Banks “create” money from lending every day. Bank loan USD100 at 10% interest and will get USD110, the bank has created USD10 even though the bank do not see that money initially PPP´s exist to “create” money and money is created by creating debt.
The PPP market is no longer limited by governments and medium term notes but also industrial companies and banks can issue their own debt instruments such as Medium term notes (MTN´s) Negotiable debt securities with an interest rate. They are issued by governments and companies in international debt markets to finance their medium and long-term capital needs, Bank Guaranties (BG), and Stand-By Letters of Credit (SBLC).
PPP´s involve trading with discounted bank issued debt instruments, money is created due to the fact that such instruments are deferred payment obligations, or debts (example: an individual, company or organization needs USD100. And generates a debt note for 120$ that matures after 1 year, and sells this debt note for USD100, the buyer must believe that the lender is financially strong to pay the debt note upon maturity. This process is known as “discounting”.
This debt notes are issued at discounted prices by major world banks in the amount of USD billions every day. The banks organize and create “subsidiaries” called “trading platforms” and PPP´s are born for the big world banks to exchange their financial instruments
Normal minimum deposit to enter PPP´s is USD100M and PPP´s Trade from major projects main in the developing world.
The main difference between PPP´s trading and conventional trading is that PPP´s trading can only be done on a private level. In this Private Placement level business transactions are based on trusted, long-established private relationships and protocols.
Conventional trading activity is performed under open market where discounted instruments are bought and sold with auction type bids. To participate in such trading, the trader must be in full control of the funds. Otherwise the trader has no means of buying the instruments before reselling them. Because bankers and financial experts are well aware of open market and so called MTN programs but are closed to PPP´s private market they find it hard to believe that exists PPP´s trading is done in a closed private market and the trading safety is based on the fact that the transactions are performed as arbitrage. This means that the instruments will be bought and resold immediately with pre-defined prices. A number of buyers and sellers are contracted comprising mostly of large financial institutions, insurance companies, or wealthy individuals. The arbitrage contracts, provision of leverage funds from the banks and all settlements follow long-established and rapid processes.
The issued instruments are never sold directly to the final buyer, but to a chain of market participants. The involved banks are not allowed to directly participate in these transactions, but are still profiting from them indirectly by loaning money with interest to the trader as a line of credit. This is their leverage. Furthermore, the banks profit from the commission involved in each transaction.
The client´s funds does not have to be used for the transactions, the trader need only show that the money is unencumbered (blocked), and is not being used elsewhere at the time of the transaction. However, no program can start unless there is a sufficient quantity of money backing each transaction. It is at this point that the client, is needed because the involved banks and commitment holders are not allowed to trade with their own money unless they have reserved enough funds from money that belongs to clients, which is never at risk The “host” trading bank is able to loan money LC (line of credit) to the trader against the client´s deposit Typically, this money is loaned at a ratio of 10:1 or 20:1 in other words, if the trader can reserve USD100 of client funds, then the bank can loan USD1 Billion against it, with which the trader can trade.
The credit line is then used to back up the arbitrage transactions. Arbitrage trading does not require the credit line to be used, but it must still be available to back up each and every transaction. PPP´s programs never fail because they do not begin before arbitrage participants have been contracted, and each party knows exactly what role to play and how they will profit from the transactions
How It Works
– By invitation only
– Your funds are blocked in the client own account and with only the client sole signature
– The trading platform uses its own line of credit
– To block the funds in the client account by SWIFT MT760 an inter-bank mechanism that prevents you using the funds for any other purpose for the period your program is operating or to block the funds in the client account by SWIFT MT799 that it’s just a proof of funds. The client can use the funds blocked at its own discretion (less profits)
– Non-depletion. No matter what, no funds can be taken from your account by anyone- other than the client
“Assume you are offered the chance to buy a car for USD30, 000 and that you also find another buyer that is willing to buy it from you for USD35, 000. If the transactions are completed at the same time, then you will not be required to ‘spend’ the USD30, 000 and then wait to receive the USD35, 000. Performing the transactions at the same time nets you an immediate profit of USD5, 000. However, you must still have that USD30, 000 and prove it is under your control.”
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