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?".

Saturday, 15 September 2012

Greg Pytel: £300m London property: crisis? what crisis?


It has been argued for some time on this blog that the current financial crisis is not in fact an economic crisis but an well organised wealth transfer mechanism from the middle classes to the superrich. E.g. "Crisis? This is how it works", "There is a method in this madness"

A couple of days ago BBC reported that the London's most expensive house ever was on the market for, what was believed, over £300m. And that it was a part of a broader trend. "Knight Frank calculates that what it calls "prime" central London property prices have gone up by 50% since March 2009."

It is worth reiterating: "Every time we read about obliterated pension schemes and generally falling income and purchasing power of the middle and working classes, the workhorse of the economy, and the growing gap between them and the super rich, thriving market of top end properties in London, luxury goods and services, from systemic perspective it is simply a wealth transfer.

One can argue whether this is right, or wrong, but this is exactly what is happening. Whatever the view is the current crisis is the largest wealth transfer exercise from the middle and working classes to the super rich using pyramid schemes which have exactly the same structures and mechanisms - pretty primitive actually - as Albanian pyramids in the 1990′s."


So if you ever wondered where the quantitative easing money went and we do not see any improvement of the economy, but rather the opposite, the price of this property and the steep price rise of prime properties in London (50% since 2009) should give some clues. And in the meantime the Bank of England balance sheets keep growing full of toxic waste.

6 comments:

  1. How to fix the economy.
    Divert all resources to medicine.
    We'll {effectively) achieve immortality in less than a lifetime.
    That will kill the Ponzi...

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  2. Greg,

    I have been enjoying your blog here for some time. Could you clarify how the bank of England's balance sheets grow full of toxic waste?

    My only criticism is that you don't update the blog enough!

    Thanks,

    M.

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    Replies
    1. Hi M.

      Sorry for a late reply. As Bank of England prints money it is buying so called "financial assets". If these "assets" were worth what BoE is paying for them there would not be a need for BoE to print money and buy them. These "assets" would have been sold for cash on the markets (and bought by other financial institutions). Hence BoE is issuing cash and getting these "assets" on its balace sheets and they are not worth what they were bought for (in cash). This is the way how BoE balance sheets are gradually being turned into a repository of toxic waste.

      I wrote more about toxic waste in my very old post:

      "UK government officially confirmed it does not have a clue about the size of the liquidity hole"

      I do not update my blog that often as before because it seems to me that I think I wrote it all. I am not a political or economics commentators or journalist (although on a number of occasions I went into this territory). I tend to write when I feel I am writing something really new, novel, original. It is a matter of opinion and some may regard it as lousy:-) Frankly speaking the entire economic crisis is explained in the first article "The largest heist in history". The rest simply expands on it.

      But... I have an article, or rather a heavy political rant, ready for publication. Its title is "Economic plebs". It argues that the people currently running the economy are not up to the job. But I am not sure whether it is a good idea to publish it as it was born out my frustration whilst watching in disbelief how the country is being mindlessly wrecked and the determination to ruin Britain seems to be on the increase.

      Best, Greg

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    2. I'd like to read it Greg :-)

      I often refer people to your "Largest Heist in History" article as an essential first step in understanding what the great and the good are up to behind the scenes.

      Yrs aye,

      Caratacus

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    3. Hi Caratacus

      I think I will put this new article on the blog in a few days (I still need to polish it a bit). I wrote it when I was in Glasgow last week (no Scottish slang in it I am afraid:-)

      Yrs aye;-)

      Greg

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  3. Richard Cantillon (writing decades before Adam Smith) was the first to observe this effect(hence “Cantillon effect”). He showed how those closest to the money source benefited unfairly at the expense of others, by hinking through the effects in Spain and Portugal of the influx of gold from the new world as follows:

    “If the increase of actual money comes from mines of gold or silver … the owner of these
    mines, the adventurers, the smelters, refiners, and all the other workers will increase their expenditures in proportion to their gains. . . . All this increase of expenditures in meat, wine, wool, etc. diminishes of necessity the share of the other inhabitants of the state who do not
    participate at first in the wealth of the mines in question. The altercations of the market, or the demand for meat, wine, wool, etc. being more intense than usual, will not fail to raise their prices … Those then who will suffer from this dearness … will be first of all the landowners, during the term of their leases, then their domestic servants and all the workmen or fixed wage-earners ... All these must diminish their expenditure in proportion to the new consumption …”

    In other words, the beneficiaries of newly created money spend that money and bid up the
    price of goods with their higher demand. Those who suffer are those who have to pay newly higher prices but did not benefit from the newly created money. The credit inflation analog to the Cantillon effect has played out perfectly in recent decades.

    Central banks provided cheap money to banks, the cheap money artificially inflated asset prices, artificially inflated asset prices made anyone connected to those assets rich as we became a nation of speculators, those riches were achieved at everyone else’s expense, and ‘everyone else’ has now realized what has happened and is understandable enraged … as Keynes explained, “Those to whom the system brings windfalls …. are the object of the hatred.

    - Dylan Grace, ''Memo to Central Banks'', Popular delusions, 2 octobre 2012

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