The Bubble Expands: "No Money Down" Loans Come To Asia

Tyler Durden's picture

Submitted by Simon Black of Sovereign Man blog,

Remember all of those credit card and loan offers you used to receive in the mail?

Bad credit? No credit? No problem.  0% APR for the first six months. Free balance transfers. No money down. And my personal favorite– no credit check.

These were all classic signs that the mother of all liquidity bubbles was upon us.

Think about it– would anyone in his/her right mind throw a bunch of money at some random guy on the street to go buy a new digital TV without so much as checking his references or requiring a sizeable down payment?

Of course not.

But if you and I wouldn’t do something so careless, then why would a bank?

More importantly, why would a bank not only make a loan like that, but do it thousands of times over? And use OUR money to make those loans?

They’re supposed to be conservative financial stewards, not drunken sailors.

We know how it turned out. This reckless lending spawned by a multitude of freshly printed money on the part of central banks nearly brought down the financial system.

Looking at the expansion of credit across the West, though, it’s happening again. Fool me twice, shame on me.

But this is a worldwide phenomenon now. My partner Tim Staermose and I were talking about it this morning, as he’s currently traveling in the Philippines.

When he went to collect the mail at his old office address yesterday, one of those credit card offers was waiting.

It was sent by a local bank, according to them because Tim is a long-standing customer.

Curiously, though, his account at the bank has less than $400. They know nothing about his ability to repay. They have no clue if he is gainfully employed, or even where he lives. But they sent a pre-approved credit offer regardless.

Another bank– a Philippine branch of a large US bank, mailed him an offer for a “no questions asked” cash loan of about US$11,000, to be paid back over a period of time of his choosing.

And of course, real estate agents are out all over town flogging Philippine investment properties, offering ‘no money down’ deals.

People only make such an offer if they

1) Expect everything to keep rising forever [which is a really baaaaad notion], or

2) They have so much money to deploy, they are forced to make rash decisions and assume tremendous risk just to be able to invest.

Both of these are incredibly dangerous and lead to disastrous consequences.

We remember the last time people thought that ‘real estate can only increase in value…’ Or the last time banks were making no money down loans.

Yet markets, bankers, central bankers, and politicians all have very short memories. This time, it always seems, will be different.

It never is.

But everything is now so interconnected that a credit unwinding in a place as small as the Philippines could actually have a substantial impact on the rest of the world.

It was the same during the Asian Financial Crisis in the late 90s, and exactly the same in 2008 nuclear banking meltdown.

The dominos in the global financial system are spaced so closely together you can hardly see any daylight between them. And a tiny central banking elite is lording over them all, clumsily and hastily cramming even more dominos onto the table.

This isn’t an environment where traditional financial thinking is going to prevail.

From ‘buy and hold’ index investing to the solvency of our banks to the basic premise of paper currency, nothing can be taken for granted any longer.

Real assets– productive land, precious metals, private businesses, etc. are much safer alternatives right now.

One of these days, someone is going to bump the table and all the dominos will start to fall. You won’t want your savings anywhere near it when that happens.

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RiverRoad's picture

Those 0% home loans were fun.....

MillionDollarBonus_'s picture

Loans should be available to everyone, not just the rich and middle class. Maybe I'm just too compassionate, but I believe if you give poor people a chance they just might shine and achieve great things. Nobody is poor by their own making - wealth is a matter of chance; and interest free loans give the least advantaged members of society a fighting chance at joining the ranks of the liberal middle class.

fonzannoon's picture

see below, god is on your side. 

You gotta think bigger though MDB. Why loans? Just give them others money!

Manthong's picture

I suggest they consider NINJA Loans except in China where I hear they are becoming less fond of things Japanese.


john39's picture

i once thought that the ancient prohibition against usury was quite archaic...   now? well... that should be obvious.

old naughty's picture

"Bad credit? No credit? No problem.  0% APR for the first six months. Free balance transfers. No money down. And my personal favorite– no credit check."

The IMF has been doing exactly that for years, if not decades.

Usury --- slavery. That too is obvious.

dryam's picture

"Loans should be available to everyone, not just the rich and middle class."

Who pays for theses loans when they are defaulted on? Hint, these people make up 49% of the population. They are called taxpayers.

"Maybe I'm just too compassionate, but I believe if you give poor people a chance they just might shine and achieve great things."

Achievement is available to anyone with real gumption with the exception of those with a *real* disability & that's what welfare is for.

"Compassionate" loans were one of the drivers behind the subprime debacle. Odd, "poor" people in the U.S. are amongst the richest in the world in an absolute sense.

"Nobody is poor by their own making"

False. Hard work & sacrifice are required to attain any wealth if one is born poor. Fewer & fewer Americans are willing to pay this price. Screwing off is a lot more fun.

"wealth is a matter of chance"

Only when you gamble, play the lottery, or put money in the rigged markets.

" interest free loans"

Nothing is free in life. Society (more specifically taxpayers who make up 49% of the population) pays for those loans. Free money is anything but free.

I came from a very poor family & have done well for myself by extreme hardwork in a meat-packing plant, shoveling asphalt, studying in school, working 110+ hour weeks during medical residency, working innumerable weekends, holidays, birthdays, anniversaries, & night shifts under very stressful conditions.

If there's a will, there's a way. Life is more choice than chance.

By the way MDB, I've missed you..........Go fuck yourself.

LawsofPhysics's picture

Yes, yes, it's not like debts ever have to be paid off.  Why won't these people embrace their debt slavery?  It simply makes no sense MDB.

Nice work.

NoDebt's picture

A true, personal story...

In the early 90s I dug myself a nasty little debt hole, including an ill-fated real estate transaction (my first house) that I had to quickly undo, at a cost.

I took out a 0% introductory rate credit card and pushed everything onto it.  6 months later I rolled it to anoher one, then another and another.  Now, I was PAYING IT DOWN the whole time, not piling it deeper.

After a couple years, it was paid off and I started getting into the lifestyle that gave rise to my ZH screen name.

But here's the kicker... All those paid off cards on my credit report made it look like I had paid off several hundred thousands of dollars of total debt, when in reality it was just the same ~$20K rolling from card to card, over and over.  I had unknowingly pushed my credit score to the moon!  I was Mr. "Pays as Agreed" to the "holy trinity" of Experian, Equifax and Trans Union.  And I still am, though I rarely use credit any more.

Now, I know most people won't do what I did, but it IS possible.


fonzannoon's picture

You must have a ridiculous amount of credit available to you. So why don't you utilize it all and buy like 500k worth of PM's and wait 3 months for the hyperinflation and then pay them back in funny money?

john39's picture

i was thinking about doing that 2009, thinking that collapse was imminent...  still a great idea, but timing is a real bitch.

ejmoosa's picture

Loans are available to everyone, accordingly sized to your earnings potential and the liklihood you pay it back.

Wealth is a matter of choice.

LawsofPhysics's picture

Damn, the Chinese are copying us again?

Please, this has been going on everywhere, if you know the right people.  Say it with me folks, "shadow banking"

Come on, give me some information I can trade on today.

nuclearsquid's picture

The dominos are going to fall... Check.

I don't want my money to be near the dominos... Check.

The falling dominos are spreading to every country on earth... wait wut?

I better buy this guy's newsletter.


Snidley Whipsnae's picture

Anecdotal info: 

I have a credit card that I use for groceries and gas and pay it off on the 24th of every month, never getting billed for interest charges. I have had this card about 20 yrs.

The credit union has upped my credit line by $5K in the last 2 yrs.

I suppose that if you want a fairly high line of credit the secret is to never use the damn card for anything but monthly needs and pay it off each month?

What sort of message are they trying to send?

RiverRoad's picture

The same message insurance companies send:  If you ever need us we'll screw you.

LawsofPhysics's picture

I pay of my cards ahead of interest payment charges. I think the message they are sending is "embrace the debt slavery".

I think my limit on a card I have had for 15 years is now 30k.  It certainly is for one of the business cards.

Makes sense for my business, but for the average "consumer" it's fucking stupid.

toady's picture

Same deal here.

Be careful with that due date. They changed mine, then tried to hit me with late fees. It's kinda standard now to forgive a late payment once or twice a year, so all I had to do was make a phone call, but you must read the statements to catch it. I think they hook a lot of fish like that...

MisterMousePotato's picture

Even sneakier than that, they are. They bill for several months, each time pushing back the due date. You get accustomed to that. Then they push it back up to the original and agreed date, which is now a week or two earlier than what you expect. Presto. Instant late fees.

fonzannoon's picture

They finally found the right scapegoat for the great asset skank that will happen globally. God.


VATICAN CITY (AP) -- Pope Francis called Friday for governments to redistribute wealth to the poor in a new spirit of generosity to help curb the "economy of exclusion" that is taking hold today.

Dr. Engali's picture

The solution to solving the plight of the poor is to seize assets and make everybody poor. Government will do well though. 

fonzannoon's picture

I gotta be honest with you Doc, I was against seizing assets all along. But if we are going to do it, it's best that it be by god's decree and we let government handle it to make sure we all benefit. Once that framework is in place, count me in!

pods's picture

I like it fonz, it becomes so much easier to slip it in if you aren't puckering.


pods's picture

Sorry fonz, in a bit of an odd mood. Up way too late last night, and working to boot.


fonzannoon's picture

don't apologize, that was tremendous. The best posts are the one sentence posts that can summarize the longer posts above it.

Dr. Engali's picture

I agree with Fonz. My favorite posts are the ones that make you thik "WTF?" followed by a belly laugh.

pods's picture

Why they always deal with anal sex I have no idea.  This place changes a man.

"You're gonna feel a little pressure."


LawsofPhysics's picture

Ah yes, the "everybody's a winner" approach.

Good luck with that.  I know enough people to know that isn't true.

NotAMathWhiz's picture

Vatican should lead by example.  They have plenty of assets (property) and cash, they should show their spirit of generosity.  Plus, unlike the government, the money that the Vatican has was given to them by free will (well, kind of, mostly).

Dr. Engali's picture

It's different this time Simon. We have grandma at the helm of the fed, and who can worry when you know grandma can take care of things? Here have a cookie and soon you'll feel right as rain.

Quinvarius's picture

What is good for the goose is good for the gander.  By goose I mean bankers.  By gander I mean the actual economy.  Of course it is good for neither.  But the cycle must complete.

Sudden Debt's picture

good old day... I wish they would return... try to get a loan now these days...

it even includes a trip to the doctor now...

Itchy and Scratchy's picture

'Look at me now!' - Tom Vu

eclectic syncretist's picture

Chinese Bankster" Ah, good morning sir!  How much "money" can we fabricate/imagineer for you today? I just got deposit of 5 yuan so I can loan you 500 yuan at 15% interest.  Is that good deal for you?

You: what if that other guy wants his 5 yuan back?  What's the collateral then?

Chinese bankster: No worry.  We insured.  If we go bankrupt you pay bail us out.

Bemused Observer's picture

.Is there still any pretense about the credit bubble being the fault of irresponsible borrowers?

They don't even CARE if you are able to pay it back! Because it isn't about your stupid little monthly payment that may or may not be made. It's about staking a claim to your life, your future. They want to OWN you, have you on standby for 'milking' should you ever manage to accumulate anything worth stealing.

Atomizer's picture

"The nine most terrifying words in the English language are: 'I'm from the government and I'm here to help.'

smacker's picture

This easy credit system has been running in Brazil for years. Virtually every shop you go into - clothes shops, shoe shops, kitchen equipment shops, now supermarkets - have a large notice on the wall or on an easel near the entrance which reads:

3X (or 5X or even 6X)

Sem Entrada

Sem Juros

In English that means "3 Payments, No Deposit, No Interest"

Why is this necessary? Because wages are so low and prices so high compared to most Western countries that ordinary people cannot afford to buy stuff unless they buy it on rolling credit. As an example, stuff in Brazil costs twice the price of what it does in London but average wages are one third. If its imported, think three times the price or more. I know of no other country where consumers are being ripped off more than in Brazil. Even Brazilian bananas cost more in Brazil than they do in London.

Atomizer's picture

Have you ever shipped containers of product into Brazil? Doubt it! Either get on your knees to suck cock or bring a wad of cash to grease the squeaky wheel of Government corruption..

smacker's picture

"Have you ever shipped containers of product into Brazil?"

No I haven't. And I wouldn't even dream of doing it. I'm well aware that it's a mind-blowing experience. Which - along with horrendous import taxes - explains why so many foreign companies choose not to do business in Brazil and consumer choice is massively limited. This deliberate socialist government strategy gives domestic companies the freedom to charge extortionate prices for their goods which are very often 2nd quality, but sold at sky-high prices.

Hence the need for easy credit.

withglee's picture

Remember all of those credit card and loan offers you used to receive in the mail?

Yes, and for responsible traders that's how it should be. Traders create money ... not credit card companies and banks. They do it by making trading promises and getting them certified ... the certificates (money) then circulate as items of simple barter.

But implicit in any trading promise is a delivery on that promise. On delivery, the certificates are returned and extinguished. If not, there is DEFAULT. DEFAULTed certificates must be reclaimed with INTEREST collections to guarantee INFLATION is zero at all times everywhere. The relation is: INFLATION = DEFAULT - INTEREST.

What you are seeing is the classic international banker's farming operation. It "sucks" irresponsible traders in (and governments are the most irresponsible traders). When the net is spread sufficiently wide (now mixing the metaphore to fishing), they call the loans, raise the rates, tighten the credit, and bring about a collapse. They then go in and pick up the fruits of these trader's labors for a fraction of their worth in a robust economy. Then they repeat the process. They call it the "business cycle".

Further, it gives "capitalism" an excuse for capitalism ... the necessity for a trader to get a capitalist to back his trades.

Wouldn't you think as often as this happened there would be a timeseries of DEFAULTs, like we have timeseries for INFLATION and INTEREST?

I beg you to show me a timeseries of DEFAULTS.

LawsofPhysics's picture

Please, a legitimate system of "checks and balances" and "rule of law" broke down a long time ago.

Nature does have real hard limits and humanity is part of the biosphere, period.

The banks now own the governments around the world, especially in the west.

Nothing short of the blood of tyrants and patriots alike "fixes" anything...

All you need to know is when fraud is the status quo, possession is the law.


withglee's picture

I mostly agree. When law breaks down you no longer have protection under the law (if you ever had it in the first place). A breakdown of law does "not" mean a breakdown of society. Most of society works without ever resorting to law. In fact, if you have to resort to law, you have probably already lost.

yogibear's picture

Jobs for appraisers that overvalue homes.

Just repeat the last housing scam but make it much bigger this time. 

Each Federal Reserve bankster bubble is larger and needs more debt.