The Spark

“The emancipation of the working class will only be achieved by the working class itself.” — Karl Marx

Goldman’s Price-Fixing Metal Merry-Go-Round

Aug 19, 2013

Goldman Sachs and other Wall Street banks are making billions on insider trading in the commodities markets – and it’s all perfectly legal.

Three years ago, Goldman Sachs began to buy 27 aluminum warehouses in the Detroit area. Today it controls one quarter of the world’s supply. This allows it to control how fast the supply moves through those warehouses, which affects the price.

Before Goldman Sachs bought the warehouses, it took six weeks for aluminum to move to users. Now it takes 16 months!

Goldman Sachs then speculates on the price fluctuations it causes by how quickly or slowly it releases aluminum into the market. It can make a killing because it knows what will happen.

There are regulations that are supposed to stop such hoarding: industry rules require 3,000 tons of aluminum must be moved out of each warehouse each day. So Goldman Sachs has a fleet of trucks moving the metal from one warehouse to another to another, in what one forklift driver called a “merry-go-round of metal.” The requirement is met – but no aluminum hits the market!

Goldman Sachs points out that it breaks no laws and complies with all industry standards. No doubt! These standards are set by the London Metal Exchange, which oversees warehouses around the world and receives one percent of the rent collected by those warehouses. So the delay in selling aluminum makes the London exchange some money – very nice for its members, such as Citigroup, Barclays Bank and Goldman Sachs!

Aluminum is only one of the many commodities the banks are playing with, as they buy up food, coffee – and oil. Goldman Sachs has itself suggested this speculation accounts for a third of the price of a barrel of oil. It may add 200 billion dollars a year to the cost of oil alone!

This is the reality of modern-day capitalism – where massive banks control all the goods they have no hand in creating, and make profits from speculation at every stage.