MBS Blog

Recently, one of my business partners here in Ukraine read his bank statement and discovered that he was the victim of fraud.  Parties unknown had withdrawn money from his European bank account…in Egypt. Well, today it was my turn to be the victim.

What the experience of my partner and I have in common is this:

We, like other travelers and ex-pats, use our bank debit cards to make withdrawals at ATMs here in Odessa.

…and the money was withdrawn from each of our accounts in Egypt.  In my case,  the fraud occurred after I had made a small withdrawal from UKRSIBANK (a member of the Paribas Group) here in Odessa this past Sunday. I am still verifying if my business partner had made any withdrawals from the same bank ATM.

I am not an expert on fraud, but I would think that banks would take precautionary measures to prevent this sort of thing.  Maybe it is an “inside job?” Would not surprise me. Bank fraud is prevalent throughout Ukraine. I was told this before I entered Ukraine. In fact, it is difficult to order goods and services online, and pay with a credit card.

Recently, a  Ukrainian banker(s) stole a BILLION U.S. dollars!! This was part of the money given to Ukraine by the International Monetary Fund. While the amount illegally withdrawn from my account was only about $1,000., there are probably scores of others who may have had considerably more taken.

One can only hope that Ukrainian banks-especially those that are foreign subsidiaries of larger institutions-are monitored more carefully by their parent companies, and that this type of fraud is addressed. Ukraine has great potential as a tourist destination as well as a place to do business. It would be a shame if it became known as a nation of thieves.

Although this article in the Wall Street Journal (www.wsj.com)  is about a so-called “trend,” taking place in the United States due to the financial crisis, it is really old news for those who live and work in emerging markets.  Keeping money someplace other than a bank is normal in Ukraine, as well as Russia.  

China-which has seen the biggest growth of any economy in the last 30 years and has a more developed banking system, insurance (private…and nothing like the Federal Deposit Insurance Corporation in the USA), annuities, as well as brokerage accounts- money is literally stored in the mattress…or nearby… by a majority of people.

Mistrust of government and financial institutions particularly, is deeply ingrained in Chinese as well as other Asian cultures. Numerous financial panics throughout Chinese history may have something to do with it. The Chinese are big savers as a result.

By some estimates, the average Chinese person saves almost 40% of their income. This is true whether they reside in mainland China, Hong Kong or Taiwan or have migrated elsewhere. This thrift is also a contributing factor to the huge amount of foreign currency reserves that the Chinese Government can draw upon. “Mattress savers” make bank deposits too…at least in China.

Actually, for Americans…what is “new”, is also old. Our parents and grandparents were savers. They did not have credit cards, overdraft protection for their checking accounts, and were frugal due to memories-real or indirect-of the Great Depression. Interesting that my generation is re-learning what we used to dismiss as quaint stories from a bygone era.

By MARK PENN

With E. Kinney Zalesne

As the financial crisis swept across the nation these past few months, one of the first microtrend groups to emerge is the New Mattress Stuffers — people who have lost their trust in the financial world, and are preparing for the next meltdown.

Just as 9/11 created a vast industry in building security, so the recession could create a big industry in personal financial security — a new kind of survival kit. New Mattress Stuffers don’t care about the 10% interest rate on GE preferred stock that Warren Buffett snapped up; they care about making it through if hard times get even worse. As a result, firms which can offer ironclad guarantees of safety will appeal to this new group. These are people who have lost their faith in the housing market, the stock market, their bank, their big corporate employer, their auto company, and their last president. What is left but themselves? 

Forget about huge, sweeping megaforces. The biggest trends today are micro: small, under-the-radar patterns of behavior which take on real power when propelled by modern communications and an increasingly independent-minded population. In the U.S., one percent of the nation, or three million people, can create new markets for a business, spark a social movement, or produce political change. This column is about identifying these important new niches, and acting on that knowledge.

In the old days, Mattress Stuffers literally hid all their assets in their homes — construction crews today are still discovering tin cans of cash in walls hidden 75 years ago by people who died without having told anyone about their nest eggs. The New Mattress Stuffers aren’t crotchety misers, though — they’re active Baby Boomers who, until just a few months ago, were heading happily into their 60s with inflated assets, unlimited second-job opportunities, and IRAs crammed full of stocks.

Now, the shocks they are feeling are taking them into strange and uncharted territory. Most Americans are so far removed from holding physical assets that their first reaction is to stuff their money into Treasury Bills instead of into a tin can. But there are other ways they can calm themselves.

The price of gold is down as hedge funds unwind their positions, but the sale of gold coins is up — because New Mattress Stuffers are stockpiling them for themselves and their children. And this was happening even before the crisis hit in full force. Between May and September of this year alone, sales of U.S. Mint gold coins grew by more than 600 percent. Over one million coins have been sold so far this year.

While almost every company in America is seeing a downturn, sales of home safes and vaults are surging. Sales of guns this year are up 8 to 10 percent.

And cash is the new plastic. Our own just-completed Holiday Spending Survey shows that most Americans are going to use more cash and charge less on their credit cards than in the past. Although most of us have lived in a plastic world so long we can barely remember people like my dad who carried around wads of bills, Americans are now seeing the first real dip in credit card sales in decades. Fear of credit and credit cards is a renewed emotion.

To take advantage of these trends, some of the dying post offices might want to open spots for safe deposit boxes instead of P.O. boxes. Investment advisers may start talking about return of your money instead of return on your money. And jewelers may start to tell you to “don’t forget to stash away a diamond or two.”

If the post-war economic expansion brought us the baby boom, this crisis may bring us a baby squeeze — a sharp reduction in births nine months from now, as refraining from having kids is the ultimate consumer pull-back. And instead of staying home, the evidence shows that more couples are going to the movies, with attendance up for this relatively low-cost evening.

People don’t talk much about their mattress-stuffing behavior. It kind of defeats the purpose if you tell people where your stash is. But there’s a hunger out there for security hedges — a gun, some cash, a little gold, a small safe in the bedroom — in case all the ATMs suddenly shut down. The TV shopping channels could be hawking that “Safe Haven” combination right now, a complete home solution.

Technorati Tags: Wall Street Journal, ATMs, TV shopping channels, baby squeeze, movies, safe deposit boxes, jewelers, diamonds, home safes, vaults, guns, U.S. Mint Gold Coins, Americans, Treasury Bills, 9/11, cash, construction crews, Baby Boomers, IRAs, stocks, job opportunities, homes, building secruity, survival kit, GE preferred stock, stock market, corporate employer, Warren Buffet, Anton Olff, Mark Penn, mattress stuffers, frugality, credit cards, overdraft protection, the Great Depression, savings, thrift, China, Hong kong, Taiwan, foreign currrency reserves, financial institutions, Asian culture, Chinese history, Federal Deposit Insurance Corporation, insurance, annuities, brokerage accounts, mattress, www.wsj.com, United States, financial crisis, emerging markets, trend, Ukraine, Russia, China, banking system,

KIEV, Ukraine — The National Bank of Ukraine has unveiled its intentions to intervene Dec. 8 through Dec. 12 so as to revaluate the hryvnia.Anatolii Shapovalov, the NBU first deputy governor, also expressed hope the national currency has bottomed out in value.

“We will hold interventions next week in addition. As soon as people understand that the exchange rate [of foreign currencies] goes down and start to sell the dollars, everything will become calm,” Shapovalov said.

Shapovalov did not disclose how many interventions there will be next week and on which days the National Bank will intervene.

He noted that the devaluation of the hryvnia stopped in early December and a trend for the revaluation of the national currency emerged then.

“The exchange rate trend has swung round. Possibly, this is the bottom we wanted to reach. As soon as people stop [purchasing foreign currency], there will be a result. There are no economic preconditions for the current exchange rate,” the NBU first deputy governor said.

According to Shapovalov, the difference between the value of foreign currency bought by the Ukrainian population and the value of foreign currency sold by the population was USD 2.7 billion in January through September. This index grew to USD 6 billion in October and November.

As Ukrainian News earlier reported, the National Bank of Ukraine has said Ukrainian population sold more foreign currency than bought as registered on December 3 for the first time over the past few weeks.

The balance of the value of foreign currency sold by the population over the value of foreign currency bought by the population on December 3 was equivalent of USD 15.6 million.

The balance of the value of the cash dollars sold by the population over purchased cash dollars was USD 13.5 million on December 3. The trend has been registered for the first time over the past two months.

The cash sell rate for US dollars in Kyiv forex outlets fell by 1.2 kopeck to 7.5600 UAH/USD on December 5, as of 10:30, compared with data as of 9:30.

The National Bank of Ukraine has set its official exchange rate of UAH7.3614/USD1 for December 5 through December 7 and of UAH7.3598/USD1 for December 8.

Technorati Tags: Anatolii Shapovalov, Anton Olff, ATMs, currency, exchange kiosks, exchange rate, foreign currency, forex outlets, hryvnia, Kyiv Post, National Bank of Ukraine, NBU, U.S. dollar, Ukraine, Ukrainian Government