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Why Is Wealth/Income Inequality Soaring?
Why Is Wealth/Income Inequality Soaring?
If conventional labor and finance capital have lost their scarcity value, then the era in which financialization reaped big profits is ending.
Why is wealth/income inequality soaring? The easy answer is of course the infinite greed of Wall Street fat-cats and the politicos they buy/own.
But greed can’t be the only factor, for greed is hardly unknown in the bottom 90% as it is in the top .1%. The only difference between the guy who took out a liar loan to buy a house he couldn’t afford so he could flip it for a fat profit and the mortgage broker who instructed him on how to scam the system and the crooked banker dumping toxic mortgage-backed securities on the Widows and Orphans Fund of Norway is the scale of the scam.
The difference isn’t greed, it’s the ability to avoid the consequences or have the taxpayers eat the losses, i.e. moral hazard. The bottom 90%er with the liar loan mortgage and the flip-this-house strategy eventually suffered the consequences when Housing Bubble 1.0 blew up in spectacular fashion.
Moral hazard describes the difference between decisions made by those with skin in the game, i.e. those who will absorb the losses from their bets that go south, and those who’ve transferred the risks and losses to others.
The too-big-to-fail banks that bought political protection simply shifted the losses to taxpayers. Then the Federal Reserve helpfully paid banks for deposits at the Fed while reducing the amount banks had to pay on depositors’ savings to bear-zero, effectively rewarding the banks with free money for ripping off the taxpayers.
America’s financialized cartel-state system institutionalizes moral hazard. This is one cause of rising inequality, as the super-wealthy are immunized by their purchase of political influence.
The top .1%’s share of the pie has been rising in the era of financialization and institutionalized moral hazard, everyone else’s share has declined:
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The Central Bankers’ Malodorous War On Savers
The Central Bankers’ Malodorous War On Savers
Well, that didn’t take long!
After just three days of market turmoil the monetary politburo swung into action. This time they sent out B-Dud to promise still another monetary sweetener. Said the head of the New York Fed,
“From my perspective, at this moment, the decision to begin the normalization process at the September FOMC meeting seems less compelling to me than it was a few weeks ago.”.
Needless to say, “B-Dud” is a moniker implying extreme disrespect, and Bill Dudley deserves every bit of it. He is a crony capitalist fool and one of the Fed ring-leaders prosecuting a relentless, savage war on savers. Its only purpose is to keep carry trade speculators gorged with free funding in the money markets and to bloat the profits of Wall Street strip-mining operations, like that of his former employer, Goldman Sachs.
The fact is, any one who doesn’t imbibe in the Keynesian Kool-Aid dispensed by the central banking cartel can see in an instant that 80 months of ZIRP has done exactly nothing for the main street economy. Notwithtanding the Fed’s gussied-up theories about monetary “accommodation” and closing the “output gap” the litmus test is real simple.
To wit, artificial suppression of free market interest rates by the central bank is designed to cause households to borrow more money than they otherwise would in order to spend more than they earn, pure and simple. Its nothing more than a modernized version of the original, crude Keynesian pump-priming theory—–except it dispenses with the inconvenience of getting politicians to approve spending increases and tax cuts in favor of the writ of a small posse of unelected monetary mandarins who run the FOMC and peg money market interest rates at will.
…click on the above link to read the rest of the article…
How Our Crazy Money System Wo
How Our Crazy Money System Works
Squirrelly and Subtle
Yes, we were in London, taking care of business. Now, we’re back in Buenos Aires. We’ve tried medication. We’ve tried prayer. We’ve tried heavy drinking – all in an effort to understand how our crazy money system works. And where it leads.
You’d think it would be easy. It’s just Central Banking 101, no? Well, no. It is squirrelly… and diabolically subtle. We doubt anyone understands it – especially those who are supposed to control it.
The basic unit for the system is a kind of money the world has never had before: the post-1971 fiat dollar. It’s paper money – worth as much as people think it is worth … and managed by people who think it should be worth less as time goes by.
What a Business!
Who are these people? Who do they work for? You might say they are “public servants.” But that implies they are working on the public’s behalf. Nooooo sireee…
They are employees of a banking cartel that is owned by private banks. These banks have a license to lend money into existence, earning interest on their loans.
It is no surprise that their share of US corporate profits has risen fourfold since President Nixon ended the quasi-gold standard Bretton Woods system. What a business! Their cost of goods sold is next to nothing. A few strokes on a keyboard and millions… billions… heck, trillions… of dollars are created.
As our friend and economist Richard Duncan points out in his book The New Depression, the amount of liquid reserves banks have to hold against their loans is now so small they provide “next to no constraint” on the amount of credit the system can create.
…click on the above link to read the rest of the article…
