China finds US$15b of loans tied to falsified gold deals

[bonanke]

China firms are just learning from the west how to trade gold paperlessly. Same gold parked in a warehouse can be sold hundreds of times in the futures market to manipulate gold prices and profit from there. China is still a small fish in this game. Former London gold trader Andrew Macguire blew whistle a few years on this business practice a few years ago, but nothing has changed.

Such deals are legitimate, both in London and China, albeit a very risky venture, which needs close regulation.

The issue with China, is the "falsified" transaction. It is risky to trade gold paperlessly, with lesser gold parked in warehouse, but it is very scary to hear trade gold paperlessly, with NO gold anywhere.

The old game created in the west is that you can legally sell non existent gold hundreds of times.
The Chinamen tried to create a new game, by telling the bank they have some gold which doesnt really exist, and borrowed money based on this lie. If we think logically, it does not differ much from each other. There is no physical gold in both cases. Just a promise that gold exists and money flows.

If China central bank can develop the concept further and legalise it, then there will be an alternative to the FED's fractional banking system eh?


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