Saturday, January 5, 2013

Neofeudal Lords and the Dispossessed

The global financial elite have been raping and pillaging in earnest for the last twenty years. One would think that the financial crisis might have reigned in their excesses. Unfortunately, the opposite is true.

The financial elite are more powerful and more in control than prior to the crisis while impoverishment rises globally among the bottom 90% of the world's populace.

I really enjoy economist Michael Hudson's analyses of the banksters' operations. Here is an excerpt from his recent essay titled America's Deceptive Fiscal Cliff The Ideological Crisis Underlying Today’s Tax and Financial Policy at Counterpunch:

[Excerpted] In today’s neo-rentier economy the bottom 99% (labor and consumers) owe the 1% (bondholders, stockholders and property owners). Corporate business and government bodies also are indebted to this 1%. The degree of financial polarization has sharply accelerated as the 1% are making their move to indebt the 99% – along with industry, state, local and federal government – to the point where the entire economic surplus is owed as debt service. 

The aim is to monopolize the economy, above all the money-creating privilege of supplying the credit that the economy needs to grow and transact business, enabling them to extract interest and other fees for this privilege.

The top 1% have nearly succeeded in siphoning off the entire surplus for themselves, receiving 93% of U.S. income growth since September 2008. Their control over the political process has enabled them to use each new financial crisis to strengthen their position by forcing companies, states and localities to relinquish property to creditors and financial investors. 

So after monopolizing the economic surplus, they now are seeking to transfer to themselves the economic infrastructure, land and natural resources, and any other asset on which a rent-extracting tollbooth can be placed.

The situation is akin to that of medieval Europe in the wake of the Nordic invasions. The supra-national force of Rome in feudal times is now situated in Washington, with Christianity replaced by the Washington Consensus wielded via the IMF, World Bank, WTO and its satellite institutions such as the European Central Bank, backed by the moral and ideological role academic economists rather than the Church. And on the new financial battlefield, Wall Street underwriters have used the crisis as an opportunity to press for privatization. 


I think this excerpt is very persuasive. The rentiers - a.k.a. financial sector - now dominate the [global] economy and disproportionately influence government policy. The older industrialists are typically owned by the new master financial class and the military is their instrument when financial warfare fails.

Although access to capital is necessary for capitalism, the rentier financial sector is essentially parasitic rather than productive, as described recently by Will Hutton of the Guardian in the article titled "Bank rate-fixing scandals reveal the rotten heart of capitalism"

[Excerpted] Global banking, intertwined with the global financial services and asset-management industry, has emerged as a tax on the world economy, generating much activity and lending that has not been needed, but whose purpose is to make those who work in it very rich. The centre-left thinktank IPPR reports that people with identical skills earn on average 20% more in financial services than in other industries, with the premium rising the higher the seniority. That wage premium does not come from virtuous hard work or enterprise. It comes from how finance is structured to deliver excessive profit.

This parasitic nature of this sector is illustrated quite effectively by the statistic on outstanding derivatives:

In 2011 there was $250 Trillion in Outstanding US Derivatives Contracts (consisting of Interest Rate, FX, Equity Contracts, Commodity and Credit Default Swaps). 5 Banks accounted for 96% of that derivatives exposure.

That exposure can destroy national economies (forcing privatization and looting of public assets as in Ireland and Greece) but does little to nothing to stimulate economic growth for the bottom 99% of the global population.

If you don't believe the financial sector is out of control, read about the Libor scandal. So far there have been no criminal prosecutions and I doubt there will be despite outright fraud in this key market.

Jul 05, 2012
I hope everyone is following this scandal. It is yet another example of how corrupt the financial world is. As if we need another example. The scandal concerns the London interbank offered rate, which according to The Wall ...
The financial crisis keeps on giving because there have been no significant efforts to hold those responsible for financial fraud and other misdeeds criminally responsible:
Jul 26, 2012
The second major scandal is the Libor scandal. This scandal demonstrates the degree to which the market system is rigged by the powerful players. The scandal concerns the London interbank offered rate, which according to ...

Nov 15, 2012
Why aren't the Wall Street banksters being charged criminally for the fraud and deception at the heart of the financial crisis. Two prominent economists have asserted publicly that criminal action was involved in the crisis: ...
Matt Taibbi has a new essay titled "Secrets and Lies of the Bailouts" in the Rolling Stone (Jan 13) that examines this culture of government lies, complicity and winking that has allowed the rentiers to rape and pillage without fear of reprisal.
I won't excerpt from Taibbi's essay but I do strongly recommend reading it in full.

The problem is that financial warfare is largely invisible and the perpetrators are cloaked in white as virtuous and industrious, albeit arcane, capitalists, deserving of the masses' aspirational regard.

The master class however has little reciprocal regard.

The capacity to create vast wealth through derivatives without risk (because of government bailouts) means that those who hold the purse strings have little incentive for investing in the welfare and education of the bottom 99% of the world's population.

Feudal lords were essentially responsible for securing their serfs from threats. 

That same responsibility is not shouldered by today's neofeudal lords. Today the bottom 99% are in fact dispossessed.

1 comment:

  1. Yep, you nailed it, again.

    They are pushing it too far, yet their greed prevents them from stopping.

    I continue to prep for the only possible outcome that I see. Madmax world for a while.


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