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, 30 November 2011

Strategic thinking void

When the incoming UK government announced severe cuts and tax rises all group were affected, including the police. Yet with such cuts and tax hikes it is rather obvious - no benefit of hindsight needed - to realise that strikes and public unrest are very likely. When Margaret Thatcher decided to take carry out deep reforms over 30 years she excluded from cuts the police. In fact she improved the police terms and conditions of their employment. Incidentally a few weeks ago the Poland's government showed the same approach to reforms: giving a rather raw deal to almost everybody but improving the police's.

So there was little surprise that when the looting erupted in London and other towns last summer, the police was quite apathetic to react. It looked almost ostentatious as if they were taking their time. As a result the scale of disorder might even surprised the police but it proved a vital point to the government. The point was that the police was important and they better thought twice before they made any further cuts. It is unlikely that it was the police officers conspiracy. It looked it was a manifestation of self-defence, that may got out of hand a bit.

Now the government is making yet another mistake. It is going into confrontation with trade unions. Historically strike were very unpopular in Britain and the public tend to blame the striking folk more than the government for the inconvenience. But this approach was a result of a judgement on the situation that to many in the society seemed fair. In the past the strikers had a good deal and generally were living on the state subsidies, like heavy industry workers over 30 years ago. This stereotype was later transferred onto all public sector workers.

But times changed. No the group that is now being subsidised heavily and most is the financial industry. All taxpayers have to chip in to subsidise the City to much higher degree than heavy industry 3 - 4 decades ago. And the remuneration of financiers is much higher than of the heavy industry workers. The public sector finances are in such a huge mess because the government has to over borrow in order keep the banks afloat. This all is a source of protest amongst all those who are affected by the government spending cuts and tax rises. "We are all in it together" apart from the financial industry who can only carry on their old ways doing business due to the fact that "we are all in it together" keep subsidising them.

Therefore now the public is likely to have a lot of sympathy for the workers going on strike. And it is an irony that trade union are actually fighting for more free market, i.e. cutting subsidies to the financial sector. The striking workers do not want anything more. They want to keep what they have got which, compared to heavily subsidised financial industry, is not that much. The government is likely to make a misjudgement: ordinary taxpayers are likely to accept the strikes as a protest against them subsiding the financial industry. And this can only fuel even more unrest and make other groups join in.

With disaffected unemployed youth that have little prospects as even they find the job they will have to start paying taxes to subsidise the financial industry, not exactly happy police, radicalised trade unionists and public sector workers and the general public who frankly have enough to keep subsidising the banks, the government should think of contingencies for a long period of discontent. Cynics say that some already are ready for it: resign and join the City (i.e. continue to live at taxpayers expense).

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