It is time to face reality over global liquidity black hole

In his article in the FT, "It is time to face reality over Greece's debt", Nouriel Roubini makes a right diagnosis but it is simply too narrow and has been blatantly obvious since "the largest heist in history” came to light at the end of 2008. The global financial system has a massive liquidity black hole: hundreds of trillions or even quadrillions of dollars that resulted from a classic pyramid scheme, that the financial system was turned to, and organised by the financiers and regulators with a blessing of some politicians.

Roubini diagnosis that Greece cannot escape a default applies equally to the UK, US and the entire eurozone. It is only a matter of timing: first Greece then the US. The UK is bust already: yet no one is prepared to admit it: it is an open secret. So as the eurozone.

Roubini recommendations have a deep sinister aspect. If implemented they will mean that having saved the banks, the taxpayers will keep on paying to these banks practically forever. And as before the money will be taken out of them by private "investors" who will pay the bankers handsomely for running such a scam. This "investors'" and bankers’ dream is taxpayers (and their children and grandchildren and grandgrandchildren and …) nightmare. It is a classic relationship of a loan shark and his victim.

Nevertheless there is a solution. World best option is an orderly default. It should take a form of global orderly write downs akin to the US Chapter 11 approach in the private business. This was elaborated in "Prime Minister, sort out this mess, please". It applies equally to the UK as the rest of the financial world that suffers from the liquidity hole. And a new ways of recouping taxpayers money should be considered (and eventually introduced). For example, taxing all money transfers, say 80% - 90%, to and from offshore financial centres (and of course to and from any country that does not sign up to such an arrangement). Such a deal would have to apportion the proceeds from such tax (so no country can be privileged as an offshore banking gateway) and could be used to plug the global liquidity hole.

The world is in the midst of an unprecedented crisis which is moving from country to country. The sheer scale of it, just numbers, makes it completely unsolvable using standard approach: i.e. let’s make taxpayers pick up the bill. It is simply too big for that. This is beyond any moral issues of massive wealth transfer (i.e. theft) from the middle classes to the very rich. Communism for the rich has triumphed. But let's hope that it will be defeated like its more sophisticated Soviet predecessor.

A nightmare round the corner?

With the current budget the Chancellor paved a way to the UK rating being downgraded soon. Do not be misled by the reaction of the guild market today. Before it the UK was so much in debt that it could not have been downgraded (as should have if ratings were honest measures of the market) as it would simply not pay (and the whole rating system would have been undermined). Now as the Chancellor made a lot of savings thereby creating a capacity for the government to borrow and spend more, the so called financial markets (i.e. bankers) will come back and ask the taxpayers to share it. To get it the UK rating looks likely to be reduced. It will not happen instantly and some pretext will be used.

The taxpayers must watch how much of their hard saved and paid money to the Exchequer, thanks to the Chancellor current budget, will result in the UK debt reduction and how much will be siphoned off to the banks to keep funding on-going salaries and bonus bonanza there and to keep on supporting the financial pyramid that the financial system has become. This is the way the relationship between banks and taxpayers has become akin to loan sharks and their victims.

Prime Minister, sort out this mess, please

Over the last week in Britain there has been a parliamentary festival "what to do with the public debt". The government is arguing that it must cut the public debt very quickly, and harshly, or otherwise the UK will lose its credibility to the markets, its rating will go down and costs of servicing the debt will eventually skyrocket. The opposition is putting their point across that if the public spending is cut then the economy will not get a necessary investment in order to guarantee future tax receipts that will eventually bring the public debt down. It is an argument between "cut and save" now and "spend, invest and earn more". There are merits to both arguments: but they are both missing the point how to solve the existing financial mess that the last Labour government financially engineered for the UK.

Let us deal with credit rating, and its possible downgrade, for the UK. Originally when credit ratings were invented some years ago they were meant to be an objective tool of assessing the risk of default of a debtor. As long as they were done by creditors, at no conflict of interest situation, they played their objective role.

In the last decade or so, the sense of credit rating has changed. The financial institutions that were selling the financial products (thereby getting into debt themselves) started commissioning the ratings for their own products. The higher the rating the lower the costs of the debt. Ultimately many products that were clearly of no value whatsoever were sold with the highest possible credit rating. Credit rating does not mean any more what it used to mean. Now it is a crude tool used by the financial players to make money and very frequently it has nothing to do with the underlying credit worthiness.

The current public debt has to be seen against this backdrop and the fact that the banks are still full of the financial instruments which they cannot cash on the open market. The massive UK debt means that the government is unable to borrow any more money and pump into the banks. If the banks executive turned up now on the Number 10 doorstep and requested yet another cash injection into the financial system, like they did in September 2008, for example in order to prop up massive bonus schemes for the bankers, they would have had to be turned down. The government simply would not be able to hand over more money. But the bankers need it so they are not going to give up easily.

Now the credit rating is used. The UK is threatened by the financial institutions that unless it cuts its pubic debt its rating would go down and the costs of debt servicing would increase thereby increasing the annul spending by the government. There is nothing far more from the truth. If the rating were cut and the debt could not be serviced, then the government would have to take emergency steps and the banks would not get any more money. The whole Greece saga only happened because the banks assessed that there would be a bailout. If there had not they would not have done anything as they would not gain anything by putting a pressure on Greece. This is a rational economic behaviour. Now they try the same basic crude method with Spain and are testing the ground with the UK.

However the game with the UK is a bit different. The financiers know they cannot risk bringing UK economy down. In fact they are unable to do so as the government would have introduced emergency measures to prevent it, and many financial institutions would have come out as losers from it. So using a crude tool of "credit rating" (which has nothing to do with real credit rating) they are trying to force the UK government to cut the debt, thereby increasing the government capacity to borrow more – at the taxpayers’ costs – in the future. Once the government makes all the big savings, of hundreds of billions of pounds or more, cutting many public services and making everyone feel it, the bankers are very likely to turn up again at Number 10 doorstep with begs of toxic waste that remains in the system and will demand another bailout (or else the banking system will collapse). At that point it will be too late. Like Gordon Brown, David Cameron will have little choice but to cough up another few hundreds of billions to the bankers. All those money saved by savage public spending cuts.

However as there is more than one way to skin a cat (sorry, taxpayers), the process of the bankers skinning (again) the taxpayers may actually be not that conspicuous as asking for another multi billion rescue package. It may also take a form of continuous dripping of money from the Exchequer into the banks (by, for example, so called market operations). In which case we will never see any savings made and the pundits who tend to protect the bankers are likely to comment that even the savings were not sufficient to reduce the public debt. They are also likely to peddle a nonsense how much worse it would be if the cuts were not done.

These scenarios and their mechanisms were presented in the first article of this blog, "The largest heist in history" over a year ago. It is astounding that neither the government nor the opposition, then and now, can foresee such glaringly obvious very high risk scenario.

What could and should the government do to bring to order the financial system that became a vampire squid on the face of taxpayers? How can the government remove a risk of taxpayers being treated by the financial industry in the same way as loan sharks treat their victims? It is not a rocket science. There is a basic five point action plan that deals holistically with the current crisis: resolves the current mess and prevents it from happening in the future.

1. Banks must be broken up so none of them is "too big to fail".

As explained before on this blog a "too big to fail" bank enjoys free insurance against failure. This is anti-competitive and is also a continuous burden on public finances by carrying risked costs of the potential failure, hence this is a free public subsidy. For both reasons such behaviour is completely unacceptable under free market rules and should be, if it is not already, made illegal.


2. Separation of high street consumer banking from investment banking.

In the process of breaking up the banks into businesses each of which is not "too big to fail" consumers banking, typical high street deposit and lending activities must be separated from the high risk investment banking. Under Glass-Steagall Act there has been such a rule and it worked for over half a century. It did not take even a decade after it was repelled and we ended up in the current crisis. Therefore whilst theoretically it may not be necessary, the experience strongly indicates that it is a good practice to separate high street consumer banking from investment banking.


3. Deleveraging of the financial system and write downs of toxic waste (i.e. liquidation of the financial pyramid).

As Mr Will Hutton observed on the Dispatches programme last Monday, the banks leverage is around 50. I.e. around £50 of banks liabilities are covered by £1 real cash. Such leverage is unsustainable. A typical sustainable leverage is 5 – 10, 10 only in times of good market confidence. Therefore between 80% - 90% of so called assets are simply toxic waste. The financial assets must be ring-fenced and the proper orderly process of write downs must be done. The aim of this process is to reduce the leverage to a sustainable level between 5 – 10.

The crux of solving the current crisis is the reduction of unsustainable leverage (50 or more) to a sustainable level (5 - 10) and who are going to be losers of this process.

As there will be losers: i.e. people and companies whose assets will be destined to be written down, the government must find a way to deal with it in form of providing a limited security. The ultimate test of the government guarantees and how they are discharged should be of a public interest. For example if a pension fund goes bust as a result of such assets write downs and ultimately the pensioners are the losers, the government must consider taking over a liability for these pensions (at a level, e.g. 50% or 80%, that it can afford or with a possible cap). Another example is if a bank goes bust. Then the government, through one of the nationalised banks would take over accounts and operations and guarantees individuals and businesses their interest. This will no doubt require some government spending but it is likely to be far cheaper than propping up the entire system with no limits as is happening now. Any new government stimulus package that may be necessary will not end up in the financial institutions black hole of toxic waste but in a newly healed banking system, as described in this point and two proceeding points. The banks will not have a problem to start lending again as they will not have an issue of dealing with massively excessive historical leverage. The losers of such operations whose assets were ring-fenced to be written down will be able to resort to private litigation against all those individuals (bankers, regulators) who brought such misery on them.

There is nothing unusual in this step: write downs are typical actions in corporate restructuring and recovery. However in case of the financial industry it is the sheer unprecedented global scale that is daunting. In that respect banks that hang on to bogus assets, which are in fact toxic waste that should have been written down or significantly valued down, and present them as genuine assets on their books, are no different in their accounting practices from Enron. Whilst Enron was using such "creative" approach to extort money from the banks and private investors, banks are extorting money from the taxpayers. Hence banks must be dealt with as decisively as Enron was: it is far better to pick up the pieces now than to allow such a scam to keep on growing.


4. Setting up an effective deterrant against a future crisis happening (i.e. prosecuting the fraudsters).

This crisis is a result of a massive pyramid scheme whose fraudulent mechanism has been lending with loan to deposit ratio greater than 100%. As it has been argued already on this blog, the financiers, bankers, regulators and some politicians that engineered or are responsible in any other way for this financial crisis must be prosecuted. They must end up in jail and their wealth (or any wealth that was "generated" by them as a result of this crisis) must be confiscated. This is not only a basics fairness, the scammers and fraudsters are not allowed to get away with their crimes and spoils of their crimes, but it will help to fund any compensation resulting from the assets write downs as described in point 3 above. Ultimately there is no better way of preventing the next crisis than prosecuting perpetrators of the current one. Enforcing the law is the best regulator.


5. Reducing the public debt.

The last point will be reconciling the public debt against what is recovered from the scammers, as described in point 4 immediately above, and also against any liabilities of the institutions to the government that resulted from orderly dealing with assets ring fencing and write downs as described in point 3 above. For example if the government owes debt to an investor (e.g. bank, financial institution) but at the same time due to a write down (as described in step 3) such an investor ends up owning money to the government (directly or indirectly, e.g. pensioners, individuals, businesses who lost in such write down and were taken care of by the government), then the government subtracts such write down from its debt to the investor. This is likely to reduce the government debt, possibly quite significantly: it seems that a good portion of a near trillion pounds rescue package can be offset against the government debt. And only then if it is not enough the government must do necessary cuts in public spending to balance the books and bring public finances into black.


Desperate times call for well-thought through measures.

Disappointment or hope?

Future of Banking Commission produced the report with very sound and thought-through recommendations: the banks cannot be too big fail and separation of risky investment structures from safe deposit banking. There are other sound recommendations. However, what striking is, that is all so obvious. It begs a question why such basic and trivial rules were not observed in the first instance.

Importantly the report does not recommend prosecuting of all those who engineered the current financial crisis. Bankers, regulators and some politicians. This crisis is a result of a giant global pyramid scheme, the same in its structure and mechanism as in Albania in 1996 – 1997.

The circumstances of producing the Future of Banking Commission report reminds a situation of a neighbourhood where houses were notoriously robbed. Its association established a commission and came to a conclusion that houses needed to have a secure lock fitted. Well, done. However such report did not conclude that the Police should be informed and the thieves must be pursued, caught and prosecuted. Languish years in jail and their wealth confiscated to compensate their victims.

This blog has long argued that enforcing law is the best regulator. The Future of Banking Commission report shows three points. Firstly the politicians, and official authorities, are clearly way out of their depth in dealing with the current financial crisis: present the glaring obvious as some kind of achievement. Secondly the establishment has realised, as Mr David Davis put it on today's Andrew Marr Show, that "if we don't do something, next time [a crisis] happens it will break the country - it will go bankrupt". He confirmed the obvious that the scale of the ongoing financial crisis is enormous. Thirdly, by not recommending pursuing and prosecuting all those who caused the current crisis, the establishment is trying to protect them (as they are part of it).

Or maybe our democratically elected representatives will come to the last point later. Albanian government was prepared to prosecute the scammers. Let's hope that our government will live up to the same standards of probity and integrity.

Comment to: To the Chancellor: UK ain't Canada

For all those who know my blog the comments below should not come as novelty, but it is worth repeating:

1. The banks should be broken up into business units of a size that NONE of them is too big to fail. Any business entity that is or is allowed to become too big to fail enjoys a free survival insurance at the costs to the taxpayers. Not only is this unfair on taxpayers (it is in fact extortion of money through the back door) but it is discriminatory to entities which are not too big to fail. I.e. under the EU rules it a monopolistic and uncompetitive practice which is banned. Hence it begs a question why the authorities allow such illegal practices to exist in the financial sector? Stupidity? Corruption?

For clarity, the current crisis is not a failure of free market rules. It is a result of breaking them and substituting them with communist-like ideology (communism for the rich that is). It is an absolute scandal that the financial sector is run by people who implemented the worst of the communist practices straight from ailing Brezhnev era. The banking communists are the new working class of the 21st century: they successfully executed a revolution of robbing mid-income people and redistributed the spoils to the fabulously rich, making them even richer. Even Soviet communism in its heyday was not that economically perverse.

2. We do not know (and indeed HM Treasury does not know) whether the bailout support the banks got, £850 billion, plugged the liquidity whole. At present it is clear that not more than £70 billion is possible to be recovered by the Treasury and the costs of bailout money is accumulating. Strong signs are that the liquidity hole still exists and may be absolutely massive (possibly even going into quadrillions of dollars globally, and the UK share of it may be huge). Therefore it is likely, above moderate, that the financial institutions in the UK will come to the government for hundreds of billions pounds of more money. (Please note that Greece bailout is in fact a bailout of private banks that lent Greece money.)

3. The basic, intuitive, risk analysis points that the chances of banks asking for hundreds of billions of pounds in form of a new bailout (again) is currently moderate but likely, 3+ (on a classic 1 (min) - 5 (max) scale) but the severity of it is massive, 5 (on the same scale). Hence the overall risk profile - on 1 to 5 scale - is 4+: this is a lot! This means high alert. Just below: imminent. This analysis is intuitive and not mathematically strict. But it is not an argument to ignore it but to prompt the Chancellor to instigate a detailed risk examination.

For the reasons above, whilst the government savings which look reasonable now may turn out to be foolish and for the benefit of the financial sector shafting the taxpayers big time again. How about that?

To the Chancellor: UK ain't Canada

On 6 June 2010 The Daily Telegraph reported that the British Chancellor of the Exchequer planned spending cuts that would be similar to Canadian ones in mid-1990's. These were the very savage cuts of public spending: 20% a year for three years.

Below is a word of caution that the Chancellor is unlikely to get either from the mainstream media or his political friends (and foes).

Canada had to cut its budget deficit because its government overspent on typical public services. The country lived, for some time, beyond its means. Hence its debt had to be repaid and adjusted to an affordable level one way or another.

British budget deficit, in its vast bulk, is of completely different nature. It resulted from the government actions to save the financial institutions at the end of 2008. Although the British government has been spending too much for quite some years on the public services, it were the banks' rescue packages, stimulus packages that were used to plug the financial sector liquidity hole that make up for a vast bulk of the current budget deficit. We are not in debt because we spent too much on schools and hospitals but because we spent absolutely unbelievably extortionate amounts of monies on financial institutions (or, as Gordon Brown said, to "save the world").

As the author of this blog was officially informed (in writing) by HM Treasury, the government does not know the size of the liquidity hole in the financial system. Therefore it does not know how much (if any) more money (billions, trillions?, of pounds) it is still likely to pump into the financial system to assure the liquidity.

Therefore it is reasonably likely that, having completed a serious of savage cut, Canadian-style, the government will save, say, a couple of hundred billions of pounds. Possibly more. At that time, once the financial industry realises that the government liquidity ratio has improved, another liquidity crisis will crop up in the banking industry. And all the monies that government saved, putting a lot of ordinary folk in hardship, will be used to "save the world" again.

The government, hence the taxpayers, will end up back in square one, with the same massive budget deficit as now (or more), but living under massive austerity spending measures. It is quite clear that this is exactly the same mechanism as loan sharks operate, whose victims are squeezed for every penny. In this case the loan sharks is the financial industry who use the government to squeeze the taxpayers for every penny.

The British Chancellor of the Exchequer should be well advised that before he contemplates any cuts, he has to ensure that the financial industry's liabilities (current, potential or future) are completely isolated from the taxpayers. I.e. that, by legal and other arrangements, the government is prohibited from bailing out any financial institution. Otherwise all the savings, done at the huge costs to the taxpayers, destroying lives of many of them, are likely to become savings that, once again, will be pumped into the financial industry like at the end of 2008.

A short tale about a Bailiff and a Good Man (or a brief history of the current financial crisis)

Once upon a time, in a village, a Bailiff lived. He was irresponsible, greedy and whilst he was good in collecting other people's money he was not that that good in managing his business. So the Bailiff himself ended up in a deep, deep debt.

In the same village, at the time, a Good Man also lived. The Bailiff pleaded with the Good Man:

- please lend me some money, a lot of money or otherwise I will go bust. And if I go bust then the whole village will go bust as the debtors will be able not to pay their debt. You have to save me, you have to "save the world".

The Good Man was a… good man. Just that. Not necessarily wise. He turned to Bailiff's friends in the village for advice. They all told him:

- you must help the Bailiff or otherwise our village will collapse. You must "save the world".

The Good Man was not wise. That's why he was not rich either. A simple hardworking man. He did not have his money to lend. So he went to a local Bank. He put all his possessions, all what he earned and inherited, as security. He pleaded all his future income. He borrowed as much as he could. He invested them in the Bailiff's business. That was just enough for a short time as the Bailiff's debt was so huge. The Good Man was even proud and bragged that he "saved the world". But only just and for a short time.

In the meantime the Bailiff was paying himself a handsome salary. The Good Man, being under pressure from his family, inquired whether he could get more in repayments. He also suggested that it was rather unreasonable for the Bailiff to pay himself so much whilst he was in debt.

The Bailiff said to the Good Man:

- you are paying for my great talent as a bailiff. This talent is worth all that and more. If I have to stop paying myself that much I would leave the village and will find a job somewhere else. And the village will collapse.

Being not that wise, rather too optimistic about his income and having underestimated his financial commitments, the Good Man overborrowed. The Bank realised that he would not be able to pay back his debt. The Bank eventually got very anxious and decided to sell the Good Man's debt to a local Loan Shark. The Loan Shark, who knew all the tricks of the trade, decided to make a mint out of the Good Man. That's a loan sharks’ business after all. He started sending demands to the Good Man, making him pay as much as he could. And more. The Good Man was starving. His family was starving. And paying. But his debt kept on increasing with penalties for late payments, additional sky-high interest, administrative charges, etc.

To enforce his "rights" and collect as much money as possible from the Good Man the Loan Shark hired… the Bailiff. And the Bailiff was thriving proving to be a man of many talents indeed.

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For those who still not get it:

1. The Bailiff are the financiers and bankers (especially investment bankers).

2. The Good Man are taxpayers (represented by our democratically elected governments).

3. Friends of the Bailiff are all kind of consultants and advisors that work for governments.

4. The Bank are the financial markets.

5. The Loan Shark are the hedge funds, offshore funds and many shadow banking institutions.

6. The Good Man investment in a Bailiff's business is called "stimulus package".

7. The Good Man costs cutting and saving to repay the loan to the Loan Shark is called "austerity package".

… and so on.

Kill your saviour: currencies' crisis is looming

In February this year [2010] the author of this blog wrote a report which was commissioned by an organisation of sovereign wealth funds, "Money Multiplier effect on currency risk" ^*. The conclusion was inescapable at that time, which was well before the Greek crisis. The currencies of countries which are heavily in debt are facing realistic to high risk of collapse. This was true especially with respect to eurozone which was (and still is) facing a break-up or major realignment. The US dollar is not much on the radar but does not look much better. Since then German Chancellor, Angela Merkel, confirmed "The euro is in danger".

The global pyramid scheme which was engineered by bankers and financiers (with help and blessing of regulators and some politicians: how are you Mr Gordon Brown?) resulted in a very high Money Multiplier. I.e. $1 (£1, €1) real cash has to service to many dollars (pounds, euros) of liabilities on banks balance sheets. This resulted in ongoing liquidity crisis. Governments "rescued" the banks by pumping cash (and cash guarantees) into them thereby putting economies heavily in debt to a tune, globally, of trillions of dollars. However this has been only a temporary reprieve since it covered only a very tiny portion of banks liabilities (especially toxic papers on their books). Although Money Multiplier was reduced (i.e. improved) as described in "The largest heist in history" the improvement was insignificant and, very likely, it has grown since then. This put the economies into a deep financial trouble. Now chickens are coming home to roost: as predicted at the time (end of 2008) rather than curing the problem in the private financial sector, governments decided to buy their time by spreading it and making it much worse dragging taxpayers (and future generations of taxpayers) into it.

To repeat the advice from the end of 2008: "If governments do not liquidate the global pyramid scheme [as explained in this article what it was but primarily write offs of many financial instruments and liabilities of so-called "casino" banking], the money they injected will be, in time, converted into toxic instruments (e.g. securities) and cashed in by organisers and privileged customers of these schemes (or in the case of Albania, gangsters and their customer friends). As the amount injected is around 200 times less than the notional value of toxic instruments, the economy will not even see a difference. It will be a step back to September 2008, only now with trillions of dollars of taxpayers' money spent to sustain the pyramid scheme. It will be merely throwing good money after bad. But can governments afford to come up again with the same amount money and do it 200 times over or more? This is based on a very optimistic assumption that the notional value of toxic instruments is not increasing. If governments take the route of continuing to inject money, they will make taxpayers dependant on the financial system in the same way that criminal loan sharks control their customers — their debt is ever increasing and customers keep on paying forever as much as it is possible to extract from them."

The ongoing liquidity (banking) crisis and the sovereign debt crisis, that just blew up, are two sides of the same coin: much too high Money Multiplier, or in simpler terms the global financial pyramid is simply too huge and keeps collapsing.

There is a perverse, sinister side of this process: the very same bankers and financiers whose institutions (i.e. the vehicles of their actions and source of rather exuberant income; this must not be confused with proper ownership, shareholding) were saved from spectacular collapse with "stimulus packages" are now using their institutions, saved by taxpayers' money, and taxpayers' money to attack the budgets of governments (i.e. taxpayers). Kill your saviour if you have an opportunity to do so and it brings you benefits: it is a free market version of an old rule "dog-eat-dog". In fact a prediction made on this blog over a year ago that the financial system – society relationship would turn into a relationship akin to loan sharks and their victims has materialised. As it is taxpayers, and their children, have to keep on paying ever more, as much as they possibly can, with no hope of any recovery. This is called "austerity packages". Loan sharks developed such ideas for their victims in the past and now the mainstream financial industry has learnt such methods and is scaling it up to encompass entire economies. This was a predicted result of "stimulus packages" exposing governments as weak, incompetent and corrupt.

The next step on this path is very likely to be a currency crisis. We already see its beginning with euro. The US dollar will also not escape a reality check. But as pointed out in April 2009 in an article "A US way out?" this make take some time and end up in a somewhat unorthodox solution.

There is only one way out: a combination to a greater or lesser degree of the two processes:

- Zimbabwe way: inflating this crisis out (printing money will reduce Money Multiplier by increasing the volume of cash available to satisfy liabilities on banks balance sheets);

- Chapter 11 way: write offs of liabilities on banks and countries balance sheets (removing liabilities on banks and countries balance sheets will reduce Money Multiplier by reducing the size of liabilities that cash available has to satisfy): an extreme form of such scenario, which is quite likely, was presented over a year ago in a short article mentioned above "A US way out?".

(And of course banks must be banned from recreating the same problem again, for example by lending with loan to deposit ratio above 100%. This is all on this blog: a bit complicated for a paragraph of explanations here.)

From banks liquidity crisis and banking collapse to sovereign debt crisis to currency crisis. These are the stops on the same path: a collapse of the global financial pyramid scheme engineered by the financial world (or technically a result of much too high Money Multiplier). The Great Depression that started in October 1929 reached its grand finale in 1939 with the World War Two. Whether the end of the current crisis will be as dramatic and "spectacular" time will tell. But there is very little to feel optimistic since politicians live in a state of denial and do not tackle the root cause of the current situation. Well, they are unlikely to have a clue about it.

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^* If you would like to obtain a complete copy of this report published by Arab Financial Forum titled ”Sovereign Wealth Funds – Where Are They Going?”, please send a request to Arab Financial Forum Secretariat: info@meconsult.co.uk