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, 22 August 2012

Greg Pytel: Still out of their depth

In the wake of the completely predictable - but for some reason considered by the mainstream media and politicians as "unexpected" - news that the UK government's tax receipts dipped last July, BBC Newsnight held a discussion between Jon Moulton and Jonathan Portes moderated by Gavin Esler proceeded by analytical material. Whilst Jon Molton was advocating further cuts in public spending to revive the economy, Jonathan Portes argued for more spending at the moment (and possible spending cuts later once the economy picks up). At one point Mr Molton concluded that the UK government did not have any other choice: either cut or increase public spending. Messrs Portes and Esler implicitly agreed.

As it has been shown in the articles on this blog the current economic situation was caused by the financial industry which was turned into a global pyramid scheme. The spending cuts would not revive the economy as any spending cuts would immediately start choking off the economy at the time when banks do not lend to businesses and are not in a position to do so. More government spending, Keynesian approach, would not work either as the additional spending would be stolen by the financial institutions and used as a part of propping up a pyramid scheme. This additional government spending would be converted into toxic waste held by the banks. One way or another it is the same net effect: no growth of the economy.

The discussion on BBC Newsnight showed, again, the nature of the current economic crisis. It showed that those who comment on it or deal with it are completely out of their depth. They are simply confused: Mr Moulton's alternative - cut or increase public spending - is a vacuous argument.

For years it has been argued on this blog that the very first step of any remedial action taken by the government to revive the economy, be it spending cuts or more spending, must be the liquidation of the pyramid scheme run by the financial institutions. Otherwise, one way or another, it will always be a good money thrown after bad, exactly what we see since 2008.

Thursday, 9 August 2012

Greg Pytel: Disturbing news

Standard Chartered has been accused by the US authorities of busting the US sanctions against Iran by aiding the Iranian financial transactions in the US dollar. Is it a disturbing news? Not really, as expected and we can expect more news of this kind about the financial institutions in the future.

The Bank of England downgraded the growth forecast to 0% (no growth), from 2% growth predicted a year ago, for the year 2012. Is it a disturbing news? Not really, as expected and - considering the way the economy is run at the moment - it is unrealistic to expect any good news any time soon. People should get real and accept that the way the government manages the economy is precisely designed to produce such results. This is the fact, this is how it works, not a rhetorical statement.

The government's Funding for Lending initiative is initially expected to lend about £80bn at below-market rates to banks and building societies. Is it going to help the economy? Of course, not. Even if the banks lend the initial £80bn to households and companies this money will come back to the banks in the first cycle of the money circulation and will not be re-lent again (or very little of it). It will then be used by the banks to convert their toxic waste to it and, of course, to pay huge bonuses to those who will do it. It is glaringly obvious that the financial system works in a way that any cash injection done through the banks will eventually be plundered by them. Funding for Lending is another classic example of throwing good money after bad after rescuing the banks and QE. The financial system is below-rock bottom.

The disturbing news is that it appears that those who run the economy, the government and their advisors, and also the mainstream media who comment on it, do not have a clue about what they are doing. As the alternative news is even worse and rather improbable: that they are damaging the economy on purpose. But from logical perspective such option cannot be ruled out either.

[Since this article has been published this morning BBC reported that "the UK's trade gap widened sharply in June, to its worst level since comparable records began in 1997." Is it a disturbing news? I can only reiterate: not really, as expected and we can expect more news of this sort in the future. But, hey, does it really matter? We are really set for more medals in the Olympics and the government folk and the establishment have a time of their lives.]

Saturday, 4 August 2012

Greg Pytel: Guantanamo Camp: a new lease of life?

In 2002 Guantanamo Camp was set up as a camp for "illegal combatants", international terror suspects. Like any government's initiative it started a life of its own: jobs and income depend on it including those of most influential companies. For example Halliburton, a US company whose CEO was once Dick Cheney, the US Vice-president at the time when Guantanamo Camp was established, was awarded a $1 billion construction contract to revamp the Camp in 2005.

After a decade there are no longer "illegal combatants" roaming the world, waging the war against the US. There is a little operational case - to justify the expense - for Guantanamo Camp as a place for detention of international terror suspects. So what next for Guantanamo Camp? Is such a lucrative place of income for many influential defence businesses going to be closed? Or is it more likely that a large US company will get a lucrative contract for another revamp or even for running its operations?

Here the LIBOR scandal may come quite handy. Whilst we may be cynical about the capitalism in the US, especially in its current form of the "communism for the rich", the US has an impressive track record in prosecuting the financial fraudsters. From Charles Ponzi in the beginning of the 20th century to more recent perpetrators of the financial wrongdoings behind WorldCom, Enron, Tyco and "NatWest three" scandals. Not that long ago Bernie Madoff experienced the decisive side of the US justice.

It appears it is only a matter of time when the US justice system will start catching up with those behind the LIBOR scandal. In a recent interview on the BBC Radio, Prof Alan Riley from City University Law School said:

"Any fixing of the LIBOR rates is prima facie criminal price-fixing and the United States extra-territorial jurisdiction applies even to price-fixing in London. If price-fixing is proved the US authorities may well seek extradition of executives based in the United Kingdom. Given the effectiveness of the US criminal antitrust regime (in which over 25,000 prison days were handed down in 2009), compared with the failure to secure any home grown price-fixing convictions in the UK under Section 188 of the Enterprise Act 2002 (the Cartel Offence), it is much more likely that US authorities will successfully prosecute bankers than the British authorities".

As the number of individuals involved in the LIBOR scandal is significant the Guantanamo Camp may become handy. The prospect of extraditions to the US is not purely theoretical. Indeed a number of City folk are already taking legal advice on that. And those who do not - who were involved in the LIBOR "business" - should think about it.