Ken Karachi

Ken Karachi

This is a video on the topic of the qualities of Bitcoin blockchain's censorship-proof attributes and how they apply in the world we live in today. It is imperative that you look at this as an dispassionate investor and steward of your assets, and not as a partisan or political supporter of XYZ.

Before moving forward, be sure to have read How to Use, Trade, Store and Invest in Bitcoin Digital Assets - Step by Step, Part 1.for a working background on what it is we are discussing.

A commenter left a response that I felt should be addressed in sufficient depth, hence I am posting it directly to the blog. Again, it is imperative that you look at this as a dispassionate investor and steward of your assets, and not as a partisan or political supporter of XYZ. I addressed his comment by relying heavily on Wikipedia text with my annotations, as a disclaimer.
Karaoke Vox13 hours ago

I understand how there are people looking for sound investments and "puts", but bitcoin and any kind of virtual currency has to be one of the biggest scams in the 21st century. Why do you think its creators stay hidden? (Rhetorical question) The best thing that could happen is all the criminals use it and then their wealth disappears in one night because of any number of practical failures.

Reggie Middleton12 hours ago

Karaoke Vox who created the dollar, yen and remnimbi?

Karaoke VoxKaraoke Vox Then wrote a lenghty and in depth reply. I'm posting his reply in combination with my reponses interspersed with a change in italics to denote his comments vs mine.

“Samuel P. Chase as Secretary of Treasury designed the first Federal Reserve Note for 1$ He is also a Supreme Court Justice who had to rule on the constitutional legitimacy of issuing paper instead of coin. “

He was responsible for the establishment of a national banking system and the issue of paper currency It not only secured an immediate market for government bonds, but also provided a permanent, uniform and stable national currency. He was the person who ensured that the Union could sell debt (versus existing assets and commodities) to pay for the war effort enabling the first wide scale example of deficit spending in America. This debt was net economically destructive, for the Civil war was not accretive (of course there are other factors that come into play, slavery, struggle for power, etc.). He worked with Jay Cooke & Company to successfully manage the sale of $500 million in government war bonds (known as 5/20s) in 1862. Today’s equivalent would be about $12,203,467,381. Yes, he tied what was essentially early standardized US currency directly to $12 trillion of freshly minted war debt. This debt was circulated through the young US economy through the Greenback demand note. The U.S. government placed the Demand Notes into circulation by using them to pay expenses incurred during the Civil War including the salaries of its workers and military personnel. These notes, which were supposed to represent the IOUs of the borrowings of the US government were signed and countersigned by officials of the US Treasury. These signatory requirements were changed and laxed over time, and more importantly, after redemption it was made legal for the redeemed notes to be reissued to the public without without a refreshed backing of new debt. An individual Demand Note could be re-issued into circulation after it was presented for redemption. This was an early form rehypothecation, of money printing without an explicit mandate. In a math-based system, one a unit of account is removed, it is gone.  Bitcoin is tied directly to math, not war, with no political agenda driving it – ex, the ability to autonomously print more in times of need.

Secretary of the Treasury Chase began distributing the notes to meet Union obligations in August 1861. Initially, various merchants, banks and especially the railroad industry accepted the notes at a discounted rate or did not accept them at all.  This shows that even government-backed notes carries with it risk and uncertainty, with said uncertainty being quite justified. Secretary Chase issued the following circular to the assistant treasurers to remove all doubt about the monetary status of the new notes:

Under the acts of July 19th and August 5th last, Treasury Notes of the denomination of $5, $10, and $20, have been, and will continue to be issued, redeemable in coin on demand at the offices of the assistant treasurer at Boston, New York, Philadelphia, St. Louis, and at the Depository of Cincinnati. These notes are intended to furnish a current medium of payment, exchange, and remittance, being at all times convertible into coin at the option of holder, at the place where made payable, and everywhere receivable for public dues. They must be always equivalent to gold, and often and for many purposes more convenient and valuable.

A sufficient amount of coin to redeem these notes promptly on demand will be kept with the depositaries, by whom they are respectively made payable. And all depositors and collecting officers will receive them, enter them on their books, and pay them to public creditors as money. Large amounts of the notes of small denominations are rapidly being issued and distributed.

These actions also created a willingness on the part of banks to redeem the notes for coin as well. This put Demand Notes on par with the value and purchasing power of gold coins and they circulated widely among the public for private transactions. They could be redeemed for silver coinage as well. In short, in the early days of US currency, as in now, ephemeral, non-commodity backing of notes of debt are considered as the risk that they are, papers potentially carrying empty promises

This played itself out immediately thereafter…

Suspension of specie payment

The ability of the government to redeem the Demand Notes in specie came under pressure in December 1861. On December 10 Secretary Chase indicated that war expenditures were far exceeding projections while Federal revenues were falling short. Then on the 16th, news of the British reaction to the Trent Affair reached New York and the major banks, which had been supplying gold to the government in exchange for seven-thirties Treasury Notes and bonds which they had been in turn reselling, saw the demand for their offerings of Union securities drop precipitously. By the end of the month the banks had suspended specie payment on their own banknotes. The Demand Notes then began to appear at assistant treasurers' offices in great numbers for redemption,[12] but since the government could not obtain adequate supplies of coin it was forced to follow suit and suspend redeeming the Demand Notes for gold in the first few days of 1862.


Bitcoin is legal because it has been argued in the U.S. that people can form their own contracts using whatever they agree to extinguish debts. I do not have to accept Bitcoin; however, I must accept the U.S. dollar as payment because it is the smallest bank note backed by the Federal Reserve Bank.

You also do not have to accept USD as payment either, contingent upon the terms of the contract. If I enter into a swap with you , US Brent Crude for euros, you cannot offer me USD at settlement. You are oversimplifying things in an effort to prove you point. I believe your point is USD is considered legal tender in the US, but that doesn’t override a contractual agreement, which is the space that Bitcoin currently lives in. In addition, since you are starting this comment off as a currency discussion, it strongly indicates that you don’t know what Bitcoin is. I suggest you read our primerHow to Use, Trade, Store and Invest in Bitcoin Digital Assets - Step by Step, Part 1


Bitcoin has been seized as an asset by the courts in Texas because of illegal drug trades on the Silk Roadwebsite. How those bitcoins will be used by the gov't is beyond my knowledge just like any other assets that are seized. So you can still try to retrieve your Bitcoin wallet by using the courts system if someone steals it from you *whether you gave it to them or not*.


This part of your comment drives home the point of the video. That asset forfeiture was made possible by the bitcoins being place on a hosted, or otherwise 3rd party controlled device, or left unencrypted. In encrypted form, it would not matter if the assets were found or seized, they would not affect the bearer in any form or fashion as long as he had access to a copy of the assets, which could be anywhere. Thank you for making that point for me.

An additional point is retrieval of the coin. You cannot use a court system to retrieve coin that was stolen from you if you don’t know who stole it, which is often the case with digital theft. Look at the larger incidences of digital theft and then look at the recovery rates –  essentially zero, as in absolutely NOTHING!.

·    Mt Gox – 850,000 bitcoins, approaching a billion USD at today’s exchange rate. Recovery that I know of, roughly 200,000 (these were “found”, not recovered from theft – likely operational and/or management incompetence). This would not have happened were the coin not left on Mt. Gox servers to begin with.

·    Bitfinex was robbed of 119,756 coins, today’s equivalent would be over $120,000,000. It is not known how the hack may have occurred, especially on such a scale, considering Bitfinex’s purported use of cold wallets and two of three multisig, with one key held by 3rd party, Bitgo. It is not, therefore, at all clear how such a staggering amount may have been stolen. They returned roughly 63% immediately from their corporate coffers and issued “IOU” tokens as collateral for the balance, of which I believe ~2% have been redeemed thus far, but I’m not privy to the relevant info. The pertinent point is none of the actual theft has been recovered, just as in Mt. Gox.  

·    Bitstamp -  Hacked for $6 million of coin (today’s prices), but since the hack was hot wallets only, they did not pass the loss onto their customers. Again, a zero known recovery amount.

Long story, short - one would die of asphyxiation waiting for the court system to facilitate the recovery digitally stolen coin, particularly form relatively thinly capitalized operations. A better way of putting this is, “An ounce of prevention is worth a pound of cure!”.


When creates uncertainty, then chaos like we've seen most recently in Venezuela's poor resource management and India's currency revaluation. U.S. institutions are losing legitimacy because of various corrupt human activities. Instead of calling out the criminals and the criminal activity, the press is playing politics.


Okay, I can’t necessarily disagree with that.


When someone reports something that is false and does not retract the story then they should be fired. Instead of the press posting the mugs of the CEOs/CFOs of the big banks committing fraud, they target what will keep them out of trouble with their financial backers. The press is not beyond the law and they are governed or balanced by laws having to do with libel and slander. They are also bound by ethics in regard to fair and balanced reporting. Just because a man likes to talk big about himself and his achievements (I got a fish this big) does not make him a criminal.


This comment goes way outside the bounds of the video, which addresses the possibility of government censorship, and the censorship-proof abilities of the blockchain, if used correctly. Even though I will likely regret bringing politics in this, even to the smallest degree, let’s address your comment as evidence that the possibility of government censorship is very, very real. You said, “When someone reports something that is false and does not retract the story then they should be fired.” This is true, and it is true for EVERYBODY, not just the media. It is particularly true for the POTUS! Donald Trump has said many things that were not true and has done so repetitively, both throughout his campaign, and throughout his presidency to date. If you truly believe that reporting something false without a retraction should result in firing, then…

Now, let's be real. Politicians say things that aren’t true, and Trump is far from the first and I doubt very seriously if he will be the last. In addition, the media (both mainstream and niche) is biased, and often distorts reality – yes that is true. The media is corporate owned, yes that is true as well, but no less true than corporate ownership in the US cabinet (big banks, big energy, industrialists, billionaires, etc.). What is unique is that the office of the POTUS (the most powerful in the world) is branding the media as the enemy of America. That’s dangerously close to enabling a censorship state. If you can’t see that then your politics are blinding you to obvious facts, and you might as well keep all of your assets in a hosted wallet on someone else’s property. A prudent investor would pay attention and prepare accordingly, regardless of their political affiliation. After al, said political affiliation will not return your assets once they are removed. To put this into a realistic perspective, these are his stated views on civil asset forfeiture (search for the 2nd appearance of the term, "asset") as gleaned from a transcript on the website.

To de-politicize this and attempt to remain objective, if you removed the name Trump, and removed the label of the industry that he is embattled with and swapped them both with generic names, then presented the situation to ten objective, independent people, I can assure you they would nearly all come back with a similar conclusion. Let's put it this way, the British look to be well on their way to doing this already, reference proposals by the UK's Law Commission become law (PDF).


If this were true, then half of the male population would be in jail, including you Reggie! Thanks for your concerns about censorship, you may censor this entire post if you so choose and I will not think anything bad of you for doing so. It's your channel.


As you can see, in lieu of censoring your comment, I gave it significant exposure – along with a few factual corrections. It is my channel, and I welcome well thought out comments. I don’t need to agree with them, they just need to be professional and respectful.


I will teach novices and experts alike how to fit Bitcoin into an investment portfolio safely and with the optimum risk-adjusted potential - along with step-by-step guides, instructions and tutorials.

This first part of the series starts with the basics, obtaining and managing your bitcoin.

What is Bitcoin?

First off, we need to know what Bitcoin is since most media pundits and even experienced financial types truly do not know. Bitcoin (capital "B") is a protocol driven network (very similar to that other popular protocol-based network, the Internet). This network is a blank tapestry upon which smart and creative actors can paint a cornucopia of applications (just like applications on the Internet). An early example from the Internet is email. It's now ubiquitous, but back in the early 90s very few people knew about it or used it. Fast forward today, and not only does everybody use and know about it, it is accompanied by a cornucopia of considerably richer applications, ie. Facebook, YouTube, Netflix, etc.

The Bitcoin network's first and most popular application to date is bitcoin (with a lower case "b"). Bitcoin (that's "b"itcoin - with a lower case "b") is a digitial currency applications that uses the Bitcoin blockchain and network as its transportation rails. It is a digital asset that can be a derivative of a physical asset or embedded in a physical device. Of course, that begs the question, aren't nearly all stocks, bonds and currencies digital assets. Short answer is yes. So, we are focusing on the next generation of digital assets, those that exist on the blockchain - the Bitcoin blockchain in particular. 


Acquisition, Part 1 - Preparing to Safely Receive Bitcoin  

Before you get you bitcoin you need to keep in mind that as a digital asset, it is susceptible to all of the maladies that befall other things digital, with the primary malady being hacking. The primary cause of hacks are lax password practice and malware. These are generally not difficult to proof against - at least in regards to lower level hackers.

  1. Makes sure you have a clean machine: Use AVG, Norton Anti-virus, Kapersky, etc. to purge malware and viruses off of your computer/phone/tablet. Don't put your money and assets on a machine that has bad actors waiting in the background to take it.
  2. Use a password manager: The second biggest whole in most people's computing habits is weak passwords. It's actually easy to determine if your password is too weak. If you can remember your password, then chances are someone else can as well. Any password that can be memorized probably isn't complex enough. Password managers store passwords for you, encrypt them and use them on their respective properties for you. This way, you can hundreds of personalized, complex passwords, a unique one for each site or app - yet only have to remember one password.

Acquisition, Part 2 - Choosing an Appropriate Wallet

A wallet is software designed to hold and manage you digital assets. You DON'T want a wallet that neuters the primary advantage that your new bitcoin offers you. That advantage is autonomy...

In a nutshell, autonomy is the ability to maintain control over your stuff, vs heteronomy, where you are forced to depend on a 3rd party to manage your assets. Bitcoin is fully autonomous. That's it's unique strength. Why should you give that up? You shouldn't! That means no hosted wallets, at all. A hosted walled is a wallet that its on someone else's servers to handle you assets. One of the most popular hosted wallets is the typical bank checking account. That wallet entails taking your assets (ie. digital dollars) and sending it to a 3rd party, thus relinquishing your possession, ownership and control of said assets. This has been done historically because most have not had a choice - other than stuffing dollars under the bed. 

Bitcoin allows you to always maintain:

  1. possession - you always have your assets or have them locked in the blockchain under your control (sending them somewhere else negates this);
  2. ownership -  our assets should always be yours, if you send them off to a hosted wallet or exchange, it becomes theirs and not yours;
  3. and control of your assets - you should always be the one to decide what happens to your assets, and when. This means no one can confiscate, freeze, tamper with and in no way frustrate your access to your assets.

 Examples of heteronomous wallets:

  • Coinbase
  • Nearly all exchanges, particularly the largest entities
    • Bitfinex, GDAX, etc.

Examples of autonomous or semi-autonomous wallets:

  • All wallets that store the assets locally, small sampling (I don't necessarily endorse any of these)
      • Bitcoin Core
      • Simple Bitcoin Wallet
      • MultiBit HD
      • Armory
      • Dark wallet
      • Bitgo
      • Airbitz (which does store you keys on their centralized server, but does so on an encrypted basis)

 Bitcoin is a bearer asset, just like the dollar bill. Think, would you rather keep your dollars in your pocket or in someone else's pocket. That's the difference between these two groups of wallet examples.

Remember, any heteronomous wallet can be seized, hacked or compromised despite your efforts to keep your assets safe - simply because you have relinquished possession and control. The larger the grouping of assets, the larger the prize becomes in targeting said wallet.

Acquisition, Part 3 - How Do I Get Bitcoin?

Actually, it's just as simple as asking someone to give it to you. I don't say this in jest. You can get bitcoin in exchange for products and services. If you don't know anyybody, then pursue This site is old school, P2P. It connects bitcoin buyers and sellers to deal with each other directly. Of course, you will end up payign a premium for your coins if you go through this channel, for there is less liquidity but it does work. These are the prices as of me typing this article...

Compare the prices to a mid level exchange such as Coinbase's GDAX. 

 This also brings us back to the autonomy vs heteronomy discussion. Use exchanges as gateways only. Use them to convert fiat (government and faith backed money) into digital asses and vice versa or to trade assets when you can't find your own counterparties. DO NOT use them as storage facilities. They can and do get hacked. You are not compensated in any way by relinquishing your possession, ownership or control of your assets to these entities, yet you do assume materially additional risk. Prudent investors ensure they are overcompensated for risks. Foolish investors are always under compensated or uncompensated for risks. Be a prudent investor!

The next installment of this series will go much more in depth in the investment in and trading of bitcoin, risks vs. rewards and how to integrate bitcoin into ANY portfolio. This will appeal to retail investors, professional traders and institutions alike.

We will delve deeply into bitcoin investment and trading, particularly integrating bitcoin into conventional investment portfolios in ways most of you have never dreamt of, using our proprietary and patent-pending Veritaseum technology., which is currently only available for beta to BoomBustBlog subscribers. If you are interest in our proprietary research, analysis or technology - please subscribe to one of our various subscription plans here. We can set subscribers up with a recommended wallet and even send you a couple dollars worth of bitcoin to get started.

Related Videos

  • This is What I Say When Asked "Should I Buy Bitcoin?
  • About Bitcoin Prices, Inflation and Volatility
  • Bitcoin: Autonomy and the Audacity of Access, part 2
  • Autonomy is the Reason Why Bankers Downplay Bitcoin, You Don't Need Them
  • Bitcoin, Autonomy & the Audacity of Access 
  •  What Is the Peer-to-Peer Economy & How It Will Change Things Forever
  • Applied Pathogenic Finance: Wall Street's "Internet Moment"
  • A Real Discussion on Currencies as Store of Value 
  •  The Network Effect of Bitcoin
  • Bitcoin's not a currency it's a whole new platform
  • What Wrong with Private Blockchains
  • Why Banks Should Be Wary of Bitcoin Tech
  • Bitcoins, Smart Contracts & Economic Disincentive 
  • Why the Media Sill Doesn't Get Bitcoin After Four Years
  • A Simple Apple Trade Using A Pure Bitcoin Wallet: The UltraCoin
  • Reggie Middleton & Barry Silbert @ 2014 Fintech NY
  • How Reggie Middleton's Start-up Patented The Future of Global Finance!
  • Reggie Middleton Discusses Forex Trading through UltraCoin
  • What is UltraCoin? A PowerPoint Presentation
  • Understanding UltraCoin Smart Money in 3 Minutes
  • Bitcoin Q&A at North American Conference
  • Reggie Middleton v Krugman, Greenspan & Shiller at N. America Bitcoin Conference 
  • Reggie Middleton Debunks Peter Schiff's Arguments at
  • UltraCoin: The Great Financial Disintermediator
  • The Future of Money: Zero Trust Digital Contracts
  • Future of Money: Transferability of Dumb Currency    
  • The Future of Money: Dumb Dollar vs Smart Programmable Currency
  • Bitcoin Trading & Investment: Risk vs Return Analysis
  • Bitcoin Q&A, YouTube Style
  • Bitcoin for Dummies: Why Bitcoin Is Not A Bubble

Our HSBC research report released September of 2016 has proven to be 110% correct. This is the first sentence of our report:

HSBC Common Equity Returns: Notwithstanding a possible boost from significant depreciation of the pound and their beating (already lowered) analysts’ expectations, it looks as if the market has not sufficiently discounted HSBC’s price given it’s extremely negative fundamental, credit and macro outlook. 

This morning the company reports an 82% drop in year over year earnings. Bloomberg reports HSBC Plunges After Missing Profit Estimates on Revenue Drop

HSBC Holdings Plc dropped the most in 18 months in London trading after reporting fourth-quarter profit that missed estimates on a surprise drop in revenue, which it warned could fall again this...

Net Interest income (US$ billion)


The bank had no less than 6 "one off" expenses and $6 billion worth of of write-downs where analysts were only expecting $1 billion. Of course, we clearly anticipated such, as you can see below. 

“Pretax profit is a large miss versus consensus” with “weakness in revenues across all major line items,” Citigroup Inc.’s Ronit Ghose said in a note titled “Weak Revenues, Messy Quarter.” Ghose also noted “an unusually large amount of one-offs” in the period, including a multibillion-dollar writedown on the value of its scandal-hit European private bank.

Here are some snippets from our report. To access our full report (HSBC Research Q3 2016 Research Report - Subscriber Edition), and legacy reports (browse banking section of paid archives), please subscribe.

HSBC Holding PLC


1 M











Notably, GBP has depreciated against dollar by ~15% in the last month. This might have contributed to appreciation of HSBC stock price since July 7, 2016 till Aug 6, 2016.

Financial Results – 2Q2016:

  • HSBC Holdings PLC reported a decline of ~29% in their reported profit before tax. Reported PBT was totaled at USD9.7 billion in 2Q2016  versus US$13.6 billion in 2Q2015

  • Similarly the bank’s revenue also fell down 11% to US$29.5 billion in 2Q2016 compared to US$32.9 billion in 2Q2015

  • HSBC reported an increase of 64% in total loan impairment and other credit risk provisions to US$2.4 billion in 2Q2016 from US$1.4 billion in 2Q2015

  • As per the bank’s Group Chief Executive Stuart Gulliver HSBC is going to buy back up to $2.5bn of its shares this year and hopes for another buyback in 2017. This is an absolutely silly use of capital given the decline in fundamentals, worsening credit metrics and deteriorating macro environment! A move whose only possible justification is to place investor perception of per share metrics.

  • The bank also stepped back from its dividend policy which implied a payout ratio of 8%

  • Risk-weighted assets (RWA) reduced by $21bn or 2% to US$1,082 billion as of June 30, 2016 mainly because of targeted RWA initiatives and the effects of currency translation in 1H2016. RWA initiatives resulted in a reduction of $48bn and included asset sales in the GB&M legacy and US CML run-off portfolios, reduced exposures, refined calculations and process improvements

Net Interest Income (NIM):

The net Interest income of HSBC Holding PLC came down by 4% to US$15.7 billion in 1H2016 from US$16.4 billion in 1H2015. Besides, the Net interest margin also came down to 1.83% from 1.92%

Margins are under continued pressure while the revenue is shrinking. What this means that HSBC’s ability to withstand any potential loss due to global banking system is weakening every quarter of every year, year after year. Revenue is not increasing and profitability will be affected. Losses in value of assets and loans may seriously impact the bank’s ability to provide returns to shareholders.

Performance by Geography:

Profit before tax (US$ million):


  • Total PBT of bank’s Europe business declined to US$1.6 billion 2Q2016 versus US$2.2 billion in 2Q2015 (a decline of almost 25%). Among the countries in Europe, HSBC’s PBT in France declined. Other countries experienced a loss of almost US$663 million.

  • The performance of Global Private Banking division deteriorated in all countries

  • Overall PBT of  Retail Banking and Wealth Management and Global Banking and Markets division of HSBC also declined in Europe


We have looked at HSBC derivatives again.

Please see the attached file. Notably, the notional value of derivative did witness a decrease in 2015 (over 2014 levels) due to decrease in notional value of interest rate derivatives. However, it again increased in 1H2016. The volatility in value of derivatives is worth noting. For example, in case of interest rate derivatives, the % of gross fair value of derivatives to notional value increased from 3.8% in 2015 to 4.8% in 1H2016 due to the fact that the yield curves in major currencies in Europe ( mostly in UK and to a lesser extent in France) have decreased in recent time because of the economic slowdown. This resulted in an increase in gross fair value of interest rate derivatives and corresponding offset amount. And this increase is the main factor behind increase in total net value of derivative assets

On an overall basis,  the % of gross fair value of derivatives to notional value increased from 3.7% in 2015 to 4.5% in 1H2016

The point being highlighted here is that the fair value is very volatile and is dependent on factors external to the bank’s control. Any major turbulence will have non-measurable and unexpected change in value of derivatives and corresponding losses that can materially impact the financial position of the banks.

On a separate note, the bank has not mentioned change in valuation approach (unlike DB) as a reason for change in value of derivatives.


I am here to weigh in on the increasingly popular marketing battle over GGP's (General Growth Properties) value in, and out of bankruptcy. The players in question are large buyside institutions who own opposing positions on the stock. Ackman/Pershing square, who are long the company's stock, and Hovde Capital Advisors, who are short the stock, and Reggie Middleton, the original player!

For those who follow me regularly and are familiar with my dealings with GGP, skip down to the bottom of this post to download my latest GGP analysis. For those who are not familiar with me and the BoomBustBlog, I am (to the extent of my knowledge) the first investor/media concern to go public with a short thesis on General Growth Properties (GGP) with a warning on commercial property in general, and a specific short on GGP in the 4th quarter of 2007 (see "GGP and the type of investigative analysis you will not get from your brokerage house", BoomBustBlog professional subscribers can download the entire GGP composite history in .pdf format). I am a private investor that generates his own proprietary research. It is solid, independent, unbiased, and of extreme quality when compared to the highly conflicted sell side marketing fluff proffered as research, and apparently now stands out among the buy side as well. With all due respect to the successful investors referred to herein, there is a hint of "talking one's book" within the presentations. I have absolutely no problem with self promotion, but when it appears the promotion comes to odds with the validity of the analysis, it does tend to raise my brow, and apparently the brow of several institutions that have come to me for my opinion.

So, let's take an unbiased, empirical look at GGP from the guy who first pointed out the insolvency of this company in the first place. As for the self promotion aspect, I am now offering consulting services to those who desire independent, objective analysis. I will soon be releasing a very interesting study on real estate funds and residential mortgage related products from Morgan Stanley and Goldman Sachs, which will assuredly cause their clients to fall in love with them. More on that later, though.

GGP from the beginning

As stated earlier, I articulated a roadmap to the largest commercial real estate failure in history a full year in advance of its filing. General Growth Properties was picked to be the big shorting opportunity in November 2007, when it was the 2nd largest commercial mall owner in the country, trading above $50, with an investment grade rating and buy recommendations from Wall Street. It filed for bankruptcy a year and a half later.

You don’t need a “” site to reveal much of the BS that is going on in the world today. A lot of revelation can be made simply by having motivated, knowledgeable experts scour through publicly available records. I’m about to make said point by showing that the proclamations of the ECB, IMF, the Portuguese government and all of those other governments that claim that Portugal will not default on their loans is simply total, unmitigated, uncut bullshit nonsense.

If you recall, I made a similar claim regarding the Irish government and posted proof of such, see Here’s Something That You Will Not Find Elsewhere – Proof That Ireland Will Have To Default… November 30th, 2010.

For those who wish to skip my market commentary and feel you may already understand how to interpret the output of the restructuring model, go straight to the haircut analysis by simply clicking this link and scroll to the bottom until you see the live spreadsheet. For the rest, let’s start by looking at it from the German’s perspective as reported in Bloomberg: Germany Snubs Pleas to Boost Aid, Sell Joint Bonds

Germany rejected calls to increase the European Union’s 750 billion-euro ($1 trillion) aid fund or introduce joint bond sales, signaling its refusal to bear extra costs to stamp out the debt crisis. With European finance ministers gathered in Brussels today for their monthly meeting, German Chancellor Angela Merkel rebuffed pleas from Belgium and central bankers to boost the emergency fund to save countries such as Portugal and Spain from falling prey to speculation. “Right now I see no need to expand the fund,” Merkel told reporters in Berlin. She said EU treaties bar joint bond sales, which might force up Germany’s borrowing costs, the lowest in the euro area. European political discord pushed down bonds in Spain and Italy today, reversing gains made last week after purchases by the European Central Bank briefly eased concern about the spreading crisis. The ECB bought the most bonds in a week since June, according to a statement today. The yield on Spain’s 10-year notes climbed 9 basis points to 5.08 percent as of 5 p.m. in London. Italy’s yield rose 7 basis points to 4.47 percent. The euro halted a three-session rally, dipping 1 percent to $1.3283.

The attempt to affect a global market in bonds long term by purchasing bonds short term is a futile effort and a total waste of resources – as we can all see.

‘No Credibility’ Europe has “no credibility” in ruling out debt restructurings, Kenneth Rogoff, a Harvard University professor and former International Monetary Fund chief economist, said in a Bloomberg Television interview broadcast today. “Greece will be very lucky to avoid restructuring, Ireland, Portugal — they’re just in denial, saying it can’t happen. They really haven’t drawn clear lines, they haven’t really said what they wanted to do, they haven’t really made choices.”

Bingo! The professor is right on point. Thus far, it has been nothing but words that have been given as an indication that said states won’t default. The market forces point to default. Their track record in terms of credibility point to default, as illustrated:

  • Once You Catch a Few EU Countries “Stretching the Truth”, Why Should You Trust the Rest?
  • Lies, Damn Lies, and Sovereign Truths: Why the Euro is Destined to Collapse!

The numbers show default.

  • Here’s Something That You Will Not Find Elsewhere – Proof That Ireland Will Have To Default… November 30th, 2010
  • “What is the Most Likely Scenario in the Greek Debt Fiasco? Restructuring Via Extension of Maturity Dates
  • A Comparison of Our Greek Bond Restructuring Analysis to that of Argentina

Only their proclamations say otherwise. Back to the Bloomberg article…

Under pressure to shield taxpayers in Europe’s largest economy, Merkel is drifting back into the role she played in the early stages of the crisis, when Germany held out against an aid package for Greece. The political standoff may saddle the ECB with more of the crisis-management burden, said Citigroup Inc. economists including Juergen Michels and Michael Saunders in London in a Dec. 3 e-mailed note. “Eventually the ECB will be forced to increase its contribution to the rescue packages substantially,” the economists wrote. “We expect that after another round of market tensions, the European fiscal policy makers will eventually come up with additional measures to fight the crisis.”

The inevitable truth of the matter is that several European states WILL default, and default they will. If Germany, or any other economy that still has its druthers to it decides to stand in front of said occurrence, it will likely be dragged down as well. The Germans apparently realize this. See this excerpt from our discussion on the topic regarding Ireland’s prospects for default:

from the post Ireland’s Bailout Is Finalized, The Indebted Gets More Debt As A Solution But The Fine Print Is Glossed Over – Caveat Emptor! wherein BoomBustBlogger Nick asked:


Do you have any reason as to why they are choosing 2013 as a deadline ? Seems like an arbitrary date.

Well, Nick, just follow the money or the lack thereof

So, what debt raising and servicing that was unsustainable in 2010 was lent even more debt to become even more unsustainable. The chickens come home to roost in 2013, post IMF/EU/Bilateral state leveraged into Ireland loan/Pension fund raiding bailout! What Angela in Germany was alluding to was what all in the know, well… know, and that is that Ireland is already in default and those defaults have been purposely pushed out until 2013. Angela simply (and wisely from a local political perspective, although unwisely from a global geopolitical standpoint) admitted/suggested was that the defaults will be pre-packaged and managed ahead of time. The EU politbureau insists that politics rule the day, and no prepackaged structure be in place for the Irish defaults to be. This means the potential foe even more carnage through the pipelines of uncertainty!

And back to the article

ECB Bond Purchases

The Frankfurt-based central bank said today it settled 1.965 billion euros of bond purchases last week. While the figure was the highest in 22 weeks, it didn’t include bonds bought between Dec. 1 and Dec. 3.

The bank is “actively” operating in the government bond market, Governing Council member Athanasios Orphanides said today in Nicosia. The ECB will act as necessary, said Orphanides, who heads the Cypriot central bank.

Greece won a 110 billion-euro EU-IMF rescue in May, leading the EU to create the three-year facility that was first tapped by Ireland with an 85 billion-euro program last month.

Both of these actions were clearly anticipated by BoomBustBlog research and analysis months ahead of time:

ECB President Jean-Claude Trichet indicated last week that EU governments might need to top up the emergency fund, a position echoed Dec. 4 by Belgian Finance Minister Didier Reynders.

Reynders said the IMF also wants the EU to put up more money and would boost its 250 billion-euro share. IMF spokesman William Murray declined to comment. Managing Director Dominique Strauss-Kahn is at tonight’s Brussels meeting.

All I can say is The ECB and the Potential Failure of Quantitative Easing, Euro Edition – In the Spotlight!

Re-Introducing the Not So Stylish Portuguese Haircut Analysis Note: this is a repost of the information initially made available to subscribers in the summer of 2010

For those who feel that the simple application of arithmetic and math amounts to “Doomsday Scenarios”, Fear-mongering, and vultures in the market place, I present to you BoomBustBlog’s scenario analysis of the Portuguese Haircut.




You think those are ugly? You ain’t seen nothing yet!

The Mathematical Truth Concerning Portugal’s Debt Situation

Before I start, any individual or entity that disagrees with the information below is quite welcome to dispute it. I simply ask that you com with facts and analysis and have them grounded in reality so I cannot right another “Lies, Damn Lies, and Sovereign Truths: Why the Euro is Destined to Collapse!“. In other words, come with the truth, or at lease your closest simulacrum of it.

In preparing Portugal’s sovereign debt restructuring model through maturity extension, we followed the same methodology as the Greece’s sovereign debt maturity extension model and we have built three scenarios in which the restructuring can be done without taking a haircut on the principal amount.

Restructuring by Maturity Extension – Under this scenario, we assumed that the creditors with debt maturing between 2010 and 2020 will exchange their existing debt securities with new debt securities having same coupon rate but double the maturity. Under this type of restructuring, the decline in present value of cash flows to creditors is 3.3% while the cumulated funding requirements and cumulated new debt between 2010 and 2025 are not reduced substantially. The cumulated funding requirement between 2010 and 2025 reduces to 120.0% of GDP against 135.4% of GDP if there is no restructuring. The cumulated new debt raised is reduced marginally to 70.6% of GDP from 72.2% of GDP if there is no restructuring. Debt at the end of 2025 will be 104.8% of GDP against 106.1% if there is no restructuring.

Restructuring by Maturity Extension & Coupon Reduction – Under this scenario, we assumed that the creditors with debt maturing between 2010 and 2020 will exchange their existing debt securities with new debt securities having half the coupon rate but double the maturity. The decline in the present value of the cash flows is 18.6%. The cumulated funding requirement between 2010 and 2025 reduces to a potentially sustainable 99.5% of GDP and the cumulated new debt raised will decline to 50.1% of GDP. Debt at the end of 2025 will be 88.6% of GDP (a potentially sustainable).

Restructuring by Zero Coupon Rollup – Under this scenario, the debt maturing between 2010 and 2020 will be rolled up into one bundle and exchanged against a single, self-amortizing 20-year bond with coupon equal to 50% of the average coupon rate of the converted bonds. The decline in the present value of the cash flows is 17.6%. The cumulated funding requirement between 2010 and 2025 reduces to 100.1% of GDP and the cumulated new debt raised will decline to 52.8% of GDP. Debt at the end of 2025 will be 90.9% of GDP (a potentially sustainable).

The scenarios above were also calculated using the haircuts necessary to bring debt to GDP below a pre-selected level (user selectable in the model, 80%, 85% or 90% – please keep in mind that a ceiling of 60% was necessary in order to gain admission into the Euro construct). We have also built in the impact of IMF/EU aid on the funding requirements and new debt raised from the market between 2010 and 2025 under all the scenarios.

A more realistic method of modeling for restructuring and haircuts In the previously released Greece and Portugal models, we have built relatively moderate scenarios of maturity extension and coupon reduction which would be acceptable to a large proportion of creditors. However, these restructurings address the liquidity side of the problem rather than solvency issues which can be resolved only when the government debt ratios are restored to sustainable levels. The previous haircut estimation model was also based on the logic that the restructuring of debt should aim at bringing down the debt ratios and addition to debt ratios to more sustainable levels. In the earlier Greece maturity extension model, the government debt at the end of 2025 under restructuring 1, 2 and 3 is expected to stand at 154.4%, 123.7% and 147.0% of GDP which is unsustainably high.

Thus, the following additional spreadsheet scenarios have been built for more severe maturity extension and coupon reduction, or which will have the maturity extension and coupon reduction combined with the haircut on the principal amount. The following is professional level subscscription content only, but I would like to share with all readers the facts, as they play out mathematically, for Portugal. In all of the scenarios below, Portugal will need both EU/IMF funding packages (yes, in addition to the $1 trillion package fantasized for Greece), and will still have funding deficits by 2014, save one scenario. That scenario will punish bondholders severely, for they will have to stand behind the IMF in terms of seniority and liquidation (see How the US Has Perfected the Use of Economic Imperialism Through the European Union!) as well as take in excess of a 20% haircut in principal while suffering the added risk/duration/illiquidity of a substantive and very material increase in maturity. Of course, we can model this without the IMF/EU package (which I am sure will be a political nightmare after Greece), but we will be recasting the “The Great Global Macro Experiment, Revisited” in and attempt to forge a New Argentina (see A Comparison of Our Greek Bond Restructuring Analysis to that of Argentina).

Here is graphical representation of exactly how deep one must dig Portugal out of the Doo Doo in order to achieve a sustainable fiscal situation. The following chart is a depiction of Portugal’s funding requirements from the market before restructuring…

This is the same country’s funding requirements after a restructuring using the “Restructuring by Maturity Extension″ scenario described above…

And this is the depiction of new debt to be raised from the market before restructuring…

And after using the scenario “Restructuring by Maturity Extension″ described above… For all of you Americans who remember that government sponsored TV commercial, “This is your brain on drugs. Any Questions?“

The full spreadsheet behind all of the calculations, scenarios, bond holdings and calculations can be viewed online here (click this link and scroll to the bottom until you see the live spreadsheet) by anyone with the wherewithal to click the link. This product was formally available only to our professional subscribers, but I have decided to distribute it much more widely. Our Ireland, Greece and Spain (to be published within 72 hours) haircut models are available solely to professional and institutional subscribers. Click here to subscribe or upgrade.

Required reading for this article: The very first paragraph of the very first post I made on this blog and "the Great Global Macro Experiment".

Of course commercial real estate is going to fall. Why? For the exact same reason residential real estate is falling. But, there hasn't been an oversupply of commercial real estate, you say. Well, the oversupply is not the core reason why residential is falling right now. Residential RE's problem is that easy, cheap money brought upon wreckless, imprudent speculation from players who were not well versed in the real estate game - and even those who should have known better. The current oversupply is a byproduct of that liquidity induced speculation. Why split hairs? Because the devil is in the details. The downfall of CRE is the rampant speculation that caused many to significantly overpay for assets that are quite illiquid and take significant expertise and time to improve (or even sell), even incrementally. Not only did they overpay, but they applied significant leverage as well, much more than the industry norm.

A Quick Commercial Real Estate Primer: Pricing Commercial Real Estate

There are several ways to price and value CRE, but the simplest and most straight forward is the capitalization rate (cap rate).

The cap rate is simply net operating income/price. The result is a yield that you can use to compare to other investments in order gauge relative price/return - such as the 10 yr. note yielding 4.114%. For instance, I buy a building for $100,000 and it throws off $10,000 after all operating expenses. $10,000/$100,000 = .10 or 10% = the cap rate. Thus this building is priced at a 10% cap rate, or priced by the seller to give the buyer a 10% return, unleveraged. This 10% return priced into the building allows a 589 basis point risk premia over the 10 yr treasury. Why, you ask? Because the office building is much riskier, being very illiquid, taking many months or years to close on and sell. The office building inherently has risk of litigation, operational risk, and market risk. It also requires a modicum of operational expertise, and in addition there is credit risk (through your lessees(?) So, as you can see, the risk premia is well deserved.

Now, many (in order to juice the return a bit) apply leverage through mortgages, bank loans, etc. to spice up the return, albeit at the risk of higher volatility of cash flows and the possibility of running negative cash flow in tight years. Assume, I used 30% of my own monies ($30,000) to buy this building and borrowed $70,000 for the rest. I now get that same $10,000 net operating income off of a $30,000 cash outlay, vs a $10,000 cash outlay. So now I yield 33% return instead of a 10% return due to leverage. Of course my astute readers realize that the cost of this leverage was not factored in. Let's assume the debt service for this loan is $4,900 per year. I must deduct that interest and principal repayment from my operating profit. This is reality. Thus, my leveraged yield is really something akin to 17%. Still not bad, and still better than 10%.

The realities of the liquidity boom generated leverage, the absence of risk premia & how the combination of the two will bring down commercial real estate

There are additional caveats to the use of leverage. For one, it greatly reduces operating flexibility. If you paid all cash in the deal above, and two out four of tenants move out or go bankrupt, your (variable) cashflows are not as hindered by your debt service (fixed) which offers you the flexibility to pay more bills until you replace your income. If you took on debt, you have less room to maneuver since the debt service is a fixed cost. Of course, the more debt you take on, the less room you have.

Now, over the last year or two, I have witnessed market participants purchase apartment and office buildings at cap rates of... hold your breath now...1.5% -4.5%. That's right. These are supposed professionals, acquiring multi-million or even multi-billion dollar risky assets yield less than a 10 yr treasury or your local money market fund - much less. There are only way two ways to justify paying a low cap rate:

  1. A clear path towards increasing net operating income, such as doubling rents (this ain't gonna in this economic downturn with corporate earnings disappointing and the residential housing stock at all time highs), or reducing expenses, or -
  2. selling to an even greater fool at an even lower cap rate. With the easy money drying up and CMBS market looking rather scary, fools that are easily departed with thier money are increasinly hard to come by. Now, we can find fools, still - but the money part is the kicker these days - And even if you find a fool who still has some of his money, how do you convince even him to pay between 0% to 1% return on his money for your risky asset when treasuries are currently yielding ove 4%. This is not even taking into consideration leverage - which would assuredely drive this asset into negative cash flow, with NO MARGIN for ERROR in operating. Trust me, you will need a margin for error. Everyone makes mistakes, even me. I made one back in the early '90s... :-)

Sam Zell, one of the most successful real estate investors of our time, sold his Equity Office Properties Trust of Class A and B buildings to Blackstone for what I assuredely thought was a fools price. When I saw the numbers, I said easy money or not, there is an ass for every seat. Well, little do I know. Blackstone found someone to pass the cherry on to, and in near real time at that - and they paid even lower cap rates than Blackstone did. Hats off to the Blackstone folk. You found the guys at the very tip top of the market to drop those cap rates off on.

Now, the problem for the last guys to buy these properties (as Sam Zell sits there smiling on his $21 billion pile of cash) is that it is going to be nigh impossilbe to find someone who will pay a ZERO cap rate, and try as you might it will be damn hard to raise lease rates amongst an economic hard landing and negative trending earnings... And thus, this is the fate of commercial real estate. The many guys who overpaid, will get burnt as values tumble from their peak bubble highs. Old school real estate guys email me and say they never even heard of 5, 6 and 7 percent cap rates until recently (after 30 years in the biz). Well, some of these guys are pushing zero (literally 1.5% to 3 and 4%).

So I told my team to find the low cap rate buyers so we can short 'em. We, of course, started looking at the profile of those who bought from Blackstone (I mean, who wouldn't?) and then moved on when we saw that their were some entities that were in some real (and I mean real) trouble. Here are a couple of companies that we passed on because they weren't bad enough off:

Vornado (NYSE:VNO) - implied cap rate of 4.2% (currently about that of a risk free note, but fraught with risk), and debt to equity of 163%. This means $1.63 of debt to every dollar of equity or in terms of residential real estate.

Equity Residential (NYSE:EQR) - implied cap rate of 5% (currently about that of a risk free note, but fraught with risk), and debt to equity of 193%. This means $1.93 of debt to every dollar of equity. Inserted comment: Error correction, hat tip to Kiku below. It has been pointed out in the comments that published equity numbers are misleading for REITS, which is why we measure portfolio value independently, as we did with the mononline insurers and the homebuilders. Could you imagine going to a bank (like Countrywide, with mortgage backed structured products insured by Ambac) and saying, "Hey, I'd like to borrow twice what my house equity is appraising for, and I want to do it now, Dammit!" :-) Alas, this is what "The Great Global Macro Experiment" has wrought.

If you think these numbers might look just a little hairy, just wait and see the numbers of the companies that I am actually shorting. The one's above were actually cut off of the short's short list, so to say. Once you see, you will be a believer just like me - commercial real estate is on its way down. See comments below for more on the accuracy of the book calculations I use in my analysis vs. used in this story.

Details of transactions for sale of properties by Blackstone Group

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It is my opinion that banks worldwide are simply not safe anymore, and we are on the precipice of a banking crisis that will make the Lehman fiasco look like a test run. For one, interest rates will definitely have to rise. Yes, I know Bernanke is running ZIRP, the ECB is QE to infinity and beyond, yada, yada… But these entities are not the end all and be all for market rates. They can manipulate rates, but they can’t ultimately control them for the long term.

After 6 years, it’s been long term… With banks failing and taking depositor’s and bondholder’s funds with them, there’s simply not enough people stupid enough to accept .7% returns in exchange for the very likely possibility of losing a large chunk of (the majority of, or possibly all of) their principal to go around!!! This central bank Ponzi scheme of printing more money to pay for the debt that you couldn’t afford to pay back because you didn’t have the money relies on the “Greater Fool Theory”.

Common sense dictates that this theory is predicated on an ample supply of “Greater Fools”. What you will read below should shake the foundations of your belief in the EU banking system, and hopefully will start a dearth in “Greater Fools”! Even more alarming, it actually gets worse from here. Oh yeah, if you have believe that the information below actually identifies a gross misrepresentation of fact, omission or outright fraud, simply contact the SEC and let them know that Reggie Middleton suggested they look into it. You can actually use this form to convery my message. 

First Off Let’s Make Bank Collapse Real… To begin with, let’s make this Cyprus thing real, by showing a live example of what happens when to a real small business that had the gall to bank with Laikie Bank, from the Bitcoin forum I excerpt a post that puts things into perspective, re: bank account confiscation:

laikie 92e57

Most of the circulating assets on our business Current Account are blocked. Over 700k of expropriated money will be used to repay country’s debt. Probably we will get back about 20% of this amount in 6-7 years.

I’m not Russian oligarch, but just European medium size IT business. Thousands of other companies around Cyprus have the same situation. The business is definitely ruined, all Cypriot workers to be fired.

We are moving to small Caribbean country where authorities have more respect to people’s assets. Also we are thinking about using Bitcoin to pay wages and for payments between our partners.

Special thanks to:

– Jeroen Dijsselbloem

– Angela Merkel

– Manuel Barroso

– the rest of officials of “European Comission”

Next, Let’s Realize That Cyprus Is Not A “Special Case”, It Is Like The Template For Future Actions

Just the fear of another wave of bank collapse has government officials and regulators in fear. Why are they afraid? I made the cause of such fear clear to all at the ING Valuation Conference in Amsterdam.

With the knowledge contained in the video above, it’s not hard to see the Infection spreads to North America as The Canadian Government Offers “Bail-In” Regime, Prepares For The Confiscation Of Bank Deposits To Bail Out Banks! Hold on, before you start worrying about your Canadian bank, you should be aware that the EU banks are still much, much, much worse off. Let’s forget Cyprus for a minute and look deeper into the EU, into a larger country with more globally interconnected banks.

On Thursday, 29 April 2010 I warned my subscribers to Beware of the Potential Irish Ponzi Scheme! Shortly thereafter, the BoomBustBlog Irish Research Became Reality. That same month, I warned again with the post, “Many Institutions Believe Ireland To Be A Model of Austerity Implementation But the Facts Beg to Differ!” Five months later, I went back at Ireland again with “If the World Knew What BoomBustBlogger’s Know, Would Ireland Default Today?” This post was the clincher, to wit:

The Farce! 

The government has set up an asset management agency – NAMA, which will buy toxic assets from banks at a discount and will in turn issue government-guaranteed securities. NAMA was expected to buy about $81 billion of toxic assets at a price of $43 billion and issue government-guaranteed securities in return. Since these securities have collateral backing and are likely to be repaid through the pay back of underlying loans, these securities are considered off-balance-sheet and are not part of general government debt by Eurostat. According to Davy research, while the projected gross government debt excluding the impact of promissory notes and NAMA bonds is 84.8% in 2012, including the impact of promissory notes and NAMA bonds (in other words, including the truth), the gross government debt can rise to 117.4% of GDP. This either competes with or bests Greece, 2010’s poster child of flagrant spending.

This means that the teacher has created a very harsh austerity plan for its “learner”/student/tax paying populace that has materially lowered the standard of living – all based upon numbers that were bogus to begin with. In other words, it ain’t gonna work!

Well, today we have proof and that proof will likely leave some EU bank despositors “Cyprus’d”, and I don’t mean just those in Cyprus either.

Introduction and Background

In 2007 Ireland had significant cross border exposure to UK and US banks through derivatives and property products. As I warned in 2007, the real estate bubble in the the US/UK popped in 2008, sending pathogenic contagion straight through the Irish banking system. The entire banking system started collapsing. On February 15, 2008, Ireland took extraordinary measures (which we will explore in depth a little later on) to mitigate said collapse, measures that many a layperson would deem misleading, if not fraudulent. RBS (Royal Bank of Scotland, one of the largest financial institutions in the countries of Ireland and the UK) was effectively nationalized by the UK and a bad bank was formed to purchase bad debt/products from the Zombie Irish banks in exchange for government bonds, backed by a country that just simply couldn’t afford it.

Following my warning in February of 2008, Lehman filed bankruptcy in September sending an additional set of contagion shock through Ireland and its banking system, causing Ireland to issues bonds and further indebt itself to save its Zombie banks – again! This time through blanket bank guarantees backed by the full faith of the government.

In September of 2010, a large swath of said government guarantees for the banks were about to expire. Reference this excerpt from the book “Zombie Banks: How Broken Banks and Debtor Nations Are Crippling the Global Economy”:

In September 2010, some of Ireland’s government guarantees for bank debts were about to expire, which put U.S. Treasury officials on edge. If the guarantee wasn’t renewed, the banks would likely default on their bonds, triggering the next event in line: a slew of credit default swap (CDS) contracts on Irish banks’ debt. U.S. Treasury officials had reason to worry – the names backing those contracts were the largest U .S. banks, and they could end up paying billions in case of default. Any more weight on U.S. banks could be a tipping point to collapse. Treasury officials made inquiries to their counterparts at the Irish finance ministry asking about the course of action the country was planning to take and indicated their concern about possible default and its CDS repercussions. A year after having issued blanket guarantees on the banks’ liabilities the Irish government once again didn’t dare let the bank fail. Instead it ended up asking for financial assistance from the European Union (EU) and the International Monetary Fund (IIMF): the country had been pushed to the brink of collapse.

The next few posts will document details the financial shenanigans played by several EU banks (Ireland included), among others, to the tune of over €40 billion. This money was essentially double counted, or to put more simply, at least one version of it simply doesn’t exist on someone’s balance sheet.

I have compiled a list of at least 6 banks which I feel are at risk of being Cyprus’d, with more being added weekly. The first bank report, whose subject is still steadily accepting deposits at measly interest rates, is available for download right now for all paying BoomBustBlog subscribers (click here to subscribe), reference File Icon EU Bank Capital Confusion, Potential Failure. Those of you who actually follow this banking stuff may very well be shocked at how bold the actions described therein actually are!

For now, let’s focus on Ireland and the Irish banks. 

Anglo Irish Bank

Anglo Irish Bank which subsequently became Irish Bank Resolution Corporation (IBRC), was recently liquidated by the Irish Government. Included below are three documents executed by this bank. The first two are charge documents that the bank entered into on the 15th of February, 2008. These charges are in favor of the Central Bank and Financial Services Authority of Ireland (the ECB). They are floating charges over Secured Obligations (repo agreements) and the banks payment module account.

So, What’s So Special About These Documents??? 

The reasons given for the floating charges are the banks participation in Target 2, which is a interbank, cross-border EU real-time payment system. A former Group Chief Auditor of one of Ireland’s largest banks who was part of the team who conducted the stress testing for the European Banking Authority was allegedly quite shocked to see the various charge documents herein. He informed BoomBustBlog consultants that these charge documents were not included in the stress testing. For those who don’t get the gravity of this statement – the previous encumbering of the Irish bank’s assets were ignored or not known by those who conducted the stress testing for the banks. What makes things even worse was despite the fact the bank’s assets were double counted, allowing them to pass the stress tests, they promptly started failing post stress test… And I do mean promptly, as in within months.

The chief auditor was also allegedly able to inform that the reasons given for the purpose of the charges was a red herring. He allegedly advised that Target 2 is only a payment system and the description stated was a complete misrepresentation of the true reasons.

The real reasons for the charges were because the bank was completely bust. The bank had already previously entered into repo transactions (secured obligations) with the Irish Central Bank (ECB) and had run out of money. The Irish Central Bank gave further funding using these charge documents. The share price of Anglo in February 2008 was still quite high but started to collapse over the coming months. These charge documents are not disclosed in the Annual Accounts (the EU version of an annual report) for the 31st of March, 2008.

Questions also arise as to the validity of the asset transfer, the legality of Anglo Irish Bank and/or the ECB entering into repo agreements, and the activity of Anglo Irish Bank in regards to its trading activity… If a charge was given over ALL of Anglo Irish’s assets, then exactly how did it legally engage in the MBS, derivative and trading activity? Underlying assets must be pledged to a trust in order to create many derivative structures, including MBS, but if there’s a negative pledge clause in the charge and the charge covers nearly everything, then those assets don’t truly belong to said trust, do they? You can imagine how far one can go with this line of thinking, no?

If you were an investor, shareholder, bondholder or regulator the information above was critical information – EXTREMELY CRITICAL INFORMATION! Anglo ADR’s were also traded through brokers in the USA. I am sure that ADR holders would have liked to have been aware of this information, as well as the SEC.

I see a number of avenues which could be worth pursuing, including terms of recompense for junior bondholders who got hosed, equity shareholders who lost capital, counterparties, etc. This is, to my lay ears, tantamount to blatant fraud. Of course, I’m not an international banking lawyer, so what do I know??? Yet, I have only touched on some of the issues. There’s a lot more to come.

In relation to Anglo Irish Bank (IBRC), the 2008 charge document states that the charge covers ‘all present and future liabilities whatsoever of the company, to the Central Bank of Ireland (ECB).’ But there is no disclosure of this in the Anglo 2008 accounts (annual report). This appears to illustrate concealment of the true facts. If these charge documents have not been overridden, then a massive amount of assets in the bank have been over-encumbered. Even if the charges have been overridden in some form or fashion, the mere omission of their existence is a misrepresentation of the banks financial condition, particularly in the stress testing of the banks and regulatory financial reporting (ex. SEC).

If you believe that the information above actually identifies a gross misrepresentation of fact, omission or outright fraud, simply contact the SEC and let them know that Reggie Middleton suggested they look into it. You can actually use this form to convey my message.

As a reminder for those who wish to ignore my banking calls as a frivolous episode of Chicken Little, BoomBustBlog is the place that was the first to reveal:

  1. The collapse of Bear Stearns in January 2008 (2 months before Bear Stearns fell, while trading in the $100s and still had buy ratings and investment grade AA or better from the ratings agencies): Is this the Breaking of the Bear?
  2. The warning of Lehman Brothers before anyone had a clue!!! (February through May 2008): Is Lehman really a lemming in disguise? Thursday, February 21st, 2008 | Web chatter on Lehman Brothers Sunday, March 16th, 2008 (It would appear that Lehman’s hedges are paying off for them. The have the most CMBS and RMBS as a percent of tangible equity on the street following BSC.
  3. The collapse of the regional banks (32 of them, actually) in May 2008: As I see it, these 32 banks and thrifts are in deep doo-doo! as well as the fall of Countrywide and Washington Mutual.
  4. The collapse of the monoline insurers, Ambac and MBIA in late 2007 & 2008: A Super Scary Halloween Tale of 104 Basis Points Pt I & II, by Reggie Middleton, Welcome to the World of Dr. FrankenFinance! and Ambac is Effectively Insolvent & Will See More than $8 Billion of Losses with Just a $2.26 Billion.
  5. The ENTIRE Pan-European Sovereign Debt Crisis (potentially soon to be the Global Sovereign Debt Crisis) starting in January of 2009 and explicit detail as of January 2010: The Pan-European Sovereign Debt Crisis.
  6. Ireland austerity and the disguised sink hole of debt and non-performing assets that is the Irish banking system: I Suggest Those That Dislike Hearing “I Told You So” Divest from Western and Southern European Debt, It’ll Get Worse Before It Get’s Better! The problems that plagued Cyprus banks plague banks in much larger nations within, and around the EU. From Overbanked, Underfunded, and Overly Optimistic: The New Face of Sovereign Europe you see institutions that are literally too big to be handled safely…

The Banks Are Bigger Than Many of the Sovereigns 



The document evidencing mortgage security required by Crown Law (law derived from English law). A Fixed Charge refers to a defined set of assets and is usually registered. A Floating Charge refers to other assets which change from time to time (ie. cash, inventory, etc.), which become a Fixed Charge after a default.

Repurchase Agreement

A repurchase agreement, also known as a repo RP, or sale and repurchase agreement, is the sale of securities together with an agreement for the seller to buy back the securities at a later date. The repurchase price should be greater than the original sale price, the difference effectively representing interest, sometimes called the repo rate. The party that originally buys the securities effectively acts as a lender. The original seller is effectively acting as aborrower, using their security as collateral for a secured cash loan at a fixed rate of interest.

A repo is equivalent to a spot sale combined with a forward contract. The spot sale results in transfer of money to the borrower in exchange for legal transfer of the security to the lender, while the forward contract ensures repayment of the loan to the lender and return of the collateral of the borrower. The difference between the forward price and the spot price is effectively the interest on the loan, while the settlement date of the forward contract is the maturity date of the loan.

TARGET 2 is an interbank payment system for the real-time processing of cross-border transfers throughout the European Union. TARGET2 replaced TARGET (Trans-European Automated Real-time Gross Settlement Express Transfer System) in November 2007.

Next up is a bank that is still steadily accepting deposits at a steady clip, paying ungodly low interest rates, and setting itself up to potentially get “Cyprus’d”. Paying subscribers can download the report now, before capital controls are set in – see File Icon EU Bank Capital Confusion, Potential Failure. Everybody else can subscribe or wait until either I make it public or the respective government does the Cyprus Thang! Yes it pays to be a BoomBustBlog member (click here to subscribe).

I will start posting a list of definitive bank names that I have apparently caught in some amazingly duplicitous and misleading capital schemes, at least as it appears to me and my staff. I know I wouldn’t have MY money in them, particularly after reading the info above.

Macro-economic theory and research as well as the theme in general credited to Dr. Drobny. For the record, the piece this is derived from was written towards the beginning of the year. It may seem to state the obvious now, but it was quite predictive when it was written.

Once upon a time, there was a man at the helm of the Federal Reserve during one of the most explosive equity market bubbles in the history of the US. Technology stocks, and internet stocks in particular, exploded in price by several hundred percent, fledging start-ups with no profit, often no revenue, and speculative business models were being brought public at astronomic multiples, and vast fortunes were being made as mom and pop investors bought IPOs in margin accounts. The Chieftain warned of the “irrational exuberance” in the markets and the dangers that ensued, but oft to no avail, as the market shot up higher and higher. This was an obvious speculative bubble, and during the past extreme bubbles in this country, previous Chieftains pricked them with higher interest rates which invariably led to a recession or worse shortly thereafter. Now, this chieftain, being the historian that he was, knew the historical effects of the pricking the bubble, so he tried to talk it down through speeches of “irrational exuberance”. Since that did not work, he decided to try something different from all of his predecessors,

and wait for the market to collapse on its own, which, of course, it did. After the market crashed, this chieftain lowered interest rates to near 1% (in terms of real rates) and consequently flooded the US with inexpensive money in the form of easy credit. Since the US is the economic epicenter of the world, the flooding of the US with money is the equivalent of flooding the world with money, and the result was that risky assets US wide and world wide became more liquid, and thus from a liquidity perspective, perceived as less risky. This love fest with risky assets ranged from real estate and mortgages to derivatives, commodities and emerging market debt (and practically everything in between). As a result of this “Great Global Macro Experiment,” real estate (primarily residential) led the US out of the dotcom implosion caused recession and powered the economy for the 6 years. As a matter of fact, the speculative excesses of the real estate industry, and consequently the mortgage industry that financed it, easily matched if not surpassed that of the dot com era just a few years ago. The Chieftain in seeing this, raised interest rates in an attempt to soak up some of the liquidity that he flooded the world with, but his efforts were to no avail. For the first time in the history of US Fed Reserve Chieftains, the power to directly or even indirectly affect interest rates were out of his reach. He remarked that for some strange reason, that he did not understand, as he would raise rates, the market rates would actually decrease. Thus, one effect of the experiment was that the Chieftain and the fed lost the power to directly manipulate market rates. As the real estate and mortgage markets crashed (as all speculative bubbles do), this author and investor predicts that real estate will lead us into a recession, the same as it led us out of one several years ago. The difference between now and then is that the entire globe’s risky assets were “mispriced” downward due to excessive and easily available credit and liquidity, thus as the US goes the world will follow. Think about the fact that it took 6 years for the bubble to form, it will not dissipate in 6 months or even 16 months, due to the illiquid nature of the base asset. These are not internet stocks sold in a minute and settled by the end of the day. My experience in selling residential in the NE of the US was a 90 day marketing period to sell a property. These days, many properties have been on the market over 6 months and have not sold (in a fairly wide cross section of locations). Now, if it takes six months or more to move property that is part of a 10 month inventory supply (don’t believe many of the official reports that exclude condos, coops, and multi-family residences that have the inventory stated lower) and that marketing time is getting longer, not shorter, how healthy do you think the environment is??? As the US real estate market (residential, and soon commercial) is tanking, the opaque derivative structures that allowed banks to write loans bigger than their balance sheets follow. This will ripple throughout the world as speculative real estate and exotic financing vehicles follow the same paths in Europe, Africa, Asia, and South America. Spain’s residential real estate market is currently on fire and 92% of the mortgages issued are ARMs, most of which are concentrated to the lower income buyers. Sound familiar? Similar scenes in Brazil. UK residential prices have soared, Australia up nearly 3 times (relative), China homebuilders and contractors or roaring, condos in Dubai everywhere… Add in the US exported structured products… Practically all of the popularized risky assets are destined to follow suit, not just real estate – expect pressure in the emerging market debt markets as a follow-through...

Here comes the next bank surprise. This bank, which is still trading in the US/Ireland and is still accepting deposits and making loans, appears to have some pretty fishy underpinnings. For paid subcribers, I've posted another potentially "Cyprus'd" EU bank with shortable US/LSE traded shares/options for subscribers, reference EU Bank Capital Confusion, Part 2 - Malarkey (you may subscribe here). As was the case in my last post, if you have believe that the information below actually identifies a gross misrepresentation of fact, omission or outright fraud, simply contact the SEC and let them know that Reggie Middleton suggested they look into it. You can actually use this form to convey my message. Let's start by excerpting the history of the country in question from yesterday's post, "Global Banking Crisis - How & Why YOU Will Get "Cyprus'd" As This Bank Scrambled For Capital!!!".

Introduction and Background 

In 2007 Ireland had significant cross border exposure to UK and US banks through derivatives and property products. As I warned in 2007, the real estate bubble in the US/UK popped in 2008, sending pathogenic contagion straight through the Irish banking system. The entire banking system started collapsing. On February 15, 2008, Ireland took extraordinary measures (which we will explore in depth a little later on) to mitigate said collapse, measures that many a layperson would deem misleading, if not fraudulent. RBS (Royal Bank of Scotland, one of the largest financial institutions in the countries of Ireland and the UK) was effectively nationalized by the UK and a bad bank was formed to purchase bad debt/products from the Zombie Irish banks in exchange for government bonds, backed by a country that just simply couldn't afford it.

Following my warning in February of 2008, Lehman filed bankruptcy in September sending an additional set of contagion shock through Ireland and its banking system, causing Ireland to issues bonds and further indebt itself to save its Zombie banks - again! This time through blanket bank guarantees backed by the full faith of the government.

In September of 2010, a large swath of said government guarantees for the banks were about to expire. Reference this excerpt from the book "Zombie Banks: How Broken Banks and Debtor Nations Are Crippling the Global Economy":

In September 2010, some of Ireland's government guarantees for bank debts were about to expire, which put U.S. Treasury officials on edge. If the guarantee wasn't renewed, the banks would likely default on their bonds, triggering the next event in line: a slew of credit default swap (CDS) contracts on Irish banks' debt. U.S. Treasury officials had reason to worry - the names backing those contracts were the largest U .S. banks, and they could end up paying billions in case of default. Any more weight on U.S. banks could be a tipping point to collapse. Treasury officials made inquiries to their counterparts at the Irish finance ministry asking about the course of action the country was planning to take and indicated their concern about possible default and its CDS repercussions. A year after having issued blanket guarantees on the banks' liabilities the Irish government once again didn't dare let the bank fail. Instead it ended up asking for financial assistance from the European Union (EU) and the International Monetary Fund (IIMF): the country had been pushed to the brink of collapse. 

Allied Irish Banks (AIB)

As you can see, AIB (Allied Irish Banks) is currently operational, taking deposits and making loans. It trades ADRs on the NSYE, having been delisted from the LSE and the Irish Stock Exchange after the Irish government nationalized it.

As per Wikipedia:

AIB offers a full range of personal and corporate banking services. AIB Capital Markets is the division of the company that offers international banking and treasury operations. The bank also offers a range of general insurance products such as home, travel, and health insurance. It offers life assurance and pensions through its wholly owned subsidiary, Ark Life Assurance.

In December 2010 the Irish government took a majority stake in the bank. AIB shares are listed as an American Depositary Receipt (ADR) on the New York Stock Exchange, under the symbol AIB. AIB's shares were formerly traded on the Irish Stock Exchange and the London Stock Exchange, but its shares were delisted from these exchanges following its effective nationalisation. The remaining publicly traded shares of AIB are now listed on the Enterprise Securities Market of the Irish Stock Exchange. 

Internationally, AIB operates mainly in the United Kingdom (as Allied Irish Bank (GB) and First Trust Bank in Northern Ireland), and Poland (as Bank Zachodni WBK SA(BZ-WBK)). In November 2010, it sold its 22.5% stake in M&T Bank in the United States. At the beginning of 2008 AIB entered the Latvian, Estonian and Lithuanian markets by acquiring AmCredit mortgage finance business from the Baltic - American Enterprise Fund.

It's obvious this was an error in judgement, as a matter of fact it was extremely ill timed - reference The Depression is Already Here for Some Members of Europe, and It Just Might Be Contagious!

... In 2009, Allied Irish Banks [] accepted a 3.5 billion euro bailout from the government of the Republic of Ireland as a part of the Bank Recapitalisation scheme. By March 2011 the total sum of required bailout was expected to climb up to 13.3 billion euro. 


On 30 September 2010, the Irish Government announced plans to use its National Pensions Reserve to inject €3.7 billion of capital into Allied Irish Banks, becoming the majority shareholder and effectively nationalizing the bank.[50]

AIB needed to raise additional capital due to increasing losses on bad loans incurred from the real estate bubble, and Irish Finance Minister Brian Lenihan stated that the bank was unable to attract sufficient interest from private investors.[50][51] As part of the deal, Chairman Dan O'Connor agreed to quit the bank while managing director, Colm Doherty, announced he would leave before the end of the year after 13 months in the job.[52]

In December 2010, the European Commission approved the plans, and the Government passed emergency legislation to allow the deal to take place without requiring the approval of existing shareholders.[53] The High Court subsequently approved the deal on Dec 24 2010, allowing the Irish government to take a 49.9% stake in the bank, rising to 92.8% following disposal of the Polish subsidiary to Banco Santander.[53][54]

AIB became the fourth of Ireland's "Big Six" financial institutions to be nationalized, following Anglo Irish Bank, Irish Nationwide, and EBS Building Society. AIB was delisted from the main market of the Irish Stock Exchange on 25 January 2011[3] and the NYSE on 26 August 2011.

Credit Event occurred

The ISDA Determinations Committee, consisting of 15 USA and European banks, decided that a restructuring credit event occurred with respect to Allied Irish Banks on June 9, 2011

Hmmm.. A credit event occurred...

AIB has incurred significant debt from which the underlying collateral has significantly diminished. This caused the need for even more capital and more borrowing. It also apparently caused it to change the wording in its annual statements regarding repos, potentially allowing it to conceal financial aid in the form of even more debt .from another party. After all, when you borrow something it's a loan right, as in additional debt??? Below, you see a loophole for near unlimited borrowing, and not a peep will show up in the financial reporting! 

AIB Charge Discrepancy

Definitions: Charge - The document evidencing mortgage security required by Crown Law (law derived from English law). A Fixed Charge refers to a defined set of assets and is usually registered. A Floating Charge refers to other assets which change from time to time (ie. cash, inventory, etc.), which become a Fixed Charge after a default.

The charge document below, which was registered with Ireland's Company Registration Office (CRO), states that the charge is in respect of the Company's participation in Target 2-Ireland. It is also in respect of 'all present and future liabilities whatsoever' of Allied Irish Bank Plc. (to the Central Bank and Financial Services Authority of Ireland or to the European Central Bank). The charge is over 'Eligible Securities'.

Target2 is a European Union payment system. I believe it is misleading to indicate in the annual accounts that Target 2 has a bearing on the security that has been given.

In the short particulars section of the charge; the property charged to the Central Bank and Financial Services Authority is over 'all rights, title, interest and benefit, present and future, of AIB Plc. in and to each of the Eligible Securities from time to time, where ' Eligible Securities' means, at any time securities of such a class or description as may from time to time be designated by the ECB as 'Eligible for Sale and /or Purchase, as the case may be.' (Refer to actual CRO charge document below)

AIB Charge Discrepency

In the Irish version of the Bank's annual Accounts (2008) and the SEC 20F (page 223 - 2) it states that the charge was placed in favour of the Central Bank and Financial Services Authority of Ireland over all of AIB'S 'right, title, interest and benefit present and future in and to certain segregated securities.'

Using the description 'certain segregated securities' is completely different to the description all 'eligible securities.'

It appears that AIB is stating that they have given 'certain segregated securities' as security to the ECB whereas the ECB actually decides which securities will be designated as 'eligible'. The charge is in favor of the Central Bank and is over 'all present and future liabilities whatsoever' of AIB. This charge is a floating charge over repo agreements, aka Eligible Securities - securities that the graphic above demonstrates can go on ad nauseum and way beyond the entities prudent ability to repay, yet not appear on the balance sheet or in its regulatory reporting!!!. These securities have been purchased by the ECB through the repo agreements.

Thus, it appears as if this floating charge granted to the ECB is over assets that the ECB already owned. The floating charge was given to the ECB by AIB for emergency funding (emergency liquidity). Do you see a circular argument here? A potential Ponzi even???!!!! I warned my paying subscribers three years ago, Beware of the Potential Irish Ponzi Scheme!

Very important note: BoomBustBlogger JPM noted below in the comment sections the following...


First up, big fan of your work. One of the few people genuinely worth listening to these days. You have consistently had the quality dope on these dopes over these past few years.

However, as an Irishman, I would draw your attention to one slight anomaly in the above post. It relates to the image containing the extracted explanation of AIB's Gross Settlement Systems from its annual report alongside a page from a CRO charge filing. As far as I can see, the extracted page from the CRO charge filing actually relates to a charge filed by that other "AIB", Anglo Irish Bank, not Allied Irish. If you look at the name of the lawyer on the filing, it comes from the (former) lawyers for Anglo, Eugene F Collins, not Allied Irish Bank's lawyers.

Correct me if I am wrong though.

Notwithstanding that minor aberration, I wholeheartedly agree with your general thesis; Irish banks are a complete shambles, and the increasing German intransigence toward sharing some of the burden (for which many German banks were also responsible) bodes ill for creditors of all colours, classes and stripes.

Of course I hope it doesn't come to that for many friends of mine, but I fear you may (yet again) be on to something.

To follow on from my post above; it has occurred to me that perhaps the same lawyers were filing the same duplicitous charges (as compared with the charges disclosed in the annual reports) on behalf of a number of their insolvent clients (relying on the nuanced cut and paste skills one learns in law school!!).

If that is so, my above post stands corrected.

While it's somewhat moot (given that the real issue is how likely it is that AIB will require further capital - very, given enough time and further, ahem, "credit crunches" (solvency blow-ups??)) , but perhaps, if you have a moment, you could clarify whether that CRO filing extract is in fact from a charge filed on behalf of allied Irish, not Anglo Irish?

Thanks, and keep up the great work!


An Irishman Watching On In Horror From Australia.

He happens to be absolutely right. I mistakenly put the charge from Ango Irish in with the annual accounts of Allied Irish. We already covered Anglo Irish Bank in Global Banking Crisis - How & Why YOU Will Get "Cyprus'd" As This Bank Scrambled For Capital!!!

It is sharp readers and subscribers such as this that makes BoomBustBlog what it is today. He actually caught the error by recognizing the lawyer's name as representing the other bank. Unfortunately, he is also correct in that this means very little difference in the grand scheme of things for even if this charge didn't exist, AIB is still over encumbered and swimming in underwater borrowings - in my all so humble opinion. There's also the fact that AIB actually did enter into and all encompassing charge to save its ass, just like Anglo Irish did. Yep, I made a boo-boo, but it means nothing for AIB, let's correct here and make sure we get the lawyers right this time around....

These charge documents apparently have not been included in the recent 'stress testing' conducted by the European Banking Authority. By AIB's own admittance, they are not recognizing the borrowing of securities unless they are intended for resale to a third party. This was not the case in the previous year!!! If this is true, these assets can very well appear on the balance sheets of both the ECB and AIB.

The assets should not appear on AIB's balance sheet as a negative pledge clause, which the ECB was granted, prohibits the bank from doing this, see details in charge document.

Now, let's suppose you buy all of that malarkey above regarding charges, disclosure, borrowing not showing up on the balance sheet, etc. Knowing what Ireland had to go through to bail out its banks the first two times, and then needing to go to the ECB/IMF the third time, and knowing what Germany did to Cyprus and it's bank depositors/bondholders last week... I just want to ask you bank customers one question. Do 'ya feel lucky??? If I'm on to something with the research above (and to be honest, it looks awfully convincing) and Ireland's already bailed its banks twice, and had to go to the ECB after those bailouts because it was broke, then what happens when this bank needs more capital.

It’s being reported by Sputnik News and other sources that Japan has declared Bitcoin to be legal tender. Unfortunately, I have not been able to quickly confirm this through Japanese sources. The use of BTC as legal tender in one of the world’s leading economies is a big plus for Bitcoin, and likely to lead to a much more rapid pace of adoption. Volume is strong on increasing price.

Be aware that volume on exchanges doesn’t necessarily equate to gross transactions. There are OTC transactions and P2P transfers via the blockchain (see ). There is one thing that is apparent, though. JPY is the new Bitcoin darling, replacing CNY in terms of BTC trade volume on exchanges.

In full disclosure, the blockchain doesn’t show this difference this morning, although it is very clear that CNY not only lost the 90% volume title, but is no more than 25% of US volume after the PBOC clamped down on KYC/AML and margin lending in Chinese bitcoin exchanges



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