This didn’t just threaten Oesterlund’s fortune. It also had the potential to carve open a portal into the world of offshore finance, a place that the global elite has spent hundreds of millions of dollars to build and defend. In the offshore archipelago, their interests are hidden behind shell companies and trusts, their anonymity guaranteed under the law, from Delaware to the Bahamas to the South Pacific. James S. Henry, a former chief economist at McKinsey, calls the offshore financial world the “economic equivalent of an astrophysical black hole,” holding at least $21 trillion of the world’s financial wealth, more than the gross domestic product of the United States.
On an April evening in Moscow, I met with a broker who had intimate knowledge of the structure of the mirror trades. The city was emerging from the choking cold of winter, and young people flirted outside Paveletskaya Station as if it were high summer. As the broker and I walked across the square, he characterized mirror trades as just one of a thousand ruses employed by smart businessmen. But why, I asked him, would somebody with a prominent position at a major bank get involved in such a scheme? Wiswell’s annual compensation was in the region of a million and a half dollars. The broker laughed. He said that Wiswell had been paid handsomely by clients of the mirror trades. For the architects of the scheme, the broker explained, it was worth it to bribe someone inside the bank: “Guys always pay something. They think it will hook you, so you are not going to do unexpected things.” In the estimation of the broker, Wiswell was a useful functionary but hardly a criminal genius. Sometimes, the broker said, money was transferred into an offshore account maintained by Wiswell’s wife, and sometimes cash was delivered to Wiswell in a bag.
“It’s not necessarily about money, it’s about winning,” he told a visiting group of American college students. He told them that to understand trading, they needed to forget everything they learned in economics class and envision the amoral, take-no-prisoners world of “The Hunger Games.”
“The only time when people cooperate is to prolong their own lives,” he said. When rivals are no longer useful, “you stab them in the back.”
He told students he had accepted the fact that he was a rogue trader—but in his telling, it didn’t sound all that sinister.
A rogue trader, he said, “is a risk taker. It’s not a crime. It’s violating the mores established by the institution that you work for. It’s a rebellion against institutional controls that deny individuals opportunities for self-actualization.”
My offshore empire was built at my kitchen table with just a few thousand pounds and Emily for help. I can only imagine what kinds of opaque and impenetrable structures could be created by those with the financial means large enough to be employing companies such as Mossack Fonseca.
The rise of the machine learning :
The quantitative investment world plays down the prospect of machines supplanting human fund managers, pointing out that the prospect of full artificial intelligence is still distant, and arguing that human ingenuity still plays a vital role. But the confident swagger of the money management nerds is unmistakable. Already there are quasi-AI trading strategies working their magic in financial markets, and the future belongs to them, they predict.
The Sunday after Lehman fell, pacing my empty trading floor, I realized once and for all that my models and reports could no longer tell me what to do. The one unmistakable fact was that my risks would increase if oil continued its decline. I decided that when I came in on Monday, I’d place a big bet that WTI would do just that.
And on a Saturday morning bike ride up the Hudson, it occurred to me that Mexico might be willing to restructure its deal—selling us back the option it owned, and buying a new one—in a way that would lock in billions of profits for the country, while giving me a much needed windfall too. I dropped my bike in a bush and texted our salesperson about the idea.
There were many other decisions and guesses, some made alone, others with help from my team, and still others made by my boss. All were guesswork, none could I have anticipated in stress testing, and all involved abandoning my original strategy along with the illusion of control it gave me.
Switzerland to revive the 100 percent reserve banking argument :
The fall of Communism completely discredited the idea of a planned economy; even in the Soviet Union for about two decades before its collapse, few believed state planning could work. Somehow, the idea that governments are less evil and better at making financial decisions than private banks has survived that disaster. It’s mainly the banks’ fault: They have been flagrantly irresponsible. A state monopoly on money could test the theory, and Switzerland, where the central bank is disinclined to do crazy things and democratic institutions are more powerful than in most other places, could be an ideal proving ground.