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 November 2009

A new (old) model of the largest heist in history

The last events of pumping ever more money into the financial system seems to have revealed how it works and why banks are still making profit despite the economic gloom.

The lending with loan to deposit ratio above 100% cleared the capital reserves out of cash causing the liquidity crisis. It appears that the heist is continued. This time government is giving money to banks only to borrow (the same money) from them at the costs later. As a result banks are making money and pay taxes. This is used as a false argument that banks, in the shape as they are, are good for the economy making profit despite economic gloom. It all looks like an organised scam as these are bogus profits.

This cycle of getting taxpayers further into debt also has an exponential growth like lending with loan to deposit ratio above 100%. With base slightly above 1 (i.e. 1% - 2% - 3% interest) it will increase at first slowly. But it is a time bomb as at some point it will start accelerating very rapidly.

The bankers’ bonuses are the ultimate insult. It is like paying a burglar for doing your home. Although emotive, it is financially of little significance to the system. In reality there is a risk of a complete break-up of the public finances as this taxpayers robbing scam is a pyramid which may reach a tipping point and collapse leaving the country with unrepayable debt. Then only hyperinflation, on a Weimar Republic or Zimbabwe scale, could balance the financial books of the country.