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, 13 June 2010

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.


  1. Ever thought of leading the charge Greg?

  2. "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)."

    This is the point I made about six months ago. We will not see any prosecutions. It will happen again. They (the bankers) will continue to get away with it because it is in the interests of those running the legal/political system that they do. Why would they prosecute the people that have been providing them with billions in profits from rigged property investment?. As I wrote before, the whole system is corrupt and the current Government are just as involved as the previous. A radical departure is needed which will not be provided by those with vested interests in maintaining the pyramid scheme upright for as long as they can.

  3. Hi Simone and readein

    I am doing my bit by running the blog. I have also made my MP aware of my views. I am not revolutionary and revolutions lead to even more mess. I strongly suggest that everyone who shares such views writes to his/her MP in the strongest possible terms. It does not have to be a long letter. It can basically make reference to my blog (or quote it).

    I am certain that if the MP's get hundreds of thousands of letters requesting prosecution of the financiers or else will be voted out, they will pay an attention. I assure you this crisis will not be over by the next elections. If anything it will get worse.



  4. It annoys me when you read in reports like this that state we are emerging from the financial crisis. In my opinion we only emerge from it once we start paying our debts back. Until we do that the crisis will continue and the risk of a fiscal crisis (like Greece) remains. That means making savings of 156bn per year and having a stable economy at the end of it. Anyone who thinks we are emerging from the crisis is either blind or stupid. Hardly anyone has been hit yet by austerity measures.

  5. Hi mike,

    I agree. We are not emerging from the financial crisis. In fact we have not even half a way down.

    You should observe a certain sequence of events:

    1. When the financial crisis started the governments rather than making cuts they increased the debt burden in order to pump money into the financial industry.

    2. However the financial industry remains still filled with toxic waste and bankers want to cash it. So now governments started making money in order to save them. Once they do it they bankers will cause another liquidity collapse in order to force the governments to pump even more cash into financial institutions.

    3. As a lot of toxic waste will still remain with the banks this process will have no end until something radical is done: i.e. the banks toxic waste is separated from the taxpayers and banks are allowed to fails (and if that happens bankers who caused it must face justice).



    2. Now the fina

  6. Greg,
    Perhaps you could explain a point which puzzles me. I agree with you about the proposition that the current financial system operates as a Ponzi scheme. However, in my opinion the 'debt crisis' is being used to force through an agenda of privatisation, deregulation and spending cuts that will benefit the financial sector and certain corporate interests at the expense of the rest of society.

    The mechanism through which this is achieved, and scores of historical precedents, are well documented by Naomi Klein in her "Shock Doctrine" volume, amongst others. My question is, whether the UK (and USA) can use their powers as sovereign and monopoly issuers of their currencies to meet any debt obligations that are denominated in their own currencies.

    If so, there is no debt crisis in the sense of sovereign debt default, which is the spectre being propmoted in the media at the moment. Though there may still be one in terms of the problems caused by debt deflation, which is not.

    I would be grateful to hear your views on this matter. Our public sector debt stock is not high by historical standards (nearing 100% of GDP). After WW2 it was over 200% of GDP, in common with many other European countries. Japan also maintains this kind of level of public debt stock, and has done for many years, without a Day of Reckoning transpiring. Like us, and unlike Greece, it is the sovereign and monopoly issuer of its currency.


  7. I choose "Disappointment". Going by Simon Johnson's assessment, we're still in the "hot potato" portion of the crisis, in which the bankers all try to duck the inevitable crash hoping that someone else will have to shoulder the blame and subsequent financial annihilation. (Cue old Family Circus cartoon with all of the Not-Me's and I-Dunno's running around.)

    By the way, here is an article on the Mises blog that sort of supports your stand, albeit in a restrained manner, on the issue of fractional reserve: http://mises.org/daily/4499

  8. Hi Nick

    I think your question is tantamount to a question in whose name the politicians, our democratically elected representatives govern? Us or the financial fraudsters who are looking for every penny they can strip the taxpayers off and more.

    It seems to me (e.g. government - City revolving doors) that the politicians are doing all their best to create a rather crude impression they govern in our interest whilst in reality making sure that the financial fraudsters are doing OK. Strong words, but not emotive. Harsh reality that we have to face and be prepared to deal with it.



  9. Greg

    Your financial blog is without doubt the best on the internet.

  10. Hi Robert

    Thanks for your good words. Please spread the link to my blog around if you think it is worth it.

    Comments like yours are really good encouragement to keep going with the blog. (I am not a natural blogger, so it is some effort for me rather than a natural way of expressing myself.)



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