Financial WAR w/ China?!?! Dollar Collapse & Gold’s Future
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A report that Chinese state-owned companies will be allowed to walk away from loss-making commodity derivative trades provoked anger and dismay among investment bankers on Monday as they feared it may set a damaging precedent.
The State-owned Assets Supervision and Administration Commission, the regulator and nominal shareholder for state-owned enterprises (SOEs), told six foreign banks that SOEs reserved the right to default on contracts, Caijing magazine quoted an unnamed industry source as saying in an article published on Saturday.
While the details of the report could not be confirmed, it was Monday’s hot topic in financial circles from Shanghai to Singapore as commodity marketers feared that companies holding underwater price hedges could simply renege on the deals, costing banks millions of dollars in profit.
The warning from SASAC follows a series of measures from Beijing this year to crack down on the sale of derivative products by foreign banks to Chinese enterprises, principally big consumers, who bought protection against higher prices last year only to watch the market collapse — leaving them with losses.
While many companies including top airlines have come clean on the losses, some analysts fear another wave may follow.
“I wouldn’t be surprised if more state firms emerge with big derivatives trading losses, otherwise SASAC wouldn’t come out with such a radical move,” said a Hong Kong-based derivatives analyst, who like most other industry officials and bankers declined to be named due to the high sensitivity of the issue.
A SASAC media official said on Monday that he was waiting for the “relevant department’s” official comment before he can clarify to media. A government official said that the Bureau of Financial Supervision and Evaluation under SASAC was handling the issue. The official declined to be named and did not elaborate.
Spokespersons at Goldman Sachs and UBS declined comment, and media officials at Morgan Stanley and JPMorgan were not immediately available for comment. All are major global providers of commodity risk management.
No bank were named in the Caijing report. The SASAC media officer also declined to identify any specific banks.
“It’s a handful of companies who are being encouraged by regulators to re-negotiate,” said a second banking source. “It’s outrageous, but it’s China, so everyone is treading very carefully.”
For banks that are hoping to sell more derivatives hedges in China, the world’s fastest-expanding major economy and top commodities consumer, the danger goes beyond the immediate risk to existing contracts to the longer-term precedent that suggests Chinese companies can simply renege on deals when they like.
The report follows an order from SASAC in July that required all central government-controlled state companies engaged in trading derivatives to make quarterly reports about their investments, including details of holdings and performance.
But the reported letter opened several important questions that could not immediately be answered. “If we were among the banks receiving that letter, we would be very angry. But now the key is to find out more details on the letter: In whose name the letter was issued, the government or the corporate’s? And under what was the reason for defaulting?” said a Singapore-based marketing executive with a foreign bank.
The source, whose bank did not receive a letter, said that Air China, China Eastern and shipping giant COSCO - among the Chinese companies that have reported huge derivatives losses since last year - had issued almost identical notices to banks.
“If it’s in the name of the government, the impact will be very negative,” said the source, who declined to be named.
Beijing-based derivatives lawyers said the so-called “legal letter” has no legal standing — SASAC as a shareholder has no business relationship with international banks.
“It’s like the father suddenly told the creditors of his debt-ridden son that his son won’t pay any of his debt,” said a lawyer from the derivatives risks committee of the Beijing Lawyers Association. (C ) Reuters
Duration : 0:8:9
and what are they …
and what are they doing with their stimulus. their not buying clunkers to go into debt for new fords and chevys.
Im confused when i …
Im confused when i hear people say that the value of derivatives is ‘only notional’ so it’s nothing to worry about. If China starts to cancel then Goldman could be next to fail, so the ramifications are real, no?
why? To lull the …
why? To lull the yanks into thinking it was worth something and to keep exporting to the US. Dont play chess with the chinese unless you are russian.
why did China buy …
why did China buy all the derivatives garbage in the first place?
Ha ha the last two …
Ha ha the last two images towards the end of the video were pretty funny.
Hello Growby 10!! …
Hello Growby 10!! It correctly spelled Fort Knox
This is interesting …
This is interesting. I heard that recently China announced they want a global supercurrency. What does this mean? Is China part of the New World Order?? Or don’t they understand that the global banksters want a world currency. Why can’t all countries just have their own currency and the new world order go to hell.
That’s the first …
That’s the first person I’ve heard use the phrase: contract fraud.
It’s also …
It’s also interesting to hear people discuss “economic warfare” - hardly a new concept. I read a book in the 1970s (pub 1968) by Juan Bosch called “Pentagonism” - he mapped out the whole economic warfare strategy in perfect detail - 40 YEARS AGO!
Thanks Growby10 - …
Thanks Growby10 - great post! OMG - My body tingles with delight thinking about Goldman Sachs and JP Morgan getting crushed by Chinese moves….
China has been …
China has been keeping their worthless currency non convertible artificially low against dollar and they 3 trillion stimulus having just 2 trillion GDP .
They should just shut the up .
well thank God
US …
well thank God
US has been trying to bring dollar down and they could not because Chinese buying it
US needs dollar lower at Index 70
We can not afford strong dollar
It is propaganda on part of US creditors
Screw them , I say , them
We can not afford it ,
China boycotts the …
China boycotts the dollar
5pm london time, …
5pm london time, us dollar is getting hit hard by oil goin to 1000 per oz., down around 77.05 or so.would hate to see what happens after it goes below 73-75.levels
thanks for sharing
thanks for sharing
Growby10: It’s Fort …
Growby10: It’s Fort Knox. This is a very good video, interesting info. If this brings down the corrupt banks like Goldman Sachs and J Pirate Morgan, GREAT!! Keiser is, sadly, correct; Goldman an Morgan are controlling the US government. There is NO way the US can use its usual response: use the US military to invade the country which offends it. Have you read the book by a couple of Chinese military officers called “Unrestricted Warfare”? Revealing.
Fort Knocks??? …
Fort Knocks??? Whats that, gold porn? lol
0:25
Great video, but …
Great video, but what are the financial implications of Paris speaking fluent Chinese.
Might want to spell …
Might want to spell check in the future…
Sometimes I thing …
Sometimes I thing Max Keiser is as much a comedian as a commentator. Spontaneous hilarity.
James
great job growby .. …
great job growby … personally even tho i’m british and in the same boat as you guys, i hope it does go pear shaped and see gs and the government gone for good..
bring on china…
LOL!
wonder if it …
LOL!
wonder if it would work with Goldmen Sucks.
fee1776: That only …
fee1776: That only works so long as AIG is still in operation…
I doubt that the …
I doubt that the American people will not over come this. It will just be a mess for awhile. There were enough guns bought using paperwork, not including private to private sales, to create the worlds 4th largest army. The American military tech, even without the BANKSTERS, will work GREAT.
@catdog- you got it …
@catdog- you got it bro! thanks for comment!
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