1979: A Warning and a Prophecy for America

"Washington must realize that the dollar can no longer act as the sole reserve currency in the world. The dependence of the world on the dollar is not a blessing but a curse for America."

.....Nobody knows how Turkey Zaire, Peru and many other impecunious countries will ever pay back their loans to Citibank, Chase or the rest of the big U.S. lenders. The debtor countries, pleading poverty, could indefinitely defer repayment. Then the Federal Reserve Board would have to cover those bad debts, meaning that the U.S. taxpayer would finance the bailout. Says Zombanakis: "We have created a system in which almost the entire debt of the world rests on the Federal Reserve."[1]

These are the words of 'gunslinger' loan shark that sold syndicated loans [2] to the third world at an astronomical rate, according to economic historian and author Michael Moffitt [3].

"...Zombanakis did not invent the syndicated loan, but he is the one who put real flesh and blood in the market. Zombanakis brought numerous countries to the market who had never borrowed in international money markets before. Jetting around the world he dropped in on companies and finance ministries drumming up loan business for Manufactures Hanover, in the late 1960s when the Shah of Iran was virtually unknown outside the Middle East, he was introduced to Europe’s banking elite by Minos Zombanakis. As one banker told ‘institutional investor’ Zombanakis almost single-handedly got Manufacrturers to make a loan to Iran when it did not even have enough reserves to cover a month’s imports.” Loans like these were extremely risky and were sold more on Zombanakis’ bravado than on Iran’s credit-worthines...."[4]



[1]
The Saudis and the Dollar
By Marshall Loeb. Monday, Mar. 26, 1979
http://www.time.com/time/magazine/article/0,9171,916691,00.html

[2] "Rather than assuming the whole risk of, for example, a $100 million loan to Mexico, the lead bank will telex a hundred others and offer them a piece of the loan. Syndicated loans are priced at the going interest rate, known as LIBOR, (London Inter-Bank Offered Rate) plus a margin known as a spread, which is inevitably proportional to the perceived creditworthiness of the borrower. For years, Brazil borrowed a tiny fraction over LIBOR. Once bankers got wind of Brazil’s smoldering debt problems, its spreads quickly soared over 2 percent. "‘The World’s Money – International banking from Bretton Woods to the brink of insolvency’ by Michael Moffitt. Touchstone Book, Simon and Schuster New York. 1983. ISBN: 0-671-50596-3 Pbk.

[3] ‘The World’s Money – International banking from Bretton Woods to the brink of insolvency’ by Michael Moffitt. Touchstone Book, Simon and Schuster New York. 1983. ISBN: 0-671-50596-3 Pbk. Pages 57 - 61

[4] ‘The World’s Money – International banking from Bretton Woods to the brink of insolvency’ by Michael Moffitt. Touchstone Book, Simon and Schuster New York. 1983. ISBN: 0-671-50596-3 Pbk. Pages 57 - 61