Guest Post: A World Without Banks

Tyler Durden's picture

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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...