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?".

Saturday, 17 April 2010

Just a start?...

Surely the recent news that US' Securities and Exchange Commission accused Goldman Sachs of fraud did not come to this blog readers as a surprise. The author of this blog argued for a long time that the financial industry is the hotbed of pathological behaviour: both in professional substance and in style.

At a time when the western world has been in deep in recession, banks were making "profits". Where could this "profit" come possibly from? Banks themselves are not creating directly any economic wealth. They are a service industry: if their clients, businesses and individuals, are not making money, how possibly banking industry keeps on making money. The only rational answer is that the financial system is in a pathological state: it is designed and set up to fleece the mainstream economy. The actual service provided is nothing more than a cover-up of thieving practices.

There still exists a myth of intellectual sophistication and professional complexity in finance. But, in fact, the industry strategies that amount to, by example, insuring a house before deliberately burning it down are not particularly sophisticated or complex. Rather primitive, dishonest and criminal. Incidentally whilst such strategies in the world of insurance are almost impossible (a role of insurance excess is to prevent that, i.e. that an insurance owner does not have a commercial interest in causing a damage), in the world of financial engineering it is possible to insure a prospective "loss" many times over (i.e. a perverse arrangement whereby a policy holder may have an interest in causing a damage in order to claim insurance exceeding the actual loss).

The SEC's move is good news and hopefully the start of the process of holding financial industry to account. There is no doubt that Goldman Sachs case is not even a tiny bit of the tip of the iceberg, measured in quadrillions of dollars, of what is happening in the world of high finance. It is promising that historically the US' authorities have a pretty good record on trying to root out the pathology from the economic free market. Hopefully Goldman Sachs case is just a good start that will lead to unravelling real causes and mechanics of the current financial crisis, the largest heist in history. As Brad Hintz of the US brokerage Bernstein said: "There is rising public appetite for punishment of the guilty parties that caused the credit crisis."

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