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?".

Tuesday, 28 April 2009

Financial pandemic

For the last few days a threat of swine flu pandemic is in the headlines. There was an outbreak in Mexico and some infections in a few countries: barely more than 200 in the world population of over six and a half billion. Yet WHO alarms that it is too late to contain it. All countries with responsible governments share these concerns and have taken urgent preventative steps.

Why do a handful of cases only in a population of billions cause such urgent actions? It may even give an impression of unnecessary panic.

During a pandemic outbreak the growth of numbers of infections is exponential: very fast with speed of rate of spreading compounding with every infection. This is why even a few cases occurring in a pandemic pattern give immediate causes for concerns and result in immediate actions. If the exponential growth is not stopped, through isolation, vaccination, treatment, etc the infection would spread quickly encompassing almost the entire population, causing a complete chaos, leading to some kind social or biological collapse of humanity.

When financiers, with regulators and government officials blessing, started lending money with loan to deposit ratio above 100%, they started a financial pandemic. A ratio of banks balance sheets to cash available on the market started growing at exponential rate. With every step of growth, banks balance sheets were becoming more bogus creating a massive financial pyramid. It is exactly a pandemic pattern.

However unlike during the current outbreak of swine flu, this insane financial pyramid growth was not stopped at the outset when it was only a risk and the first adverse effects could have been easily dealt with. It was not even stopped when it was obvious that the growth of banks balance sheets did not bear any relationship to actual economic growth indicators. According to the financial establishment, collecting huge payouts, it was a new economy with new type of growth. Governments acquiesced. It looked as if epidemiologists and biologists were convincing the governments and public during a pandemic that illness symptoms are a new and natural kind of behaviour that our bodies evolved to and we just have to accept them as the evolutionary progress. And governments would let it grow uncontrollably.

Pandemic risks are too serious to be managed by historians, philosophers, psychologist or other liberal art graduates, the kind of establishment that dominates the financial world. Epidemiologists are scientists who understand issues of exponential growth and lethal effects of pyramid structures. A pandemic outbreak is a natural phenomenon difficult to predict and prevent, that we have to deal with when it happens. The current financial pandemic however was engineered by the financial establishment with regulators’ and government officials’ blessing.

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