Saturday, November 28, 2009

The Debts of the Lenders: China's Garlic Bubble

Apparently, Chinese speculators were not content with stockpiling copper. Now, the Financial Times reports that garlic is the newest craze. Wholesale prices of garlic have shot up 15x w/in the past few months. Accounts vary. Official accounts from the Chinese Ministry acknowledge that prices have soared 286 percent since March. Meanwhile, the Economist reports that prices have shot up 40x since the same period.

Fundamental factors like reduction in land acreage for planting have been supplanted by folk beliefs regarding the curative powers of garlic against the swine flu. Then there is plain, old fashioned greed.

"You need a warehouse, a lot of cash and a few trucks. That's how it works," said Mr Lou, describing the tools of the trade for speculators.

"Basically, what you do is try to arrest as much supply as possible, then you bid up the price. Moving garlic from one warehouse to the other, you make millions of dollars."

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