by Simon Black: Your
Monies and Positions Are Not Safe
If the global
financial crisis has taught the world anything, it’s that there
is massive weakness running through western banking systems.
The big banks
in New York and London, once considered to be the strongest and
most stable in the world, have been completely exposed for what
they are – weak, toxic, and corrupt.
debt, shaky sovereign bonds, and uncertain consumer loans, most
of these banks are sitting on incalculable losses. They get around
disclosing their true financial condition by using clever accounting
tricks (which are completely legal thanks to government regulators).
As such, they
can go on borrowing money from the Federal Reserve at 0% and loaning
it to the US government at 2% – a practice that has essentially
become the banks’ core business.
If you haven’t
noticed, most banks hardly lend against anything that isn’t
guaranteed by the government anymore. A Fannie Mae conforming loan
is a no-brainer, but making a small business loan is a non-starter.
By way of personal
experience, one company that I co-own is a very successful retail
products brand. We went to the bank to obtain a loan to buy more
inventory, secured by accounts receivables and contracts from mass
retailers (think Wal Mart and Target).
And yet, no
bank would finance us, even with our strong revenues, brand success,
documented future cash flows, and excellent credit. The only loan
they would grant had to be matched and secured by cash. In other
words, they would happily loan $1 million… as long as we deposited
$1 million in cash as collateral.
This is hardly
a well-functioning system… let alone the pinnacle of global
pounded the table on banking overseas – foreign banks are often
healthier, more innovative, more secure… and best of all, not
controlled by your home government.
You may be
surprised, for example, to learn that, according to recent FT data,
the country with the most profitable banking sector (as a percentage
of average capital) is none other than… Pakistan! The country’s
banks posted an average profit of 36.41% of capital. Brazil, Indonesia,
and Egypt rounded out the top 4, all exceeding 30%.
and Canada were the only big western nations in the top 25 at roughly