If you are new to this blog, you are invited to read first “The Largest Heist in History” which was accepted as evidence and published by the British Parliament, House of Commons, Treasury Committee.

"It is typically characterised by strong, compelling, logic. I loosely use the term 'pyramid selling' to describe the activities of the City but you explain in crystal clear terms why this is so." commented Dr Vincent Cable MP to the author.

This blog demonstrates that:

- the financial system was turned into a pyramid scheme in a technical, legal sense (not just proverbial);

- the current crisis was easily predictable (without any benefit of hindsight) by any competent financier, i.e. with rudimentary knowledge of mathematics, hence avoidable.

It is up to readers to draw their own conclusions. Whether this crisis is a result of a conspiracy to defraud taxpayers, or a massive negligence, or it is just a misfortune, or maybe a Swedish count, Axel Oxenstierna, was right when he said to his son in the 17th century: "Do you not know, my son, with how little wisdom the world is governed?".

Friday, 2 December 2011

Andrew Neil (BBC) is "scared": better late than never


Last Wednesday on "Daily politics" (BBC 2) whilst commenting George Osborne's statement, Andrew Neil said that he was "scared" by the current economic situation. It was a really worrying statement. Firstly if a journalist of such off-the-record knowledge, known for a rather moderate language, said that he was "scared" the situation must be really ghastly, i.e. the economy is on the verge of a systemic collapse. Secondly, the time to be scared was three years ago when the financial system collapsed and when it was more than obvious that unless the fundamental overhaul to the system was done it could only get worse. Basically what's happening now was easily predictable three years ago. In fact the current crisis is very mild indeed as it could have been considering the real state of the banking system.

Incidentally back in May 2010 Hugh Hendry gave a sensible advice: "I recommend you panic". At that time many people took this as an eccentric comment of a financier, although it was obvious that it well thought through advice.

George Osborne should also not be too smug because the UK keeps AAA credit rating and has a very cheap borrowing rate, cheaper than Germany. Currently the financial markets are preoccupied with taking as much money as possible, squeezing Germany to the maximum. Once they finish this process, and in the meantime the UK makes a lot of cuts thereby creating a lot of room for additional borrowing in the future, there is little doubt that the financial markets will turn their attention to the UK and squeeze it for more cash. Hence all the money that the Chancellor is saving now are really destined to the bankers coffers. This is how financial system works these days. It is all about extracting as much money as possible from the middle class taxpayers. Another obvious fact that seems to be completely missed.

5 comments:

  1. I live in south east asia.

    The events in USA and Europe have zero impact on the man in the street here.

    The only sector that "feels" the pressure are people who have telescopic eyes. That is bankers and politicians.
    Business people appear to understand what is happening only via proxy from politicians and bankers.

    Despite natural calamities like floods, earthquakes and tsunamis, life is happy, jobs aplenty. This is evident from increasing demand for homes, cars and all luxury items.

    Where is this doomsday scenario? No doubt GDP growth may slow, but take note, its: "slow" not minus and not zero.

    There are even more people visiting casinos!
    Stock markets have not dropped to 2009 prices!
    Airplanes are filled to the brim!
    Traffic is backed up everyday!
    Tourism numbers have surpassed previous years!
    BMW has even emerged as having the best sales here!

    Recently, a chinese buyer paid for a home using hard currency.. all $15 million dollars!

    World economy is doomed?.. naah!.. come over here mate, you'll be far batter off here then to waddle in a negative bubble.. even Myamar welcomes you!

    ReplyDelete
  2. Thanks Grove for your comment. I will add that when Albanian pyramids were collapsing in 1996 - 1997 the western world did not really pay much notice. So why should healthy economic and financial systems in Asia pay attention to the fraud that's happening in Europe or in the US?

    Best, Greg

    ReplyDelete
  3. Greg, I may have missed something as I'm not a regular reader but are you suggesting we could end up in a similar situation to European countries, with large borrowing costs dictated by others?

    Whilst I agree with lots of your points regarding pyramid schemes on this one you're well off the mark, the European counries are, and can only be, punished by the markets as they effectively borrow in a foreign currency. As sovereign issuers, borrowing only in our local currency and with a floating exchange rate, we cannot be forced into the same position. This has been demonstrated for decades by Japan and the empirical evidence form the current crisis eg non-appearance of the so called bond vigilantes in UK, US or Japan, no matter what we all do with fiscal or monetary policy. No matter what we do which should supposedly be punished our borrowing costs don't budge and our gilt issues are oversubscribed multiple times, this is no mistake and is a function of the modern monetary system in the UK, US, Japan and other nations who haven't ceded sovereignty and borrow only in their local currency which has a floating exchange rate.

    If you weren't saying that then my apologies.

    ReplyDelete
  4. Hi Joshua, thanks for your comment. Maybe I missed something but let me put my point across. European (euro zone) countries borrow in euros and they auction their bonds on open markets. So they do not have much say who buys their bonds and where these bonds end. Similarly the UK borrow in pounds on the open market (auctioning bonds). And there are rating agencies that also come into play. The US is a special case due to its massive military might and the fact that some 60% of the world reserves are in dollars. Japan is also a special case as a massive part of their debt is held internally (in an institutional not openly traded way). I do not think the UK has the same advantages. Incidentally I expressed the same concerns as the Chancellor of the Exchequer when he justifies cutting the debt. I do not think that Mr Osborne is misleading us.

    I agree that as the UK has its own currency is in much better position than euro zone countries.

    Best, Greg

    ReplyDelete
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