Russian obligations could be had for
less in August 1998 and Macedonian ones during the Kosovo crisis. In
cahoots with the issuing country's central bank, they then convert
the obligations to local currency at par (=for 100% of their face
value). The difference makes, needless to add, for an immediate and
hefty profit, yet it is in (often worthless and vicissitudinal)
local currency.
The latter is then hurriedly disposed of (at a discount) and sold to
multinationals with operations in the country of issue, which are in
need of local tender. This fast becomes an almost addictive
avocation.
Intoxicated by this pecuniary nectar, the fortunate, those privy to
the secret, try to raise more capital by hunting for financial
instruments they can convert to cash in Western banks. A bank
guarantee, a promissory note, a confirmed letter of credit, a note
or a bond guaranteed by the Central Bank - all will do as deposited
collateral against which a credit line is established and cash is
drawn. The cash is then invested in a new cycle of inebriation to
yield fantastic profits.
It is easy to identify these "investors". They eagerly seek
financial instruments from almost any local bank, no matter how
suspect. They offer to pay for these coveted documents (bank
guarantees, bankers' acceptances, letters of credit) either in cash
or by lending to the bank's clients and this within a month or more
from the date of their issuance.
Pages:
94
95
96
97
98
99
100
101
102
103
104
105
106
107
108
109
110
111
112
113
114
115
116
117
118