The bull charges the red flag being waved by the matador, and is killed because he makes a mistake in recognizing the enemy. A standard strategy of the ultra-rich throughout the ages has been to convince the masses that their real enemy lies elsewhere. Most recently, Samuel Huntington created a red flag when he painted the civilization of Islam as the new enemy, as no nation was formidable enough to be useful as an imaginary foe to scare the public with. Trillions of dollars have since been spent in fighting this enemy, created to distract attention from the real enemy.
The financial deregulation initiated in the Reagan-Thatcher era in the 1980s was supposed to create prosperity. In fact, it has resulted in a sky-rocketing rise in inequality. The gap between the richest and the poorest has become larger than ever witnessed in history. Countless academic articles and books have been written to document, explain and attempt to provide solutions to the dramatic increase in inequality. The American public does not need these sophisticated data and theories; it experiences the fact, documented in The Wall Street Journal, that the quality of jobs and wage earnings are lower today than they were in the 1970s. Growing public awareness is reflected in several movies about inequality. For instance, Elysium depicts a world where the super-rich have abandoned the ruined surface of the planet Earth to the proles, and live in luxury on a satellite.
The fundamental cause of growing inequality is financial liberalisation. Just before the Great Depression of 1929, private banks gambled wildly with depositors’ money, leading to inflated stocks and real estate prices. Following the collapse of 1929, the government put stringent regulations on banking. In particular, the Glass-Steagall Act prohibited banks from speculating in stocks. As a result, there were few bank failures, and widespread prosperity in Europe and the US in the next 50 years. Statistics show that the wealth shares of the bottom 90 per cent increased, while that of the top 0.1 per cent decreased until 1980. To counteract this decline, the wealthy elite staged a counter-revolution in the 1980s, to remove restrictive banking regulations.
As a first step, Reagan deregulated the Savings and Loan (S&L) Industry in the Garn-St Germain Act of 1982. He stated that this was the first step in a comprehensive programme of financial deregulation, which would create more jobs, more housing and new growth in the economy. In fact, what happened was a repeat of the Great Depression. The S&L industry took advantage of the deregulation to gamble wildly with the depositors’ money, leading to a crisis which cost $130 billion to the taxpayers. As usual, the bottom 90 per cent paid the costs, while the top 0.1 per cent enjoyed a free ride. What is even more significant is the way this crisis has been written out of the hagiographies of Reagan, and erased from public memory. This forgetfulness was essential to continue the programme of financial deregulation which culminated with the repeal of the Glass-Steagall Act, and the enactment of the Financial Modernization Act in 2000. Very predictably, the financial industry took advantage of the deregulation to create highly complex mortgage-based financial instruments worth trillions, but with hidden risks. A compliant ratings industry gave these instruments fraudulent AAA rating, in order to sell them to unsuspecting investors. It did not take long for the whole system to crash in the Global Financial Crisis (GFC) of 2008.
Unlike the Great Depression of 1929, the wealthy elite were fully prepared for the GFC 2008. The aftermath was carefully managed to ensure that restrictive regulations would not be enacted. As part of the preparation, small media firms were bought out, creating a heavily concentrated media industry, limiting diversity and dissent. Media control permitted shaping of public opinion to prevent the natural solution to the mortgage crisis being implemented, which would have been to bail out the delinquent mortgagors. Princeton economists Atif Mian and Amir Sufi have shown that this would have been a far more effective and cheaper solution. Instead, a no-questions-asked trillion dollar bailout was given to the financial institutions which had deliberately caused the disaster. Similarly, all attempts at regulation and reform were blocked in Congress. As a single example, the 300-page Dodd-Frank Act was enacted as a replacement for the 30-page Glass-Steagall Act. As noted by experts, any competent lawyer can drive a truck through the many loopholes deliberately created in this complex document. This is in perfect conformity with the finding of political scientists Martin Gilens and Benjamin Page that in the past few decades, on any issue where the public interest conflicts with that of the super-rich, Congress acts in favour of the tiny minority, and against public interest. Nobel Laureate Robert Shiller, who was unique in predicting the GFC 2008, has said recently that we have not learnt our lesson from the crisis, and new stock market bubbles are building up. A new crash may be on the horizon.
While billions sink ever deeper into poverty, new billionaires are being created at an astonishing rate, all over the globe — in India, China, Brazil, Russia, Nigeria, etc. Nations have become irrelevant as billionaires have renounced national allegiances and decided to live in small comfortable enclaves, like the Elysium. They are now prepared to colonise the bottom 90 per cent even in their own countries. The tool of enslavement is no longer armies, but debt — both at the individual and national levels. Students in the US have acquired trillion-plus dollars of debt to pay for degrees, and will slave lifetimes away, working for the wealthy who extended this debt. Similarly, indebted nations lose control of their policies to the IMF. For example, ex-Nigerian president Olusegun Obasanto said that “we had borrowed only about $5 billion up to 1985. Since then we have paid $16 billion, but $28 billion still remains in interest on the original debt.”
Like the gigantic and powerful bull, each pass through a financial crisis wounds the bottom 90 per cent by putting them deeper in debt, while strengthening the matador of the top 0.1 per cent. Sometimes, the bull can surprise the matador by a sudden shift at the last moment. On this thrilling possibility hangs the outcome of the next financial crisis: the masses achieve freedom from debt slavery, or the top 0.1 per cent succeeds in its bid to buy the planet, and the rest of us, with its wealth.
WEA Pedagogy Blog 
Global tax reform for corporations is the key but how do you get the Chinese and Russians to play fair. It’s a complex world we live but it is improving slowly. Life is not fair.
From the time when our developing scientific knowledge of macroeconomics was deliberately distorted by John Bates Clark and the Chicago School, for political reasons, our experts have been in a confused state of mind. My recent book has solved this problem of spreading false knowledge, because now it is based on true scientific reasoning and takes a human engineering approach to our society. “Consequential Macroeconomics–Rationalizing About How Our Social System Works” is my answer to this dilemma. Write to chesterdh@hotmail.com for a free 310 page e-copy and begin to live a more realistic life in thinking about ourselves in society.
Ethnography and surveys support the conclusion that many ordinary Americans are aware that their wealth and income have not kept pace with increases in the CPI. The question then, is this: is that just an accident of circumstances or is it the result of specific plans by identifiable planners. “Elysium” seems to present a more likely, and familiar scenario. As with the brief life of the pirates of the Caribbean, the pirates today steal all they can as quickly as they can, then run away to as safe and protected place as they can find. The pirates don’t control their victims. They merely steal from them and sometimes murder them. However, today’s pirates now steal so much they leave little for their victims to fight back with. And then they run away to their exclusive estates and gated communities. But just as all ships on the sea were not pirates, so today not all corporations or wealthy persons are pirates. So, our disputes today are not class disputes. They are disputes about democracy, fairness, and justice. Subjects few economists have shown interest in or understanding of.
Pirate vs. non-pirate today are mostly separated not by wealth but by ideology. Most of the pirates align themselves with one or both of two ideologies. Neoconservatism and its more radical cousin fascism. Some of the more famous Americans and companies that were involved with the fascist regimes of Europe during World War II are: William Randolph Hearst; Joseph Kennedy (JFK’s father); Charles Lindbergh; John Rockefeller; Andrew Mellon (head of Alcoa, banker, and Secretary of Treasury) DuPont, General Motors, Standard Oil (now Exxon), Ford, ITT; Allen Dulles (later head of the CIA); Prescott Bush of National City Bank, and General Electric. Their progeny still holds great political and economic power today. Prominent recent neoconservative supporters of liberalization include: George W. Bush, Dick Cheney, Donald Rumsfeld, Paul Wolfowitz, Elliott Abrams, Richard Perle, and Paul Bremer. Leo Strauss is sometimes credited as the philosophical godfather of neoconservatism.
Financial liberalization is one of the many code worlds that populate history. Historically, liberalization refers to laws or rules being liberalized, or relaxed, by a government. You might talk about the liberalization of marriage laws in states that allow same-sex marriage. So, financial liberalization is the relaxation by the government of laws or rules about financial transactions. Including interest rates, banking, stocks, and the institutional framework of monetary policy. The claim is that financial liberalization promotes economic growth. But it rests on two other assumptions. First, that everyone who participates will participate fairly and within the rules (even if they are mostly implicit). Second, that the government will pursue and punish all who fail the first test. As another sign of just how successful liberalization is as a technique for theft, none of these assumptions is valid today or has been for at least 30 years in the US. And with ever more resources (money) in their control today’s pirates quash and indoctrinate increasingly more opposition. Soon, they may even create that society of “Elysium.”
Thanks for naming names. It is a clash of ideologies, but powerful “leaders” promote and maintain these harmful positions and must be called out constantly.
Don’t forget a couple of others in this mess, Bill Clinton and Barack Obama, both of whom sought the key advice of Robert Rubin, Larry Summers and Tim Geithner, major architects of neoliberalism. Also Clinton oversaw the repeal of Glass-Steagall. To name just a few.
The question: are Clinton, Obama, etc. pirates? Or, victims of pirates? We should be careful not to harm citizens who’ve already been attacked by the pirates. Pirates, as I said steal and murder, and they do so with the intent of becoming as rich as possible. Is this Clinton, Obama, Rubin, Summers, and Geithner?
To my mind the structures that allow the powerful to use other people’s money (borrow), are the root cause of the growing inequality; and not only that, these structures are anti-democracy. I am not an economist, thus cannot put across my arguments well enough, but made an attempt a few years go in a paper titled The Illusion of legitimacy – predatory borrowers and inequality
http://blog.therules.org/the-illusion-of-legitimacy-the-predatory-borrower-and-inequality/
“Elysium depicts a world where the super-rich have abandoned the ruined surface of the planet Earth to the proles, and live in luxury on a satellite.”
Strange thing is, the super rich would never do this, and the reason is because the super rich are not happy with just being rich – they get their kicks from having power and control over people and manipulating them – if you really think about it, it’s all they can do with their time – there is nothing else for them to do. Just look at Bill Gates today – he does not care at all about anyone except his own ego and yet he masquerades as the worlds savior. He is so heavily invested in what he is now preaching to the world that he now has to see it through trying to sell to the world his ideals and his view of what a health system should look like. He is a monster.
So this is the real problem we have. There are humans which have certain biological aspects which make them terribly insecure, but which as a result of our system, enable them to use property as the means to fill this void. You can always tell who these people are – they are the ones who are constantly trying to sell us something, whether its a thing, an ideal or whatever. The average person does not suffer from this deep level of insecurity, and hence do not pursue financial wealth in the same way. Whilst we can maybe re-create the period leading up the 70s, how are you going to prevent these mega insecure types from making another comeback? These people are never going away, and neither will we be able to change how insecure they are, unless we are able to get to the bottom of why they are so insecure to begin with.