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?".

Sunday, 15 April 2012

How the City ruined the British industry


Yesterday Daily Mail published a serialisation of a new book by Alex Brummer: "Britain For Sale: British Companies In Foreign Hands". It has been argued in many articles on this blog that the financial industry is heavily subsidised by the state, in form of direct subsidies like bailouts and stimulus packages and indirectly by being provided by the state, at a massive costs of the taxpayer, with an implicit insurance against failure ("too big to fail" phenomenon).

Mr Brummer's book shows even more sinister side of the financial industry: how parasitical it has become in the last 30 years and how dysfunctional and damaging it is for the British economy.

As Mr Brummer explains:

"What tipped the balance towards foreign takeovers in the late Nineties and 2000s were three key factors: the cheap cost of borrowing; liberal takeover rules; and the presence of global investment banks in the City, with ready access to the world’s capital.

Throughout the boom years, these banks were allowed to write their own rules. What this meant, in essence, was that a bank which might once have considered it risky to lend ten times its share capital would now lend up to four times that amount.

The result? Foreign companies took full advantage of all this cheap and easy credit to snap up increasing numbers of great British brands.

Not only that, but our eccentric tax system actually made it more profitable for overseas owners to buy companies with borrowed money. For example, foreign firms who buy British companies using borrowed money are able to deduct the interest they have to pay on those loans from their tax bills.

And this had a direct effect on jobs in the UK. Weighed down with often massive debts, new owners were far less likely to invest in the future of the firm and were instead more likely to close down factories and plants, throwing thousands of Britons out of work.

(...)

In the real world, away from the gilded environs of the City, the tragedy is that tens of thousands of jobs have gone. Crucial skills have been lost — probably for good. And the strategic heart of British manufacturing has been ripped out, which affects our ability to climb out of recession.

Still, the outlook isn’t all bleak: bankers and foreign shareholders are doing just fine."


Mr Brummer's book should be dedicated to the British government, the London mayor, Mr Boris Johnson, and The Economist team and its Editor, Mr John Micklethwait, and all City supporters. Maybe they will realise, at long last, that it is not a matter of academic arguments or having different views. Their views are not only irrational but also are highly damaging to the interest of the country.

2 comments:

  1. Their views are highly rational from their perspective: how can we make the rich get richer in the next five years? There is no long term thinking, it's all about making it happen so they can retire in about the same longevity as a parliament lasts. "Screw the public for as much as you can get in as short a time as it takes". Let this be your watchword.

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  2. i thoroughly enjoy to read this post. it's awesome dear. Thanks for sharing it.

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