China Begins Stockpiling Rare Earths, Draws WTO Attention 227
eldavojohn writes "A report by China Securities Journal claims that China is now stockpiling rare earths although it has not indicated when this stockpiling started. Many WTO members have complained about China's tightening restrictions on exports of rare earths while China maintains that such restrictions are an attempt to clean up its environmental problems. A WTO special conference scheduled for July 10th will hopefully decide if China's restrictions are unfair trade practices or if the US, the EU and Japan are merely upset that they can't export their pollution and receive rare earths at low prices. Last year, China granted its mining companies the right to export 30,200 tons but in actuality only 18,600 tons were shipped out of country."
Smart but not nice (Score:5, Insightful)
China thinks ahead, but doesn't play nice.
They could be doing it not just for practical purposes but possibly for setting up a DeBeers of rare earth metals.
Re:Smart but not nice (Score:4, Informative)
Comment removed (Score:5, Informative)
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The US would have to have a rare earth mine to buy. Last I heard the only one near production was in CA and not presently mining.
That's normal in a commodity market -- practically a textbook example of the price-demand curve. At any given price, there are producers who could physically supply that commodity but won't bother because they'd only break even. A marginal increase brings these producers on-line. A marginal decrease shuts down producers who are barely making a profit.
I've personally visited inactive gold mines that weren't tapped out; they just didn't have a high enough concentration of gold in their ore to turn a profit
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The issue is that for suppliers in other countries to emerge, there basically needs to be some profit in it for the investor.
With China sitting on enormous stockpiles however, they could just release a bit of that stockpile, causing the price to crash and putting any foreign company out of business.
WTO basically needs to either tell China to allow unlimited sales abroad, or, to allow foreign nations to subsidise their rare earth metal industry to cover for any price crash caused by China.
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Even worse for China Inc. is if the US aired speeches from Mao Zedung and dropped photos of capitalist pigs living in the lap of luxury on China's coast. The greatest threat to China's regime today is a communist uprising of the peasant class.
Re:Smart but not nice (Score:4, Informative)
Because there are lots of them and more and more would open.
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Why can't China do that with rare earth mines?
You really think that the US would sell their mines to the Chinese?
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It's probably a combination of factors. They really do have horrible environmental problems, and there probably are people with power in China who really do want to limit the exportation of fruits of this damage to discourage the practices. Then you probably have people with power who want to limit exports because China has the market cornered and this raises profit or strengthens their hand in trade negotiations. Those people have reason to work together and so you have the current situation.
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They really do have horrible environmental problems
On a per-capita basis, China produces far less pollution than either the USA or Europe. There are fewer restrictions on factory emissions. But the workers at that factory arrive on bicycles instead of commuting 30 miles in a four ton SUV. If you look at all the sources, moving production to China leads to less pollution in some cases.
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Lower carbon foot print does not always equate to less pollution. Nor does tons of waste.
Led in your drinking water is a much more immediate problem than more C02 in your atmosphere or a big landfill stuffed mostly with fairly inert plastics.
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Re:Smart but not nice (Score:5, Interesting)
... setting up a DeBeers of rare earth metals.
Diamonds are valuable only because they are rare. If the DeBeers cartel fell apart, the value of diamonds could quickly collapse, because demand would likely go down with falling prices (the opposite of normal supply/demand). But rare earths are different, because they are actually useful. If they became more plentiful and the price started to decline, many alternative uses would open up, which would push demand back up, and provide price support. Rare earths are used in things like super-magnets, catalysts, specialty alloys, etc. These could be used much more widely if they were cheaper. There is very little risk of a price collapse.
Re:Smart but not nice (Score:5, Informative)
Diamonds aren't that rare. In fact, it is less expensive to create man made diamonds than it is to mine them. Diamonds are expensive because DeBeers has convinced women that they need a big fat expensive but utterly useless gem to get married. As for the manufactured diamonds, they are indistinguishable from real diamonds except for the fact that they are typically more "pure". DeBeers is now selling a machine that can tell the composition of diamonds and thus distinguish between natural vs man made diamonds, AND also verify if the diamonds are from their "legit" sources (no blood diamonds).
"Diamonds are a girls best friend" and "Diamonds are forever" indeed.
Re:Smart but not nice (Score:4, Interesting)
Better yet, give her gold or silver.
They can be bought and sold via the oz price and she could get a fair price for them. Resale value of jewelry is horrible.
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Sapphire you can make from alumina with a hydrogen flame - it's a fairly easy process, and you can pick color by adding the appropriate impurities.
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If they were based in the US, they'd get slapped so hard with an antitrust suit they'd be called DeDrunks.
In fact DeBeers executives are warned not to visit the U.S. since they would be vulnerable to arrest for anti-trust violations.
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Could you dig up the link please? (No, Googling myself is not the answer since only you know if it is the article YOU are thinking of.)
Re:Smart but not nice (Score:5, Informative)
Naturally occurring diamonds are rare. But the overall scarcity of diamonds is a man-made affair. It's easier, and cheaper, to produce diamonds artificially. Not only that, but lab produced diamonds can be made even more purely than what is normally found in nature. De Beers however, has managed to severely limit the production of artificial diamonds. Nearly a decade ago, De Beers even paid a paltry fine for colluding with GE to fix prices on industrial diamonds. Interestingly enough, diamonds have been discovered around the world in areas outside of De Beers control. So their decades long monopoly has eroded.
China, however, is not even close to being in the same situation when it comes to rare earths. Rare earths is relatively plentiful. Mining has stopped in the US moreso because of environmental regulation and cost than because of scarcity. China is gambling that it will be too difficult and costly for Western nations to reopen or start up new mines and that they'll eventually cave. The logistics of overseas manufacturing are getting to complex, inflexible and expensive. Given the rise to automated manufacturing the benefits of cheap labor are dwindling. This is giving rise to one of two scenarios: in-source manufacturing or move it where it's substantially cheaper. China is already trying to hedge its bets by expanding into Africa. But at that point why not just cut out the middle man?
The point being that China is getting too ambitious for it's own good; they're thinking too highly of their position in the world. Yes, the China owns a bit of American debt. What's the worst case scenario? The US defaults on it's debt? It's in China's best interest that the US continue to thrive. The US, on the other hand, just needs a cheap manufacturing base. That could be anywhere; Southeast Asia, India, Middle East, Africa, South America, Detroit.
The main thing China has going for it is experience and established infrastructure. But in the scheme of things those are easy challenges to address... I don't know about you, but I've been noticing an increasing number of products made some place other than China.
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Naturally occurring diamonds are rare. But the overall scarcity of diamonds is a man-made affair. It's easier, and cheaper, to produce diamonds artificially. Not only that, but lab produced diamonds can be made even more purely than what is normally found in nature. De Beers however, has managed to severely limit the production of artificial diamonds. Nearly a decade ago, De Beers even paid a paltry fine for colluding with GE to fix prices on industrial diamonds. Interestingly enough, diamonds have been discovered around the world in areas outside of De Beers control. So their decades long monopoly has eroded.
The concept of "rarity" is a relative, not an absolute one. They are not nearly as rare as DeBeers, and the world diamond market, would believe. Since every woman who wants some can buy as many as she likes, and the price has remained stable in constant dollars for more than a century, it is clearly plenty of diamonds to meet all demand.
You are right that enormous new deposits have opened up in recent decades (Australia, Siberia), and although the new producers are not part of the DeBeers cartel, they know
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They are not nearly as rare as DeBeers, and the world diamond market, would have you believe.
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China thinks ahead, but doesn't play nice.
Never mind not nice, how about not legal.
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Maybe they've just produced more than they can use?
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Again, to remind of what a few have already posted, China's domination of rare earths is not limited to Chinese soil. Chinese corporations are buying up mines and plantations around the world, especially in Africa and South America. Rare earths are in high demand right now, and the limited number of mines plus the high cost of operating means that China (and for those who are less informed, the Chinese government is the principal shareholder of all "private" Chinese corporations) can have an immediate imp
Why shouldn't they? (Score:5, Insightful)
The minerals are theirs; why shouldn't they keep them?
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Re:Why shouldn't they? (Score:5, Funny)
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Two pieces of advice:
Never get involved in a land war in Asia.
Never go against a Sicilian when death is on the line.
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A war with someone who has nuclear weapons.
Re:Why shouldn't they? (Score:5, Informative)
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Re:Why shouldn't they? (Score:5, Funny)
US: I think you should share the rare earths, China. Is that so hard? ...and yes. Now it comes to it, I don't feel like parting with it. It's mine, I found it. It came to me! ...it's mine... my own... my precious...
China: Well, no.
China:
US: There's no need to get angry.
China: Well, if I'm angry, it's your fault.
China:
US: Precious? It's been called that before, but not by you.
China: Oh, what business is it of yours what I do with my own things?
US: I think you've played god with the international economy quite long enough.
China: You want it for yourself!
US: China! Do not take me for some conjuror of cheap tricks! I am not trying to rob you. I'm trying to help you.
Re:Why shouldn't they? (Score:5, Funny)
The above best read using Cartman's voice for China, and Mr Mackey's voice for US.
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This doesn't make sense. The US is neither old nor wise, and I certainly wouldn't have doubts about its intent on robbing, either.
And quite franky, sir, I find your stereotype towards the size and character of Chinese people offensive.
Wait...
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The US is for all useful measures older than China. China as we know it today started under Mao. Regardless of their own claims to the contrary the Chinese state is just pup compared to us.
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The problem is they entered into trade agreements. Which means that they get to sell stuff without tarriffs imposed, in exchange for the other country to sell stuff to them without tariffs.
These agreements may have included raw materials as well.
Not to say that it doesn't happen elsewhere (the US is notorious for imposing trade restrictions when it turns out that the agreed to free trade agreements mean some lobbying group is losing out).
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The minerals are theirs; why shouldn't they keep them?
Because They agreed not to perform such shenanigans when they petitioned to become part of the WTO. The WTO is not just opening the rest of the worlds markets to the Chinese.
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Because they voluntarily joined the WTO, because they *chose* to submit to certain trade agreements. Because they get lots of benefits by being in the WTO, and are expected to comply with their obligations.
Among those is that if they are selling this mineral to a Chinese company for X, then an American company has to be able to buy it for X, too. The market value of the mineral is X, period. Thus, Chinese and American companies are in competition for the mineral on an even footing. That's what the WTO membe
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Who are "they"? "They" are not "keeping" them. "They" are selling them internally only, and that is against free market.
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the problem is that you need those rare earths to build almost every products we want. little things like catalytic converters for cars so we don't pollute our air. even if we built them in the USA we couldn't get the materials to build them.
Afghanistan has lots of these as well
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China is supposed to be a trading partner; a fact acknowledged every time China turns to the WTO when something displeases it. Now, if China wants to make exceptions and withhold certain valuable products, that's fine. We should then withhold valuable parts of our market. It's ours after all — why shouldn't we keep it?
That's called a trade war, and usually results in tariffs and embargoes, and generally decimates trade, which is what WTO and free trade agreements are about preventing.
Perhaps appeasement for business & China was b (Score:5, Interesting)
Even if it harms the businesses and the fellow travelers that aid and abet such a hostile regime, it is time that the world plays hardball on China.
Things like this are why Faustian deals of getting a pliant slave-labor workforce are always a bad idea. Trade is no excuse for appeasement.
Comment removed (Score:5, Insightful)
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because they will be bullies 100 times worse than the Americans at their worst
Now I'm curious to see that happen, because I'm not sure it is even possible. And I live in Europe, not one of the 20 or so countries that american wars have left devastated for decades.
Let's talk again when China's track record comes near, shall we?
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He was talking about the 100 years of suppression and conquering by britanny and the USA BEFORE WWII.
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Hmmmm (Score:5, Insightful)
So why isn't the WTO complaining about OPEC?
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Probably because the OPEC countries are not in the WTO...
Re:Hmmmm (Score:4, Insightful)
Re:Hmmmm (Score:4, Interesting)
The point being is that OPEC sets a ceiling on how much oil it pumps out each month. If you are interested in $2 / gallon gasoline, you want OPEC to produce flat out and, in fact, punch wells in every square foot of space you own.
If you're OPEC and trying to manage a non renewable resource, you don't want to do that. While OPEC isn't the only source of oil (and neither is China the only source of Rare Earths), they produce enough to partially control prices.
Same with China.
Buy cheap, sell dear.
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The words "Organization of the Petroleum Exporting Countries" do not include the word "cartel." Regardless, they are a cartel, and China is not in this case since it is a single entity. Cartels are made up of two or more entities.
Wait (Score:4, Funny)
1. Trade low-cost goods with us.
2. Don't trade low-cost goods with us.
Those bastards! *shakes fist*
Re:Wait (Score:5, Insightful)
They sell low cost consumer goods by manipulating exchange rates.
They don't see low cost raw materials by manipulating supply.
Both sides function as pro-Chinese manufacturing, anti-US manufacturing.
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Oh please. Keeping their exchange rate low just means China is selling the US stuff cheap (and lending the US money cheap). Boo hoo. If you don't like it, don't buy it. "Manipulating supply" just means not selling you stuff. If you don't like it, go mine your own. It's a little bit nasty if China waits until US mines get up to speed, then floods the market, but if that happens slap a duty on Chinese rare earth's and be done.
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We are mining our own. The problem is that it takes 10ish years to get rare earth processing facilities into place. In the mean time, it's a monopoly market, and China is operating as such.
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Take it as a lesson in why you shouldn't rely entirely on products from other countries. Particularly not countries that you treat as potential enemies.
The US should have identified rare earth minerals as critical resources and kept those mines running. It didn't. I suppose that would have been too close to socialism though.
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Stop selling them bonds and require trade be done in RMBs instead of USDs and there can be no manipulation. Oh wait, you guys like that side of the deal.
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Defining an exchange rate makes goods not necessarily cheap. I assume if the chineese currency was traded freely the consumer goods would become even cheaper.
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Different parties complaining on each side, of course. You see it everywhere you go. This is how politics work. It doesn't matter which side of any issue you take, there's money there for you.
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Then the US manufacturers' response should be:
To stockpile materials in the US when the Chinese are dumping.
To sell into the shortage when US producers go out of business and the Chinese tighten up their supply.
Double Standard (Score:4, Insightful)
I thought that this is what the Free Market is all about. Why do I have to hear my country's (USA) leaders complain ONLY when it doesn't benefit us? It's not like we're an impoverished nation. China can do whatever they want, and we can pay them for the resources or not buy them. It's not like we can't survive without them providing rare earth metals. So tired of the hypocritical whining ONLY when things don't go our way.
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you are thinking very wrong. Every bit of your comment becomes incorrect the moment you decided to apply your own definition of "free market".
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Yeah people who don't complain when something benefits them, what a bunch of idiots!
Re:Double Standard (Score:5, Insightful)
This is where the "free market" and "free trade" as practiced in the US now (everything done by private companies with short term profits above all) fails. When some entrepreneur tries to ramp up production of rare earths in the US, the Chinese will release enough of their stockpile to put him out of business, similar (but not exactly the same) as for solar panel production lately. The US should just close its market to Chinese produced goods which incorporate Chinese produced rare earths unless US manufacturers have the same access to the Chinese rare earths.
Re:Double Standard (Score:5, Insightful)
I thought that this is what the Free Market is all about
There are always comments like this whenever articles about trade problems come up and I can never tell whether they're honestly in the dark about how free trade and markets work or if they're just snarky trolls.
The second sentence of the article clearly states that the Chinese government is buying up and stockpiling the material in question. Sometimes it's rare earths, sometimes some other material. Whatever the commodity, the definition of free market operations is that individual businesses buy and sell in competition with each other, When governments get involved then it stops being a free market to one degree or another .
Sure, the USA hardly has a model free market system due to regulatory oversight, taxation, subsidies, etc, but it is *relatively* free in comparison. The US government doesn't stockpile much and when it does, it's a rare case that it's trying to actively influence international markets. Mainly the US government just messes around with protectionist tarriffs with the international market and various subsidies for the domestic market but outright stockpiling to influence markets almost never happens. This stockpiling operation by the Chinese government is an extremely "up yours" move and thus all the fuss.
Meanwhile, if an individual non-governmental player decides to stockpile a resource as a competitive strategy against other players, that would be a free market action. Perhaps it's impossible to have free market operations in a country such as China where the government takes such a active role but that's a different problem. It's not a cause to make a snide remark about free markets.
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Low cost, high risk (Score:2)
Dealing with suppliers or manufacturers of anything in China presents the possibility of low costs but adds risk. The reward/risk calculus is seriously out of whack these days: for example, a tremendous amount of world HDD capacity is located in Thailand, where floods can stop everyone's production. China's industral advancement is going to be short-lived unless they start treating contracts as binding instead of a general idea.
A responsible supply chain manager would second-source everything they bought in
Molycorp already on line (Score:5, Informative)
Molycorp, which owns a big rare earths mine at Mountain Pass, California, is back on line [molycorp.com]. That mine used to supply 100% of US demand, plus exports. It was shut down in 2002 due to cheaper rare earths from China. Now it's back.
Rare earths aren't that rare. They're just present in small concentrations. So mining produces huge volumes of waste for small amounts of product. The big rare earths mine in China is an environmental disaster area. The one in California had to comply with US and California regulations. At current rare earths prices, that's not a problem. (They do, however, ship some of the sludge to Nevada through a 20 mile pipeline. Really).
A year from now, rare earth supplies won't be a problem. Then people will be bitching about the Molycorp monopoly.
Re:Molycorp already on line (Score:5, Insightful)
Right now, it appears that China is building a large stockpile so that they can dump it on the market and destroy Molycorp.
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Do you see where this goes?
Yes. An excellent opportunity to do a bit of arbitrage.
Engineering Challange (Score:2)
A mountain of wealth is worthless, if only one group has it.
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challenge accepted:
Rare Earth Alternatives in Critical Technologies (REACT) [grants.gov]
National Lab Developing Alternatives to Rare Earth Materials [technewslit.com]
Idaho may provide rare earth alternative [idahostatejournal.com]
Semiconductor nanocrystals as rare-earth alternatives [nature.com]
Rare Earths Fall as Toyota Develops Alternatives: Commodities [bloomberg.com]
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The Clean Energy project uses computational chemistry and the willingness of people to help look for the best molecules possible for: organic photovoltaics to provide inexpensive solar cells, polymers for the membranes used in fuel cells for electricity generation, and how best to assemble the molecules to make those devices. By helping us search combinatorially among thousands of potential systems, you can contribute to this effort.
Pump and dump? (Score:4, Insightful)
Stockpiling does two things:
1) In the short term it limits supply, causing prices and profits to rise.
2) In the medium term, it gives the Chinese the means to flood the market, driving out new competitors and restoring their near monopoly.
Rinse, lather, repeat
Some will claim "Not a problem" (Score:2)
Solution for US Thorium and Energy Problems (Score:3)
Start a Thorium energy program. This makes lots of heavy rare earth deposits in the US economical to mine:
http://www.youtube.com/watch?feature=endscreen&v=tyqYP6f66Mw&NR=1 [youtube.com]
How is this the fault of China? (Score:3)
The USA and several other countries had their own mining operations inside their own borders which produced meaningful amounts of "rare earth" metals. The US companies chose to close them and purchase cheaper Chinese metals instead. Thereby handing China an effective monopoly on rare earth metals.
Now everyone is screaming that China has a monopoly and is not playing fair. I mean really, what the fuck did everyone think would happen?
China looks at the long game. We look towards the next quarters profits. I am sure that from China's point of view, this is all poetic payback from how the western world fucked them as hard as possible in the 18th and 19th century.
I just do not see how China is the bad guy here for putting itself in a position of power. A position, like the US, where everyone else is afraid to piss them off. Hell, we do it every chance we get and we are somehow the moral compass of world.
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and yet the US companies will continue to buy the Chinese metals. If the US feels they are not playing my the WTO rules, then why is does the US no impose a massive tariff on Chinese RE Metals?
WTO (Score:2)
Wait, the WTO essentially wants to force them to exporting their raw materials? That's a very strange definition of "free market". Last I checked, coercion was one of the things that a free market does not allow for.
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And there is no free market where China is concerned.
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Last I checked the "free market" slowly ended between the passage of the Sherman Antitrust Act of 1890 and the Fair Labor Standards Act in 1938, and that's just fine with me. As far as letting the Chinese government hoard or restrict the sale of rare earths, that is clearly a government restriction of free trade, as there are no private companies independently choosing to do so. And in China, the notion of an independent company becomes muddied by the fact that the Chinese government is the principal shar
More proof of how noisy the dollar is (Score:2)
Oh, well...Wal*Mart's share prices are doing well, and that's what counts...right? [wsj.com]
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(And I think you forgot a word between the 'A' and 'Earth'. Something like 'Regular' or 'Common'.)
Darn typos get the best of us, you and me included
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America used to be a place where effort was rewarded with success, so the people who did well in Math and Science were rewarded. Now it is all about making things "fair" to all the various "groups".
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Would you sacrifice the few? The few who are the best? Deny the best its right to the top - and you have no best left. What are masses but millions of dull, stagnant souls with no thoughts of their own, now dreams of their own, no will of their own, who eat and sleep and chew, helplessly at the words other have put into their brains? ... I know no greater injustice than the giving of the undeserved. Men are not equal in ability and one can't treat them as if they were.
Re:What the hell (Score:5, Insightful)
Allowing people to do stupid shit to themselves is my idea of "fair". What is unfair is expecting the rest of us to bail out their stupidity in the name of "fairness" or whatever. Sorry, but trying to fix people's idiocy doesn't accomplish a thing except make a few people feel better about themselves as being some form of superior or another.
Stupid should hurt. That is how some people learn (and often the ONLY way they learn)
Re:What the hell (Score:4, Funny)
You guessed my location wrong too.
I can now narrow your location to Alberta based on your sensitivity towards jokes about the US.
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The problem being, of course, that there will be every possible obstacle put in the way of exploiting these resources. Just like oil.
Re:Except we may have just as much (Score:4, Informative)
Yeah, but we also have environmental regulations that make it VERY difficult(costly) extract the Rare Earth Elements. It's these environmental regulations that is the only reason that China is the leading producer of these elements. Getting this stuff out of the ore is a rather nasty processes which is expensive to do in the US.
Also until recently it was not clear it was worth extracting these elements. I know that there was a large mine that used to produce much of the worlds supply in the 80's-90's located in California. They shutdown because of the regulations and the fact that they couldn't compete with the low cost of stuff coming out of China. At that time it wasn't clear that these elements were that vital. Long term this action will cause other countries to re-open old mines or start extraction of new deposits. Rare-Earth deposits aren't really that rare it's the concentration of these elements in the "ore" that are low which is why they are called "rare".
This action by the Chinese has only caused people to start looking for new deposits and different methods of extraction. Last I heard, the Californian mine is in the process of being re-opened and should start producing in 2013.
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Most asteroid mining plans involve mining asteroids for things that are valuable in space. It's possible you might drop a few things down to the surface as a bonus, but not as your main business.
Seawater mining is expensive because the stuff in seawater is very dilute, all mixed up together, and dissolved. Seawater mining isn't economical with current technology and prices, but it might be in the future. Asteroid mining isn't either, but might be in the future. When either one becomes economical, it wil
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News reports are that there actually is a group right now that is planning on snagging some asteroid riches. I'll believe they are serious when they actually bring back a load of minerals.
Pretty much all this stuff is controlled by the market price and cost to extract dynamic.