Monetisation also written monetization is the process of converting or establishing something into legal tender. While it usually refers to the coining of currency or the printing of banknotes by central banks, it may also take the form of a promissory currency. The term "monetisation" is used informally to refer to exchanging possessions for cash or cash equivalents, including selling a security interest, charging fees for something that used to be free, or attempting to make money on goods or services that were previously unprofitable or had been considered to have the potential to earn profits. And data monetisation refers to a spectrum of ways information assets can be converted into economic value. Still another meaning of "monetisation" denotes the process by which the U.S. Treasury accounts for the face value of outstanding coinage. This procedure can extend even to one-of-a-kind situations such as when the Treasury Department sold an extremely rare 1933 Double Eagle, the amount of xx € was added to the final sale price, reflecting the fact that the coin was considered to be issued into circulation as a result of the transaction.
The process of liquidating a financial instrument by converting them into a legal tender is called Monetising Bank Instruments. We can monetise or lend CD’s, SBLC’s, DPLC’s, BG’s and MTN’s which can be used for project funding. They can be moved to various trading platforms swiftly and flexibly to innovatively incorporating them into financing development projects. It has become a rather common practice to monetise a SBLC which takes a period of less than 14 days usually.
Nowadays it is often referred to as SBLC financing or SBLC Funding since essentially cash is obtained in the basis of SBLC or Bank Guarantee. This process allows you to:
• Monetize instruments for cash
• Monetize instruments for buy/sell platform entry
• Monetize instruments for both cash and buy/sell platform entry
List of Financial Instruments that can be Monetized:
• Sovereign Guarantee (SG)
• Bank Guarantee (BG)
• Standby Letter Of Credit (SBLC)
• Documentary Letter Of Credit (DLC)
• Letter Of Credit (LC)
• Medium Term Note (MTN)
• Certificate Of Deposit (CD)
• International Bill Of Exchange (IBOE)
• Bank / Banker's Draft (BD)
• Banker's Acceptance (BA)
• Telegraphic Transfer (TT)
• Cashier's Check/Cheque
• Teller's Check/Cheque
• Bond
DEBT MONETIZATION
Debt monetization is the financing of government operations by the central bank. If a nation's expenditure exceeds its revenues, it incurs a government deficit which can be financed by the government treasury by:
• Money it already holds (e.g. income or liquidations from a sovereign wealth fund)
• Issuing new bonds or by the central bank by
• Money it creates de novo
In the latter case, the central bank may purchase government bonds by conducting an open market purchase, i.e. by increasing the monetary base through the money creation process. If government bonds that have come due are held by the central bank, the central bank will return any funds paid to it back to the treasury. Thus, the treasury may "borrow" money without needing to repay it. This process of financing government spending is called "monetizing the debt".
In most high-income countries the government assigns exclusive power to issue its national currency to a central bank, but central banks may be forbidden by law from purchasing debt directly from the government. For example, the Treaty on the Functioning of the European Union (article 123) forbids EU central banks' direct purchase of debt of EU public bodies such as national governments. Their debt purchases have to be from the secondary markets. Monetizing debt is thus a two-step process where the government issues debt (Government bonds) to cover its spending and the central bank purchases the debt, holding it until it comes due, and leaving the system with an increased supply of money.
DEBT MONETIZATION AND INFLATION
When government deficits are financed through debt monetization the outcome is an increase in the monetary base, shifting the aggregate-demand curve to the right leading to a rise in the price level (unless the money supply is infinitely elastic).When governments intentionally do this, they devalue existing stockpiles of fixed income cash flows of anyone who is holding assets based in that currency. This does not reduce the value of floating or hard assets, and has an uncertain (and potentially beneficial) impact on some equities. It benefits debtors at the expense of creditors and will result in an increase in the nominal price of real estate. This wealth transfer is clearly not a Pareto improvement but can act as a stimulus to economic growth and employment in an economy overburdened by private debt.
It is in essence a "tax" and a simultaneous redistribution to debtors as the overall value of creditors' fixed income assets drop (and as the debt burden to debtors correspondingly decreases). If the beneficiaries of this transfer are more likely to spend their gains (due to lower income and asset levels) this can stimulate demand and increase liquidity. It also decreases the value of the currency - potentially stimulating exports and decreasing imports - improving the balance of trade. Foreign owners of local currency and debt also lose money. Fixed income creditors experience decreased wealth due to a loss in spending power. This is known as "inflation tax" (or "inflationary debt relief"). Conversely, tight monetary policy which favors creditors over debtors even at the expense of reduced economic growth can also be considered a wealth transfer to holders of fixed assets from people with debt or with mostly human capital to trade (a "deflation tax"). A deficit can be the source of sustained inflation only if it is persistent rather than temporary, and if the government finances it by creating money (through monetizing the debt), rather than leaving bonds in the hands of the public.
MONETIZATION OF NON-MONETARY BENEFITS
Monetization is also used to refer to the process of converting some benefit received in non-monetary form (such as milk) into a monetary payment. The term is used in social welfare reform when converting in-kind payments (such as food stamps or other free benefits) into some "equivalent" cash payment. From the point of view of economics and efficiency, it is usually considered better to give someone a monetary equivalent of some benefit than the benefit (say, a liter of milk) in kind.
• Inefficiency: in the latter situation people who may not need milk cannot get something of equivalent value (without subsequently trading or selling the milk).
• Black market growth: people who need something other than milk may sell it. In many circumstances, this action may be illegal and considered fraudulent. For example, Moscow pensioners often give their personal cards that allow free usage of local transport to relatives who use public transport more frequently.
• Changes on the market: supply of milk to the market is reduced by the amount distributed to the privileged group, so the price and availability of milk may change.
• Corruption: firms that should give this benefit have an advantage as they have guaranteed consumers and the quality of the goods supplied is controlled only administratively, not by market competition. So, bribes to the body that choose such firms and/or maintain control can take place.
Standby Letters of Credit (commonly called SBLC) are used in the US in lieu of Bank Guarantees and work in a similar fashion. Neither Letters of Credit nor Bank Guarantees can be bought or sold nor are they tradable securities. Letters of credit and guarantees and is able to advise Clients on all areas of their utilization. Your instruments can be monetised with a non-recourse Program meaning you don’t have to pay it back at all; funding is done within 10-15 days.
When Monetizing Bank Guarantees it is CRITICAL you get this right, there are some big traps uninformed clients/customers fall into that cost them a lot of money or the whole deal. You can avoid these nasty pitfalls and get your BG issued and monetized seamlessly with the below:
Mistake 1: Buying a BG that is neutered - Some sneaky companies issue neutered BG. That is a BG that can only be used for credit enhancement on a company’s books but can never be monetized or traded. It’s a nasty surprise you get when you realize your BG delivered by MT760 to a Monetized is useless.
Mistake 2: Buying a BG it must say – Transferable or Assignable on it if not it cannot be monetized, If you buy a BG that is leased or and it does not say the word “Transferable or Assignable” on it. You have a worthless piece of paper you can’t use. You should be offered “unrestricted beneficiary ownership of the BG for a 12 month term” this gives you full monetization capability for the price.
Mistake 3: Procedures DON’T Match – If the delivery procedures of the BG issuer don’t exactly match with the BG monetized you will never get the BG delivered because the two parties are incompatible with each other. Both parties end up blaming one another and no deal ever gets done.
Mistake 4: The No Bank Play – When your BG issuers’ contract with you includes them sending a MT999 or MT799 from a non-bank entity to the monetizes bank entity. You’ve been screwed. Banks will not reply or communicate with Non-Banks or private companies. Therefore a message sent from a non-bank to a bank is ignored. The issuer then claims they delivered service and keeps your money and the monetizer claims you never communicated with them on a bank-to-bank basis.
Mistake 5: No CUSIP or ISIN Number – Some monetizers will only accept Bank Guarantees with CUSIP or ISIN Numbers. This means they will NOT accept a fresh cut bank guarantee, ONLY seasoned instruments. Seasoned BG’s cost more and generally are only available to be purchased from secondary owners not banks.
The process of liquidating a financial instrument by converting them into a legal tender is called Monetising Bank Instruments. We can monetise or lend CD’s, SBLC’s, DPLC’s, BG’s and MTN’s which can be used for project funding. They can be moved to various trading platforms swiftly and flexibly to innovatively incorporating them into financing development projects. It has become a rather common practice to monetise a SBLC which takes a period of less than 14 days usually.
Nowadays it is often referred to as SBLC financing or SBLC Funding since essentially cash is obtained in the basis of SBLC or Bank Guarantee. This process allows you to:
• Monetize instruments for cash
• Monetize instruments for buy/sell platform entry
• Monetize instruments for both cash and buy/sell platform entry
List of Financial Instruments that can be Monetized:
• Sovereign Guarantee (SG)
• Bank Guarantee (BG)
• Standby Letter Of Credit (SBLC)
• Documentary Letter Of Credit (DLC)
• Letter Of Credit (LC)
• Medium Term Note (MTN)
• Certificate Of Deposit (CD)
• International Bill Of Exchange (IBOE)
• Bank / Banker's Draft (BD)
• Banker's Acceptance (BA)
• Telegraphic Transfer (TT)
• Cashier's Check/Cheque
• Teller's Check/Cheque
• Bond
DEBT MONETIZATION
Debt monetization is the financing of government operations by the central bank. If a nation's expenditure exceeds its revenues, it incurs a government deficit which can be financed by the government treasury by:
• Money it already holds (e.g. income or liquidations from a sovereign wealth fund)
• Issuing new bonds or by the central bank by
• Money it creates de novo
In the latter case, the central bank may purchase government bonds by conducting an open market purchase, i.e. by increasing the monetary base through the money creation process. If government bonds that have come due are held by the central bank, the central bank will return any funds paid to it back to the treasury. Thus, the treasury may "borrow" money without needing to repay it. This process of financing government spending is called "monetizing the debt".
In most high-income countries the government assigns exclusive power to issue its national currency to a central bank, but central banks may be forbidden by law from purchasing debt directly from the government. For example, the Treaty on the Functioning of the European Union (article 123) forbids EU central banks' direct purchase of debt of EU public bodies such as national governments. Their debt purchases have to be from the secondary markets. Monetizing debt is thus a two-step process where the government issues debt (Government bonds) to cover its spending and the central bank purchases the debt, holding it until it comes due, and leaving the system with an increased supply of money.
DEBT MONETIZATION AND INFLATION
When government deficits are financed through debt monetization the outcome is an increase in the monetary base, shifting the aggregate-demand curve to the right leading to a rise in the price level (unless the money supply is infinitely elastic).When governments intentionally do this, they devalue existing stockpiles of fixed income cash flows of anyone who is holding assets based in that currency. This does not reduce the value of floating or hard assets, and has an uncertain (and potentially beneficial) impact on some equities. It benefits debtors at the expense of creditors and will result in an increase in the nominal price of real estate. This wealth transfer is clearly not a Pareto improvement but can act as a stimulus to economic growth and employment in an economy overburdened by private debt.
It is in essence a "tax" and a simultaneous redistribution to debtors as the overall value of creditors' fixed income assets drop (and as the debt burden to debtors correspondingly decreases). If the beneficiaries of this transfer are more likely to spend their gains (due to lower income and asset levels) this can stimulate demand and increase liquidity. It also decreases the value of the currency - potentially stimulating exports and decreasing imports - improving the balance of trade. Foreign owners of local currency and debt also lose money. Fixed income creditors experience decreased wealth due to a loss in spending power. This is known as "inflation tax" (or "inflationary debt relief"). Conversely, tight monetary policy which favors creditors over debtors even at the expense of reduced economic growth can also be considered a wealth transfer to holders of fixed assets from people with debt or with mostly human capital to trade (a "deflation tax"). A deficit can be the source of sustained inflation only if it is persistent rather than temporary, and if the government finances it by creating money (through monetizing the debt), rather than leaving bonds in the hands of the public.
MONETIZATION OF NON-MONETARY BENEFITS
Monetization is also used to refer to the process of converting some benefit received in non-monetary form (such as milk) into a monetary payment. The term is used in social welfare reform when converting in-kind payments (such as food stamps or other free benefits) into some "equivalent" cash payment. From the point of view of economics and efficiency, it is usually considered better to give someone a monetary equivalent of some benefit than the benefit (say, a liter of milk) in kind.
• Inefficiency: in the latter situation people who may not need milk cannot get something of equivalent value (without subsequently trading or selling the milk).
• Black market growth: people who need something other than milk may sell it. In many circumstances, this action may be illegal and considered fraudulent. For example, Moscow pensioners often give their personal cards that allow free usage of local transport to relatives who use public transport more frequently.
• Changes on the market: supply of milk to the market is reduced by the amount distributed to the privileged group, so the price and availability of milk may change.
• Corruption: firms that should give this benefit have an advantage as they have guaranteed consumers and the quality of the goods supplied is controlled only administratively, not by market competition. So, bribes to the body that choose such firms and/or maintain control can take place.
Standby Letters of Credit (commonly called SBLC) are used in the US in lieu of Bank Guarantees and work in a similar fashion. Neither Letters of Credit nor Bank Guarantees can be bought or sold nor are they tradable securities. Letters of credit and guarantees and is able to advise Clients on all areas of their utilization. Your instruments can be monetised with a non-recourse Program meaning you don’t have to pay it back at all; funding is done within 10-15 days.
When Monetizing Bank Guarantees it is CRITICAL you get this right, there are some big traps uninformed clients/customers fall into that cost them a lot of money or the whole deal. You can avoid these nasty pitfalls and get your BG issued and monetized seamlessly with the below:
Mistake 1: Buying a BG that is neutered - Some sneaky companies issue neutered BG. That is a BG that can only be used for credit enhancement on a company’s books but can never be monetized or traded. It’s a nasty surprise you get when you realize your BG delivered by MT760 to a Monetized is useless.
Mistake 2: Buying a BG it must say – Transferable or Assignable on it if not it cannot be monetized, If you buy a BG that is leased or and it does not say the word “Transferable or Assignable” on it. You have a worthless piece of paper you can’t use. You should be offered “unrestricted beneficiary ownership of the BG for a 12 month term” this gives you full monetization capability for the price.
Mistake 3: Procedures DON’T Match – If the delivery procedures of the BG issuer don’t exactly match with the BG monetized you will never get the BG delivered because the two parties are incompatible with each other. Both parties end up blaming one another and no deal ever gets done.
Mistake 4: The No Bank Play – When your BG issuers’ contract with you includes them sending a MT999 or MT799 from a non-bank entity to the monetizes bank entity. You’ve been screwed. Banks will not reply or communicate with Non-Banks or private companies. Therefore a message sent from a non-bank to a bank is ignored. The issuer then claims they delivered service and keeps your money and the monetizer claims you never communicated with them on a bank-to-bank basis.
Mistake 5: No CUSIP or ISIN Number – Some monetizers will only accept Bank Guarantees with CUSIP or ISIN Numbers. This means they will NOT accept a fresh cut bank guarantee, ONLY seasoned instruments. Seasoned BG’s cost more and generally are only available to be purchased from secondary owners not banks.