I got this email from a blog reader.
| Are the Chinese increasing commodity prices by stock piling? They would accomplish several things at one time.|
They would be hedging the prices.
They would insure the availability to strategic materials to themselves in times of disruption.
They would have the alternative to holding so many dollars. They can't find a currency that rates any more long term VALUE than the dollar.
They would be gaining favor with less powerful countries they wish to influence without actually loaning or giving them handouts.
They have enough dollar reserves to use them strategically/ politically. More like a weapon?
The U. S. has time left to manage and correct it's global goofs of the last 10 years,but it MUST shake off this self destructive guilt ridden self image. If the U. S. prospers, the WORLD prospers....FACT!!!!
Here's what I wrote back:
Pension funds, hedge funds and other long-only investors are buying commodities and/or futures because they view it as an asset class. The government allows this.
From what I have read China has recently given more money to U.S. hedge funds. This represents some of the Chinese money behind recent price runnups in materials.
What's curious is that pension funds are regulated investments (tax advantaged and, thus we can say, "backed by taxpayers.") So how twisted is this...that by allowing these kinds of investments the government is actually using taxpayer money to push up the prices of gasoline and food...on taxpayers!!!
The whole thing is so convoluted as to be surreal. The only thing is, it's not surreal, it's real!
PS: Notice how the U.S. markets now rally when commodities go up? Didn't used to be that way. We are transforming our nation into an export power, just like our leaders want. We keep the dollar weak, lowering the living standard of Americans (or forcing workers out of good-paying jobs by putting companies like GM and Chrysler into bankruptcy. Those workers will have to take minimum wage jobs just to survive, making them more competitive from a labor cost standpoint.)
And what are we exporting? Technology? High-value-added stuff?
We're pretty much exporting our food and natural resources...in exchange for Chinese money!!!
The joke's on us, BIG TIME!!