Thursday, March 3, 2016

How 2nd Rate Nations Arrange Financing


Here we can see the government of second rate EUR-zombie nation China lending the government of second rate EUR-zombie nation Russia the currency balances issued by a pan European institution.

When will these second rate nations ever sober up and get some self-respect and just use their own currency.





7 comments:

Ryan Harris said...
This comment has been removed by the author.
Ignacio said...

Hard to use your currency to buy foreign capital goods if no one wants it Matt.

In the case of China is not the same of the case of Russia right now though, as the Euro-zombie-zone maintains a worldwide trade surplus to import demand (amongst other places from China).

By extension the whole eurozone is made off second rate zombie nations who implement beggar-thy-neighbor policies.

Matt Franko said...

I,

So what do you think here Russia Gasprom needs some EZ sourced components so instead of borrowing from a EZ bank the Chinese govt has some surplus EUR balances they can lend them to buy some sort of components only for sale in EUR?

What purpose does in serve for the govt of China to engage in this bcommercial activity in (to them) another national foreign currency? I dont get it...

Matt Franko said...

And its pretty sad when what we are left with today as 1st rate nations still think they are borrowing their own munnie... "from the future!" or wtf.... borrowing it from somebody or something...

Maybe I will have to modify my ratings scale to second and third rate and reserve the first rate for when we ever may figure it all out....

Neil Wilson said...

"What purpose does in serve for the govt of China to engage in this bcommercial activity in (to them) another national foreign currency? "

Bank of China Ltd is a London company - no doubt with an ECB reserve account. So this is just normal commercial bank affaics - perhaps with reserve liquidity provided by the Chinese central bank - which no doubt has a big slush fund thanks to the currency swaps.

Looks just like the usual multinational banking conglomerate to me.

Ignacio said...

Right, is probably not that easy to acquire EUR balances for Russian entities (at such quantities), so the Chinese bank is doing the intermediation and earning money in the process.

Probably not any European bank will do that business with Gazprom directly because is too risky, prone to geopolitical risk. The state owned Bank of China on the other side probably has no problem (and liquidity risk due to the accrued reserves) or maybe there is some second-derivative interest in doing so.

Ralph Musgrave said...

Perhaps Gazprom can’t borrow and spend millions of Rouples on foreign equipment without permission from their KGB overlord Putin. Putin probably doesn’t want to see the Rouple decline further, so he says to Gazprom: “You can borrow, but it has to be in some foreign hard currency”.