2710 Chinese Action II

The Chinese government is taking actions which will
cause a massive global stimulus. This is not being
done out of altruism; the Chinese are attempting to
protect themselves from the expected inflation in
dollar-denominated assets. Here's the deal:

1. The Chinese government (and bankers) have concluded
that the dollar is not a good place to keep over $1T
in assets. They have also concluded that yen, Euros,
gold, Swiss Francs, and pounds aren't looking so good,
either.
So, they decided to buy copper, as in 10% of the
copper in the entire world:

http://www.ft.com/cms/s/0/b1176552-1710-11de-9a72-0000779fd2ac.html

2. Now, there is still some question about exactly how this works.
Allegedly, they have been putting copper ingots equal to 10%
of 2008 world copper production into warehouses in Shanghai.*
This has already driven prices up 35% from their lows, which is to
say, up to around 3/4 of the price 2 years ago. This has also
created a lot of jobs in Chilean copper mines, international ore
carrying ships, and Chinese smelters. Annual production is
15 Megatons of copper, and the recent price is $6000/ton.
Buying 10% of the total copper production (1.5 MT) is $9B.
This program has already produced perhaps 4.5 million jobs,
and has protected $9B if Chinese investments. I'd call it
"a good start".

3. In order to protect the rest of the Chinese national reserves,
and to create jobs, I'd say that the Chinese hard asset purchase
protection team is going to have to buy some other stuff:
Lithium, Cobalt, Vanadium, Manganese, Nickel, Silver, Chromium.

4. This is likely to cause the world economy to rebound.

This is the best economic news is a while.

-dave chapman

================================================================
* I wouldn't put the copper in Shanghai, and I don't believe the
stories about how that's where it is going. I would put it
into certain buildings a couple of hundred km north of Nanjing. . .