Jim,

Western banks find out that even Saudi families may default on their debt.

This fight between 2 Saudi families could be a $15.7B potential loss for 8 international banks, BNP and Citigroup among them.

In addition, the Saad group involved in infrastructure among other businesses may file for bankruptcy.

"Saudi Arabia’s economy will contract 1 percent this year as the debt problems of family-run businesses dissuade banks from lending, Riyadh-based Jadwa Investment Co. said in a July 28 report. In addition to these two Saudi conglomerates, “several other family groups are stressed financially,” Jadwa said"

Best regards,
CIGA Christopher

SAMA will not buy up Gosaibi, Saad debt: Al-Jasser
Saudi Gazette – 06 September, 2009

SAMA won’t buy up the $ 15 billion debt of Ahmad Hamad Algosaibi & Bros. and Maan Al-Sanea’s Saad Group that defaulted after borrowing more than SR58 billion (about $ 15.7 billion), said Muhammad Al-Jasser, the central bank governor.

“Absolutely not,” Al-Jasser said when asked by Bloomberg News whether the Saudi Arabian Monetary Agency would buy up the debt from local banks.

Units of the two family-owned businesses have borrowed at least SR58. 88 billion ($ 15.7 billion) from more than 80 regional and international banks, including Paris-based BNP Paribas SA, New York-based Citigroup Inc. and Arab Bank Plc in Amman, Jordan, according to documents provided by lenders. About $ 5 billion of that is owed to Saudi banks, Standard Chartered Plc said in an Aug. 26 report.

Al-Jasser’s comment made in London Saturday where he was attending a meeting of central bank governors and finance ministers of the Group of 20 countries refuted an Economist Intelligence Unit report this month that said the “fall-out for local banks may be limited as the Saudi Arabian Monetary Agency is expected to help local banks to cover losses.”

International and regional banks are suing the Al-Khobar- based Saudi groups after both missed payments due from their Bahraini-based banking units, which are now under the administration of the Bahraini central bank. Court cases are also taking place between the two after the Al-Gosaibi group said in a May 22 New York filing that Al-Sanea, the owner of Saad Group, used ‘falsified documents’ to obtain $ 10 billion. Saad Group will respond to the claim through the judicial process, according to an Aug. 1 e-mailed statement to Bloomberg News from the company.

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Dear CIGAs,

CIGA Doug sends us this extraordinary work of genius suggesting that we consider subscription. I concur.

My Favourite Excerpt:

"Here is a very illustrative analogy of the crisis today that imposed itself on our researchers: a rubber ball in a staircase. It seems to rebound on every step (then giving the impression that the fall has stopped) but it falls even lower on the next step, resuming its collapse."

CIGA Doug

GEAB N°37 is available! Global systemic crisis: In pursuit of the impossible recovery
- Public announcement GEAB N°37 (Septembre 16, 2009) -

Before this summer, LEAP/E2020’s team announced that there would be no recovery in sight in September 2009, and not until summer 2010 in any event. Well indeed, contrary to the claims of the media, and financial and political circles, we confirm our anticipation.

The slowdown in the speed of collapse of the global economy, at the origin of all the « good news » (1), is only due to the world’s enormous public financial effort of the last twelve months (2). But the « time saved » using taxpayers’ money around the world should have been dedicated to redesigning the international monetary system at the heart of the current systemic crisis (3). Yet, besides a few cosmetic considerations (4) and huge gifts to US and European banks, nothing serious has been undertaken, and, when it comes to the future, the « every man for himself » rule prevails (5).

Now, as summer 2009 comes to a close, and as the three rogue waves start impacting the global economy hard (unemployment (6), bankruptcies (7) and monetary shocks (8)), the time to mend the system, or to prepare for a soft transition towards a new global system, is over (9). The first signs of a major decoupling (10) are beginning to appear: the rest of the world is rapidly moving away from the Dollar zone. As shown by the chart below, there is a 95 percent chance that 1,000 billion new USDs will be printed in a very near future… not very attractive for the Dollar zone.

Inconsistent statistics reflect a chaotic world economy

We are heading straight to the phase of geopolitical dislocation expected to begin in the fourth quarter of 2009 (11). In this issue of the GEAB, our team analyses the trends at work (real estate market, srategic issues…) within the current chaos resulting from a flood of unchecked public expenditure and a persistently uncontrolled financial system in a context of growingly inconsistent statistics. Paradoxically, dislocation has become, according to our researchers, the only way to economic recovery (a recovery that will take place around a global architecture and interaction between economic, social and financial spheres profoundly different from anything we knew in past decades. Our team believes that the first features of the “post-crisis world” should begin to appear by summer 2010 and, in the coming months, they will dedicate themselves to their identification.

Meanwhile, as anticipated in the previous editions of the GEAB, no one can now construct a true picture of today’s global economic situation as macroeconomic figures are more and more contradictory or simply absurd (12). Measurement data and instruments have been so manipulated (13) and limited to a volatile US Dollar as sole benchmark (14), that no government, international organisation or bank (15) can now tell in which direction the global system is heading. The media reflect this chaos and contribute to their readers’/auditors’/viewers’ bewilderment: depending on the day, or even the hour, that they give contradictory news on finance, economy or currency. Policy makers, entrepreneurs, employees,… economists or analysts… are reduced to Pascal’s wager (16) to assess what will happen in future months.

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