banks can now control copper prices.Isn’t that special? I’m sure that will work out well for us.