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?".

Wednesday, 6 May 2009

Budget: more horror

The current crisis was triggered last autumn by the collapse of the pyramid that the financial system had become. This collapse resulted in a huge liquidity hole, or rather a number of “black holes” that suck in the liquidity, of a total notional value of quadrillions of dollars: at least $1.144 quadrillion (more than 21 times the world's GDP) and very likely in the region of $5 – 6 quadrillion. We do not know what proportion of this can be attributed to the UK’s market. But considering the size and the role of the City on the global markets it is likely to be very substantial.

The UK government do not know the size of the liquidity hole they are trying to plug with banks’ bail out packages and other measures. They seem to be pumping money into the banks’ vaults, read ”black holes”, without an idea of their size. The recent budget, already considered as optimistic or even "totally dishonest", does not take into account a possibility that the UK government will be forced, again, to commit further hundreds of billions of pounds in case of yet another huge liquidity crunch. Considering that the liquidity “black holes” have the ability of sucking of quadrillions of pounds from the financial markets such a scenario is likely to happen. Unless the global pyramid is liquidated, the UK government (and consequently taxpayers) are at the mercy of the bankers: by converting securities into cash they can, and very likely will, cause another wave of the liquidity crisis. Or it can be a creeping drain. It is only a question “when” and "how" it is done. It is a time-bomb. The aim of the financiers, (actually, perversely their professional duty towards their clients), is to realise all, or as much as possible, toxic securities at the best possible price: such price to be paid by the taxpayers. And the taxpayers will end up owning worthless papers. Sounds like an idea of ”bad bank” or continuing the largest heist in history.

What this is going to do to the British economy is too frightening to think about. Especially that the government is oblivious to the scale of the problem. Propping up the economy in a way that looks like serving the last expensive drinks on The Tytanic, the current government appear to be transfixed on surviving till the next elections (May 2010 at the latest). They may not achieve even that. "Apr├Ęs nous, le deluge", Gordon Brown, a City lover, is taking on a role of Madame de Pompadour.

No comments:

Post a Comment