Babylon's Bankers

MORE ON EVERGRANDE’S QUANTUM SUPERPOSITION

If you've been watching the strange story of the big Chinese real estate investment firm Evergrande, you'll be aware that recently, Evergrande's looming default on bond interest payments were allegedly "made good" and that the impending default did not occur. In other words, a party or parties unknown paid the interest, conveniently just before Evergrande was to be significantly downgraded by ratings agencies. With that in mind, V.T. shared an interesting article with me, and I'm passing it along to you, because the article includes something very interesting that jumped off the page when I read it, seemingly once again confirming my suspicion of all things digital in the financial world.  Here's the article:

Evergrande’s Unconfirmable Interest Payments, The Silent Paying Agent, The Roaring Helicopter And The Parable Of The Rich Fool

The story begins with the reports that Evergrande had dodged the interest bullet:

Two weeks ago, the financial press reported that at the 11th hour, Evergrande, the second largest Chinese Real Estate Developer, made its past due interest payment one day before the ratings agencies would have declared the Company bankrupt for being in arrears for 30 days to bondholders.

Then, a week later, Evergrande pulled a rabbit out of their hat for an encore with the ‘journalists’ who cover the business of money proclaiming that Evergrande paid the second past due interest payment just before they would be baptized as bankrupt.

But, as things would have it, when queried about the alleged payments, there was no response:

Last week I wrote ‘Dr. Marco Metzler: Evergrande Missed Second Past Due Interest Payment In A Week-Is Bankrupt-Could Drag Down Real Estate Sector/HSBC & World Financial System’ detailing the work of Dr. Metzler who says that the company did not respond to his firm’s request for positive confirmation of the payment(s). With the supposed and reported making of these payments-promulgated by the media, the beleaguered company should have their investor relations department broadcasting this to the entire world, who by the way, is watching. But they don’t. Dr. Metzler got -no- confirmation from Evergrande regarding the proof of their payment. Not from them, not from any rating agency. According to Dr. Metzler in a press release referenced in my article…’the bankruptcy has apparently already technically occurred’.

On September 21, 2021, before the company was past due on its interest payments, ‘China ‘Evergrande Inches Close To Default Deadline, Investors Wait’ appeared at nasdaq.com.

As we now know, that claim was a fallacy as Evergrande missed that payment. In reading the article, the contributors at nasdaq clearly described the bond issues: …’A major test for Evergrande comes this week, with the firm due to pay $83.5 million in interest relating to its March 2022 bond VG158043114= on Thursday. It has another $47.5 million payment due on Sept. 29 for March 2024 notes VG158786753=.’…

This details enough information about the bonds so there can be no mistaking exactly which securities are in question. As is further detailed on the nasdaq article…’Citigroup Inc C.N subsidiaries serve as trustee and payment agent for a China Evergrande bond VG158043114= that matures in March 2022 and has $83.5 million in interest coming due on Thursday..’…

So we know that Citibank is the paying agent for at least one of the Evergrande bonds.

Now that's a significant clue: Citibank is the paying agent for at least one of the maturing bonds. Armed with this information, Mr. Szymanski (author of the article) went hunting. As he states, at one time he had a job with a local branch of the Federal Reserve, working precisely in the bond department. This led him to do something very unusual, or at least, unusual in contemporary practice:

Later, I worked the non-cash desk being responsible for taking in and processing the actual bonds. I am relating this story because most people in the brokerage business have never actually read a physical bond that they could hold in their hands. But I did. I made a point of reading through the covenants on the bonds and could actually see that the ‘paying agent’ was part of the covenant of the bond.

Of course today, what do investors get when they buy a bond? They only get a digital notification of the title of the bond, the interest rate and when it is due. There is actually a lot more to the ‘promises’ in a bond covenant but does anyone honor those anymore? Less and less do we see the honoring of covenants whether it is between God and man or between corporations and bondholders.

So this is why I am aware of things like the paying agent for a bond. I thank the folks at nasdaq for providing us which some of the information necessary to identify the bond issue and especially for identifying the paying agent, who in this case is Citibank.

So, just as Dr. Metzler tried to get information from Evergrande and the rating agencies about the authenticity of the alleged interest payments, so too, I tried to obtain the veracity of the media claims of remittance of interest and principle when due to bondholders which should be available from the paying agent. (Boldface emphasis added)

Needless to say, when Mr. Szymanski attempted to contact the paying agent, the Citi group, he got no response. Nada. Zip. Zilch:

The financial media has acted with subterfuge and the actual responsible parties who should be able to unequivocally provide the truth in this matter (the company and the paying agent) are silent in the face of public questions.

I would like to share that shortly after I placed the phone call to Citi Fixed Income Investor Relations that a roaring helicopter flew directly over my little house located half way to the middle of nowhere at approximately 75 feet AGL (Above Ground Level). I’m sure that this was just a coincidence (now turn off sarcasm). I also had this happen this year after I wrote ‘Dr. David Martin, CEO M•CAM Illuminates What Big Pharma Knew, When They Knew It and the case for RICO’. It was the same deal; helicopter in the middle of the afternoon, while I was outside flying approximately 75 feet AGL over the house.

Now, other than black helicopters roaring over Mr. Szymanski's house, what interests me here is the fact I've warned against more times than I can remember, namely, the reliance on digital information about a security rather than actual physical possession of the physical security itself. In this case, Mr. Szymanski complains of a problem I've often noted and commented about. Suppose one goes to a broker and buys a corporate bond, say from Frankenfauci Food and Rare Agriculture Underwriters and Developers , LLC. (ticker sign FRAUD). Rather than receiving the actual copy of the paper bond in the mail, current and common practice is simply that you'll be notified that you're the owner of bond number xxyzzp,  at such and such a maturity date, and so on, as Mr. Szymanski explains. The broker usually holds the bond. Thus, like most folks, you never actually read the bond contract or covenant at all. You have no idea what it says. In fact, without the physical possession of the bond, you cannot even clip the coupons of the bonds to present to the paying agent for payment. This too, is usually all handled by the broker who keeps physical possession for you.

If indeed even the broker has it. Perhaps all he has is a digital record of the owner(s) of the bond, and of course, all they have is a digital record.

Now the bottom line here is rather obvious: how does one enforce a financial convenant one hasn't even read, because the physical covenant is... where? Who has possession? And while we're at it, how was the bond purchased initially? Probably by payments in more digital blips on a computer screen.

It's a wonderful way to create, and abscond, with lots of money, claim payments on interest that don't exist.

So, as of now, it looks like Evergrande defaulted, because there's no concrete verifiable information that payment of interest was made, yet, the story is out there, and the paying agent at least as of this writing, has not commented. Which means that, like Schroedinger's Cat, Evergrande appears to be in a state of quantum-economic superposition: it has, and has not, defaulted, like Schroedinger's cat it's both alive and dead, but we don't know, because we can't open the box and make a verifiable observation.

...now think of digital "currency", and have a nice day, and I'll see you on the flip  side...

20 thoughts on “MORE ON EVERGRANDE’S QUANTUM SUPERPOSITION”

  1. For many years I was an inspector–which type doesn’t really matter. Much of the work I did was in Acceptance Tests of newly installed systems. Our monetary and payments systems are analagous.

    One indispensable principle to this endeavor is that the inspector must demand that ORIGINAL PRINCIPLES BE DEMONSTRATED. This is usually cumbersome and, in an honest industry, is a complete waste of time. But without it, there inevitably arises the practice of using derivative proofs which leads to a cascading of derivative proofs with an ever more tenuous connection to actual, fundamental proofs. This is DERIVATIVE DRIFT and it occurs in the pursuit of process efficiency. Now add shysters to the mix and you’re on the road to ruin.

    Our financial and monetary systems have cascaded so far from fundamental proofs (rehypothecation) as to be a virtual reality game. Smart contracts would solve the problem but only if everyone can see and understand the code, all of the code. Complexity is the enemy of clarity, so one can predict a proliferation of clauses to introduce confusion and ambiguity and the ascendency of a new class of shyster–the computer code shyster.

  2. I had no idea the bond system was such a farce. And to think the food we eat, the energy we use… might hinge on this facade. Ah, for the good old days of counterfeiting money and forging paper bonds, occasionally cracking a safe.
    I think we are heading into a bad time. When those fortunate enough to buy food will have it pushed out a chute in the side of a warehouse.
    Shortages are nothing new, but we are not being prepared for their eventuality. In WW II on the home front we had ID ration cards and purchasing stamps. It worked pretty good. But after the war in Occupied Germany it was a different story. Germany money no longer existed, cigarettes became the legal tender. German criminal gangs ran a black market in alcohol, narcotics, chocolate, cosmetics and penicillin, and what food could be had. They took advantage of the German civilians who were mostly women, the elderly and children. There was a large number of U.S. Army deserters who were roaming around and up to no good. And a U.S. Military Government that was collecting a trove of booty for pennies, sending it back stateside. Then the worst winter in 20 years set in.
    A cave full of gold was found, and went unaccounted for. Tons of gold vanished.
    What we are going through now is a prelude to Occupied Germany I think. But we are not being prepared and don’t have a good security system to bring order to the mayhem internally and protect us from external threats. Instead we are reminded that if you want to go to a bar or restaurant, or jet off to somewhere, you need to get jabbed. That’s pretty much it. And don’t worry about the helicopters that snoop on you.
    You can read about Occupied Germany and the missing gold and what was going on in the streets in NAZI GOLD by Sayer and Botting. Its an eye opening look a what can happen.

  3. Our Planet Earth is in an incredibly dangerous place at the moment and is facing utter chaos.
    It appears that crises exist on many fronts and I believe the Commander in Chief will need to carefully orchestrate his tripartite alliance of The White House, The US Capitol and The Pentagon to successfully and urgently confront each threat in order of priority:

    1. Cyber hacking and sabotage by hostile states.
    2. Infiltration of our institutions, places of learning and research, national infrastructure and social media platforms by some members of hostile states who have ulterior motives.
    3. The world banking system.

    1. You seem to put a lot of trust onto those entities commonly called “Commander in Chief”, “The White House”, “The US Capitol” and “The Pentagon” to actually working in good intentions 😉
      And can they decide what happens in China, Russia or even in Germany-EU ?

      My hope relies more on things like Truth, Humanism, “We the people”, “Le peuple français”, any researchers or journalists with some moral integrity or any kind of believers that are ready to see the world in more deeper insights…

  4. Welcome to the world of a embezzler and swindler paradise the logical end of legalize counterfeiting we don’t have to print the paper bonds, money, or stamp out the coin of the fiat money. All we to do is believe those digital notes and bonds really exist the problem we won’t ever have anything to touch and feel in our hands the stuff dreams are made of.

  5. Robert Barricklow

    The interest payment wasn’t that large in terms of players on hand.
    The principal is another matter.
    Since China has a public banking system; unlike the USSA, which is supposed to be public[Art I Section 8 of the Const1tution]. In the dead of night on Christmas Eve, when the Federal Reserve Act was passed w/it being quiet all through the House[congress] w/only a tiny few congressional rats committing treason.
    So w/a public banking system the CCP will let the big investors go bankrupt; saving the Chinese economy. Not like Wall Street saving the irresponsible fat cats, while letting the USSA economy eat the fat cats gambling debts. What else is new since the infamous 1913 and 2008 criminal acts?

    Also in the USSA the media is the government.
    So like Christmas Eve 1913; not a word on Evergreen, unless you count the government telling you this and that and whatever, as if it were truth.

    No payment, and that’s all she wrote.
    The big-time investors go down; wherever in the rabbit hole they be.

  6. I’m not sure holding paper is much of a guarantee. I’m thinking of the Federal ReserveD bonds (as JPF has discussed elsewhere).
    https://www.investmentwatchblog.com/those-missing-trillions-and-the-fed-the-gao-report-on-the-feds-quantitative-easing-uncovered-a-secret-16-trillion-feeding-tube-structured-as-revolving-low-cost-loans-to-any-bank-foreign-or-dome/

    And this puts some historical context into reliability issues……….. (from GOLD WARRIORS HOW AMERICA SECRETLY RECOVERED YAMASHITA’S GOLD Sterling & Peggy Seagrave 2010. FRN, FRB = Federal Reserve notes, bonds)

    ” Professor Richard Aldrich of Nottingham University, co-editor of the
    journal Intelligence and National Security, described the strategic situation in
    1948 in testimony before a British court in 2003:
    As Chairman Mao’s forces advanced through China in 1948, Dr. Aldrich said, Britain and the US dreaded the prospect that one of the world’s largest stocks of gold – worth $83-billion at current prices – would fall into communist hands. So it was decided to extract the gold reserves from China before the communists could seize them. The CIA provided the means for this bullion-rescue mission, flying in B-29 bombers disguised in the livery of its CAT, later renamed Air America. CAT flew numerous missions to bring huge shipments of gold out of Mainland China. Where did the FRNs and FRBs fit in? Professor Aldrich said they may have been used “for persuading managers of major banks in the interior of China to part with their vast stocks of gold.” Printing FRNs and FRBs with a face value much greater than that of the gold they were to replace, he said, served to encourage the banks or wealthy individuals to swap their gold for the
    bonds and notes, which would be easier to hide and later smuggle out of China to be cashed in the West. As Aldrich said, the US almost certainly had no intention of honoring them, anyway.
    Professor Aldrich explained that the CIA was only emulating Britain’s Special
    Operations Executive (SOE), which printed and circulated massive quantities of counterfeit currency and bonds during the war.
    “Foreign Office files also show that the CIA was involved in other currency
    issues, including the movement of printing plates for Chinese currency,” Aldrich testified. ”
    xend

  7. Flying that low is generally illegal over people, except in certain circumstances (landing at a hospital, etc), so that helicopter should have been reported to the FAA and local authorities (just to be a nuisance, if nothing else).

    It is possible to do digital graphic images which can have most of the details of a physical piece of paper, and embed watermarks and encrypted coding which can be extremely difficult to detect, break, or copy. These would be nearly as “concrete” as paper bonds, and could be backed up by PGP encrypted files to authenticate them. The technology does exist to make digital bonds (or authentication or possession) nearly as good as paper (and without blockchain, I might add.)

    But they don’t seem to be using it. As Joseph points out, numbers in a computer are just that: numbers. Numbers in a computer can be rewritten easily, and by something as intangible as a stray cosmic ray particle. Veritasium has a great video on a computer’s vulnerability to cosmic rays and such. Really eye-opening:

    https://www.youtube.com/watch?v=AaZ_RSt0KP8

    As someone quite experienced with computers over the last 40 years, I am constantly disappointed in the quality of various implementations of computer technology. Medical record systems (EMR and HMR) are horribly done and are actually far, far slower and less accurate for health care professionals to use than paper records. I have yet to see an EMR interface that isn’t so stupidly designed that it must have done by a cognitively impaired sea slug while drunk.

    After even a brief look at the whole EMR landscape, it is clear that the real purpose of these systems is data mining. They are a major contributing factor in the declining quality of healthcare in the U.S. over the last couple of decades. Doctors and Nurses now spend far more time doing data entry than patient care. That is very expensive data entry, not to mention a blisteringly stupid waste of advanced training.

    The problem is, the systems are so fraught with error that the data they are collecting are intensely corrupt and inaccurate. 100 percent of the people I know have had serious errors in their medical records on computer. Some have to correct their records on a regular basis because the systems seem to generate more errors with time. Any use of this data will be equally corrupt and inaccurate, not to mention any diagnosis based on faulty data could have catastrophic results (which the healthcare system will not report because it “buries its mistakes.”).

    This makes me suspicious of the financial use of computers, much like Joseph. While systems could be designed to eliminate most of these types of errors, they do not seem to be, at least from where I sit.

    Buckminster Fuller used to refer to the “ephemeralization” of technology: the process of technology becoming ever more invisible and intangible. He saw it as a positive thing, but that is because his mind was geared toward making things which worked properly. It is an extremely dangerous thing, as the more removed technology gets from people’s ability to see it and use it intelligently, the more likely it becomes that society in general will forget how to create and repair it, ensuring slavery to those who control the tech, or a massive risk of catastrophic collapse.

  8. To think, they’re still trying to re-define what a monetary agreement is and should look like. It won’t take long for the sociology of what is an agreement and what is not to gum up the gears of prosperity. What will barter appear as when the switch is turned off?

  9. What is the role of the DTCC in here? Isn’t this agency involved as a custodian in all securities? Wasnt it this agency who didn’t move the physical (paper) bonds from the cellar when a hurricane hit and flooded the cellar and if this wasn’t destroying all had a fire a short time later? What is the exact role of the DTCC in securities trading? In my view they are also involved in transferring ownership of securities, however due to flash trading they are not able to keep in sync with this either.

  10. A guess: the Chinese govt. feared the consequences of the company defaulting; they made the payment(s); they didn’t or couldn’t hide the transaction through proxies; they’re pressuring the parties involved to keep things quiet because they fear market reactions.
    With entities that can’t create money, things like this end at some point in bankruptcy/failure. With entities that can can create money, stop gap measures can go on for years.

  11. Digital currencies based on a blockchain are transparent. Everyone can see the transactions on the blockchain explorers. Govt. doesn’t want this because everyone can see where the money goes.

    Smart contracts are created on the blockchains to move money according to the contract. The contract can be read by everyone and it is immutable once it starts.

  12. After all these years of promoting the computer age and the paperless society, we’ve arrived. Hard copies of computer records are no longer required, not even in a court of law. God save the trees.

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