Zimbabwe Central Bank To Accept Cows, TVs, Fridges As Collateral

Tyler Durden's picture

Long before China Huishan Dairy Holdings, China's largest daily farmer, became known as the latest Chinese corporate fraud whose stock crashed 90% in seconds after a Muddy Waters report brought attention to its questionable shadow banking funding, exposing the company as a hollow sham and leading to the prompt departure of four of its directors who hope (in vain) to escape prison time, the company was best known for being the first ever company to do cow-collateralized stock buybacks.

For readers whose recollection on this particular topic, fascinating as it may be, is vague, this is what we wrote last May:

"China Huishan Dairy is selling about a quarter of its [cow] herd, about 50,000 animals, to Guangdong Yuexin Finance Lease for 1 billion yuan ($152 million) and then renting them back. The reason: to obtain urgently needed cash (let some other sucker CEO worry about paying the coupon on the lease), so it can repurchase glorious amounts of its stock.

 

And yes, cows were used as collateral. "It’s not very common to use cows as collateral," said Robin Yuen, an analyst at RHB OSK Securities Hong Kong Ltd. "The value of a cow would fluctuate depending on milk prices and other factors, so it’s a risky asset for lenders. It would be hard to do forced selling - there’s no liquid market for a large number of cows."

So anyone wondering where Muddy Waters may have gotten the idea that not all is well with the company engaging in the sale-leaseback-of-cows-to-buyback-it-stock, Robin Yuen, an analyst at RHB OSK Securities Hong Kong, who had a Sell rating on the company long before Muddy Waters appeared on the scene, explained: 

"Huishan Dairy seems to be selling cows and leasing them back in order to raise money now, because they’ve been using cash to buy back shares.... "It’s not very common to use cows as collateral. The value of a cow would fluctuate depending on milk prices and other factors, so it’s a risky asset for lenders. It would be hard to do forced selling - there’s no liquid market for a large number of cows. The chairman wants to prop up the share price for reasons that are unclear."

One year later the reasons became clear: the company was a fraud, and only his relentless buybacks provided the levitation needed to offset the pesky sellers and shorts, which incidentally led to our conclusion, which predicted the inevitable failure of this particular Chinese fraudcap: "what's the point to propping up the stock price in an unviable company, and not to sell to the greatest fool? Especially since if there is one thing Chinese capital markets have a lot of, it's the latter."

* * *

The above, very long preamble takes us to the "logical" continuation of the cows-as-collateral story, because less than a year after cow sale-leaseback transactions emerged in the "financial bubble banana" country that is China, they have now moved to the original banana republic: Zimbabwe.

Bloomberg reports that commercial banks in Zimbabwe will soon be forced to accept livestock such as cattle, goats and sheep as collateral for cash loans to informal businesses under a new law presented to Parliament Tuesday. Under the "Movable Property Security Interests Bill" tabled for debate by Finance and Economic Development Minister, the Reserve Bank of Zimbabwe will compile and administer a collateral-security register in which small-business operators and individuals can register their movable assets as security for credit.

Translation: step aside cash-collateral, fractional-reserve banking, here comes cow-collateral reserve banking.


It gets better.

In addition to cows, pretty much anything will soon be bank-eligible collateral as Zimbabwe desperately attempts to restart its monetary system. Vehicles, television sets, refrigerators, computers and other household appliances will become acceptable as collateral once they are evaluated and registered in the central bank’s register, according to Chinamasa.

It probably makes sense: the US has loan sharks; Zimbabwe has a central bank.

“As minister in charge of financial institutions, I feel there is need for a change of attitude by our banks to reflect of our economic realities,” he said. Banks are “stuck in the old ways of doing things and failing to respond to the needs of our highly informalized economy,” he said.

It remains unclear if this latest Zimbabwean monetary experiment will work: the southern African nation has mainly used the dollar since economic mismanagement and runaway inflation rendered its own currency worthless eight years ago, BBG notes. A liquidity squeeze ensued as growth faltered and a strong dollar eroded the competitiveness of Zimbabwe’s exports.

And now, over a decade since its infamous hyperinflationary episode, Zimbabwe finds itself in another cash crunch so severe that banks are limiting customer withdrawals.

That's where the cows come in.

And yet, in all of this one thing remains unclear: once the debtors are unable to repay the central bank, and the lienholder collects on virtually every piece of livestock, as well as every "car, TV, refrigerators, computer and other household appliance" and nationalizes every asset that is and isn't nailed down in Zimbabwe , what happens then?

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Croesus's picture

Haha...what kind of rates can I get with a few chickens, and an 800+ FICO?

Donald Trump's picture

Commiefornians would do it also, but fortunately those snowflkes don't have cows or other assets.

GOOD.

Let's keep it that way.

Mr. Universe's picture

Now they can open trade talks with Venezuela.

knukles's picture

Well, they sure learned rightly from the FED, DoJ and ECB.  Just calling shit collateral, shit collateral.
Can we please get back to hard money!

Mandel Bot's picture

Trust the fucking banksters to wind up owning everything of value!

End the FED!

knukles's picture

Collateralized Cow Farts

Haus-Targaryen's picture

I wonder what the average IQ of Zimbabwe is. 

Franklin Mint Chip's picture

Real farming is for dumb white people who like to work hard and physical cows are messy. Try this instead you fucking chumps:

http://bitcofarm.com/home

Four chan's picture

blacks are no jews thats for sure. how long would it take blacks to evolve to enslave the world to debt? another hundred thousand years?

Franklin Mint Chip's picture

How do we know your mom wasn't a black jew cow?

Donald Trump's picture

But but they say we all come from blacks.

I guess only the ones that skipped town evolved.

 

Franklin Mint Chip's picture

We weren't black. We were genetic experiments from the Annunaki for the purpose of mining gold in South Africa.

Grumbleduke's picture

sure, why using machines if you can create some fuck-up species.

stacking12321's picture

why are these zim fools trying to re-invent the wheel with their cow-lateral?

cows are not fungible, divisible, or durable.

we've been over this before people, just use gold.

Is-Be's picture

I self-identify with my Neanderthal ancestry.

You Sapiens have lost the plot.

Anyway I see that the author of this piece managed to get right through without dropping one name.

Why so coy? Was it M'nunggagwa?

As per usual I see that Zimbabwe is ahead of the pack again. Absolutely no sarcasm. It makes one proud.

Collapse early and avoid the rush.

Dimitry Orlov.

Save your titters and giggles for later. You are going to need a good sense of humour.

Laowei Gweilo's picture

it's funny

 

Zero Hedge on one hand exposes the craziness of Western central bank paper money, fake money

 

but when a country tries to use actual real pracical assets

they're made fun of as undeveloped or in crisis

 

so, which is it -- paper money good or bad lol

wee-weed up's picture

They're taking their cue from Janet, who has already proved she'll buy anything.

Joe Sichs Pach's picture

Will they take a friendly local jig or two as collateral or is that only in west Africa where they're trading them?

Frito's picture

I thought it would be low, but fuck me, it's 66. That's not even borderline retarded, that's full retard.

 

"Think of how stupid the average person is, and realize half of them are stupider than that." -- George Carlin

Is-Be's picture

Da's Raciss!

I must be less than that then, because (some of them) were a lot smarter than me. And beside which the empirical evidence is that they have got all of Africa and they stand a good chance of colonizing Europe

( Europe? Nay, Eurasia)

No wonder our womenfolk prefer them. They are not Raccis. They spread em for the money.

techpriest's picture

I wonder what the average IQ of Zimbabwe is.

I mentored a Zimbabwean student in grad school. The IQ is falling because the smart people keep leaving, as soon as they are able to do so.

The central planners's picture

Do you want to be taxed by the carbon emissions?

Franklin Mint Chip's picture

I deposited one cow paddy last month and I've already earned a shitload of droppings.

The Gun Is Good's picture

Collateralized Cow Farts = toxic ass-ets!

City_Of_Champyinz's picture

How the fuck am I supposed to withdraw half a cow from the bank?

bob_bichen's picture

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Franklin Mint Chip's picture

You realize your "anti-spam" takes up more room than the actual spam does, right??

Donald Trump's picture

EPIC FAIL

He must be just another Trupty boy butthurt that right wing webs dropped Trump

Raffie's picture

WHAT!?!?

No chickens, ducks or frogs as currency? This is an outrage.

Mr. Universe's picture

It's possible that chickens could become very valuable in the near future.

knukles's picture

One of my Green Beanie buds (2 tours Nam) was telling me (to much laughter) how they were taught to make chickens into booby trap like signals.  You lull them to sleep (Or whatever a chicken does when rubbed on the head between the eyes) set 2 of em down facing one another and when somebody passes between them, they'll start a racket.
Chickens

#Chickensmatter

Mr. Universe's picture

Chickens do signal each other, that's for sure. Not only that other bird friends warn them too. Doves hang out and watch the chickens, all sorts of little birds too. Then the crows will fly buy and cry "alert" whatever that call is. The chickens response, full alert. I mean loud vocalizations that last sometimes almost 5 minutes. I don't know if they get an all clear, but hawks and owls are not their friends. Egrets are another matter, since a flock of them decided to take up residence in the two large trees several yards from my house.  I had no idea all the noise they make. Gobble like turkeys they do. There must be close to two dozen living in the two trees. I'm starting to feel like the Birdman of Bay Point. 

Miffed Microbiologist's picture

Try guinea fowl. Anything entering their territory and their screeching will wake the dead. Poor mans home alarm.

Miffed

The central planners's picture

What about one of the failed tomashawk used in Syria as collateral?

Franklin Mint Chip's picture

Tomahawks is rayciss against brown blown-up peoples

Offthebeach's picture

Whats the differences between loan sharks and a central bank?

 

Loan sharks don't lie.

You don't have to bail out a  loan shark.

Loan sharks don't know 'nuttin from 'nuttin except you borrow, you pay.

Loan sharks don't make your kids and their kids, if any, debt slaves.

Loan sharks work nights and have low overhead. 

 

SomethingSomethingDarkSide's picture

gold is money, everything else is just credit

Franklin Mint Chip's picture

Gold was money... before 2009 when Satoshi came along.

Don Pancho's picture

Geez, somebody give that skinny cow a hamburger or somthin'...

HRH Feant's picture

I thought the same thing! Tha cow has its ribs showing. Sad. Can't do much with a skinny cow other than tan the hide and grind up the bones for bone meal and use the blood for fertilizer. Ya, I am a gardener. What else would you so with a cow like that? Yikes.

Grumbleduke's picture

Don't laugh, guys. Isn't there a bank in Italy accepting cheese as deposits aka collateral? It seems to be working for hundreds of years.

Those banker fucks can't sell a cow twice, although I'm sure they'll try.

knukles's picture

The Italian deals are merchandise trade financing. 

BandGap's picture

Wonder what my ex-wife would fetch, speaking of cows.

rf80412's picture

Good cheese lasts a long time if properly stored ... and it doesn't eat, drink, shit, or require veterinary care.

medium giraffe's picture

Zimbabwe Industrial Index is going up so fuck it, who cares?