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?".

Wednesday, 12 October 2011

State investment bank and the European banks meltdown (in slow motion)

As reported on tonight BBC Newsnight, currently politicians and business leaders in the UK propose setting up a structure that would amount to a state investment bank. Originally it was called by the Chancellor of the Exchequer a "credit easing". This means that the government would be lending money directly to businesses bypassing the commercial banking system. Nearly three years ago the author of this blog wrote in the first article "The largest heist in history":

"Deposit accounts records, along with mortgage and genuine business accounts, would be moved to a specially created agency of the Bank of England which would honour them with government help. If a pension fund collapsed due to a bank collapse, individual pensioners would continue receiving their unchanged pensions from the social security system. This would guarantee social stability and a normal flow of cash into the economy."

Finally, years too late some politicians and experts have started realising the obvious: the 2008 crisis exposed the financial system as dysfunctional and that it did not serve the real economy anymore. Therefore any economic stimulus must not have gone through the banks, as it would never reach the business but instead would be consumed by the financial pyramid. A government help for businesses must be provided directly.

In the meantime the European banking system is facing a collapse. There is a talk in Eurozone of setting up a multi trillion euro rescue fund for the banks. But where is this money going to come from? The European countries are in debt to the extent that it prevents them being a source. (Otherwise any more debt will trigger credit rating downgrades and the confidence will collapse. This in turn will trigger another debt meltdown chain reaction.) And there is no other source. However Eurozone countries may still try. This would only prolong the agony and make inevitable collapse even more spectacular.

"If governments do not liquidate the global pyramid scheme, 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?"

was also stated in "The largest heist in history".

It is of no particular satisfaction to the author of this blog, in fact it is a rather sad reflection, that the process of the financial collapse that he predicted nearly three years ago is happening now. This process was easily avoidable if the decision-makers followed the recommendations described in "The largest heist in history" and refined in "Prime Minister, sort out this mess, please". Of course the particular events and their timing could not have been predicted. But the logic of the process or rather its result, the financial meltdown that is happening now, was trivial to anticipate and prevent. A multi trillion euro question is why the decision-makers did not act accordingly.


  1. "A multi trillion euro question is why the decision-makers did not act accordingly".

    There are times, Greg, when you really must despair... But it is always a mistake to expect more of people than they are able to give. These people are remarkable if only for their timidity and stupidity.

    As someone who is pretty sure that the CIA was behind Kennedy's assassination, I'm fairly sure that there is no conspiracy surrounding financial events today. Combine lack of common-sense with breathtaking hubris and fear and the results are pretty much a foregone conclusion.

    Thanks to your blog and a few others I have managed to educate myself as to what is going on and to see how things may develop. It's not pretty but my thanks anyway!

  2. Hi Caratacus

    I am always sceptical about, what's called, "conspiracy theory". A lot of things indeed happen by accident, or a collective trend. There are certain professionals that exploit their customers not because they "conspire" but they are typically very intelligent people with a high sense of their collective interest. Same applies to actions by many large companies: although you cannot legally prove they form a cartel, their business amounts effectively to the same. And really practically any business negotiations and contract amounts to a form of "conspiracy" (typically legal ones).

    The concept of "conspiracy theory" is more complex than their opponents and proponents usually happen to think. And quite often it is applied in a ridiculous way but equally it is also used to laugh off criminal conspiracy.

    With respect to the financial crisis, in my view, a lot of financiers on the top knew they were organising a pyramid scheme (i.e. committing a crime). They were not daft. Many financiers also did not have an idea about it being utterly incompetent but very useful to the financial brainy decision makers in the same way as child soldiers are useful to African warlords. And it suited them as they were given high income and status. This, in my view, resulted in a very high sense of self-interest. They have to defend the status quo.

    It happen to think that in the same way as communism could not have been reformed over 20 years ago and had to collapse, they same applies to the currently existing in the west degenerated form of free market capitalism (that has nothing to do anymore with free market or capitalism!). In both cases the reasons is the same: a) financial bankruptcy, i.e. the situation is financially unsustainable and b) it is impossible to change a self-serving culture built on the collective interest of the ruling elite.



  3. I'm beginning to wonder...

    In one sense, they're only throwing *money* down the drain. Perhaps they're not being stupid at all. Simply prescient!

  4. i'd find it far easier to believe that this financial scenario was not contrived, if the tax payers of the USA and the UK et al, had not been deluged by pre emptive attacks on civil liberties (particularly concerning the right/s to protest)in the years immediately prior to the balloon going up. And if the MSM were reporting this crime in any other way than they ALL are. At some point, what are apparent coincidences, may well reveal themselves to be significant cogs in a catastrophic plan. i shudder to think what the cog designers will use as a diversionary tactic if/when this point occurs and we turn on them.
    Oh, i nearly forgot; thanks so much Greg. The explanations in the comment section of "..the biggest heist.." helped my understanding enormously. Also, any news on the suggested power point/youtube teaching aid?
    All the best

  5. Hi Dave

    I sometime think that like any period in our civilisation the current one called "democracy" will also come be history too. What emerges out of it I have no clue. But being an optimist I hope it will be something better. However before that happens we may go through a bit of a havoc.

    And what would future historians say in 100 - 200 years time about the democracy? I think they will judge it as a system that developed throughout the 20th century as quite meritocratic. But towards the end of 20th century it got corrupted by politics driven by media and eventually degenerated into a system run by criminals who controlled a bunch of politicians, who frankly are, well, cretins. They have no clue but are controlled by financial criminals in the same way as African warlords have control over child soldiers. They satisfy their urges and give them feeling of status and importance. I think this will be seen in 100 - 200 years time as a historical reason for the collapse of what we know as western democracy now.

    This is a bit of a prophetic rant. I really worked out the mechanics of the current crisis and the rest are just thoughts. Thanks for suggesting preparing some tools (videos, presentations). I will try to do something about it. I think running a virtual workshop about money and how it works can be helpful.



  6. Hi Greg,

    i agree completely both with your 'rant' and your child soldier analogy. It is truly staggering that so much damage has been done by so few criminals in so short a time, simply by us taking our collective eye off of our own ball.

    Re: tools, there is a great site, that you may have heard of, called www.khanacademy.org that gives free video classes in a huge range of mathematics, and a more limited number of banking/money/finance, topics. Maybe, if you have time, you could take a look at the site and, as a de facto tool, direct readers as to which topics they should watch/learn (and perhaps in what order) to gain a complete understanding of the mechanics of the crime.

    As a possible alternative, should you be thinking of a short presentation, may i suggest you have a quick look at: www.youtube.com/user/marketplacevideos
    This guy's presentations, often on "too baffling for us mere tax payers to understand" financial topics are, to me at least, a revelation.

    i get the feeling that when people are armed with, and liberated by, a thorough understanding, they will quickly and confidently show others how to become similarly liberated. And so, another vector for the ugly, yet essential, truth emerges.
    IF we westerners can deal with this particular criminal attack on our democracy in such a way that those responsible are (against all the current odds) jailed and stripped of the proceeds of their crimes, we may yet save it from the ridicule of historians. People being armed with a thorough understanding is, i feel, a considerable stepping stone across that treacherous river. Any thoughts most welcome.

    All the best