Surge in nickel prices threatened to blow $2.6bn hole in key LME entity

Financial Times/Harry Dempsey and Philip Stafford/12-1-2022

photograph of sign on London Metals Exchange building“A surge in nickel prices in March threatened to topple a London Metal Exchange entity designed to keep troubles in a single market from infecting the financial system, according to the fullest accounting to date of a crisis that has shaken confidence the 145-year-old venue.”

USAGOLD note: Money printing creates all sorts of excesses one of which is to encourage rampant speculation and leverage. The LME experience described in this detailed review is an example of the perils of excess leverage. There is simply way more exposure than the exchanges can cover in the event of a meltdown. In the LME’s case, it canceled billions in trades that it says would have sent seven of its members and its clearing house into default.

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