OP-ED: It's Time for a Financial Reality Check



M. Yass



Left: Kylie Jenner (Instagram: @KylieJenner) | Right: A man carrying a box leaves a Deutsche Bank office in London on Monday. PHOTO: SIMON DAWSON/REUTERS

Disclosure: I currently maintain financial positions on some of the companies mentioned. This is not financial advice.

It's odd to write about global finance to a page dedicated to ill-made confectionary boxes, but here it is!

Yesterday, Deutsche Bank decided to lay-off 20 per cent of its global staff and had utterly decided to offload its equities, leaving worthless debt hanging out to dry. In a move reminiscent of the 2008 GFC, Deutsche has restructured to sell off their toxic equities, about €70 billion, to a series of "bad banks."

For what little coverage New Zealand media tends to give these sort of events, it's a big deal for the country. Deutsche's $1.5 trillion far-reaching assets (from Frankfurt to Sydney) were exposed, leaving the broader economy very vulnerable to a major collapse. Despite what the US Federal Reserve says, DB's stress test results should be taken with a grain of salt.

What Does This Have to Do With Celebration Box?

It doesn't. At least not directly... It does have to do with dodgy mortgages, spruikers, and the promise of quick riches via Instagram and Alibaba.

To put in bluntly... China is in debt. Chinese debt will affect China. Chinese debt will also affect everyone else.

The years leading up to the GFC were prosperous, at least on paper. Home ownership was rising, and there were a growing number of instant millionaires coming out of the woodwork. Everyone from property gurus to business experts were holding conferences to get people to start a new venture in life. Usually, such ventures had a caveat that you had to make the speaker rich first.

In fact, the author of Rich Dad, Poor Dad, Robert Kiyosaki was heavily pushing his followers into Real Estate in 2006, while his seminars were partnered with a real estate firm.

The problem is that spruikers are often not easy to expose or takedown. Their fans have dedicated a lot of time and their life savings into a dream, and believe that only one person or one company is the key to their happiness and success.

If you haven't already, take the time to read the following blogs below to understand how spruikers are created, and what happens when they are exposed. Also included is a clip from the documentary, Betting on Zero, which exposes the pyramid scheme, Herbalife.

Betting on Zero Trailer

Read More:

Celebration Box: Iyia Liu and the Media’s Underlying Credibility Crisis

Meme Page Considers Lawsuit Against Controversial Celebration Box Owner

BABA:...an "Earnings Call" without discussing "Earnings"

What is apparent is that financial and media institutions can often be complicit in promoting a blatant scam, because they're hoping to find some financial gain as well.

Instagram businesses/Influencer marketing only works in the hype cycle of excessive ownership. The sweet spot between 2014 and 2017 saw the rise in Kylie Jenner's branding. While Jenner will continue to succeed as a celebrity, a large majority of business gurus and their followers stand to lose a lot.

Iyia Liu promoting her influencer marketing services.

While Girls in Business is not necessarily a pyramid scheme, it is a vehicle to convince desperate young women (many with student debts or young children) to take on the risk of losing their life savings to start a business. Furthermore, this organisation pushes followers to purchase ebooks and influencer marketing services that are largely ineffective, even for the BossBabes promoting it. Keep in mind, Girls in Business uses volunteers to run the event, not paid staff.

Why Deutsche Bank Is Relevant

The reason why Deutsche Bank is in such a bad state is because of its exposure to money laundering often perpetrated by members of the Chinese Communist Party (CPC), Russian criminals, and by other players mimicking them.

Deutsche is also a double-edged sword as it has been a big believer in Alibaba as well. This allows for cash dealings to go through a series of international trusts tied into the Bank of China, all underneath the regulatory radar.

The Cycle of Dollars to RMB (Twitter: DeepThroatIPO)

The above explains how imports from China funnels through the banks and various instruments of finance to help mainland China retain laundered cash.

Chinese President Xi has taken steps to curb dissenters in an anti-corruption sweep, but (as exposed in the Panama Papers) his own family and supporters conduct in the same business.

From the above exposé on Celebration Box, there is no smoking gun connection made to the party (the sale of Bambi Boutique is a big hint that any CPC connection is weak), but it does describe how Chinese citizens have obtained properties through unscrupulous mortgages. Synthetic mortgage frauds that plagued the US economy ten years ago have become commonplace among Chinese citizens.

With the desperation of debt looming for many Chinese nationals and expats, the prominence of business and investment "cults", such as Future Living and Waiwera Heights Country Club, has also accelerated the spread of dubious loans throughout China and overseas. In China, committing mortgage fraud is common practice, with no one caring to stop it.

Mortgages similar to the ones mentioned above have since been used globally as a tool for laundering money away from banks and investors. Either for Chinese officials to hold money outside of debt-ridden yuan or by greedy citizens looking for riches.

Very few people actually noticed or understood the second mortgage documents tied to Ms Liu in Waiwera. But it should be worth more attention over the next several months as the scam continues.

Website for Waiwera Heights Country Club (http://waiweraheights.com)

How Exposed is New Zealand?

It's hard to tell. New Zealand is an easy place to launder money through a layer of businesses. The government has kickstarted new efforts to tackle laundering under its "Keep Our Money Clean" campaign, but it feels like it is too little and too late to be effective.

Despite the foreign housing ban, there's still the possibility of a mass Chinese exit from currently owned and new developments, which could affect the market.

Further Readings

What’s the difference between the renminbi and the yuan? The answer to this and other questions in “Renminbi Internationalization”

Chinese buyers are pulling out of New York real estate in droves