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, 21 January 2012

BBC defends financiers

Last Thursday BBC Newsnight broadcasted an analytical piece about the nature of capitalism.

The issues raised were profound: capitalism as a free market system with seemingly no alternative, "responsible" v "irresponsible capitalism" and so on. It was very insightful.

However all these issues were discussed in the context of the ongoing financial and economic crisis. It was presented as if the current financial mess was a result of a failed system, the current version of capitalism. The truth is much simpler. Indeed it is very basic.

In the same way as the economic system in Albania had nothing to do with the criminally-engineered pyramid schemes which collapsed and caused a huge financial mess in Albania in 1996 - 1997 but much more to do with pure fraud, the current financial mess and resulting the economic crisis have nothing to do with capitalism, socialism, "too greedy capitalism", "irresponsible capitalism" or any economic system or indeed any legal human behaviour. The current financial ills highlighted by the BBC are the result of a huge fraud engineered by the financial industry which is exactly the same mechanism as the one employed in Albania in 1996 - 1997, i.e. it is a pyramid scheme from both a technical and a legal standpoint.

To put this into a small business perspective: it would be the same as discovering a shop where all the money is being stolen from the till by thieving employees and discussing the management practises of a shop owner (the taxpayers for the banking system) or the greedy irresponsibility and the unethical behaviour of the thieving staff (the bankers). Such discussion is obviously important but in the case of our hypothetical situation the shop workers would have been prosecuted for theft. In the real, much more grave situation currently facing us, no-one has seen fit to prosecute the thieving shop workers. The dishonest behaviour continues, under the watching gaze of the powers that be and the public at large, with no-one seemingly aware that any kind of crime is being committed. If the justice system is to mean anything it cannot be more lenient to financiers than it is to ordinary shop assistants.

A discussion about capitalism v socialism, or "responsible capitalism" v "irresponsible capitalism" is generally important. Society will always be looking for an equilibrium that will give it prosperity. However with the BBC Newsnight broadcast, it was the context and timing that mattered. And in this context the discussion was not only vacuous but it was actually a smokescreen. It created an impression that the fraudulent criminal activities (in the technical and legal sense of these words) of the financial industry were not what they were but somehow a result of some systemic failure. The behaviour was maybe irresponsible, maybe immoral, maybe a result of greed, but not a crime. And here is the key to BBC propaganda: you can despise people for being greedy, unethical or irresponsible. They may even be considered as repulsive. But you cannot bring them to justice.

Therefore one cannot consider the programme as simple hogwash. It was in fact, very soft propaganda (therefore quite likely to be effective) which will help, the financial criminals who caused such damage to the economy and brought massive misery to millions, to escape justice. And the BBC seems to be doing a good job of doing this, evading a discussion of the most important historical event that is happening in front of our eyes, i.e. the liberal western democracy, as we know it, is on the ropes.


  1. This comment has been removed by a blog administrator.

    1. Comment removed: it was a duplicate of the comment below

  2. Dear Greg,

    A great article, as usual.

    This argument reminds me of Ian Hislops evidence re Phone Hacking by the Press, given recently to the Leveson enquiry. He pointed out that no new laws were necessary to prevent this disgraceful behaviour. All that is required is that existing laws, which are perfectly adequate for the purpose, be enforced! You rightly make the same point.

    Your article should be on the front page of every newspaper, and one would also expect it to be the subject of hot debate in Parliament (if one could summon up even an ounce of respect for its members and their like).

    Why is this not happening? It can only be one of two things.

    Firstly your viewpoint might be mistaken.

    Secondly it might be that those in power and influence are, for reasons of nothing other than self interest, fraudulently misrepresenting the true state of affairs, to reward themselves, and their friends, to not only mislead ordinary folk, but to make them feel that this disaster is their own fault.

    If the latter is the case then one can only concur with your final point, that "the liberal western democracy, as we know it, is on the ropes

  3. Hi mysavano,

    Thanks for your comment. If you like my blog, please spread the link to it around. And what else shall I say? Maybe check-up my other article, "The Economist's 'Save the City' campaign":


    "It may all sound a bit unsporting but after all, hey, we have democracy and free press, don't we?"

    Best, Greg

    PS. I do not rule out that my viewpoint is mistaken. (And, in a way, I really wish I am!) However the events of the last three - four years do not seem to suggest that this is the case.

  4. Then it would be possible to trace to a person or persons acting in concert to carry out this fraud.

    At the moment, it suggests that entities such as banks are the culprits. With many persona sitting on the board that yield lots of political clout and influence.. with the added complexities of intertwined financial products and links.. no one can even proceed to craft a charge or to serve that charge/accusation to a whole board.

    Except for your blogg.. no one else seem to want to point fingers.. let alone talk about the root cause of all this.. at least not now ( there were discussions earlier in the main stream media, but that has found a natural death )

    I suppose the main idea is to solve the problems first...rather than to convict a person or hold an entity responsible..

    Chicken or the egg first?

    1. Dear Ron

      Thanks for your comment. If you like my blog please spread the link to it around.

      You wrote: "Then it would be possible to trace to a person or persons acting in concert to carry out this fraud."

      Fraud is not necessarily done as a conspiracy. Lending with loan to deposit ratio greater than 100% is a fraud (a pyramid scheme) and this is sufficient to instigate criminal proceedings and prosecute for running a Ponzi scheme.

      Having said that some financiers behaved in a way that it appeared as if there were a conspiracy. However as a recent scientific research paper showed (https://www.technologyreview.com/blog/arxiv/27512/) - in the context of researching cartels - it is possible for humans to act as if they were conspiring without actually setting up an explicit conspiratory structures (or agree to conspire).

      Having said that I actually have little doubt that there is a lot of conspiracy going on in the financial sector. The City is legendary for that. Things like "pump and dump" trading "strategies" using insider information, donating shares with artificially inflated price to charities to claim tax and so on. Pretty primitive and basic. But, boy, they work. They made many millionaires in the square mile and only idiots and those who did not pay up the right people got caught.

      You also wrote: "I suppose the main idea is to solve the problems first...rather than to convict a person or hold an entity responsible.."

      Solving the current crisis in a technical way is the key. Please refer to:


      But a part of this is prosecuting people who set up the current fraudulent system. There is no vindictivness, anger or a cheap populist demand behind this recommendation. It is a propotionate and pragmatic approach. This is simply to serve as a deterrent. As I wrote in my old post: enforcing the law is the best regulator to help to prevent from getting into a financial mess again.


      In my view mass prosecution of the financiers (for example set up akin to Nuremberg Trials) would be far better than any regulations. In this context I advocate comprehensive deregulation of the financial industry. But it MUST be combined with personal financial liability and criminal responsibility of the financiers if things go wrong or fraud is committed.

      At the moment they want to have it both ways: little regulation and immunity from civil suit and criminal prosecution.

      Last but not least, and without undermining the argument of criminal behaviour, the current crisis shows - from governments to international organisations (e.g. IMF) to regulators to financial institutions - that the Swedish Count Axel Oxenstierna was right when he wrote to his son in 1648: "An nescis, mi fili, quantilla prudentia mundus regatur?" ("Do you not know, my son, with how little wisdom the world is governed?")

      Best, Greg

  5. Thanks Greg for telling it as it is.

    What I don’t understand, however, is why the government, which supposedly controls the printing presses and ruthlessly incarcerates anyone who forges banknotes, allowed the creation of money to pass out of its control into the hands of barrow boys.

    Wasn’t it Nathan Rothchild who said something to the effect that whoever controls the money controls the state?

    1. Hi Joe

      Thanks for your comment. If you like my blog please spread the link to it around.

      I consider your questions as rhetoric.

      Have a nice day. (There may be not many of them left that can be nice.)


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