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?".

Friday, 22 October 2010

"To the Simple Man"

In the wake of the Wall Street crash in October 1929 as Great Depression erupted Julian Tuwim wrote the following poem. Ten years later the world was engulfed by the World War Two.

To the simple man

When every wall is hid by many
new posters freshly pasted up,
when ‘to the people’, ‘to the Army’,
in black print stare appeals alarming,
and any dolt, and any pup
will take for gospel each old lie
that one should go and shoot off guns
and murder, poison, rob, at once;
start drumming into all our noggins
the ‘Fatherland’; the mob incite,
bamboozle with bright-coloured slogans,
egg on with ‘Our historic right’,
‘every inch’, ‘glory’, ‘sacred borders’,
with ‘our forebears’, ‘pay the price’,
with ‘heroes’, ‘flag’ and ‘sacrifice’;
when bishop, pastor, rabbi come
to say a blessing on each gun,
for God has told them, that His will
is that for Country – you should kill;
when gutter tabloid screams and rages
in letters huge on its front pages,
and herds of females lose their voice
throwing bouquets at ‘our brave boys’,
– O, my untutored simple friend,
mate from this land, or other land!
Know that the bells for these alarums
kings strike, with girls with ample charms,
Know it’s all hogwash, lies perverted,
And when these call out: ‘Shoulder arms!’
That somewhere from the ground oil spurted,
With dollars soiling the bright colours;
That in their banks there’s something rotten,
They smelled some moneybags, it looks,

Or cooked some scheme, the oily crooks,
For higher import tax for cotton.
Drum on the pavement with your gun!
Ours the blood, the oil is theirs!
And through each capital and town
Scream out, to guard your cash blood-won:
‘Tell us another, noble sirs!’.

(translated from Polish by Marcel Weyland)


  1. Great find - nothing changes it seems.

    I have read most of your posts, and sense that, like me, you would rather know the truth than live a lie. Sadly, that's not true of most it seems.

    I think I have a good grasp on what happened in the USA, where I live. However, I still have a burning question which you can probably help me answer. Did Wall Street deliberately sell toxic CDOs and CMOs to Europe and Asia knowing they would go bad when the sub-prime load default rate rose? A statement by Hayman Capital suggests it was intentional, institutionalized, and partly in response to high oil prices. Others speculate it was also encouraged by fears about the growth in Euro reserving. To me it seems plausible that the mezzanine structures were designed to disguise the risk making it easy for brokers in Europe to dump securities costing around a trillion dollars onto the EU and Asia.

  2. Hi SilverSurfer

    Thanks for reading my blog. If you think it merits it, please spread the link to it to others.

    As to your last question: my answer is "I don't know". There is also another example: "why the US let Lehman Bros go under and saved AIG?" Collapse of Lehman affected to the great extent outside US, collapse of AIG would have affected inside the US.

    There is (and always has been) a big game in the financial business who screws whom. (It was enough to talk to couple of financial executives and traders to realise that.) So considering the above and the fact that I was not born yesterday my view is that, on the balance of probabilities, Wall Street deliberately sell toxic CDOs and CMOs to Europe and Asia knowing they would go bad when the sub-prime load default rate rose.



  3. Grist to the mill.....

    At the end of last week's letter on the whole mortgage foreclosure mess, I wrote:

    "All those subprime and Alt-A mortgages written in the middle of the last decade? They were packaged and sold in securities. They have had huge losses. But those securities had representations and warranties about what was in them. And guess what, the investment banks may have stretched credibility about those warranties. There is the real probability that the investment banks that sold them are going to have to buy them back. We are talking the potential for multiple hundreds of billions of dollars in losses that will have to be eaten by the large investment banks. We will get into details, but it could create the potential for some banks to have real problems."

    Real problems indeed. Seems the Fed, PIMCO, and others are suing Countrywide over this very topic. We will go into detail later in this week's letter, covering the massive fraud involved in the sale of mortgage-backed securities. Frankly, this is scandalous. It is almost too much to contemplate, but I will make an effort.

    But first, let me acknowledge the huge deluge of emails I got over last week's letter, the most I can ever remember. I thought about just making this week's letter a response to many of them, but decided I needed to go ahead and finish the topic at hand. Maybe another time. As a side note, I quoted a letter that came to me anonymously via David Kotok. I said if I found out who wrote it, I would give them credit. It was originally written by Gonzalo Liro, at www.gonzalolira.blogspot.com.

    Many of you wrote to point out that his argument about the tracking of title was not correct, but others pointed out many other issues as well. This is one of the most complex problems we face, and I got a lot of good information from readers. It just makes me wish I had our new web site finished so you could avail yourselves of the wisdom among my readers. We are close, down to final changes. And now, on to today's letter.

  4. The REAL problem is the irreversable muliplication of debt BY INTEREST.

    Assume that we are on an island with 1,000 people, and we have no debt or money – we are starting off with a clean slate and we will mimic our debt/INTEREST based money system in establishing a monetary system.

    More specifically, all money is debt with interest applied. Since only the principal is created through IOUs and collateral, there will always be more debt than money. We can calculate the percentage of loan failures that must result unless new money is added to the system.

    We can calculate the success/failure percentages: (Note: P = Principal and I = Interest collected through the life of the loan)
    * The percentage of successful loans = P/(P+I)
    * The percentage of failed loans = I/(P+I)

    So, if $100 million were borrowed (P = $100 million) and $10 million in interest was charged (I = $10 million), then we may calculate that 91% can be paid back and 9% will fail.

    The alternative is to borrow more money to reduce/eliminate the defaults. But, this will set up a perpetual loop, the gap between money and debt will increase as we borrow more BY INTEREST.

    We can also use Laplace transformations and algorithms to model more dynamically but that would require more variables.


    Link to article: http://endtheecb.ning.com/profiles/blogs/why-we-need-to-adopt

  5. this is the poem sung in polish original: https://www.youtube.com/watch?v=7wChlvZbXjY