does intra-bank and LBMA trading affect PM prices?

[bart]

Re: does intra-bank and LBMA trading affect PM prices?

I would guess that it does not.

say $10B is to be traded - the 2 banks in question say

"right, now, that amounts to xxx ounces of Silver, so on LMBA we'll switch bookkeeping entries representing ownership of xxx ounces and call the $10B transfer done."

I'm having a hard time seeing how this could affect the Silver price for example on COMEX.

This question arises for me because a few commentators (Paul Van Eeden & Antal Fekete among others) claim this type of transfer is what has been raising prices over the last couple of years, as more of these transfers are done in PMs instead of US dollars.

comments?

Of course that precise example you gave will have a minimal effect on COMEX, especially since deliveries seldom occur on COMEX.

Add in a few extra parties in that transaction between the two banks, and then reconsider. Also consider the broad area of leasing and the lease rates.

[Sapiens]

Re: did the volume of money shrink?

I bet it did.

How many margin calls do you think went out?

worldwide? - especially in China where allegedly taxi drivers are mortgaging their houses to the armpits to by into the stock markets.

The money stock stayed the same, unless debt was written off or forgiven. (not counting any additional borrowing from banks or those authorized to expand the money stock)

[Sapiens]

Re: does intra-bank and LBMA trading affect PM prices?

yesterday, while the market was dropping, i had the thought that my dollars were getting more valuable.

duh! I get to eat crow! You are right, your dollars were getting more valuable in reference to the declining stocks...!

Sorry, brain freeze!

[Finster]

Re: does intra-bank and LBMA trading affect PM prices?

Finster, who acts as if the latter doesn't exist.

You just cited supply alone as if demand didn't matter. Don't feel bad, though, a lot of folks make the same mistake.

Remember currency, is a very special commodity, it is the commodity that fits every taste and size. Even better, since it is part of what constitutes Money, it tends to be a commodity that is used to set the standard as to how other commodities are measure in value.

It sure does tend to be, Sapiens. And that is the very property that allows its issuer to inflate it for long periods without the public becoming suspicious.

The question I address is not merely whether lots of people think of it as being a standard of value, but whether it in fact is.

[jk]

Re: does intra-bank and LBMA trading affect PM prices?

How was that so? Did the money stock shrink?

-Sapiens

my guess is that credit shrunk, what with margin calls, the liquidation of derivatives, the rise in volatility causing an increase in value-at-risk models resulting in reduced positions....

[Spartacus]

Re: did the volume of money shrink?

Since you bought stock with (brokerage company) credit, the cash you would have used to buy those stocks remains in circulation. Total money is increased over what it would have been without the brokerage credit.

my understanding is that a margin call demands the early payoff of (brokerage company, non-bank loans) with cash.

I'm not understanding how this would not decrease total money stock.

The money stock stayed the same, unless debt was written off or forgiven. (not counting any additional borrowing from banks or those authorized to expand the money stock)

[Spartacus]

Re: does intra-bank and LBMA trading affect PM prices?

my guess is that credit shrunk, what with margin calls, the liquidation of derivatives, the rise in volatility causing an increase in value-at-risk models resulting in reduced positions....

I agree about the margin. The other things are not as clear-cut.

Some parties cold take this opportunity to write much more of some specific types of derivative - net of liquidations and new underwriting, total money might increase due to derivatives.

We don't know how VAR plays out institutionally. The sensical assumption is that the VAR/(risk management) jackbooted cops get out their nightsticks and beat up the traders, forcing position reductions, but that's far from guaranteed.

[Finster]

Re: did the volume of money shrink?

Since you bought stock with (brokerage company) credit, the cash you would have used to buy those stocks remains in circulation. Total money is increased over what it would have been without the brokerage credit.

my understanding is that a margin call demands the early payoff of (brokerage company, non-bank loans) with cash.

I'm not understanding how this would not decrease total money stock.

It doesn't have to decrease the money supply; what it actually does is increase money demand. When you buy stock on margin, you're going short money - and you need money to cover.

[Sapiens]

Re: does intra-bank and LBMA trading affect PM prices?

You just cited supply alone as if demand didn't matter. Don't feel bad, though, a lot of folks make the same mistake.

It sure does tend to be, Sapiens. And that is the very property that allows its issuer to inflate it for long periods without the public becoming suspicious.

The question I address is not merely whether lots of people think of it as being a standard of value, but whether it in fact is.

Finster, I have been thinking about this... Clearly what is valuable is up to each and everyone of us individually. As for a medium of measure, transfer and exchange of value between individuals, the only element that can objectively provide that is Gold, due to its inherent characteristics.

Thanks for the thought exercise.

-Sapiens