Tuesday, May 8, 2018

De-Regulating the Would-Be Masters of the Universe and Re-Regulating the Rest



After his election, Trump told his administration to reach out to regulated industries and ask them to re-write their regulations. I've previously blogged about the fallout in the oil industry as post-BP oil spill crisis regulations are being lifted (see here).

Trump clearly favors the short-term economic interests of big oil, coal, and nuclear over human health and the environment. Trump's new rules for the nuclear industry would allow reactors to run up to 80 years despite clear scientific evidence that reactors become embrittled by radiation over time (see see Bloomberg here).

Now the Trump admin is rolling back post-financial crisis regulations (see previous post here). The latest regulation targeted for modification concerns the rules that govern financial firms' leveraging:
Tracy, Ryan (2018, May 8). Regulators refashion bank rule in capital. The Wall Street Journal, p. B10.
Trump-appointed officials are retooling the leverage ration, a capital rule adopted to curb excessive borrowing... Capital rules seek to prevent too much risk-taking by forcing bankers to fund loans and investments with a minimum amount of investors' equity, as opposed to less-secure borrowed money... Bankers say the current version is so strict and simplistic that it discourages them from from low-risk activities.

The financial crisis was caused most primarily by excessive leveraging. Excessive leveraging allows unfettered capital accumulation by the most powerful financial firms.

The concentration of wealth and power in an ever-smaller number of financial firms illustrates the effect of banking rules promoting ascendancy of our new masters of the universe:
Telis Demos (2018, Tue May 8). Big Banks Thump Small Rivals. The Wall Street Journal, B10.
Global institutions are gaining in size while more modest firms are running to keep up. Its a good time to be a megabank. In many businesses, the largest global banks such as JPMorgan Chase & Co and Bank of America Corp., are getting bigger, while others are struggling to keep pace.... 
...trading arms of the biggest US banks - at JP Morgan and Bank of America, as well as at Citigroup Inc., Goldman Schs Group Inc. and Morgan STanley - posted gains in equities sales and trading revenue ranging from 26% to 38% for the quarter versus a year ago.... 
The first-quarter equity revenue surge at big banks was driven primarily by derivatives activity, around volatility, not traditional stock trading.
The big banks are getting bigger and they are making the most money through their derivatives activity. The article notes that "a new trend" involves investing directly in volatility.

Back in February I wrote a blog post addressing who was benefiting from the market volatility - the biggest banks of course (see http://majiasblog.blogspot.com/2018/02/if-you-are-wondering-whos-profiting.html).

The new bank rules that "retool the leverage requirement"  will produce more market volatility as hot capital flows produce destabilization in their wake.

The banking powers that are the primary source of volatility will profit from it, growing ever bigger as our masters of the universe.

Michael Hudson, an economist whose work I very much respect, describes the financiers' logic of primitive accumulation here:
Michael Hudson (2018, May 4). “Creating Wealth” Through Debt: the West’s Finance-Capitalist Road. Counterpunch, https://www.counterpunch.org/2018/05/04/creating-wealth-through-debt-the-wests-finance-capitalist-road/
Hudson argues that risky financial transactions that build the wealth of today's financial titans produce crises.

Each crisis erodes the bases of democracy itself as wealth is transferred, as we saw with home ownership in the wake of the 2007-2008 financial crisis, and as new "emergency measures" are instituted to police the population.

Whitehead's description cited below of those measures are indeed frightening when viewed as an apparatus:
John Whitehead (2018, May ). While America Feuds, the Police State Shifts into High Gear. Counterpunch, https://www.counterpunch.org/2018/05/04/while-america-feuds-the-police-state-shifts-into-high-gear
Henry Giroux has some suggestions for resistance here: https://monthlyreview.org/press/gangster-capitalism-nostalgic-authoritarianism-in-trumps-america-henry-giroux-via-salon/


RELATED POSTS
http://majiasblog.blogspot.com/2018/04/the-instruments-of-financial-sovereignty.html

1 comment:

  1. Trump is not easy to grasp. It usually turns out that he knows things we did not expect him to know. Surely he knew the gas attack was a hoax. My hunch is that his actions have several levels--and the visible one is the least significant. This is not to say he does not make mistakes, but generally he has a long term goal that most seem to miss perceiving. For example. regarding his range of knowledge he evidently knew that Schneiderman was a sexual predator long ago.

    Now We the People are hardly Sovereign, but the election of Trump was an expression of some of the People rejecting elite politicians. Trump is aware of this so his maneuvers are surprising responses to this change in the Body Politic. Regardless of what happens to Trump the age of Elitism is over in America.

    Netanyahu's "discoveries" suit the game Trump has been intending to play--but what he really intends is largely a mystery. We will have to wait and see.

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