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?".

Tuesday, 27 November 2012

Greg Pytel: No skin in the game


With the appointment of the Governor of the Bank of England, the Chancellor of the Exchequer confirmed that he was determined to ensure that the economic situation of the UK continued to worsen. (It is another matter whether the Chancellor realises that or whether it is his intention.) In that respect he has been doing a pretty good job. As predicted and expected by any sane person, the government actions led to a double dip recession and a growing debt.

Incidentally it would be interesting if the politicians, especially those in the government,published information how their financial situation changed since 2010 (the general election), or actually since the end of 2008 when the economic mess - which was an easily predicted result of actions of the financial industry - became omnipresent in the UK. If their personal financial situation improved - unlike the financial situation of the country - this would show that the politician have been acting in a conflict of interest situation as they have a personal vested interest in worsening the economy. As the UK economy deteriorates, they are becoming better off. Is it not great? The same applies to all the commentators but they are not elected and they do not wield a direct power.. (At very best they would not have a vested interest in not worsening the economic situation of the UK.)

We should not ignore that. Apart from statistically insignificant exceptions, people act for their own and their families benefit. And there is nothing wrong with this provided they do not act in a conflict of interest situation. And this is precisely the same lethal problem as a moral hazard. "no skin in the game", which clearly was one of the reasons that drove the financial industry to a behaviour that caused the current crisis. We should have been wiser by now.

5 comments:

  1. Hi Greg
    Please could you elaborate on the statement: "With the appointment of the Governor of the Bank of England, the Chancellor of the Exchequer confirmed that he was determined to ensure that the economic situation of the UK continued to worsen". What is it that the new Governor will do (or won't do) that will make the situation worse.

    ReplyDelete
    Replies
    1. Hi Skoqp, this is my opinion. I only wish and do hope that I am proved wrong. We will see.

      PS. The list of what the new Governor will or will not do could be endless. But for example I do not believe he will follow up the basic recommendations from

      http://gregpytel.blogspot.com/2010/06/prime-minister-sort-out-this-mess.html

      This is a bare minimum to resolve the financial mess and put the economy on the growth path. (In itself it is not enough: logically it is a necessary but insufficient condition.)

      But time will tell and I only wish I am proved wrong.

      Best, Greg

      Delete
  2. Another question: When you say "It will get worse: it is designed to get worse". I assume there must be a natural limit to how much worse things can get. Presumably even those people benefiting from the adverse conditions will find they stand to lose their gains when the suffering of people becomes unbearable and results in civil unrest?

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    Replies
    1. "even those people benefiting from the adverse conditions will find they stand to lose their gains when the suffering of people becomes unbearable and results in civil unrest"

      This actually can be a pretty long shot. In my view, in many cases, the world is governed with very little wisdom and the greed (which is "good") is even bigger than the lack of wisdom.

      Something will happen, no doubt, but whether it will have catastrophic proportions of WW2 or is even bigger I simply do not know.

      Best, Greg

      Delete
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    ReplyDelete