Tuesday, July 24, 2012

Dust Off Your Pitchforks

All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident - Arthur Schopenhauer

Bankers have never been well-liked, but in certain Western capitalist circles, there has always been respect for those at the top of the big banks: after all, if these guys are raking in multi-million-dollar bonuses, they must be doing something that ordinary mutts on the street like me and every other sucker can't, right?


A study by Daniel Kahneman, winner of the 2002 Nobel Prize in Economics, is described in an informative article by George Monbiot here.

From the article:

He (Kahneman) discovered that their apparent success is a cognitive illusion. For example, he studied the results achieved by 25 wealth advisers across eight years. He found that the consistency of their performance was zero. "The results resembled what you would expect from a dice-rolling contest, not a game of skill." Those who received the biggest bonuses had simply got lucky.

Such results have been widely replicated. They show that traders and fund managers throughout Wall Street receive their massive remuneration for doing no better than would a chimpanzee flipping a coin. When Kahneman tried to point this out, they blanked him. "The illusion of skill...is deeply ingrained in their culture."

We have almost daily chances these days to get glimpses into the minds of these 'chimpanzees' thanks to the never ending stream of scandals and outright fraud. Inside Job, the Academy Award-winning documentary about the global financial crisis of 2008 is a perfect place to start if you want to see the outrageous and illegal behavior of the likes of Goldman Sachs, whose role in the Greek economic crisis is only one of their many gross abuses.

More from just the last three weeks:

1. Millions of savers are being misled in the UK by City fund managers about hidden fees that can halve the value of pensions.

2. A report by the UK Citizen's Advice Bureau (CAB) sent to the Financial Services Authority (FSA) shows British high street banks intentionally selling 'packaged' accounts for low-income customers who mistakenly believed they were opening a basic account and were unaware that a monthly fee was being charged. The CAB accuses banks of 'blanket selling' these accounts to people with 'learning difficulties, limited understanding of English, and a limited knowledge of personal banking'

3. HSBC, Europe's largest bank, recently said 'sorry' for laundering billions of dollars for Mexican drug cartels among other heinous things. Mexico's drug war has killed more than 50,000 people in six years.

From the article on HSBC above:

A report compiled for the committee detailed how HSBC's subsidiaries transported billions of dollars of cash in armoured vehicles, cleared suspicious travellers' cheques worth billions, and allowed Mexican drug lords buy to planes with money laundered through Cayman Islands accounts.

4. And then there is the LIBOR scandal. A series of articles here summarize this but the excellent Matt Taibbi of Rolling Stone summed it up best at the bottom of this very useful graphic:

"This is the world's biggest banks stealing money that would have otherwise gone toward textbooks and medicine and housing for ordinary Americans, and turning the cash into sports cars and bonuses for the already rich. It's the equivalent of robbing a charity or a church fund to pay for lap dances."

What this litany of disgraceful and fraudulent activity by financial elites clearly displays is the mindset of these people; they feel unconstrained by laws and regulations designed to keep order. In short, they believe they are above the law, and with good reason: because they are, in actual fact, above the law.

To put this into context, if I knowingly sold you a car that was defective and you went on to be involved in an accident, I would rightly be held criminally responsible for any damage or injuries caused and, depending on the nature of the accident, I would probably go to prison for a lengthy stretch, and would also obviously lose the right to sell any cars in the future.

How is this any different to what the financial elites have been demonstrated to do? The cases listed above represent only a tiny fraction of abuses knowingly committed by bankers and their ilk in the full knowledge that their reckless greed will almost certainly cause suffering down the line. Yet these people are very rarely punished; indeed many of the original architects of the 2008 crash are still deeply involved with the financial industry in some regard, and in some cases, are profoundly influential in government policy making.

It is quite simply a case of one rule for us, and no rules for them.

A bombshell that surprised precisely no one who has been paying attention hit the news stands last week: a global super-rich elite has channeled funds worth $21 trillion into offshore tax havens like the Cayman Islands. This enormous sum of money, which the vast majority of people have no hope of comprehending, is equivalent to the GDPs of the US AND Japan put together.

What this means is that the assets of nations are being held by a tiny group of financial elites in offshore accounts while the debts are being shouldered by ordinary people through their governments. This wealth is now beyond the reach of tax authorities, meaning that money that could be used for social programs that alleviate real suffering and poverty is instead being used to bolster the wealth of people and corporations who are already insanely rich.

In addition it is money taken out of the productive economy and is therefore essentially 'dead money'. Small businesses can't borrow it and therefore it can't create employment and wages and it can't be taxed, spent or recycled through the economy again.

This money is moved out of countries via legal loopholes in tax systems and very little has been and indeed can be done to stop it. Compare the lenient treatment the super rich get compared with the little guy accused of tax avoidance; even when they have done absolutely nothing wrong. A truly outrageous example is detailed here.

One rule for us, no rules for them.

What will it take, I often wonder, for people to finally say they have had enough and actually take to the streets en masse and demand action? Unfortunately people will first have to overcome the phenomenon of 'system justification' described in two posts here and here, and that will not be easy. Frankly, until people are personally damaged or threatened with imminent harm, most will do nothing and simply hope pressure groups will have an effect, but these groups suffer due to limited support and, in many cases, ridicule from the mainstream media.

The gospel needs to be preached far and wide: the financial elites, people we have demonstrated have no special skill or genius at what they do, see you, the ordinary person, as both commodities and consumers. Everything can be and has already been commodified; human ingenuity, creativity, beauty, you name it. They care not one jot about your welfare and only need you to be kept under control and buying their products in order to sustain them, products which are increasingly extending into public services, meaning that it will soon be almost impossible to boycott them.

When I feel the need to be succinctly reminded of all that is wrong with the financial industry, I watch this short clip (which went viral) of an Irishman telling it how it is. It contains strong language but he sums it up perfectly.

It's time to dust off the pitchforks.

'The 99.99998271% - Why the Time is Right for Direct Democracy’ by Simon Wood is available for free download. In this 70-page book, the current state of human rights and democracy is discussed, and a simple method of implementing direct democracy is suggested.
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