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, 26 January 2010

Stiglitz: ”US does not have capitalism now”

One is tempted to say: has it not been obvious, Professor Stiglitz for at least a year? You can say it again. However the fact that such a well-known and respected economist says it, confirming that the current crisis is not a failure of capitalism as we do not have capitalism, leads to conclusion that basic rules of free market were broken. A breach of such rules is at best a wrongdoing at worst a crime.

Professor Stiglitz makes also, implicitly, a very important point. Many, including top experts, pointed out to the Author of this blog, that the banks have not been operating a pyramid scheme since in a pyramid scheme the beneficiaries would normally be its originators high up its chain. Whilst this is only an intuitive argument, generally it makes sense. However the banks suffered heavy loses and were not beneficiaries at all. Therefore banks were not operating such a scheme.

Professor Stiglitz, implicitly, points out a difference, even a separation and conflict, between bankers and banks. So whilst the banks (or rather their shareholders) suffered heavy losses, bankers who run the banks and were up the pyramid chain, extracted and are still extracting their profits through remuneration and also by being "sophisticated" investors in a pyramid themselves. Banks, as institutions, were not originators of a pyramid scheme. Bankers were such originators turning the banks into their tools of running a pyramid scheme.

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