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justaregularperson Donating Member (153 posts) Send PM | Profile | Ignore Mon Dec-08-08 01:31 AM
Original message
The Triumph of Greed
(Comment from Poster - We MUST understand that what precipitated this economic crises was NOT irresponsible homeowners. It is much deeper than that. This period will be looked on by history as a new "Robber Baron" era, when massive thefts and movement of money to corrupt individuals brought down the common wealth.)

The Triumph of Greed

Clive Dilnot
New Statesmen
Published 04 December 2008

Tax evasion, tax avoidance, money laundering: institutionalised crime is so much part of the global economy. Then there is moral crime...

The events of the past few months have shown with stark clarity that the financial models pursued in the sub-prime mortgage industry were so deeply flawed that they call into question the economics on which they were based. Yet to date there is precious little evidence of any fundamental rethinking taking place, either in the financial industry or by the economics profession, much of which still seems in denial about the gravity of the present crisis. With few exceptions, the argument from all sides and from most in politics, too seems to be for a return to business as usual as quickly as possible. But is continuity in how markets operate what we want? Or even what we can afford? Or are the costs of doing business this way and the moral and social, as well as financial, costs more than we should be asked to bear?


Caribbean tax havens run on tax evasion and money-laundering, as do their British counterparts, something their governments no longer bother to deny. (Barack Obama had a telling line in one of his campaign speeches: "By the way, did you know that there's a building in the Cayman Islands that supposedly houses 18,000 corporations? That's either the biggest building or the biggest tax scam on record. And I think we know which one it is.")

In Europe as a whole, crime is now one of the largest single sectors of business, with the Mafia alone controlling, through "legitimate" companies, roughly 15 per cent of Italy's GNP (worth as much as $800bn a year). We know this, but we pretend - along with our governments - that the institutionalisation of crime within the "mainstream" economy does not matter; that it doesn't come with acute costs. This is nonsense. The global cost of tax evasion and avoidance is estimated, conservatively, at roughly $500bn. When more than 40 per cent of the value of African bank accounts is in Swiss banks, we know that looting and corruption - the politics of spoil, as Oswald Spengler named it nearly 80 years ago - has taken place on a huge scale. The (failed) reconstruction of Iraq, with almost no new infrastructure or working institutions to show for it, will be recorded as probably the largest site of embezzlement in history.

One could go on. This should merely serve to remind us that crime is indeed a redistribution of wealth, but there is nothing of Robin Hood about it. It is the most regressive form of "taxation" and the one most debilitating, in all its consequences, to social well-being. It is also - though we tend to forget this - economically destructive, and even incompetent. After all, crime is nothing but theft; by definition it does not make, it takes. It leeches monies out of the economy and it erodes the conditions for real economic life, because these are dependent on the structures of trust that crime destroys.

To slip towards crime, therefore, is to slip into an economic model in which wealth is no longer created in any real sense but only extracted from what already exists. In fact, the much-vaunted "creativity" of the financial markets since 2001 boils down to little more than the invention of extraordinary mechanisms which increase the circulation of capital through the system (enabling revenue to be skimmed from each stage in the process) but which do not actually create wealth.

Derivatives are the most famous of these inventions, but in the sub-prime mortgage market it was the creation of complex devices for enabling the packaging and perpetual selling-on of securitised loans. For the companies that deployed them, these models permitted a whole new model of banking in which a bank's profit comes not from deposit-and-lend in the old sense, but from its ability to generate increasing flows of capital by packaging and selling on loans, these made possible by leveraging the banks' deposits at ever higher ratios. If you can leverage deposits in this way (at ratios of up to 30:1) it allows for astonishing short-term profit. The downside is enormously extended and intensified longer-term risk.

More at:

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TahitiNut Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Dec-08-08 01:53 AM
Response to Original message
1. K&R ... to Greatest with you.
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justaregularperson Donating Member (153 posts) Send PM | Profile | Ignore Mon Dec-08-08 02:38 AM
Response to Reply #1
2. Thanks
Bump so a few more people get a chance to read it. A lot of people, even on this board, still think this has been a mortgage problem or poorly run business. This is the culmination of a great theft that has been going on throughout the world.
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Waiting For Everyman Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Dec-08-08 03:02 AM
Response to Original message
3. Why are the homeowners' actual losses never counted in this though?
Not only what they put into their homes over many years, but personal property lost in foreclosures as well. It's as if because, at some point they became unable to make several payments in a row, none of that paid-in cost ever existed. Nor the loss involved in moving everything one owns, with nowhere to go.

A great many of those dollars in those WS bonuses and needless profit came from real people.

I read about banks' losses, and bailout losses, and tax-base losses, and neighboring homes' losses... but for the people directly involved, supposedly, none exists. None happened, I guess. Everyone's "property" and "assets" matter, except the one who loses the largest percentage - 100%.

This is not a complaint to you though, OP. Just an observation it brought to mind. Thanks for the article.
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lostnotforgotten Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Dec-08-08 04:50 AM
Response to Original message
4. It's Amazing That Many At DU Want To Give Those Responsible A Pass
Additionally, It's amazing that many at DU are willing to let Obama slide in his pronouncements that extracting a toll for this criminality is not worth the trouble.

Seems that many at DU are becoming just as responsible for the problem as the problem itself by their unwillingness to seek retribution.
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truedelphi Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Dec-08-08 01:13 PM
Response to Reply #4
6. I grew up with kids whose parents applauded the Kennedys
Those kids grew up and although remaining Demcorats, took things in their hands in a way that their paretns never would have.

My best friend from childhood, she and her husband inherited her dad's business, and despite their voting Democratic, they put the firm into bankruptcy and raided the worker's pensions for the husband's Golden Parachute.

Democrats are just as greedy as anyone else.
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justaregularperson Donating Member (153 posts) Send PM | Profile | Ignore Mon Dec-08-08 09:43 PM
Response to Reply #4
7. I think neo-liberal propaganda has just been so effective it is ingrained in the sub-concious
Many otherwise liberal thinkers have yet to wake of to the depth of the disease.
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zeemike Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Dec-08-08 05:54 AM
Response to Original message
5. K&R for the truth
But it is a hard truth for some that live with the beast to swallow.
But there it is looking us square in the eye.
The culture of greed that we have created is destroying us.
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