Keith Weiner / Gold Seek Zero Hedge has run an excellent article explaining the use of commodities, beginning with copper, to work around the Chinese government’s imposed capital controls[1]. Capital controls are intended to prevent arbitrage between the dollar interest rate and the yuan interest rate, which is much higher. To keep this gap open, and prevent the arbitrage—aka hot money—they have a choice to shut off trade with the outside world as North Korea does, or resort to capital controls. The basic idea of capital controls is that the government thinks it can tell the difference between “good” and “bad” types of money moving in or out.
Read more about Why Was China Carrying Gold?
No comments:
Post a Comment