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How China's Rehypothecated "Ghost" Steel Just Vaporized, And What This Means For The World Economy

Tyler Durden's picture


One of the key stories of 2011 was the revelation, courtesy of MF Global, that no asset in the financial system is "as is", and instead is merely a copy of a copy of a copy- rehypothecated up to an infinite number of times (if domiciled in the UK) for one simple reason: there are not enough money-good, credible assets in existence, even if there are more than enough 'secured' liabilities that claim said assets as collateral. And while the status quo is marching on, the Ponzi is rising, and new liabilities are created, all is well; however, the second the system experiences a violent deleveraging and the liabilities have to be matched to their respective assets as they are unwound, all hell breaks loose once the reality sets in that each asset has been diluted exponentially.

Naturally, among such assets are not only paper representations of securities, mostly stock and bond certificates held by the DTC's Cede & Co., but physical assets, such as bars of gold held by paper ETFs such as GLD and SLV. In fact, the speculation that the physical precious metals in circulation have been massively diluted has been a major topic of debate among the precious metal communities, and is the reason for the success of such physical-based gold and silver investment vehicles as those of Eric Sprott. Of course, the "other side" has been quite adamant that this is in no way realistic and every ounce of precious metals is accounted for. While that remains to be disproven in the next, and final, central-planner driven market crash, we now know that it is not only precious metals that are on the vaporization chopping block: when it comes to China, such simple assets as simple steel held in inventories, apparently do not exist.

From Reuters:

Chinese banks and companies looking to seize steel pledged as collateral by firms that have defaulted on loans are making an uncomfortable discovery: the metal was never in the warehouses in the first place.

This means that in an economy in which the creation of liabilities, and pledging of assets took place at a furious pace in the past 5 years, nobody really knows just what the real state of credit creation truly was. What is 100% certain is that as a result of this revelation, the GDP number of the country, which is and always has been a derivative of credit formation and expansion (and heaven forbid contraction), is massively overrepresenting what it is in reality, and that the Chinese economy has been expanding at a far slower pace if defined not only by the creation of liabilities, but by matched assets. Most importantly, it means that every single Renminbi in circulation is impaired as a country-wide liquidation event would see huge losses by every creditor class. It also would mean, naturally, zero residual value left for the equity.

And just like that the Chinese growth "miracle" goes poof... as does its steel first, and soon all other commodities (coughcoppercough) that served as the basis of "secured" liability creation.

Reuters continues, even if the punchline is already known:

China's demand has faltered with the slowing economy, pushing steel prices to a three-year low and making it tough for mills and traders to keep up with payments on the $400 billion of debt they racked up during years of double-digit growth.


As defaults have risen in the world's largest steel consumer, lenders have found that warehouse receipts for metal pledged as collateral do not always lead them to stacks of stored metal. Chinese authorities are investigating a number of cases in which steel documented in receipts was either not there, belonged to another company or had been pledged as collateral to multiple lenders, industry sources said.


Ghost inventories are exacerbating the wider ailments of the sector in China, which produces around 45 percent of the world's steel and has over 200 million metric tons (220.5 million tons) of excess production capacity. Steel is another drag on a financial system struggling with bad loans from the property sector and local governments.


"What we have seen so far is just the tip of the iceberg," said a trader from a steel firm in Shanghai who declined to be identified as he was not authorized to speak to the media. "The situation will get worse as poor demand, slumping prices and tight credit from banks create a domino effect on the industry."

Ultra-rehypothecation 101:

Police have arrested an employee from Baoyang Warehouse in Shanghai and are investigating documentation for steel stocks that the employee issued to a trading firm, said an official with the surname Ou at Baoyang. Baoyang is owned by China Railway Materials Shanghai Company Limited.


The trade firm used the stocks more than once as collateral to obtain loans, said an executive at Shanghai Minlurin, another trading firm that had steel stocks in the warehouse. The receipts used were for steel worth around 380 million yuan ($59.96 million), the executive said.


Similar cases have prompted some trading houses to temporarily halt transactions related to warehouse receipts, disrupting China's steel business, traders said.

If the above makes readers queasy, it should: after all rehypothecation of questionable assets is precisely what serves as the backbone of that critical component of the shadow banking system: the repo market, where anything goes, and where those who want, can create money virtually out of thin air with impunity as long as nobody checks if the assets used for liability creation are actually in the system (and with JPM as the core private sector tri-party repo entity, secondary only to the Fed, one can see why this question has never actually arisen).

In the meantime, the entire Chinese economy is unraveling:

Banks, too, are giving less credit against warehouse receipts.


"Fake warehouse receipts have become a problem for some banks and because of this, many banks have boosted monitoring of existing stocks at warehouses and temporarily stopped accepting steel stocks as collateral for loans," said a Shanghai-based branch manager from a Chinese bank who declined to be identified as he was not authorized to speak to the media.


Steel mills and end users rely heavily on trading firms to keep steel flowing from producers to consumers. Steel traders often buy consignments with full payment, ensuring cash flow to the mills. End users can buy small volumes from the traders, more convenient for them than the big volumes the mills sell.


Industry sources estimated cases that have already come to light account for about 5 billion yuan ($787.50 million) of bad debt in Shanghai, one of China's biggest steel trading centers.


At another warehouse, a logistics unit of giant steelmaker Baosteel rented a small office to a company called Shanghai Yiye Steel Trade Market Management Co Ltd. Documents were forged stating Yiye was the owner of some of the steel stored in the warehouse, said Wang Xueying, the spokeswoman for the unit called Shanghai Baosteel Logistics Co Ltd.


Yiye used the documents in dealings with two companies, China Railway Harbin Logistics and Wuhan Iron Yitong, the spokeswoman said.


The two companies came to the warehouse to collect the stocks only to find that Yiye did not own the materials, she said. The case is still under investigation, she added.


Nobody answered telephone calls to Yiye made by Reuters to request comment for this story. Both China Railway Harbin Logistics and Wuhan Iron Yitong declined to comment when contacted.

In conclusion we can only add that we hope none of this comes as a surprise to our regular readers: we have been warning for years that i) the inventory of the world's credible assets is literally evaporating in absence of technological efficiency and CapEx spending (which is also the reason for the ECB's endless lowering of collateral requirements) and ii) illegal rehypothecation of assets, which infinitely dilutes claims on real assets, can and will lead to total losses even for investors who thought they had strong collateral backing.

We now know that this has been happening in China with the most critical component of its economic growth miracle: steel. We will soon discover that all other assets: stocks, bonds, commodities (including gold and silver) and finally cash (think deposits) have been comparably rehypothecated and criminally commingled. The end result will be the most epic bank run in world history, which incidentally is precisely what the central banks are attempting desperately to delay as much as possible by generating excess inflation to "inflate" away the debt, leading to rematching of finite assets and virtually infinite liabilities. Alas, in a world in which credit-money liabilities are in the quadrillions, and in which the real assets are in the tens of trillions, only hyperinflation can seal the deal.

Or, in other words, lose-lose.


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Mon, 09/17/2012 - 17:26 | 2805055 CPL
CPL's picture

Bubble time!!!

Mon, 09/17/2012 - 17:34 | 2805094 Newsboy
Newsboy's picture

"Steel Your Face"


Mon, 09/17/2012 - 18:41 | 2805264 strannick
strannick's picture

China was content with accepting Treasuries in return for their labors. No surprize they were also content with paper steel -which doesnt have near the tensile strength- instead of real steel. Maybe they wrongly interpreted the Google translation of ''steal''. Just as warehouse receipts dont equal ''steel'', so GLD, gold certificates, allocated, unallocated doesnt equal ''gold"

Mon, 09/17/2012 - 18:55 | 2805299 CPL
CPL's picture


It means IOU's, were backed with IOU's, that were backed by IOU's backed by Steel that doesn't exist.


Well, there it is.  I usually only mock that strategy in jest, some fool actually did it.



Wouldn't be funny if all that gold they've been buying has been written against the vapour steel?

Mon, 09/17/2012 - 18:58 | 2805334 surf0766
surf0766's picture

Monster Pawn Stars !!!!!!!!!!!!!!!!!!

Mon, 09/17/2012 - 19:12 | 2805373 mjcOH1
mjcOH1's picture

You have to applaud their initiative.   Five years ago they were plowing their excess capacity into empty cities that no one will ever live in.   At a certain point they saw the inefficiency in that, skipped the actual production phase, and started filling imaginary warehouses with imaginary steel.   And think of the greenhouse gas emission savings!

Mon, 09/17/2012 - 19:39 | 2805470 Stuart
Stuart's picture

somebody needs to check the ozs supposedly backing up GLD and SLV.   

Mon, 09/17/2012 - 20:01 | 2805540 CPL
CPL's picture

You don't get it.  This calls into question of any delivered asset shipped to China, from China, near China.  What was the trade backed with exactly and who ends up with the stolen asset.  Because that's what it is at that point.  Theft.  Biggest gold and silver robbery ever.

They could have underwritten the delivered Gold and Silver with illusionary steel against the cash backed asset of GLD and SLV.  Hell, the bonds they've been buying, how were they collaterilzing it.  Imaginary steel in empty warehouses.

Chinese firecrackers on a string going off one by one.  Pop pop pop crack pop crack...until the big finale.


Then that in turn triggers GLD/SLV clients to review their inventory and find the same thing in their pocket as they were walking in.  Nothing.  Shell game.



Mon, 09/17/2012 - 22:36 | 2805913 smlbizman
smlbizman's picture

alright this is nothing new...back in the late 80's early 90's,,,this guy selling trailors, if your park has dirt roads, or mobile homes , if your streets are asphalt and a manufactured home if your park has a pool.....was floor planning units to many lenders at one time...this guy was rolling..helicopter, yacht etc.....and swear his company was "johns homes" , yea i know...he was located in delaware....the party eventually ended and john went to jail for quite awhile...the only difference is he went to jail...

Mon, 09/17/2012 - 23:06 | 2805955 Michael
Michael's picture

What's that thing I'm always saying that I have informed you thusly of?

Mon, 09/17/2012 - 23:16 | 2805968 Pinto Currency
Pinto Currency's picture


This article shames China.

Prepare to be attacked when China is finished with Japan.

If not ZH directly, then your at least  your proxy servers.


Tue, 09/18/2012 - 00:53 | 2806108 hiramspiral
hiramspiral's picture

Wait, what happened?  I don't speak ground-up hamburger--please elaborate. 

Tue, 09/18/2012 - 00:58 | 2806109 hiramspiral
hiramspiral's picture

...not that ground-up hamburger is entirely unintelligible. 

Mon, 09/17/2012 - 20:30 | 2805642 bilbert
bilbert's picture


I'm glad I swallowed my sip of wine before I read this, as it would have sprayed the walls.

This must be the Moore's Law of Finance!


Mon, 09/17/2012 - 23:54 | 2806045 Pool Shark
Pool Shark's picture



Aaaaand,... it's gone!



Tue, 09/18/2012 - 02:47 | 2806177 Au Member
Au Member's picture

maybe all that steel was actually there but then turned to dust.

where have I seen that before, oh yeah here:

Tue, 09/18/2012 - 04:21 | 2806220 Michael
Michael's picture

It was an orbiting SDI defense satellite that did them in along with explosives, so no one would figure it out, the two WTC Towers. Building 7 was explosives only, that's why they had to get rid of it in a hurry, along with all the Dot-Com evidence.

Just like this Iranian facility done late last year, note the absence of creators and other things;

Satellite Images Show Iranian Missile Base Destroyed

Tue, 09/18/2012 - 04:49 | 2806236 Au Member
Au Member's picture

I can't comment on orbiting satellites as I don't have any evidence of this. But the evidence presented by Dr Wood is compelling and is the only scientific methodology I have seen used to derive an explanation as to what happened. She doesn't speculate as to who or how, just merely what occured which is important as a discerning and inquistive mind can easily be derailed by trolls into who, why etc. Just get the book and see what happened in all it's stark horrendous reality and that is enough to shake the foundations of our conditioned reality. I've owned the book for 2 years and only just mustered the courage to read it.

Tue, 09/18/2012 - 05:47 | 2806269 Sheeple Shepard
Sheeple Shepard's picture

Aaaaand, was never there!

Tue, 09/18/2012 - 06:35 | 2806291 Philippines
Philippines's picture

Southpark really hit the bullseye on that episode.

So.. What would happen if China decides to inspect all collateral around the world, in particular with any "things" the USA liened to China, existent or not? 

Mon, 09/17/2012 - 19:01 | 2805338 CPL
CPL's picture

GASP...they did, thieving little shits.

They leveraged their steel against delivered gold.  Holy's going to be a weird ride now.



Mon, 09/17/2012 - 20:03 | 2805549 slyhill
slyhill's picture

I keep tellin anyone listening - use your education: kite credit cards 'till your're an 800 w/100k in revolving credit, payoff your "student loans," buy PMs. Enjoy.

Mon, 09/17/2012 - 23:20 | 2805972 tenpanhandle
tenpanhandle's picture

yeah, that's the ticket.  Become a slimeball crook because others are doing it.

Mon, 09/17/2012 - 23:49 | 2806031 Michael
Michael's picture

Fair Isaac will be destroyed!

Mon, 09/17/2012 - 20:20 | 2805605 JackT
JackT's picture

Or even better, leveraged rehypothicated steel for rehypothicated gold.

Mon, 09/17/2012 - 20:33 | 2805649 Kayman
Kayman's picture

When Muddy Waters outed Sino Forest, they should have outed the entire country.  Larceny forever.

Mon, 09/17/2012 - 19:07 | 2805342 Michael
Michael's picture

Repo 105

What's that thing I'm always saying that I have informed you thusly of?

Mon, 09/17/2012 - 19:14 | 2805375 CPL
CPL's picture

Lehman with real assets of delivered gold backed by nothing but a fuck you.  I wonder what was underwriten with bullshit as well.  Anyone take a look at facebook angel investors yet?


Well played China, well played.


Cocktail anyone?  Grab a deck chair, beer's in the fridge, coffee's on the stove, snacks are in the fridge.  This is going to be a hell of a show.

Mon, 09/17/2012 - 19:17 | 2805386 Michael
Michael's picture

I got extra popcorn.

Tue, 09/18/2012 - 08:49 | 2806547 blindfaith
blindfaith's picture want to see an investment backed by a fuck you, then you need to look into the "on line education' fraud that is being 'discovered', nation wide.    Robo-signing of diplomas by teachers that never saw the student and had no idea their names were being used by the 'universities'.  Worthless degrees 'earned' by students that can't pass 5th grade math, construct a readable sentance, etc.

Just ask Michael ( below) what the ( yes, another one) scandal in Florida is over K12.  And the great Governor of Florida has, once again, stone waledl any investigation of the crimes of friends and supporters.  Florida....the shinning example for the great USA for integrity.

Mon, 09/17/2012 - 19:03 | 2805346 stocktivity
stocktivity's picture

Now this is scary

Mon, 09/17/2012 - 19:11 | 2805370 knukles
knukles's picture

Actually, it's not that uncommon.  Ask any commercial loan officer.  People attempt to pledge single assets multiple times against new loans all the time... called fraud.
Remember the Tea Pot Dome Scandal!
Was done abundantly in MBS/CLO/CDO land as well.


Mon, 09/17/2012 - 22:47 | 2805915 RockyRacoon
RockyRacoon's picture

I was wondering when someone was going to come back down to earth.  This shit ain't new, just a  new player.  It's common procedure in the commercial real estate markets.   Probably less now that we have appraisers with their wits about them now, but it's not totally gone -- just more clever.  As a real estate broker all thru the 1980s I can just shrug my shoulders at this thing the Chinese think they invented.  The real sparks will fly as we uncover the Wall Street angle!  Now those guys are geniuses at this.

Tue, 09/18/2012 - 00:44 | 2806100 Almost Solvent
Almost Solvent's picture

The twist that China may have hit on is getting physical gold & silver delivered based on fake collateral. 


Why bother with real estate when you can get physical gold & silver for free?

Tue, 09/18/2012 - 07:49 | 2806393 Melin
Melin's picture much gold does China have again?

Tue, 09/18/2012 - 08:55 | 2806564 blindfaith
blindfaith's picture

as much as they want you to believe, and not an ounce more!!!!

Mon, 09/17/2012 - 19:24 | 2805419 dexter bland
dexter bland's picture

You can bet a lot of the copper sitting in Shanghai bonded warehouses is for just this purpose. Why use copper (or any other metal) for collateral when you could use cash, real estate or something else? Because it is easier to use metals fraudulently.

Fraud is driving the commodities boom.

Mon, 09/17/2012 - 19:35 | 2805452 dexter bland
dexter bland's picture

Great article by Professor Michael Pettis of Peking University:

Mon, 09/17/2012 - 23:23 | 2805981 tenpanhandle
tenpanhandle's picture

tungsten filled copper bars, anyone.

Mon, 09/17/2012 - 19:57 | 2805529 1000924014093
1000924014093's picture

To badly paraphrase Bertrand Russell-- It's IOU's all the way down.

Mon, 09/17/2012 - 19:22 | 2805404 Ookspay
Ookspay's picture

LMFAO, If I steal your steel will it still be steal

Mon, 09/17/2012 - 22:35 | 2805910 Harbanger
Harbanger's picture

There's an old joke about the family iron and steel business, where the mother irons and the father steals.

Mon, 09/17/2012 - 20:28 | 2805631 Kayman
Kayman's picture

If you ever had to work with Chinese steel, you would know "paper steel" is of the same quality.

Chinese Steal.  That is what the country is all about.

Mon, 09/17/2012 - 23:27 | 2805992 tenpanhandle
tenpanhandle's picture

I thought everyone knew where the Chinese steel was.  Its stored in American landfills, for petes sake.

Tue, 09/18/2012 - 02:41 | 2806172 Dr. Sandi
Dr. Sandi's picture

I believe that's the 'In Ground Steel Reserve' you're talking about.

Mon, 09/17/2012 - 21:12 | 2805741 sgt_doom
sgt_doom's picture

Fantastic blog posting, TD but.....

Was there ever really any there there ? ? ?

I mean, would they have offshored all those jobs from America, Japan, UK and Eurozone to China if the labor hadn't been the cheapest 'cause the country was the poorest???

They got the jobs, and others received their purchases of endless financial instruments of debt.

DTCC's Stock Borrow Program (SBP) for naked short selling, unlimited number of naked swaps (unconnected credit default swaps), unlimited number of commodity futures contracts, unlimited number of investors per hedge fund, rehypothecation to the max, and LIBOR manipulation (plus those finer points of securtizations of re-securitizations of re-securitizations, .....).

Is there any there anywhere .....?

Tue, 09/18/2012 - 19:29 | 2808904 redd_green
redd_green's picture

haven't you read enough ZH to know by now that China in now way traded treasuries for "their labors"?

Mon, 09/17/2012 - 18:27 | 2805268 malikai
malikai's picture

One thing you can be sure of about the Chinese rehypo thing is that some people will hang.

Mon, 09/17/2012 - 18:59 | 2805336 Henry Hub
Henry Hub's picture

Actually, they shoot them in the back of the head. The family has to pay for the bullet and their organs are sold. Chinese justice is s bit rough by our standards, but it is an effective deterrent.

Mon, 09/17/2012 - 19:32 | 2805439 donsluck
donsluck's picture

Apparently not.

Mon, 09/17/2012 - 19:55 | 2805522 Henry Hub
Henry Hub's picture


Mon, 09/17/2012 - 23:29 | 2805993 tenpanhandle
tenpanhandle's picture

either the steel gets delivered or the fraudster does.

Mon, 09/17/2012 - 19:56 | 2805527 Dadburnitpa
Dadburnitpa's picture

That'd be perfect for Corzine.

Mon, 09/17/2012 - 20:35 | 2805656 malikai
malikai's picture

Who would want his organs?

Mon, 09/17/2012 - 20:58 | 2805707 Dadburnitpa
Dadburnitpa's picture


Mon, 09/17/2012 - 23:32 | 2805998 neidermeyer
neidermeyer's picture

My bologna has a first name , it's JOHN , My bologna has a second name it's Corzine...

Mon, 09/17/2012 - 19:59 | 2805528 Dadburnitpa
Dadburnitpa's picture


Mon, 09/17/2012 - 19:00 | 2805337 mjcOH1
mjcOH1's picture

And we can be nearly as sure it won't be the right people.

Mon, 09/17/2012 - 20:10 | 2805571 malikai
malikai's picture

Slaughter the monkey to scare the pig.

Mon, 09/17/2012 - 20:41 | 2805668 toady
toady's picture

I always say that the other way...

Slaughter the pig to scare the monkey.

Tue, 09/18/2012 - 05:01 | 2806234 malikai
malikai's picture

Think of the context.

Tue, 09/18/2012 - 16:26 | 2808382 bigfire
bigfire's picture

The actual phrase goes like this: Kill the Chicken to scare the Monkey.

Mon, 09/17/2012 - 19:22 | 2805403 EnglishMajor
EnglishMajor's picture

Steel your money.

Mon, 09/17/2012 - 23:26 | 2805986 El Oregonian
El Oregonian's picture

Sounds like their steel was involved in a terrible boating accident... OR somebody ended up stealing the steel!

Mon, 09/17/2012 - 17:40 | 2805117 bank guy in Brussels
bank guy in Brussels's picture

This is really a profound turning-point ZeroHedge article actually ...

The whole concept of a 'receipt for goods held on your behalf' is really dead, all around the world ... vapourised ...

'Give me a loan, and I'll give you a receipt for full collateral held safe and secure in a warehouse in China!'

Groucho Marx foresaw this decades ago ...

« I'll give you my personal note for 90 days ... and if I don't pay you back, you can keep the note. »

Mon, 09/17/2012 - 17:55 | 2805176 CPL
CPL's picture

I love Duck Soup.

Mon, 09/17/2012 - 18:00 | 2805192 centerline
centerline's picture

Is the mechanism by which everything will be vaporized.  Skips right past the hyperinflation run-up and goes directly to fail.

Mon, 09/17/2012 - 18:07 | 2805211 AL_SWEARENGEN

"Precious metals are financial assets like currencies, T-bills, and T-bonds; they trade in the multiples of a hundred times the underlying physical"


-Jeffrey Christian (aka Baghdad Bob) Testifying before the CFTC 03/25/2010

Mon, 09/17/2012 - 18:09 | 2805215 Eally Ucked
Eally Ucked's picture

Lets load up on iron investments then!

Mon, 09/17/2012 - 18:23 | 2805254 AllThatGlitters
AllThatGlitters's picture

Sprott just filed for his latest offering:  Sprott Physical Steel Trust (PHSTL)


Mon, 09/17/2012 - 19:10 | 2805368 Manthong
Manthong's picture

And the metal will be redeemable after acquiring units equivalent to 50,000 tons.

That might be a bit much to stow in the back of the Jeep, though.

Mon, 09/17/2012 - 21:07 | 2805728 Ness.
Ness.'s picture

IOU's are not realised as payment.  


No Hedge.

Mon, 09/17/2012 - 18:39 | 2805296 Son of Loki
Son of Loki's picture

"Physical possession is 10/10th of the law," my Dad used to say.

Mon, 09/17/2012 - 19:21 | 2805401 Piranhanoia
Piranhanoia's picture


Groucho saw his money disappear with the stock market crash.  He had purchased mass quantities on margin.  He was real lucky.  They just started making sound pictures and the brothers were ready.


Mon, 09/17/2012 - 20:26 | 2805626 Ness.
Ness.'s picture

I'm anticipating the pop, we all know is coming.  


But this "Popped" into my mind.  Not the Weasel?  Cause pop pop goes the weasel, and the weasel goes... POP!


Poppin' corn and just waiting for the "finalee".


Mon, 09/17/2012 - 21:22 | 2805772 Buck Johnson
Buck Johnson's picture

Look at MF Global and the rest, we are going to see something that will make the great depression look like a 1% down day in the stock market.  Instead of China put in the US, we are in the same boat and it's alot worse.  Once the dominoes start falling, it will be a mad dash out the door.

Mon, 09/17/2012 - 17:26 | 2805056 ghengis86
ghengis86's picture

What is "Corzined" in Mandarin?

Mon, 09/17/2012 - 17:29 | 2805072 CPL
CPL's picture

Man that travel through turnstile sideways going to bang cock.

<rim shot>


I got nothing...

Mon, 09/17/2012 - 17:30 | 2805074 Randall Cabot
Randall Cabot's picture

Is this why China stocks were down over 2% last night while the rest of Asia was up?

Mon, 09/17/2012 - 17:33 | 2805088 CPL
CPL's picture

They haven't got an Algo division yet...note yet.

Tue, 09/18/2012 - 01:08 | 2806122 TIMBEEER
TIMBEEER's picture

The Chinese HFT botnet is down for some reason. People should visit more x-rated sites to fix this capacity issue.

Mon, 09/17/2012 - 22:12 | 2805869 chump666
chump666's picture

Looks like what all our indexes will look like once war breaks out.  Repatriation flows. 

Days of Iraq/Afghanistan quagmires are over.  Next blowups are standup fights, country to country.  So if you are about to go to war, you pull your funds/projects...everything out of the country that looks like it's about to go all out war.

Asia is still selling.

Mon, 09/17/2012 - 20:07 | 2805565 krispkritter
krispkritter's picture

  "_________ _____ _  ___" Translation: "Invisible Thief Go Poof"

Mon, 09/17/2012 - 20:33 | 2805648 JohnG
JohnG's picture

Line up, ready, aim, BANG.

Mon, 09/17/2012 - 21:24 | 2805779 Death and Gravity
Death and Gravity's picture


Mon, 09/17/2012 - 17:27 | 2805058 roadsnbridges
roadsnbridges's picture

Surprise, bitchez!


(Shoulda gone for Remington Steele.)

Mon, 09/17/2012 - 17:27 | 2805062 Rainman
Rainman's picture

Does this mean commies are still lying ?.......i thought the Chinese were honest capitalists now.

Mon, 09/17/2012 - 17:29 | 2805069 roadsnbridges
roadsnbridges's picture

Let me check with OBlameO....sure there's a video about that somewhere.

Mon, 09/17/2012 - 17:29 | 2805070 Tyler Durden
Tyler Durden's picture

They are merely doing what every other "developed world" capitalist is doing: lying and making stuff up.

Mon, 09/17/2012 - 17:32 | 2805082 CPL
CPL's picture

Ignore the man behind the iron curtain I am the great and powerful Hu Jintao...skratch that...ZeMin Jiang.

Mon, 09/17/2012 - 18:39 | 2805295 dick cheneys ghost
dick cheneys ghost's picture

Pass the Sweet and Sour Shrimp mother fucker

Mon, 09/17/2012 - 18:46 | 2805313 CPL
CPL's picture

Here I got the soup you ordered... Cream of Sum Yung Guy.  Waiter told me it was a little salty but said you don't mind.  Now get your purse Nancy...time to blow this Popsicle stand.


<rim shot>


Be sure to tip your waitress.

Mon, 09/17/2012 - 22:35 | 2805907 Rylie
Rylie's picture

One more time for the cheap seat at the back.......

Tue, 09/18/2012 - 00:04 | 2806059 CPL
CPL's picture

Go...and never darken my towels again!

Mon, 09/17/2012 - 17:49 | 2805157 falak pema
falak pema's picture

what does this chinese situation do to the assets and profits of a global steel oligarch like Mittal; is it good or bad for him, given that steel prices are falling, as is demand?

This could be contagion big time.

Mon, 09/17/2012 - 17:54 | 2805171 CPL
CPL's picture

It's still a physical asset, because the steel just vanished and the Chinese have a habit of killing executives that do bad business.  I'm going to guess someone is going to go have to go buy a shit load of steel that they loaned out more times than they have steel.


Like the Tylers and others in the thread, this is where a steel backed bank run happens and people look to cash out of their position.  All the reasons fractional reserve anything is a stupid idea.  Credit is extended to many people for the same object many times over.

Mon, 09/17/2012 - 17:59 | 2805190 Spastica Rex
Spastica Rex's picture

Sudden catastrophic failure.

Possible, but I still don't think it will happen. Preventing that is the real plan, IMO - not the "catastrophic failure" part,  the "sudden" part.

Mon, 09/17/2012 - 18:10 | 2805218 CPL
CPL's picture

Kind of like trying to steer a train.  It's the velocity that kills you.


Feel like we've all been through this tap dance over the last five years repeatedly.  Smoke and mirrors.

Mon, 09/17/2012 - 20:02 | 2805550 Its_the_economy...
Its_the_economy_stupid's picture

Thing is... with a bank run the its only currency that has been re-hypothicated.. Contrrol-P fixes that problem. Not so easy w steel.

Mon, 09/17/2012 - 23:10 | 2805964 RockyRacoon
RockyRacoon's picture

Even harder with gold since there is so much less of it.

Mon, 09/17/2012 - 20:16 | 2805588 The Gooch
The Gooch's picture


Mon, 09/17/2012 - 20:26 | 2805625 Hulk
Hulk's picture

The smoke is about cleared. Now the mirrors are breaking, revealing that millions of tons of steel turned out to be one I-Beam...

Mon, 09/17/2012 - 23:05 | 2805953 The Gooch
The Gooch's picture

i-Beam. (5)


Mon, 09/17/2012 - 18:21 | 2805250 centerline
centerline's picture

+1.  The goal is to streeeeeettttttcccchhhh it out over time.  I don't think they have the luxury of enough time though.  The feedback loop is negative and accelerating.  

Mon, 09/17/2012 - 20:53 | 2805597 SafelyGraze
SafelyGraze's picture

the steel has been salted safely away and is all accounted for

together with the tungsten

in a storage facility just south of louisville


Mon, 09/17/2012 - 20:42 | 2805675 Kayman
Kayman's picture

Someone may have to buy a shitload of steel, but if it is Chinese, then all you will get is a load of shit steel.

Mon, 09/17/2012 - 21:16 | 2805751 CPL
CPL's picture

Well I'm still waiting on a supplier but would you give me 60 million and I'll get the underwriter to give me a lien on my enormous pile of steel.

Where do I store it?

Next to the BreX pile of gold.

Yes indeed, sign right here, I'll take your 30 years bonds, brb

Bank of America I can some bonds issued by your government and I would like to buy SLV/GLD.

<year later>

Yes I would like to have the gold delivered.  

Sure I'll ship the steel over after I recieve my gold shipment.

<BDI shits the bed>

I'm having trouble obtaining secure passage of the steel, do you have a reference on your end that can be used.


Fuck...some stole all my steel and every ounce of my BreX gold pile.

Call the insurance company we've been robbed of 800,000 metric tonnes of refined market grade steel.


Insurance industry implodes with the force of a thousand suns at this point along with every insurance policy and pension chain on the planet.

Mon, 09/17/2012 - 21:20 | 2805764 SmittyinLA
SmittyinLA's picture

fraud by insiders is excluded

Mon, 09/17/2012 - 18:23 | 2805252 Omen IV
Omen IV's picture

Mittal is in deep deep trouble - seriously paid up for ten years to amass capacity on multiple continents - and now competes with a nationalized chinese steel industry with over  220 million ton capacity with the deepest credit lines in the world - prices could be anything going forward for every steel product imaginable

look to 1978-1986 in usa as tariffs and import limits were taken off in 1980  - competed with government owned steel cos - ALL went BK: Wheeling Pitt / J & L / Bethlehem / Lone Star  / on and on  - Houston and New Orleans had foreign sourced dumped OCTG pipe inventories - in 1982 -  that lasted for almost 10 years

Mon, 09/17/2012 - 18:31 | 2805276 OpenThePodBayDoorHAL
OpenThePodBayDoorHAL's picture

And what happens to Hugh Hendry's "short Japanese steel" play? Maybe since the steel doesn't exist in the first place, the price for the real stuff will hold up? And how about iron ore? Sounds bullish for iron ore to me. People will need real steel and when they discover the warehouses are empty there will be a price melt-up.

It's going up because this other is going down but not really because they guy lied so it's going down but that other guy was lying too when he said he owned I have a migraine.

Mon, 09/17/2012 - 17:57 | 2805185 fockewulf190
fockewulf190's picture

Jean-Claude Juncker: "When it becomes serious, you have to lie!".

This quote pretty much sums up the entire economic and political world we live in today. No matter which language you speak, or in what country you live, this universal statement has to be the easiest to translate amongst all the languages spoken on this Earth....with perhaps the exception of "You wan good time? Twenny dolla!"

Mon, 09/17/2012 - 18:12 | 2805225 Eally Ucked
Eally Ucked's picture

So they don't have steel, they don't buy anything jugding from Baltic index, it looks like they decided to survive without steel for few months.

Mon, 09/17/2012 - 18:42 | 2805304 Son of Loki
Son of Loki's picture

So is man born evil or is it a matter of a diseased brain?

Age old question.

Mon, 09/17/2012 - 19:09 | 2805365 InconvenientCou...
InconvenientCounterParty's picture

Man is born to reproduce.


Mon, 09/17/2012 - 21:01 | 2805715 Taint Boil
Taint Boil's picture



Man is what “works” – if it didn’t work we wouldn’t be here. Women are caring and nurturing and men are promiscuous; end of story really. We kill shit and eat it. If you have food I kill you (or take it) and eat it. Want to see what man is really like? Remove the modern farm tractors, electricity, easy oil, refrigeration, cement highways, etc, etc. We have always killed each other and we always will – sad but true.

Mon, 09/17/2012 - 19:16 | 2805379 knukles
knukles's picture

That's new to me...

Mon, 09/17/2012 - 19:28 | 2805430 Michael
Michael's picture

Man is brainwashed and mind controlled from the day it is born.

Mon, 09/17/2012 - 19:24 | 2805416 Michael
Michael's picture

I was curious about that too.

China started their housing bubble in full swing when the US housing was beginning to burst.

Mon, 09/17/2012 - 21:10 | 2805737 DosZap
DosZap's picture

They are merely doing what every other "developed world" capitalist is doing: lying and making stuff up.


Yep, They put  the west To shame, They have had it down pat as an art form for a 1000yrs.

Mon, 09/17/2012 - 17:30 | 2805073 GlomarHabu
GlomarHabu's picture





If a pig drinks a quart of buttermilk before he starts,

and runs a mile before he farts,

the farther he runs, the farther he gets,

how far will he get before he shits?


Now, in order for me to calculate the answer,

I must know where the fart was let.

A farmer by the roadside saw the pig pass,

with buttermilk squirting from his ass.

Now, the farmer was a mile from where the pig started,

and the pig passed the farmer just after he farted.

It was so funny, the farmer had to laugh

while the pig ran nearly a mile and a half.

Now, if the pig is lucky and can control his gas,

and can run a mile with a puckered ass,

it seems to me if he can keep his wits,

he can run five miles before he shits.


Mon, 09/17/2012 - 17:37 | 2805105 Newsboy
Newsboy's picture

Squirting counts, too.

He squirted right after farting at the 1-mile Farmer's-Marker.

The rest is just distraction.

Game Over!

Mon, 09/17/2012 - 23:21 | 2805975 RockyRacoon
RockyRacoon's picture

That's technically a shart.  The poem needs updating to include the new vernacular.

Mon, 09/17/2012 - 17:38 | 2805108 CPL
CPL's picture

Awesome.  mind if I spam that around?

Mon, 09/17/2012 - 18:04 | 2805195 fockewulf190
fockewulf190's picture

I must have missed this Dr. Seuss story when I was a kid....or was my childhood environment sterilized against my will? Wonder what kind of tricks that piggy could do with green eggs and (cannibalized) ham in it's gut?

Mon, 09/17/2012 - 19:08 | 2805359 Henry Hub
Henry Hub's picture

And we're having pork roast for dinner. I've lost my appetite.

Mon, 09/17/2012 - 22:35 | 2805909 pods
pods's picture

Let's hope you get it back before tomorrow's buttermilk pancakes.


Wed, 09/19/2012 - 13:54 | 2811920 Possible Impact
Possible Impact's picture

earliest citation of this:


the man from Sparta limerick "extended edition" is good too.


Mon, 09/17/2012 - 17:30 | 2805075 negative rates
negative rates's picture

You mean the guys that just got started in 1996 have aquired that much paper wealth? Or is a ponzi about to be uncovered??

Mon, 09/17/2012 - 17:31 | 2805077 Meatballs
Meatballs's picture

Vaporization bitchezzz!

Mon, 09/17/2012 - 17:32 | 2805080 spanish inquisition
spanish inquisition's picture

They are IOU's for steel, just as good as the real thing. Better hang on to the receipts.

Mon, 09/17/2012 - 17:34 | 2805098 CPL
CPL's picture

Somewhere there's an underwriter that just shat his pants by that statement.

Mon, 09/17/2012 - 17:54 | 2805172 blunderdog
blunderdog's picture

We must prevent such fraud in the future.  Write your congressmen and stress the critical importance of implementing a steel-backed currency.

Mon, 09/17/2012 - 21:53 | 2805836 BooMushroom
BooMushroom's picture

1943 pennies, BiTcHeZ!

Tue, 09/18/2012 - 01:19 | 2806132 TIMBEEER
TIMBEEER's picture


Yes, sure. That will work! "Now I have 500 letters from my voters. On the other hand we have these people from the financial industry who would like to make a campaign donation. Oh, what a difficult decision.."

Tue, 09/18/2012 - 04:49 | 2806237 Parrotile
Parrotile's picture

Thought the US already had - things called tanks, APCs, Warships (diverse variety of including submarines), and other steel-based Military hardware "supporting" the current Reserve currency . . . . . .

Mon, 09/17/2012 - 17:33 | 2805084 icanhasbailout
icanhasbailout's picture

aaaaaand it's gone!

Mon, 09/17/2012 - 17:33 | 2805085 TheSilverJournal
TheSilverJournal's picture

Bank that the new exercise fad?

Exercise and diet...combine a bank run and not being able to afford food and the CITIZENS will be all that much healthier. Central planners are doing it for the good of the people.

Mon, 09/17/2012 - 18:19 | 2805245 tekhneek
tekhneek's picture

McRib is back, $999.99 while supplies last!

Mon, 09/17/2012 - 17:34 | 2805091 Ralph Spoilsport
Ralph Spoilsport's picture

Sum ting wong?

Mon, 09/17/2012 - 17:34 | 2805095 KickIce
KickIce's picture

Damned parasites.  We hand them the world on a silver platter and they still screw it up,

Mon, 09/17/2012 - 17:39 | 2805115 CPL
CPL's picture

It's all about the jetpack and tthe unicorns that shit skittles now.  Benjamin is sadly only a tank of gas.

Mon, 09/17/2012 - 17:43 | 2805135 roadsnbridges
roadsnbridges's picture

U rang?

Mon, 09/17/2012 - 18:11 | 2805221 CPL
CPL's picture


Mon, 09/17/2012 - 18:12 | 2805227 KickIce
KickIce's picture

I'm definitely getting shit on but it's not skittles.

Mon, 09/17/2012 - 18:47 | 2805317 cougar_w
cougar_w's picture

You have to use your -- imagi-nation!

Mon, 09/17/2012 - 19:06 | 2805354 KickIce
KickIce's picture

I hopey they changey to skittles?

Mon, 09/17/2012 - 17:36 | 2805101 Randall Cabot
Randall Cabot's picture

"The end result will be the most epic bank run in world history, which incidentally is precisely what the central banks are attempting desperately to delay as much as possible by generating excess inflation to "inflate" away the debt, leading to rematching of finite assets and virtually infinite liabilities. Alas, in a world in which credit-money liabilities are in the quadrillions, and in which the real assets are in the tens of trillions, only hyperinflation can seal the deal."

There you go, that's it in a nutshell!

Mon, 09/17/2012 - 19:43 | 2805482 donsluck
donsluck's picture

You cannot hyper-inflate through the primary dealers. In fact, I think this hemming and hawing may just bite the Fed in the ass and prevent inflation before deflation. Damn, back where I was, 50% cash and 50% PMs (stored safely in China).

Mon, 09/17/2012 - 17:38 | 2805112 AC_Doctor
AC_Doctor's picture

Watch this be x100 when all the putz's try to claim their gold and silver from allocated and unallocated storage accounts.

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