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The PetroTrust: A New Path for Energy Investment

Explore the revolutionary concept of PetroTrust as a solution amid the global credit crisis, offering Iran a way to enhance energy infrastructure investment and lead a financial paradigm shift.

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The PetroTrust: A New Path for Energy Investment

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  1. Introducing the PetroTrust A New Approach to Energy Investment Chris Cook – International Oil Refining Conference Teheran October 2008

  2. We live in Interesting Times…..

  3. ….some say, “the end of the financial system as we know it”

  4. If the global system of credit creation is indeed in terminal decline……

  5. ….might the solution lie in a new approach to investment?

  6. Iran needs massive investment in energy infrastructure…..

  7. ....but the Credit Crunch has made worse the existing problem of US sanctions

  8. The PetroTrust may help Iran in obtaining that investment….

  9. …and the “Trust” approach could allow Iran to lead the creation of a viable alternative….

  10. ….to the “Western” model of financial capital.

  11. How did the Banking system go wrong?

  12. A Bank is a Credit Intermediary – or “Middleman” Borrower Bank Depositor £ £

  13. But it does not lend pre-existing money….

  14. ….it creates new money as interest–bearing credit….

  15. ….which is then deposited back into the system

  16. Now, if you think about it, a bank’s true economic function….

  17. …is to guarantee that the borrowers’ credit is good…

  18. Interest is charged for the use of the guarantee Borrowers Interest Bank

  19. ..from which Interest is paid to Depositors.. Borrowers Interest Interest Bank Depositors

  20. ..Default and Operating costs deducted... Borrowers Interest Interest Costs Bank Depositors

  21. ..and a profit to Investors normally results Borrowers Interest Interest Costs Bank Depositors Investors

  22. So Banks create a Pyramid of Credit, on a base of Equity Bank Credit Bank Equity

  23. Demand for Credit has been so high…

  24. ….that Banks began to “outsource” their guarantee to rid themselves of risk.

  25. …and thus allow Equity to support more credit creation

  26. Banks outsourced risk totally – through “securitising” debt and sale to investors….

  27. …temporarily – with “Credit Derivatives” (a time-limited guarantee)….

  28. …and partially – using credit insurance from insurers such as AIG

  29. The Result is a bigger Credit Pyramid than Banks alone could sustain… Credit Investor Equity Bank Equity

  30. …and an opaque “shadow banking system” of Investors holding “sliced and diced” risk… Credit Investor Equity Bank Equity

  31. This extended Pyramid of Credit funded the “Mother of all Bubbles” in US property prices….

  32. …and servicing this credit finally exceeded the financial capacity of the US population.

  33. In August 2007, the Bubble started to deflate and attention turned at last to defaults …

  34. ..but by now no-one knew where the Risk lay… Credit Investor Equity Bank Equity

  35. Banks started to think, “if this is what our balance sheet looks like…..”

  36. “…what does everyone else’s look like…..?”

  37. The problem is not shortage of money - liquidity – Central Banks can handle that….

  38. …..it is shortage of Equity - a Solvency problem – which Central Banks cannot handle…..

  39. Bank Equity is being eaten away by defaults….

  40. …Investors are licking their wounds…

  41. …and will risk no more of their Equity…

  42. The Result? Credit Equity

  43. So, Credit is becoming both scarce and expensive….

  44. …Central Banks are irrelevant….

  45. …and further defaults will destroy yet more Bank Equity…..

  46. ….and drain money out of the system in a “deflationary spiral”....

  47. ….leading inevitably to a Depression....

  48. So much for the Credit Crunch problem

  49. Clearly the solution cannot lie in creating more credit

  50. So we will take a new approach to “Equity” investment instead.

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