JPMorgan Had Some Fake Nickel
Also the Credit Suisse rescue, AT1s, CCAs, First Boston, Signature Bank’s bad deposits Silicon Valley Bank’s disputed deposits.
If you want to make batteries or cars, you might need nickel. If you buy some nickel from a nickel merchant, and she delivers it to you, and you open the box, and the box is full of rocks painted to look like nickel, you will be disappointed. You will not be able to make a battery or a car with a box of rocks.
If you are in the business of building batteries or cars, you might want to hedge your exposure to global nickel prices by trading nickel futures on an exchange like the London Metal Exchange. Or if you are a hedge fund or bank with a view on commodity prices, you might want to trade nickel futures to express that view. These futures do not, in the first instance, involve any nickel. If you buy nickel futures, it is purely a financial trade: If the price of nickel goes up between now and when the futures expire, you get paid money; if it goes down, you pay money. You buy the nickel for the batteries or cars through normal industrial channels — your nickel merchant delivers nickel in the types and quantities you need — and the point of the futures is just to have a financial hedge to your cost of buying actual nickel.