Quote of the Day: Paying people to borrow money is just crazy; No Money Down Loan Philippine Edition

Sovereign Man's Simon Black on a 2008 Déjà vu bubble but at a larger scale: 

This feeling was only reinforced when I whipped out my phone and saw that German bank Berlin Hyp had just issued 500 million euros worth of debt… at negative interest.

I wondered if I really did go through a time warp, because this is exactly the same madness we saw ten years ago during the housing bubble and the subsequent financial crisis.

To explain the deal, Berlin Hyp issued bonds that yield negative 0.162% and pay no coupon.

This means that if you buy €1,000 worth of bonds, you will receive €998.38 when they mature in three years.

Granted this is a fairly small loss, but it is still a loss. And a guaranteed one.

This is supposed to be an investment… an investment, by-the-way, with a bank that almost went under in the last financial crisis.

It took a €500 billion bail-out by the German government to save its banking system.

Eight years later, people are buying this “investment” that guarantees that they will lose money.

The bank is now effectively being paid to borrow money.

We saw the consequences of this back in 2008.

During the housing bubble, banking lending standards got completely out of control to the point that they were paying people to borrow money.

At the height of the housing bubble, you could not only get a no-money down loan, but many banks would actually finance 105% of the home’s purchase price.

They were effectively making sure that not only did you not have to invest a penny of your own money, but that you had a little bit of extra cash in your pocket after you bought the house.

Paying people to borrow money is just crazy, whether it’s homebuyers, bankrupt governments, or banks.

Global insurance giant Swiss Re calculated that roughly 20% of all government bonds worldwide now have negative yields. And over 35% of Eurozone government bonds have negative yields.

(They would know—along with pension funds and banks, insurance companies are some of the largest buyers of bonds.)

With this deal, Berlin Hyp becomes the first non-state owned company to issue euro-denominated debt at a negative yield.

They won’t be the last.

We’re repeating the same crazy thing that nearly brought down the system back in 2008—paying people to borrow money.

The primary difference is that, this time around, the bubble is much bigger.

Back then, the subprime bubble was “only” $1.3 trillion.

Today, conservative estimates show that there’s over $7 trillion in negative rate bonds.

What could possibly go wrong?

I recently received a text message...

...which indicated of an offer for Philippine properties (high end condos for sale) financed by NO money down loan. So people are being "paid" to borrow money to buy Philippine properties. And that's how Philippine corporate sales and profits are being generated. And most importantly, that's the essence of the real estate-shopping mall propelled domestic demand boom: a credit bubble

Ironically, Mr. Black warned of this in 2014.