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, 25 October 2009

Will the UK go bust after the elections?

Sir Howard Davis made some very refreshing comments at recent HSBC clients gathering in London. It is clear that the public do not understand the scale of the crisis which was caused by a collapse of the giant pyramid scheme. The demands of those who are still at work, from postal workers to university professors, make it clear that the current crisis appears as something unreal. And, ironically, it is.

The government have no idea of the size of liquidity hole they are trying to plug. It may still be some hundreds of billions, if not trillions, of pounds. On top of that they keep on spending money to sustain artificially the lifestyle the UK cannot afford any longer (if it ever afforded at all). This puts the country in even more debt. As the government does not want to lose the next elections (or to lose them by the least possible margin), they keep the public in delusion of affluence like someone who got unemployed and is draining his credit cards to their limits.

The Conservatives, seeing the public mood and appetite for continued high lifestyle, are too afraid of telling the harsh truth: that the UK is already in a very deep debt hole and tightening of the belt has to start now. They do not want to be accused of scaremongering by the Labour, which may well result in scuppering their elections chances of near-certain (at the moment) victory.

It is this rather unholy alliance of interests of both sides of political spectrum: the Labour's and the Conservatives' that contributes not only to irresponsible but economically irrational behaviour. We try to live financially as nothing has happened. After the publication of the recent economic figures, the time till the next elections increasingly looks like the last dance on the Titanic. The reality check will come after the elections. Doesn't matter who wins: there is a pretty good risk that the UK will be bust by then.

We seem to believe that what happened to Albania in 1996 – 1997, Argentina in 1999 – 2002 and is happening in Zimbabwe now will never happen to us. That all these can happen to others. Well, it may already have started happening…


  1. I agree we will go bust if there is no way to pay back the money the government is borrowing. The government not only has save over 11bn pounds per month but they must save even more to begin paying back the huge 825bn mountain of debt. The interest payments alone which will soon exceed the cost of running the NHS for one year. Swift cutbacks must follow the election which I also think will trigger a huge house price crash.

  2. Thanks for comment Mike:

    ...if we survive as a solvent country till the election. This is a serious concern as economic problems (as well as recovery) tend to accelerate. We'll see...



  3. Well said Greg.
    Completely agree with you and I think its only a matter if time before your message gets through.

  4. Hyper inflation is the only way to repay this debt - inflate away the debt. This is why the housing crash is far from over since interest rates will have to rise in the wake of high inflation. This will case massive defaults in the future and I just cant believe people cant see this. Ive left the UK - June this year, if you can - do so too!

  5. It seems that population groups do not react to economic meltdowns until individuals are starving in the streets and there is a breakdown of society. What is happening to the UK economy now has occurred dozens of times in the last 50 years all over Asia, Africa and South America. For example, the economic collapse of Brazil in 1961-64, just before the military coup is similar to our current situation.
    Another historical similarity: Argentina in 1974: "The massive budget deficit might have been better managed had it not been that the Peronists were under enormous pressure from their political base (the unions, in particular) to avoid a recession at almost any cost (a consideration painfully denied them by Economy Minister Alvaro Alsogaray in 1959 and in 1962).[18] Refusing to resort to borrowing and unable, by 1975, to control soaring budget and trade deficits, as well as a wave of violence between Trotskyite and fascist extremists, the Peronist government resorted to a chaos of sharp currency devaluations and erratically timed wage hikes and freezes.[23] In a seemingly never-ending tide of near-hyperinflation, strikes, business lockouts and violence, the military took power in a violent March 1976 coup."
    Unless there is some unforseen miracle, where we somehow 'bootstrap' ourselves out of this disaster, our economy is going to carry on shrinking and our debt is going to continue to rise, until the government can no longer afford to pay unemployement benefit. Only then will change start to take place. It seems inevitable to me that we as a nation are going to be forced to go through something akin to another 'great depression'. We are all going to suffer together for a long time, rather than making those that caused this mess suffer greatly now. Banks should be allowed to go bust, pension funds should be allowed to go bust, and inevitably those private pension holders will lose their pension and have to rely on the state pension-not their fault, but better to have the aged lose their pension than the whole economy collapse. It is the only solution and it will be forced on us no matter what we do, whether we choose to let it happen now, or are forced to do it by the IMF or by an angry mob /Military coup. Our whole economic system has been leveraged to spending beyond our means, and now our huge debts are being "reverse leveraged" against us - a sort of Keynesian multiplier in reverse. for example, the 100,000 personal bankruptcies in 2009, with an average debt right off of £20k, that is £2B of unpaid bills written off from the economy- this will probably cause a further £8B worth of bankruptcies in teh next 12 months and so it goes on.