Is The Temple Of The Free Market A Cartel?

[wonderpup]

No exactly a dazzling new insight but not a point often made either;

Imagine a restaurant had served up product as toxic as that which big banks, credit rating agencies and accountancy firms were churning out until 2008. You would expect that restaurant to have closed. You would also expect new restaurants to have opened up in the area. This is how a free market should work: competition drives out bad practices.

But where are the new credit-rating agencies, accountancy firms or big banks? Even worse, not only are there just four major accountancy firms, they are also financially dependent on the very banks they are supposed to audit critically. It's the same with the three credit-rating agencies dominating the market.

And it gets worse. Imagine that a restaurant in your neighbourhood made the kind of money paid to top employees in banking, credit-rating and accountancy firms. You'd expect people rushing to open more restaurants, and with that increased competition you'd expect wages to come down. Again, this is how competition works. There are thousands and thousands of young graduates aching to get into investment banking, so no shortage of prospective chefs. So where are the new players in high finance?

The reality is that global high finance is de facto a set of interlocking cartels that divide the market among themselves and use their advantages to keep out competitors.

Cartels can extract huge premiums over what would be normal profits in a functioning market, and part of those profits go to keeping the cartel intact: huge PR efforts, a permanent recruiting circus drawing in top academic talent; clever sponsoring of, say, an ambitious politician's cycling scheme; vast lobbying efforts behind the scenes; and highly lucrative second careers for ex-politicians. There is also plenty of money to offer talented regulators three or four times their salary.

Capitalists have an expression for this, and it's "market failure".

A perfect irony that the very jewel in the crown of free market ideology is in reality a failed market to which competition is denied access.

Anyone familiar with Max Keiser's description of bankers as 'financial terrorists' will also appreciate the irony of this observation;

Before studying bankers I spent many years researching Islam and Muslims. I set out with images in my mind of angry bearded men burning American flags, but as the years went by I became more and more optimistic: beyond the frightening rhetoric and sensationalist television footage, ordinary Muslim people go about their day like all other human beings. The problem of radical Islam is smaller and more containable than Islamophobes believe.

With bankers I have experienced an opposite trajectory. I started with the reassuring images in my mind of well-dressed bankers and their lobbyists; surely at some basic level these people knew what they were doing? But after two years I feel myself becoming deeply pessimistic and genuinely terrified. This system is highly dysfunctional, deeply entrenched, and enormously abusive, both to its own workers and the society it operates in. The problem really is exactly as bad as the "banker bashers" believe.

- See more at: http://theautomaticearth.com/Finance/playing-russian-roulette-with-someone-elses-head.html#sthash.60pgJAuk.dpuf

[Guest eight]

A perfect irony that the very jewel in the crown of free market ideology is in reality a failed market to which competition is denied access.

I don't think you're telling anybody here anything they don't know.

The whole idea of the ratings agency makes me laugh. You have AAA (basically, you'll get your money back) and then all the other ratings below that (you've got no chance of getting your money back). And yet not only is the difference in borrowing costs between the two negligible, if it's actually different at all, but the downgrading and the subsequent 1-2% rise in borrowing costs is supposed to be enough to push an economy that was previously considered utterly sound into the financial abyss.

I think what I'm saying is that's all just one big pile of toss.

[Si1]

Yes, but socialism's an even bigger one

[wonderpup]

Yes, but socialism's an even bigger one

If socialism is the redistribution of a nations wealth toward a select group of VI's then I would argue that the Banking Cartel is the most successful socialist organisation in history.

You think that just because a man lives in a mansion and drives an expensive car he can't be a socialist?- Bankers believe absolutely in the idea of wealth redistribution- and have benefited handsomely from the redirection of state funds into their own pockets.

Edited June 28, 2013 by wonderpup

[interestrateripoff]

It doesn't go far enough it's not just bankers it's the entire corporatist entities that have taken over. Although the bankers sit at the top of the tree.

[(Blizzard)]

Yes, but socialism's an even bigger one

As descriptions of society and human behavior, socialism, capitalism (and conservatism, which is not the same as either) are all reasonable and all have some validity.

As political systems, they are pure fantasy. There is only one political system, the hierarchy.

It doesn't matter why the ruling classes claim they deserve to be the ruling classes - will of the proletariat, will of the market, or will of God.

Hell, our own ruling class has changed it's creation myth from one to the other and no-one seems to have noticed.

The idea that socialism is somehow worse than capitalism, or vice versa, is just meaningless. Not wrong, meaningless.

It's just brainwashing to create useful idiots.

[Lewis Gordon Pugh]

The game has always been totally rigged. It is only the internet and the flow of information that is now showing people how rotten it is.

[montesquieu]

If socialism is the redistribution of a nations wealth toward a select group of VI's then I would argue that the Banking Cartel is the most successful socialist organisation in history.

You think that just because a man lives in a mansion and drives an expensive car he can't be a socialist?- Bankers believe absolutely in the idea of wealth redistribution- and have benefited handsomely from the redirection of state funds into their own pockets.

Socialism was an utterly necessary reaction to the unbridled capitalism of the industrial age and the abuses of workers that went along with the concentration of power and wealth in the hands of a tiny ruling class. Essential rights like holidays, pensions, humane working hours as well as fairer wages for all are what came out of the socialist struggle.

That very laudable impulse has been hijacked almost since its inception, unfortunately, by representatives of the elite (as well as class traitors of course) who just saw it as another route to power.

I have no doubt that today's apparent triumph of the 1% will ultimately result in a battle between the rent-seekers and those whose goal is similar to the early socialists - to redistribute to the many the gains concentrated in the hands of the few. The discourse and methods will have to be different - economies and societies are no longer reliant on industries where 10,000 people can meet in a field or car park, vote to strike, and bring a company or a country to its knees. But ways will be found.

The methods the state will take to support the 1% will be draconian and have already been put in place to deal with 'terrorism'. We don't have an ideology yet to provide the basis for this struggle but I'm pretty sure its emergence can't be far away.

Edited June 28, 2013 by montesquieu

[mfp123]

the banks went bust and should have gone bust. it was only socialist policy of bailing them out that kept them where they are.

had they gone under other smaller companies would have taken up the slack and taken their place, new ways of doing things would have been found (or at least the businesses that didnt engage in flawed practices would be the new players in the field) and a different system/group would have had to naturally develop given that existing practices failed.

instead if was bailed out to keep the same flawed system running in exactly the same way.

thats the problem of socialism - it does things in one way, so when it goes in the wrong direction it keeps going in that direction.

[Lone_Twin]

You'd have to be willfully ignorant or intent on deception to suggest that modern banking has anything to do with free markets.

[Ah-so]

I don't think you're telling anybody here anything they don't know.

The whole idea of the ratings agency makes me laugh. You have AAA (basically, you'll get your money back) and then all the other ratings below that (you've got no chance of getting your money back). And yet not only is the difference in borrowing costs between the two negligible, if it's actually different at all, but the downgrading and the subsequent 1-2% rise in borrowing costs is supposed to be enough to push an economy that was previously considered utterly sound into the financial abyss.

I think what I'm saying is that's all just one big pile of toss.

AAA is now only with a few governments - not even the UK. However, if the company has an A rating or better, you will almost certanly get your money back.

During the boom years, credit risk was largely ignored and there was very little premium charged for lower credit ratings. That was the investors' mistake.

[winkie]

the banks went bust and should have gone bust. it was only socialist policy of bailing them out that kept them where they are.

Take the bailout of the banks.....it would be absolutely correct to allow the banks to fail but only if the correct information about how strong and healthy they were and are is made public, whether accountants figures gave the true information and facts about the businesses thousands were investing their saving in....the share price told investors nothing about the real and true picture of their strength and viability.

Clear facts, open and honest transparency and accountability.......only then can people make an informed choice about whether they use their services or not......

Edited June 29, 2013 by winkie

[wonderpup]

You'd have to be willfully ignorant or intent on deception to suggest that modern banking has anything to do with free markets.

Yet this is exactly what the banking cartel does claim- it presents itself as the ultimate meritocracy in which success and failure are determined entirely by impersonal and totally unbiased market forces.

My point being that the very centre of free market ideology- it's high temples on wall street and in the city- are exactly what they they say they are not- a rigged cartel in which any kind of free market is ruthlessly suppressed to maintain the wealth and power of the status quo.

[goldbug9999]

Yet this is exactly what the banking cartel does claim- it presents itself as the ultimate meritocracy in which success and failure are determined entirely by impersonal and totally unbiased market forces.

My point being that the very centre of free market ideology- it's high temples on wall street and in the city- are exactly what they they say they are not- a rigged cartel in which any kind of free market is ruthlessly suppressed to maintain the wealth and power of the status quo.

Wonderpup with another straw man argument, who'd have though it.

[wonderpup]

Wonderpup with another straw man argument, who'd have though it.

The idea of a 'straw man' is that you create a false proposition- and then go about attacking it. So am I wrong to point out that the bankers claim to be operating a free market when in reality they are operating a cartel?

If I am not wrong then there is no straw man, since the target I am attacking is not false but authentic.

After all- the people on wall street and in the city defend their bonus's as being the outcome of free market forces- so this claim is a core part of their world view. If the reality is that they are not operating a free market but a cartel then their profits are not a reflection of their market value but a reflection of their ability to manipulate the market- quite an important difference.

[campervanman]

You'd have to be willfully ignorant or intent on deception to suggest that modern banking has anything to do with free markets.

The problem is that there are a large number of ignorant people willing to be deceived in the name of what they believe to be the free market. At least the commies had a degree of honesty with the Berlin wall.

[mfp123]

well the issue of socialising losses isnt new, i think everyone understands that has been the case and its well known.

in terms of a cartel though, there are a ridiculous number of banks and financial institutions that work in the financial industry.

i would estimate every country in the world has a presence in London and each country has dozens of institutions working there. add to that the various financial services and insurance companies, id say there is a lot of competition.

if anything theres too many financial companies floating about. there are more fund managers and derivative services and currency traders than you can shake a stick at.

if you want to buy shares, or dollars, or invest money or borrow money id bet you can probably find over 1000 different sources to choose from ranging from big companies like goldman sachs, to bob the wine investment fund manager.

so competition exists within the industry but when the government intervenes it becomes socialist. it just depends on how you analyse it

[winkie]

Breaking news.....Church of England bids for bank branches, would that help people to trust the banks again?

[wonderpup]

Breaking news.....Church of England bids for bank branches, would that help people to trust the banks again?

I doubt it- they have just arrested a priest in Italy for financial crimes- is nothing sacred?