Sunday, June 28, 2009

“socialism for the rich and capitalism for the rest”

Labour remains intensely relaxed about people getting rich

"...by kowtowing to the financial elite, policymakers on both sides of the Atlantic helped that elite to wreck the system."

Posted by letthemfall @ 09:45 AM (956 views)
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4 thoughts on ““socialism for the rich and capitalism for the rest”

  • stillthinking says:

    Umm.. The population of the UK pretty much on mass went into excess debt in the hope of making large unearned profits and got it wrong. They were not quite innocent victims.

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  • my question is what is the way out of this mess?
    higher salaries for the bankers?

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  • Re the article by Lankaster, who argues that inequalities in income and wealth in the US and UK (what caused these inequalities? explain) “supplemented by massive borrowing” caused high house prices and forced people to borrow beyond their means. Let’s try to sort out cause and effect here.

    Mortgage debtors are simply the bottom of an extractive financial food chain. A massive growth in credit/debt was needed to keep real estate and financial bubbles inflating. The inflation of these bubbles led to the increase in wealth inequality because this credit imposes the interest charges (plus compulsory insurance, commissions etc) which have polarised wealth. Rising price/rent and price/earnings ratios for real estate, shares and bonds have forced wage earners to go deeper into debt to house themselves and provide a retirement income.

    Pumping up the real estate market faster than the growth of real incomes and rents has made for debt peonage and default. Current policy still attempts to keep prices above the price where the carrying charge is equal to the cost of renting over time, which is roughly the level that people can afford without going deeper into debt. The reason? – once it’s rolling the only way to keep the debt pyramid going is to lend mortgage debtors enough to pay off interest and amortisation charges on existing debt, and if people aren’t earning enough the only way to do that is to inflate house prices, which are the collateral against which people refinance to pay off those charges.

    All this makes for increased polarisation between those who live off the returns to wealth (finance and property, yielding interest, rent and capital gains) and those who live off what they can earn, struggling to pay down debts and taxes the rich avoid paying (transnational corporations with transfer pricing and other accountancy tricks, tax havens and a lot of tax breaks on property and finance, especially in the US. The un-taxing of the rich then gives them the means of bidding up house prices at the top end.). We live increasingly in a rentier economy (wiki “economic rent”). Those returns to wealth are nothing but a drag on the economy. They do not increase direct investment in the means of production and real wealth generation, and tax breaks for the wealthy simply shift more of the tax burden onto the productive sectors of the economy.

    The average person cannot win. If the tax on land or property is reduced speculators come in to use the reduction to bid up prices and thus to pay the tax saving to the bank as interest on the mortgage.

    The joke is that while asset prices are rising we call it “wealth creation” even while disposable income and workers’ living standards are falling.

    Savings and investment and credit creation is being used less for productive investment (the means to pay off debt) and more for bidding up asset prices and loading down the economy with debt. This is why wealth is polarised.

    Re Keegan’s “kowtowing to the financial elite” – economic democracy has become financial oligarchy, to which politicians turn for funding because that’s where the money is.

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  • Unfortunately confused 76 the answer to you question is yes. Massive bonuses return where many more redundencies should be. The banksters and their political pets have shown the world, again, that they are the spoilt brats of the adult world, crying foul when their toy, MONEY, is takenfrom them and they scweam and scweam until we are convinced they are simply too important to fail and are given billions of our pounds so they can rebuild THEIR balance sheets and gamble to increase THEIR profits. This is a true depiction of the inequaliities in our world, as has ever been so, but we are all so much better informed so why the apathy?

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