Brent posted this link in the comment section of my last post, but I think it is worth a dedicated post.
Once source is sanguine about the risks:
"Arguably, any arbitrage losses on metal that is brought into China, if financing deals are wound up, is perhaps more akin to an interest rate than a trading loss, i.e. an additional cost for the facility to that already paid to the financial institution."
However, as I read through the half dozen or so related posts its seems like it is the kind of thing that is going to work fine until it doesn't and then it will go horribly wrong. Or as Mishkin might say, expect significant nonlinear effects on the downside.
Once source is sanguine about the risks:
"Arguably, any arbitrage losses on metal that is brought into China, if financing deals are wound up, is perhaps more akin to an interest rate than a trading loss, i.e. an additional cost for the facility to that already paid to the financial institution."
However, as I read through the half dozen or so related posts its seems like it is the kind of thing that is going to work fine until it doesn't and then it will go horribly wrong. Or as Mishkin might say, expect significant nonlinear effects on the downside.
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