This story is going to break over the weekend, potentially sooner. It’s somewhat unclear to me exactly how big it is, as my experience with commodities trading is very limited. But having spoken to a few people who have done similar commodities trading with such firms as Barclays Global Investors and Morgan Stanley, I can confirm that the accusation holds water, which automatically makes it a big story. When David Anderson starts pushing the story, I’ll have more to say about it. For now, suffice it to say that a government unit and a large financial institution colluding to everyone’s financial detriment, on this scale, is totally bad.
First mainstream article on the subject: http://www.huffingtonpost.com/nathan-lewis/its-ponzimonium-in-the-go_b_519893.html
UPDATE: ‘Shadow banking’ is apparently what this system is called, it is not necessarily nefarious, according to Michael Woods, a former BGI principal. “The central claim that banks expand the money supply via poorly overseen derivatives is spot on, but not such a big story.” It obfuscates accounting, but isn’t a crisis. Whew!