Comment on Goldman Sachs article

Tweet

I commented on this Seth Freedman piece



Any company that can turn 50% of its turnover into cash profit for its 'partners' must, by definition, be doing something evil, or immoral, or whatever you want to call skimming billions from the capitalist system without contributing anything.

I will repeat that so everyone gets it - in a normal year - GS takes 50% of its revenue as profit. That is not possible for a business engaged in legitimate activity. A good rate of return is 10%. Marx once said that a capitalist will wade knee deep in blood for 300% profit. GS are wading at least ankle deep. Of course they are not alone in doing this, but 'investment banking' is nothing of the sort. It is vampire banking, and if Seth can't see this, he is blind and needs to go and read some history and some Marx, or some other non-orthodox economist if he prefers.

In any normal industry, a 50% plus rate of profit would lead to a massive influx of players which would bring down the average rate of return as the fees or costs of the industry fell due to competition. But in an oligopoly new players can't enter.

Also - all this talk of breaking up the banks is nonsense. Capitalism will always lead to concentration of capital. This is not new. Companies merge, gettaken over or go bankrupt. Breaking up the banks will just start this processs over again. Of course you can impose a maximum market share on any one bank -as in media - but this will not work long-term. As long as there is money to be made, the bankers will push for this limit to be removed until the government swings back in their favour.

No, money and credit is a public good. Why should banks get to lend it out at interest when it costs them little or nothing to create it. All money nowadays is fiat anyway -it has no intrinsic value since we went off gold and the debt expansion model took off a century ago. Banks should be nationalised, or held in trust under a strict public obligation to serve the common good by providing security and credit for individuals and businesses.

Of course banks charge interest as a risk premium. Fair enough, except that in an unequal society people with money get interest from their assets and need do nothing for it - they can leave it on deposit which is guaranteed by the government and their bank. People without money have to borrow from banks at interest, often just to pay their bills. So money is continually transferred from poor to rich. Brilliant!

There is a lot of what they call arbitrage going on which enables the financial wizards to milk assets by interest differentials - they get money cheap and sell it expensive. Ultimately if the investment banks make billions but create no value, they must be taking that value from the rest of society - sometimes just by borrowing from the future by saddling companies they takeover with a pile of debt, or in the case of Greece, an entire country....