Intangible assets, like patents and other intellectual property, are difficult to use as collateral.
Yet the use of collateral transformation on such a wide scale also carries risks.
Many Russian families own their homes, which they inherited after the collapse of the Soviet Union and can use as collateral to borrow money.
The alleged method: borrowing shares of restricted stock in several small companies to use as collateral for loans without telling the banks the shares were borrowed.
They will not however be able to sell the land or use it as collateral.
That makes it impossible to use land as collateral for traditional bank loans.
What this creates is chains of counterparty risk, where multiple re-hypothecation borrowers use the same collateral over and over again.
Although a peasant can indeed sell his land share or use it as collateral, he cannot trade the actual piece of land.
Certainly, mortgages could not carry lower interest rates than other bank loans nor have developed as they did without the ability to use property as collateral.
The moment that Greece defaults, its bonds will no longer be eligible for use as ECB collateral, the Greek banking system will collapse, and this process will screech to a halt.
It would also make it harder to use its bonds as collateral when borrowing cash, short term, from the European Central Bank.
The Wilf family did not need to use their team as collateral.
They also use requisitioned land as collateral for bank loans, adding to the potential woes of a banking system in which risk is poorly understood.
Not all debt is created equally, and at least in terms of interest charges, loans that use a home as collateral tend to be among the least expensive.
Interestingly, 44% of those that do view it as an investment are buying and holding art more for the diversification and capital protection, rather than the returns, while 41% said they would use their collections as collateral for loans.
FORBES: Collectors Buy Art Because They Love It (Or Want to Take Out A Loan With It)
That could cause significant collateral damage to many auto dealerships that use LIFO.
That will require the REITS to put up more collateral, reducing the 6:1 or greater leverage they use to provide those generous 12%-plus yields.
The extension and clarification of land rights would enable more productive use of that land and make it available as collateral to attract financing.
In the rare event a borrower went under, his land collateral was as good as gold anyway since legions of land-use restrictions acted as virtual government price supports.
Ability to reduce collateral damage and casualties in every targeting application, to enhance credibility of use.
CENTERFORSECURITYPOLICY: A Different Approach to Nonproliferation (2005)
Inefficient energy use is what's bad for the economy, as is the collateral damage in terms of pollution, erosion of water resources, and international security that accompanies old-school fossil fuel and nuclear solutions on the supply side.
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