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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VWAndy's picture

  Say what you want barter can and will work when nothing else can be trusted. Pay attention kids. We might be learning somthing worth knowin.

City_Of_Champyinz's picture

Except that this does not sound like barter, nobody is trading a cow for a car for example.  Just more credit creation, at least it is not backed by made up paper fiat...

VWAndy's picture

  If they made it this far. They are just one step away from dirrect barter. All thats missing is a storefront.

MEFOBILLS's picture

 Just more credit creation, at least it is not backed by made up paper fiat...

 

When you take out a loan in the west, you are creating new banker fiat!  You usually put a house or a car on the ledger to make the new money.  Banker fiat is bank credit creation.

Collateralizing a cow is not that much different.  A cow can be eaten, whereas a house is a durable good.  Afican blacks don't make durable goods.  They can extract minerals from their lands if a western or chinese company shows them how.

 

Herodotus's picture

They will be worth more than most of that paper that the Fed is holding on their balance sheet.

s2man's picture

may I collateralize my wife?

83_vf_1100_c's picture

  Maybe, I'll need pics and do a physical exam.

In an agrarian society cows are certainly good collateral for a loan. 50% loan value could be a great deal for the bank when you miss a payment. That poor cow though ain't woth a 10 tril Zimbab note.

Is-Be's picture

Check her teeth.

They lie about their age.

Calmyourself's picture

 What is she good at?  I may go as high as ten goats for the right skill set..

VWAndy's picture

 Um no she already did it to you though.

Terremoto's picture

Sounds like a pawn shop operation. 

SomethingSomethingDarkSide's picture

More like outright theft - taking livestock to shore up bad loans - because starving your population to make assets temporarily elevated ALWAYS turns out well..

Ajax_USB_Port_Repair_Service_'s picture

Facebook users, read your user agreement carefully. YOU may be collateral. Moo!

grunk's picture

So they'll take toasters?

How about Spider-Man towels?

HelloSpencer's picture

I take a cow as collateral any day if the alternative is a fiat currency denominated government bond.

MicroSecession's picture

I actually think this is a great idea.  It gives banking back to the people.  This is what banks are supposed to do - provide a ready medium of exchange for goods that are not so easily movable.  Normally this is done with assets such as treasury bonds and gold, but allowing an ordinary person to do this with the things that he owns seems a reasonable idea to bring the government to the people and not just the elites.

grunk's picture

How many cows in Fort Knox?

rockstone's picture

No cows. Just a lot of bull shit.

SgtShaftoe's picture

They can have my tv; but my cows, chickens, fowl and metals they may not have.

GunnyG's picture

Put a nigger in charge and it goes to shit. Idi Amin. Mugabe. Obama. I wonder what is the mortgage on a mud hut? 2 cows and a goat?

SilverRoofer's picture

Obama did have the Anti-Midas Touch for sure

Extra Oink's picture

I don't know... the 9th Ward in New Orleans is pretty sweet... no, wait...

didthatreallyhappen's picture

if you are sober, you should not be posting

withglee's picture

When you don't know what money is ... and pretend it's something that it is not ... you're going to have this kind of nonsense.

CAPT DRAKE's picture

Maxine Waters says that this is all good.  

Able Ape's picture

How much can you loan with your wife as collateral?...

Jethro's picture

You mean, "collateral".  Yeah...sorry I couldnt make those payments.

Rock On Roger's picture

Sounds like Zimbabweans know that paper is not collateral.

veeger's picture

small-town bankers better take notice......after the goldman scum steal everything that there is to steal , cows , chickens , potatoes . etc...will be what you will will be dealing with

Is-Be's picture

Speaking of the squid, the talk in Australia is that they are going to allow the kids to use their Superannuation for a mortgage deposit.

And our dear leader is a graduate of GS.

The last time I looked the super fund was $1.6 Trillion. Real money.

Can you join the dots?

veeger's picture

right you are , is-be.......take a look at the muscle behind the north-atlantic-terrorist-organization , and the assholes who keep demanding war,,,,,,,,,easy enough....

Stormtrooper's picture

I have a lot of liquor stored as collateral.  But the poor debt collector that comes to take it will find out that I also have a few hundred thousand rounds to protect it.

Offthebeach's picture

Wonder what I could get for a Manavox color console,  in Mediterranean oak with  built in rise up Hi-Fi turntable  and FM turner?( dusty, but no scratches )

rockstone's picture

Depends. Can you throw in an avocado rug?

Offthebeach's picture

Sorry, harvest gold colored.

Bemused Observer's picture

Well, this is one way to prevent your 1% from being able to take everything. At some point, (and with live animals that point will come quickly) it costs more to feed and accomodate than they are worth. So, either you have to temper your greed, or eat lot's of beef very quickly.

brushhog's picture

Likely they are sold off immediately.

cui-bono's picture

Zimbabwe President Robert Mugabe --- Isn't he the former mayor of Detroit???
Hey, Robert, I"ve got some red caps with slogans for you:  "Make Zimbabwe Great Again".  Send me half a cow and a turnip and I'll ship them ASAP.

Jethro's picture

HAHAHA!  Awesome!  Zimbabwe has higher collsteral requirements than most US lenders

Herdee's picture

You can easily go for another loan at high interest rates anytime in the United States if you have "equity" in your automobile. Loan sharks will make you a deal, no problem, as long as you got a few bucks left in your paycheck. Same debt slave system based on interest. The banks will suck it out of you just like what a giant bloodsucker would do.

BendGuyhere's picture

Negroes are SO entertaining!

And, my, can they dance....

Seal's picture

same as here in the US since the 2008 bankster bailout

Extra Oink's picture

Traditional Black Culture... Wonderful.

Xando's picture

Sounds like an excellent opportunity to take a loan out on your neighbor's television!

DC Beastie Boy's picture

Well I own a business and I would take cows as payment.  No electronics or appliances though.

We've been taking credit cards as payment for invcoies, which is much better than net 30 terms, even with paying 3% processing.  The money is in our account the next day.

As for cows, it would have to be a Jersey or Scottish Highland or something worth keeping or reselling.

brushhog's picture

Ironically, it might be the only bank in the world that actually has something behind it's paper.

Twee Surgeon's picture

If it was not for the white Colonialist invaders, they could have had this level of prosperity decades ago.

We also accept used Toasters at our business and are considering doing an IPO next year.

Used Microwave or Dishwasher, money in the bank and I can run the business from my Condo in Vegas where I bang hookers and do blow, in the Limo, on the way to my Private Jet to my Ranch in Maui. My Mother in law made $7000 last week following these few simple steps.