U S A Pays the Most

And now, so does China...  when I get into discussions with doctrinaire Austrian acolytes, and tell them the "price" of a given commodity is the price USA pays, and everyone else pays less, they say it cannot be so, because the hard rules of economics prevents it.  And this from people who are aware of government distortion of markets.

Subsidies, regulations, loan programs, are just three of many factors which cause people to act uneconomically, or at best, find a bad idea tradable.  By that I mean they see a bad situation forming, but realize they can get in, make money and get out, before it goes bad.  I got in TalkCity.com at 22 cents, tried to sell at $35 (the top), but got out at $13.  It was never worth 22 cents, let alone 13 or 35.  But it was "tradable."

The circumstances had nothing to do with free markets, or even business, it was pure fraud, goosed by government planners.  Better people, like the Amish, stay out of it, but it is easy to rationalize participating.

Mish quotes Michael Pettis on Chinese traders buying copper overseas when local copper is cheaper, bidding up the world price of copper, or at least allowing copper traders to sell into China at a higher price than elsewhere.  (Why not sell all your copper if China price is higher?  Because the price would drop, and your sane customers might go out of business.  In free markets cartels form to manage madness and disband after the trouble has passed.)

At any rate, in essence, Chinese business can find credit for importing commodities, but not for domestic operations.  So, get govt credit to import copper, sell the copper at a loss, but net proceeds constitute working capital.  (Borrow 100, buy copper for 100, sell copper for 90, lose ten, but have 90 to work with. Hope your 90 working capital earns enough to cover the 100 loan.)

I doubt the Chinese do not view this as madness, they likely do.  They view it as tradable, but these things, like TalkCity.com, tend to unwind real fast, where even those with eyes wide open get caught in the storm.

So now China, like USA, pays the most.  In neither instance does it have anything to do with free markets.  In both instances it has everything to do with people make a living, or more, by exploiting tradable circumstances.  AS Pettis points out, someone has to pay for all of this inefficiency.  The cost is normally applied to people who draw a paycheck, employees.  The lost is nationalized and laid on paychecks as taxes.

There is another possibility, if you look at the list of commodities Chinese traders are buying, it sure looks like war materiel.  Maybe the Chinese know what they are doing.

In the meantime our leaders gather to watch live-action snuff movies and expend immeasurable resources on people who do not matter and enrage decent people everywhere by killing the children of our "enemies." (Saddam, Gaddafi, bin Laden...)  We did not kill the children even of the nazis.  We have become so barbaric.

If I were a Chinese leader, I would worry about the irresponsible USA leadership.

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