Guest Post: A World Without Banks

Tyler Durden's picture

Submitted by Chindit13

A World Without Banks

Imagine a world without bankers. 

That thought either rattles you to the core of your being, or it brings on the kind of ecstasy heretofore only available in a Southeast Asian massage parlor.  If you are a Congressman, addicted to the effluent from the wallets of your owners on Wall Street and their lobbyists in Washington, if you are a real estate developer who believes no amount of office space and no amount of luxury condominiums is too much, or if you summer in the Hamptons and Nantucket, then you are clearly in the first camp.  If you are a typical ZH’er, spending your weekends at the range with your Beretta or sharpening the tines on your pitchfork, then welcome to SE Asia and the world of your wildest fantasy.

Yes, there is a country without banks as we know them, where no one knows the meaning of subprime, Alt-A, securitization, HFT, prop desks, insurance---portfolio or otherwise---CDS’, CDO’s, CDO^2’s, CLO’s or Too Big to Fail.  There is a country where the financial crisis went almost unnoticed, where no bank assets went toxic because there are no bank assets.  No depositors faced loss because there are few depositors.  Mortgages did not take a hit because there are no mortgages.  No car loans, student loans, or HELOC’s went bad.  The country is the Union of Myanmar, known to many in the West as Burma.  It is also called the Golden Land, which is entirely apropos given its wealth of natural resources.

Many reading this might have a political view on the country and its leadership, to which you are most welcome.  Other websites, other writers, and the activist community address that issue elsewhere and have been doing it almost as long and almost as successfully as America has been enforcing sanctions against Cuba.  I’ll leave politics to them, for this is not a political fluff piece; it is an economic fluff piece.

While much of what you will read here will seem odd, please don’t let the bizarre nature of this system scare you off.  What they have, albeit in a different form, is workable even in a large society.  If any of you find humor in this piece, then that is good enough, for at times like this humor is what keeps some of us going. More than that, however, I write this to attempt to counteract the fear mongering foisted upon us all by the likes of Hank Paulson, Timmy Geithner, Ben of the Inkjet Bernanke and that drooling, semi-embalmed cadaver who goes by the name of Representative Paul Kanjorski.

“We were that close”, so they told us ad nauseum in order that we accept the passage of TARP and all of the other alphabet soup of programs that shifted the wealth of America’s savers, elderly and Middle Class to the same people on Wall Street who nearly brought the system---their system---down.  Yes, the collapse of the financial system would have had dire consequences---for the ones who caused its near demise.  Their world almost did cease to exist, and it would have eviscerated them, one and all.  Sadly, we lost an opportunity.  Our world, on the other hand, though difficult, would have survived, and we would have found a way to continue.  Humans are resourceful.   Humans adapt.   Anarchy creates its own communities, its own bonds, out of necessity and the will to survive. Burma is an example.  Now I’ll tell you why.

Let me begin by getting a salient point right out front:  Burma’s economy probably grew 15% in 2009.  Fifteen percent.  Their currency was the world’s strongest currency in 2009, climbing against everything from the dollar to euro to swissie to loon.

Nobody really knows the actual GDP number, because no one really bothers to keep track.  Much of the economy is of the underground variety, and even the official economy is cloaked in secrecy.  Fifteen percent---which would be the top growth in the world amongst countries with a population  greater than 50 million souls---is my own estimation based on what I see, and comparing it to what I have seen there over the last fifteen years, or over the last thirty in places as diverse as Saudi Arabia, Japan, China, Thailand and Burma.  2009 was staggering in the amount of development, as anyone who spent time in the country could attest.  Why I am there and why I know this is a long story.  Suffice it to say I left a host of Wall Street prop desks when I thought my pockets were full enough, and when I wanted to try to find a way to add value in the world while I was still young.  As most of you believe, if not know for a fact, Wall Street adds precious little value to the greater good of the human species.  It’s a nice place to visit but I wouldn’t want to live there.  I mean Wall Street, not Burma.

It is possible not every country could do what Burma has done.  Few countries in the world have the breadth and depth of natural resources Burma has, which include economically significant deposits of gold, platinum group metals, silver, antimony, molybdenum, copper, nickel, iron ore, zinc, tin, uranium, chromite, rare earths and gypsum.  Burma also has approximately eighty-five percent of the world’s remaining tropical hardwoods, including the world’s best teak, plus stunningly beautiful woods such as padauk, pyinkado and yemane.  Burma has most of the world’s top jadeite, gobbled up to the tune of a billion dollars a year by the emerging Middle Kingdomites.  It has precious gemstones such as rubies, sapphires and spinels.  Its biggest source of wealth in recent years has been natural gas, plus some oil, which accounts for upwards of 80% of government revenues.  Major investors in the country---mostly in mining and oil/gas exploration---include China, (both public and private sector), Singapore, Thailand, India and Russia.  Also trying to exploit Burma's vast natural wealth are companies from Malaysia, Vietnam and Australia.  A gas pipeline run by France's Total and US Chevron (oddly exempt from the sanctions that prevent me from even buying a home-sewn shirt) is single handedly responsible for nearly 25% of total Myanmar Government revenues via a long term sales contract with Thailand.  As with the financial industry, lobbying Congress has its benefits, allowing Chevron privileges denied to you and me and the other lesser members of our egalitarian society.  TransOcean (RIG) is also allowed to lease drilling rigs, at $210,000/day, to a project controlled by a company called Asia World, run by a man name Lo Hsing Han and his Harvard MBA educated son Steven Law.  Google that and ask US Dept of Treasury, Office of Foreign Asset Control, why RIG gets an exemption.  I am not criticizing the Burmese here;  I am calling America a hypocrite nation, however.

At present China is constructing two new pipelines from the Arakan (Yakhine) Coast on Burma’s western side to Kunming in China's Yunnan Province.  One line will carry Burmese natural gas;  the other will carry oil obtained from the Middle East, enabling China to bypass the dangerous Straits of Malacca and save 14-20 days shipping costs.  Burma will reap billions from this, despite the odd fact that 35% of its standing army will be involved in guarding the two lines. India just paid $1.4 billion for gas exploration rights in an offshore block off Yakhine and for a 12.5% stake in the twin pipelines.  Of course that’s small money for a hedge fund type who bet on TBTF in America, but it’s enough to make it boom time in this all but bankless society.

Situated between the two largest populations on Earth---China and India---both of which are hungry for resources, has undoubtedly benefited Myanmar and helped it pass through the crisis the rest of the world experienced full bore.  Still, the other thing that helped it avoid financial calamity was its lack of banks, because people were always forced to pay as they went.  Lack of banks and insurance does not prevent dealmaking or trade, it just means that it must be self-financed and self-insured.  Projects are carried out only when they are paid for up front, and if a project fails, the loss is born by the owner.  Goods are moved with the acceptance that losses are possible, but goods are still moved, potential loss factored in to prices.  There’s trucks on the highway carrying manufactured goods, produce, and people.  Homes get built, as do office buildings, restaurants and shopping centers.  People only buy what they can afford because if they cannot afford it, nobody will sell to them.  Other than neighborhood loan sharks who charge upwards of 5% per month, there is almost no debt. Growth comes only from what one can pay for in the here and now.  That encourages saving, though most savings are of the cash-under-the-mattress variety. Business still gets done.  Banks can be an aid, but they are not a necessity.  Eating and having shelter are necessities, and these will happen with or without banks, whether it's in Burma or America.

In the end, rather than shift risk around the economy so that it eventually ends up in the hands of those least able to weather it (AIG), risk stays with the risk taker in a bankless/insurance-less world.  People, or firms, do not impose their own burdens or ineptitude on to others.  One might argue it’s a better form of capitalism.  It is certainly more fair than you and me paying for AIG’s FP Desk stupidity.

The Greeks used to say “everything in moderation”, though the last few months have shown the world that that belief is as decayed as the frescoes on the Parthenon (except for the ones ‘liberated’ by Lord Elgin).  Humans, if given the chance, will forever shy away from moderation.  Too much is never enough. Banks may occasionally do a little bit of God’s work in congregating and allocating capital, but they do much more of the devil’s work.  Bank profits come from Oscar Wilde-ing society (“the only thing I cannot resist is temptation”), whether it is in the form of indebted consumers or customers chasing yield (these are the ones Blankfein, in a bold faced lie in front of a Congressional hearing, called “sophisticated investors”.).  Easy credit encourages people to over consume, and over consumption always leads to obesity, either in body or in debt.  Americans are textbook examples of both:  fat and indebted.  They are addicted to immediate gratification, so much so that it is almost held up as entitlement.  The junkie, however, does not get rich;  the pusher does.  If the pusher becomes rich enough, he eventually owns society.

Banks also over consume, in that they continue to rope in consumers and institutional customers until the bank itself becomes obese.   Unbridled greed, or uncontrolled appetite, as we have come to learn all too well, leads to Too Big to Fail.  No limits on the consumer leads to no limits on the banks which then leads to the dire situation in which we find ourselves now.  Indebted consumers, however, lack the ability to manipulate our democracy.  Bankers do not.  That is why Goldman Sachs get bailed out and why you and me must pay for it. 

The Burmese, whose society lacks this negative feedback loop, are puzzled by what happened to us.  Exploding debt?  What’s that?  For them , it is buy what you need or want only when you can afford it.  Given the chance they would have become like us.  That lack of opportunity saved them from what we now have.

A change of lifestyle, necessitated by a sudden change in a society where debt is almost impossible to obtain, would not be easy for spendthrift Americans, but living on a pay-as-you-go basis imposes a kind of discipline most Americans need.  It would hurt, but it could be done.  Losing Bank of America, Goldman Sachs, JPMorgan, Citibank and Wells Fargo would not have destroyed America, though it would have given a kick in the teeth to Lloyd and Jamie and their ilk. Like the Burmese now do, however, we would have survived and found a way to deal with the new reality.  We might even be better off, rather than having to pay off---and having our offspring continue to pay off---the mistakes of the Blankfeins and Dimons and Fulds and Mozilos and McMansion buyers.  We will never know, because the powers that be did not allow us to see that alternative.  They tried to scare us, then ignored the vehement public opposition to TARP and passed it anyway.  And some criticize Burma for a lack of democracy!  Congress and the powers that be did not allow big bank failure, because for them the alternative would have been horrible in lost bonuses and lost contributions.  For the rest of us, we may well have been better off.  At the very least, we wouldn’t be working until May each year to fund, via our taxes, the bonuses and lifestyles and re-election campaigns of those who blew it.

Another plus is that if we as a society jumped off the over consumption bandwagon for a while, we might have had time to rediscover each other, which might also have necessitated that we all develop personalities again.  I'll end this segment with a curious observation.  I am two days out of Yangon at this moment and in Tokyo.  In Yangon I often take a break in a local tea shop, full of crowded tables where people are chatting, joking, romancing and just passing time with others of the same species.  In Tokyo today, which is a society very much like the US, I sat in a Starbucks and saw twenty people, all sitting alone, playing with their laptops, iPods, iPhones, Kindles and assorted other gadgetry that allows them to exist alone in their own soul-less world.  Is that what we really want?

If you wish to continue reading, it gets a little fluffy and travelogue-ish here, but you might find it amusing.  What the heck, have a read.

Now banks do exist in Burma, they just are not like any bank you know.  The best description is that they are glorified Western Union offices, since almost all bank business involves domestic cash money transfers.

I should mention here that Burma is a cash society.  Credit cards were tried for a period in the earlier part of the decade, but were just as quickly eliminated.  If you come here, forget your Visa, Mastercard or Amex;  they are not accepted.  All purchases are cash and none is on credit.  That includes real estate and cars. If you want to buy a house, you deliver the purchase price in physical cash to the seller.  The same thing for a car.

At first you might not think this is such a big deal, suspecting as you probably do that since Burma is a poor country (per capita income around $250/year), prices cannot be too high.  You would be wrong to think that, for two reasons.

The first reason is that up until very recently, the largest note in circulation in Burma was the one thousand kyat note (they just introduced a five thousand kyat note).  Converted to dollars, that makes the largest piece of fiat paper in circulation the equivalent (at current black market rates) of one US dollar.

The second reason you would be wrong is that both real estate, and car prices in particular, are quite high.  Real estate appreciation over the last seven years in some of the most sought after parts of the former capital city of Yangon (the new capital of Naypyidaw is only a few years old) approaches five thousand percent.  That is, a piece of land that sold for $100K in 2003 now sells for $5 million.  Car prices are worse, impacted by import restrictions that keeps the supply of vehicles significantly less than the demand.  How much below demand?  Try this:  a 1981 Toyota Corolla Station Wagon in white (until 2000 this vehicle represented approximately 80% of all road going passenger vehicles) currently sells for US$20,000.  A 1992 Toyota Mark II, the present fan favorite, fetches US$46,000.  Top-of-the-line Toyota Landcruisers recently went for US$540,000, though prices have come down a bit as of late.  These prices are not for pristine, cherry examples;  these are for all of a given make/model/year, as if it were a commodity.  The lack of internal upholstery, bare metal roofs and floors, hand-held windshield wipers operated by a long-armed front seat passenger (me)...none has any impact on the value.  One is as another.  My typical ride has four of six windows, which may or may not open, little or no side upholstery, and a hole in the floor through which I can see the passing road.  In some of them zero to sixty times are still being determined.

Banks do not make car loans, though one bank tried in the past and went bust.  Lessons were learned from that, as they should be in a capitalist system.  A car buyer must ferry the bales of cash to the seller before he or she can take delivery of the chariot, which creates a kind of barrier to entry for car ownership in that one almost needs to already own a car to carry all the cash required to buy one.

A real estate purchase is done the same way:  all cash, baled up and stuffed into the kind of nylon sacks migrant workers from developing countries carry their lives in when they return home.  Years ago another bank tried to introduce the concept of mortgage, or at least a home equity loan.  Many recipients did not know they had to repay, thinking that the loan was some kind of reward for owning a home.  (I guess Americans are not that much different from Burmese after all.)  That bank went bust, too.  Capitalism works if allowed to work.
A visit to the buildings known as banks is quite an experience, one from which I have yet to tire.  Some of the buildings are rather grand, while others look as if a good strong wind could bring the entire edifice down.  Inside one would be hard pressed to find a loan officer or even someone to open an account.  Indeed, I have never seen either one.  What they do have are facilitators who arrange for fund transfers, a slew of strong young men to lift the heavy sacks of money that get carried inside, and a gaggle of barely-out-of-their-teens women behind the counter, each manning a bill counting machine.

The banks are crowded and the atmosphere is hectic.  A flat panel TV hanging precariously from the ceiling blares out the latest local music video.  Children play around on the floor.  Bales of money are tossed about like medicine balls, often over the heads of the rows of customers sitting on primary color plastic chairs awaiting word that their money either arrived or was successfully sent.  There are no formal lines, but the crowd gushing around the counters seems to follow a natural law that allows first come first served.  Forms are filled out, ID cards shown, the obligatory stamps and signatures obtained, and the money is sent, arranged via a telephone call with the receiving branch.  A truck arrives in the front, and five barefoot young men pile out and begin tossing sacks of money passed the security guards into the bank lobby.  Customers make room, though there is not much free space.  Soon, the bags are ripped open and bales tossed on to the service desk, from which the women, faces smeared with yellow thanaka paste, then begin the long process of counting what might be fifty or even a hundred thousand pieces of fiat paper. If the money is part of a real estate deal, the number might be in the millions.  The whirr of the machines is constant, the women focused.  The scene has a simple beauty.

As the piles of money move from in front to behind the counter, a kind of makeshift furniture is formed which sometimes serves as a place for staff to sit and take a tea break.  Five money bricks for a seat, ten for a table.  When the money is counted, a receipt is given, and the customer walks out just in time for another truck of money to arrive.  It is mayhem.  Cacophony.  It certainly ain’t Bank Pictet, but it works.

Most of the banks have vaults where the excess from a day of inflows and outflows is stored.  Some banks do not have vaults.  I can only assume that with the denomination of the currency being as small as it is, it would take a robber so long to remove enough cash to make theft worthwhile, that by the time he finished, the work crew would be arriving for the new day and would catch him in the act.  It might also be that the people are pretty honest.

My favorite treat is to arrive early and watch the staff in banks where vaults do exist, unload cash into the counter area in preparation for customers’ arrivals.  In assembly line style, three or four men spread themselves out in a line, from vault to counter, and pile stacks of notes baled in thousand piece packs.  Ten of these packs are piled, but not bound, then tossed from man to man, bucket brigade style.  That’s $10K equivalent per toss, by the way.  In ten minutes perhaps a million dollars has been tossed from vault to floor, and not a single brick has been dropped.  Tinkers to Evers to Chance would play second fiddle to this display.  I seriously doubt Lloyd Blankfein could pull it off.  In things that excite and fire the soul, he is a man of lesser talents.

So there it is.  A world without banks.  It could have been us.

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chumbawamba's picture

Banks are superfluous in the US as well, if you try.  And you don't really have to try that hard.  I know this firsthand.

I am Chumbawamba.

Shameful's picture

Cool read, thanks for posting it up!  I might not be a world traveler but to my research a lot of the world does not have the insane credit system we do.  In these places the same thing must be done, you buy what you can afford and what you save for.  I would point out that if we allowed the system to flow our banks would also go bust and the system would purge itself.  Sadly the banks bought the politicians so they are really our rulers.  To get redress one would be better served to petition Dimon or Blankfein then their elected "representatives".

An interesting view from Burma, have to be honest have not heard much good out of the country except for it's vast natural resource wealth.

Cognitive Dissonance's picture

"I might not be a world traveler but to my research a lot of the world does not have the insane credit system we do."

And in my view this is precisely why America and it's minions are aggressively and militarily expanding it's economic and cultural systems into every corner of the world. The undeveloped and underdeveloped world is a wet dream to the fiat paper credit pushers in the US. It's either spread the credit virus to keep the exponential growth of credit on track or die. Seen from this point of view, America's madness is just of matter of survival.

Where's the "super-bug" antibiotics for this particularly virulent strain of capitalism?

ToNYC's picture

Myanmar/Burma is like a tiny pilot plant /test tube/ small, well-stirred reactor vessel that are totally useless on the scale-up that modern economic states need to operate. Do you need to be a Chem. E with a hard knocks-earned MBA to see whererthis desperate this Burmese wunderkind is going?

Oracle of Kypseli's picture

It is important to point out to those who will critisize Myanmar, that it is one of the two countries in the world, the other being the good and forward thinking US of A that still does not utilize the metric system.

Cheers mates

Dirtt's picture

They have teak wood.  That is something I want from them but probably can't get.

order6102's picture

its all good but wrong. Credit system exist. Its call loan sharks. Majority of them spread in Chinatown of Yangoon. Rates as high as 50% monthly and if you don't pay they going to kill your family as most of them linked into triads. In addition to it there are various types of colaterlized lending where interest rate depends on collateral type and can be as low as 10% monthly interest if you use land as collateral asset. So, get your fact straight please

Hephasteus's picture

That's the tier 2 banking system. It's the same system it's just a matter of using the tier two system to try to keep as many people as possible in the tier one system. The banks are an ugly abusive bastard. So they have to keep the even uglier and even more abusive system in place so that they look good by comparison. It's like the family guy where you hire an ugly person to walk around and look horrible so you look better by comparison.

order6102's picture

+1. I fully agree, but any economy need banking in some shape and form and having tier 2 system without tier 1 system makes former even more uglier...

chindit13's picture

This is about banks, or lack thereof, not the loansharks (whom I mention in the piece).  Your comment is a little sensational.  One can find loansharks in NYC who might also charge 50% a month and are nasty if repayment is tardy, but that is hardly indicative of the cost of money throughout US society (though it's not far off current CC rates).  The reality for those who might want to borrow in Yangon is a bit different.  Rates (loansharks, as of last week) are 5% unsecured (per month), 3% if gold is put up or a deed pledged (this should warm the likes of Gordon Gekko) as collateral, 4% or so if diamonds or precious stones.  Some monasteries will accept things such as sewing machines, bicycles, clothes, etc, but they charge higher.  I once saw 17% per month out of a Mandalay monastery, and was told the senior monk was a "good businessman".

The data above comes from acquaintances who do this for a living.

As for the "killing your family" part, please provide some instances.  Yangon, despite its 5 million or so people, is a small community at heart.  The "go la ha la" (rumors) get passed around pretty quickly, and just about every murder is talked about in the tea shops hours after it happens.  The reason they are talked about is because there are so few.  I would guess every major US city has more in a week than Yangon has in a year.


order6102's picture

first of all, sorry for sounding sensational. My rates kind of old, as last time I visited place (even its just few hours away from where I am), about 8month ago (have issues with visas, that its NOT easy to get. And you right - i have no indication of actual killing taking place, but I have seen treats to families if repayment will not be make on time and smashing of the cars and shop windows, so system works.

Issue is - there is very efficient shadow system with money transfered in and out Bangkok/Singapore/Hong Kong together with loans made and promisary notes written. Howevery,  due to lack of banking system charges/interest/cost can be much higher then for example in Thailand or Singapore where banking system exist side-by-side with shadow loan shark system due to competition. As you said - capitalism works and more competition is good.

ShortStack's picture

You should probably change cards if youre anywhere close to 50% a month. Every state in the US, and every province in Canada, as well as all across Europe has regulations that keep the rate CC companies can charge far below that on an ANNUAL, not even monthly basis. 

If you want to look at a real representation of a lower-tier banking system in the West, just look at pawn shops. They charge upwards of 10% monthly interest and its the oldest form of banking there is. In places like the US this would be considered a tier-three system because of the already existing shadow banking system.

jm's picture


I have another SE asian example of a country without banks.  It was Pol Pot's Cambodia.

I hope you take this with a smile, as was meant.  But I do have point.  Without banks you cannot economize risk, and everything SSLLOOWWWSSS down.  A continuous near sudden stop.

How can Burma exploit a uranium mine and other resource wealth without credit financing on large scale?  They won't get that kind of financing from the neighborhood triads. 

IBelieveInMagic's picture

The reality is that commercial credit for projects with reasonable chances of repayment from future cash flow is good to have. Unfortunately, we have a runaway consumer credit system that issues credit to borrowers for personal consumption (not investment) whose future cash flow is unlikely to ever support the interest and principal repayment.

Consumer credit depends on the credit rating system to keep him on the repayment track but that assumes that the person has a real income stream. 

jm's picture

I was being a bit sarcastic back at Mr Chindit's sarcasm.  Most posters do not consider him sarcastic at all. 

So no one is against business loans as such, but consumer credit is a different issue altogether.  Well, without consumer credit, I guess you'll have to save up a whole lot more to get that car.  Oh wait, you need a car to get a job.

Oh wait, you mean people can't buy Hummers or big screen TVs anymore because consumer finance is out of control. 

I've got a much more simple idea.  Why don't we give people to the freedom to do what they want with their money, and the freedom to fail? 

Otherwise, back to Pol Pot I guess. 

Dburn's picture

Speaking of credit ratings. Here's an article about Talx that handles 30% of the market for challenging unemployment claims mainly for the Fortune 500. They were bought out by Equinox. They must have seen some synergy there. This might be a good sample of the types of growth industry we can expect for this "recovery".

I'm sure states that are deep in the red give them a under the table type greeting so to speak as Corporate America works hard to make peoples life go from miserable to desperate as quickly as they can because that decreased unemployment insurance rates can only mean one thing: more bonuses.

A Nanny Moose's picture

How can Burma exploit a uranium mine and other resource wealth without credit financing on large scale? 

Rely on the eternally "altruistic" to provide it?

jm's picture

And I thought all those altruistic NGOs invested in whorehouses... 

Bow Tie's picture

sounds like a barbaric, criminal system. transparent though...

tmosley's picture

Banks are good, so long as they are free from government interference either for or against them.

See for the reasons for having a bank, and how NOT to corrupt it.

Hephasteus's picture

Ya. I'm the same way. I'm really good and always do the right thing as long as you avoid policing me. I'm sure I'm not like those raping, speeding, hooker killing amabassadors with diplomatic immunity.

tmosley's picture

"Lack of regulation" doesn't mean "immune to law".  Without banks, large capital projects woud never get built (Myanmar doesn't even have paved roads, no skyscrapers, no aqueducts, no modern port facilities, no trains (unless they were built by outsiders), etc), and waste is introduced into the system as you force individuals to spend time and money doing their own investment research, rather than entrusting some person to look after their money in a responsible manner (read the comic I posted).

Understand that regulations on banks hurt small banks 100% of the time, and large banks ~0% of the time.  Subsidies help large banks ~100% of the time, and hardly touch small banks.  As such, banks are encouraged to grow ever larger.  Further, introduction of moral hazard by communo-fascist central bank guarantees encourages banks to make stupid decisions which lead to the mess we have now.

Or have you been under a rock for the last three years?

mouser98's picture

seems like you fail to see that the same law that prevents most people from being "raping, speeding, hooker killing" is the law that protects said ambassadors with diplomatic immunity from retribution by the victims or relatives of the victims.  and you don't need vigilante justice, just an unmonopolized system of law enforcement.

Dicite justitiam's picture

I'm with McCulley on the concept of enhanced liquidity, but we could do such a better job of it than we are.  Decentralized control and lower higher reserve ratios.  But then we have the problem of the 30's.  I don't know.  I'm not smart enough.  This is a paradox.

tmosley's picture

The banking problems of the 30's were caused by regulations limiting banks to a single branch.  These size limits meant that they were unable to withstand banking runs, and since they were vulnerable to them, their customers were more skittish than they would have been otherwise, resulting in more bank runs.  The government "solution" was to socialize the risk, which has lead us to our current dilemma.  The reason it took so long is because we did have some regulations preventing too much risk, but the regulations were removed, but that action was not balanced by removal of deposit insurance, which created the perverse incentive.

Deregulation only works when you also remove all the government goodies and "protections".

Dicite justitiam's picture

Then there should be a tiered reserve ratio system.  Have bullion banks with 100% reserves, tier 1 banks with a 50% reserve, tier 2, etc...  With different deposit insurance...

nah.  blah blah blah.  the clever will always promote their self-interest, even if we use beads or clams or whatever.  it just lowers the amplitude of both the risk and the liquidity.

it's zero sum.  if we try to insure away any economic risk, there is no liquidity left over.

murray's picture

The answer, as always, is the free market

Cookie's picture

Good piece Chindit, although certain Generals still need banks in Bangkok to launder drug money into property in Singapore.

dumpster's picture

also remember the late 80's.  open an account get a free toaster , banks need to get back to giving out stuff . even an occasional donut

dondonsurvelo's picture

Transocean is a Swiss company.

swamp's picture

Go into any little strip mall along Tully Road near 101 in San Jose, CA, near Silicon Valley. There's a large Asian primarily Vietnamese population, and most all the bakeries, hair salons, auto tint glass, restaurants and other shops for miles have signs on the door to the business: "cash only". 

dumpster's picture

"cash only". 

large Asian primarily Vietnamese

or gold and silver .. give it a try . i bet thats as good or better than cash . gold is money

Gordon_Gekko's picture

Seems to me like instead of the banks pillaging the people (using the government as an accomplice), it is simply the government directly pillaging them in Burma. 5000% inflation in property? 1000 kyat = $1? They gotta be printing a heck of a lot of fiat money pieces for sure (and looting the savers in the process). Plus we have restrictive import policies which ensure that people have to pay thru the nose (most of the money going to the government coffers) for basic amenities, hence lower standard of living (e.g. $20k for a 1981 car). The labels may change (i.e banks, government, etc.), but the essence remains the same - a few oligarchs looting the masses.

And then there is the question of where do the Burmese oligarchs get their money/power? Selling natural resources for - that's right - US Dollars - which they get from the US companies/other USD enabled oligarchical countries doing business with them - which they then proceed to keep for themselves instead of lifting the living standards of the populace. So basically the deal is - you sell your natural resources to us on the cheap instead of using them to lift your own countrymen's living standards and we'll keep you in power and flush with dollars which you can then use for your personal benefit. So, ultimately, it's not that Burma is untouched by banksters - it's just that they call them "the government" over there; not to mention that the rot in Burma is enabled by none other than that filthy bankster product - the fiat US Dollar.

swamp's picture

That's some keen insight. 

anony's picture

Just like other natural resource-rich EXPORTING countries that think they are so much better off than the rest of the world.

They don't seem to realize that they are hollowing out their own country for the almighty dollar, directly selling out the ground from underneath their own feet.

Denial, stupidity, ignorance call it what you want but what's left when these countries have exceeded "peak" reserves and the wind down begins?


Lionhead's picture

Precisely, they're selling out for pieces of paper that have no intrinsic value. It's amazing to me the stupidity of these globalised countries that they're that naive to sell tangible things with value for pieces of paper or electronic digits created as ledger accounts. Humans are strange what they believe in as advantageous somehow believing in the full faith & credit of Ben Bernanke. If I was a mining company in Myanmar selling rare elements, I would accept only gold bullion as payment, after assaying it for its fineness. No paper please.

AnAnonymous's picture

Stupidity? Their resources are needed elsewhere in the world by countries that without them would know domestic unrest.

Taking the option of self preservation is not always stupid.

chindit13's picture

GG, perhaps you will get a kick of sorts out of this.  First, the biggest source of funds for the country is China.  China is the "neo-colonialist" buying up the natural resources of the country, and (in my view) is the biggest threat to the country's future independence.  Other than Chevron on the pipeline, US firms are non-existent (as I was corrected on RIG).  And here's the kicker:  about three years ago the government began carrying out its jade auctions priced in euros, not dollars.  While the dollar is still the second currency among the general populace, the government is trying to make it a kyat-yuan-euro based economy.  In other words, the generals of Burma just say "no" to the US Dollar and Ben and Timmy's printing and spending machine.

DoChenRollingBearing's picture

Chindit and Gordon, you both are kind of making the same point: that almost any country has its points of corruption (vampire squids if you will.)

USA has its banks and .gov.

Burma has its generals running the show.

Some of the developing countries I know (though perhaps not really well) offer somewhat of a blend of Burmese (Myanmarese?) and the USA's models: banking is there, but credit is hard to get (Peru comes to mind).

Gordon makes the point that a vampire squid is always out there. 

Chindit makes the point that a colonial threat (China) will likely take Myanmar at some point.  They already are building a naval base in Myanmar.  And as you say, China is the asset stripper.


I do not see personal liberty as any kind of priority there (at least some of us seek liberty here).  Further, since I do not speak the language, Myanmar is not on my list of places to invest or even visit.

Thank you for the piece from a place we read little about.  That is one of my favorite reasons for reading ZH, the insights people pass along from different places as well as from the little known cracks in our very own system here.

Gordon_Gekko's picture

Don't take my comment the wrong way (I wouldn't write that long a comment if the post wan't worth it :-)) - I think the piece you wrote is just awesome - but by writing that comment I was also trying to clear some things in my head. I'll just say that cash and carry is good but it doesn't mean good things are happening for the people UNLESS the cash is not a fiat currency, in which case it is perfect. I think we're getting there as a society i.e. complete and total repudiation of fiat currencies all over the world with the subsequent reduction in oligarchical powers.

Oracle of Kypseli's picture

You can actually set up new co-op banks on an emergency basis in a NY second.

You need brave politicians with brass cojones. I hate to see so many talented politicians sell their souls to the devil where they could have been hailed as heroes.

Where are you brave ones? "We the people" will exhalt you to an apotheotic state of divinity and you legacy will be eternal. Where are you? Show yourselves. Glory and appreciation is higher than ill obtained riches.

All you have to do is appear on all TV shows and just tell the truth. Just say that you will close the evil big banks and either abolish or audit the FED. Turn the tide on the banksters.  




dark pools of soros's picture

but Gordon, we all know they have to sell out or just get invaded

Gordon_Gekko's picture

Yup - and we'll shove some much needed "freedom and democracy" down their throats...