User 142738

China, Shipping and the Great Commodity Carry Trade

“In Ancient China the gold/silver price ratio was 2:1.”

The Chinese monetary system fixed the price of silver to copper, not to gold. There was no fixed silver-gold exchange rate in China until 1930, and it only lasted until the end of WWII. The exchange rate was 5,590g silver to 90.28g gold, or about 62:1.

Burst Bubble? Commodities' Long-Term Story Remains Intact

I like how some of the commentators mentioned trading commodities on margin: isn't this basically moving the credit crisis from real estate to oil and gold?

I see it this way: people were buying homes on credit, expecting a huge return to outpace the high interest they borrowed on. Now people are buying both futures and physical bars of gold and silver with the same lines of high-interest credit.

History is repeating itself at an incredibly high frequency.