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11 years ago
Showing posts with label economics. Show all posts
Showing posts with label economics. Show all posts
Wednesday, 11 October 2017
QE: the financial elite’s magic money tree and the birth of finance communism
Sometimes you read something that just blows the lid of reality and makes you mad.
In the latest issue of the New Statesman, Christopher Thompson describes how QE is the greatest redistribution of wealth to the rich in history, helping increase wealth for the rich through $8 trillion of central bank money creation, helping spur a $100 trillion expansion of wealth at the top since 2008. The result: 13 zeros added the balance sheets of bankers, stock holders and all those with significant financial assets. Is it any wonder that populism is on the march and people no longer trust mainstream politicians?
This article should be read as a manifesto for revolution. By bailing out the rich, and squeezing the rest through rising asset prices (the house you can’t afford, the giant mortgage you must pay) and wage depreciation, QE should be seen as a form of financial crime — disguised as an economic rescue. No doubt central bankers and politicians genuinely believe they saved us — but really they saved themselves at our expense.
More than that, this is a new model of state finance capitalism — or we could call it finance communism. A permanent guaranteed income for the financial elite, and permanent stagnation and austerity for everyone else. Traditional economics — both neoliberal and Marxist — holds that capitalists use their capital to invest in production and out of this they make a profit.
Neoclassical economics holds that this profit is a reward for risk. Marxism holds that it is surplus value taken from labour (or as rent for land).
But the age of QE effectively marks the end of traditional capitalism. Previous acts of primitive accumulation, to use the Marxist term, occurred during colonialism, slavery, conquest and imperialism. This accumulation then funded early industrial capitalism in the UK and Europe.
According to the believers in traditional free market economics, there was no plunder, rape and colonially induced mass famine, simply voluntary trade in which everyone got richer from the 18th century onwards. (I read this fairy tale every day, a faith that facts cannot impede.)
With less of these opportunities available in recent decades, and traditional honest capitalism also struggling due to financialisation and stagnant wages, the corporate elite must now find new ways to extract wealth and rent from the rest of society.
Old fashioned exploitation is still there, but it is supplemented by state backed extraction. Take the Iraq war: this was a plunder exercise — not just of Iraq’s wealth, but of no-bid contracts (often simply cash in suit cases for fake work) financed by the US Treasury to the tune of $1 trillion. Then, just as the war booty was drying up, along came QE.
This huge bailout is disguised through central bank bond purchases. “Central banks don’t just hand over this money regardless. They do it by buying bonds, most of them issued by governments, from financial institutions such as pension funds and insurance companies, which hold them as investments,” Thompson explains. “Bonds” are just tradable pieces of debt.
This is the best description of what happened after 2008 I’ve read. The central banks of the US, UK and Eurozone (as well as Japan) created $8 trillion for the 1 per cent, or $10,000 per head for the rest of us. Noticeably this vast cascade of magic money has not trickled down. Real wage stagnation has hit incomes of the bottom 90 percent while asset prices for the wealthy have soared in the biggest housing and stock bubble in history.
“Thanks to central banks’ money spigots, rising property, stock and bond markets have helped global private wealth grow by two-thirds since 2008 to $166trn, according to the Boston Consulting Group,” writes Thompson. That's a $100trn wealth gain.
“Banks have been the biggest beneficiaries,” hedge fund boss Paul Marshall, co-founder of Marshall Wace, wrote in September 2015. “Asset managers and hedge funds have benefited, too. Owners of property have made out like bandits. In fact, anyone with assets has grown much richer. All of us who work in financial markets owe a debt to QE.”
As a result of QE “financiers have used the new-found money to go shopping, all at the same time. Suddenly, demand for assets significantly exceeds supply. This pushes up the value of investment assets — including shares, which have surged to record highs despite weak economic growth, and bonds, and also fine art, London property and vintage Château Lafite,” writes Thompson.
QE can’t be stopped, or the markets might panic. They are addicted and so $131bn in new bond purchases by the central banks is added each month in Europe and Japan. National and private debt expands continuously.
What comes next? The 99 per cent must find leaders and policies to take the trillions back. In the next crisis, the rich must take a haircut, and the helicopter money must go to the bottom 90 percent. The people must be bailed out. Look out for parties and leaders who put that in their manifesto. We won’t get fooled again.
Sunday, 22 July 2012
$13 trillion offshore wealth hidden from taxman
The Observer reports
That's it, the missing liquidity that is bringing everything to a grinding halt. It's like a game of Monopoly with most of the money missing.
This country is not in debt. Our deficit is a taxation deficit, it is money that governments fail to collect and that the rich hide, not money that governments owe.
A global super-rich elite has exploited gaps in cross-border tax rules to hide an extraordinary £13 trillion ($21tn) of wealth offshore – as much as the American and Japanese GDPs put together – according to research commissioned by the campaign group Tax Justice Network.
James Henry, former chief economist at consultancy McKinsey and an expert on tax havens, has compiled the most detailed estimates yet of the size of the offshore economy in a new report, The Price of Offshore Revisited, released exclusively to the Observer.
He shows that at least £13tn – perhaps up to £20tn – has leaked out of scores of countries into secretive jurisdictions such as Switzerland and the Cayman Islands with the help of private banks, which vie to attract the assets of so-called high net-worth individuals. Their wealth is, as Henry puts it, "protected by a highly paid, industrious bevy of professional enablers in the private banking, legal, accounting and investment industries taking advantage of the increasingly borderless, frictionless global economy". According to Henry's research, the top 10 private banks, which include UBS and Credit Suisse in Switzerland, as well as the US investment bank Goldman Sachs, managed more than £4tn in 2010, a sharp rise from £1.5tn five years earlier.
According to Henry's calculations, £6.3tn of assets is owned by only 92,000 people, or 0.001% of the world's population – a tiny class of the mega-rich who have more in common with each other than those at the bottom of the income scale in their own societies.
That's it, the missing liquidity that is bringing everything to a grinding halt. It's like a game of Monopoly with most of the money missing.
This country is not in debt. Our deficit is a taxation deficit, it is money that governments fail to collect and that the rich hide, not money that governments owe.
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