Can We Blame The Bankers? (Spoiler Alert: Yes!)

Authored by Ann Pettifor via RethinkingEconomics.com,

At a Rethinking Economics conference in Oslo last month I pointed out that western politicians and economists are repeating policy errors of the 1930s. The pattern of a global financial crash, followed by austerity in Europe and the UK, led in those years to the rise of populism, authoritarianism and ultimately fascism. The scale of economic and political failures and missteps led in turn to a catastrophic world war.

image source: @alecmonopoly and @bigg_antt

Today that pattern – of a global financial crash, austerity and a rise in political populism and authoritarianism – is evident in both Europe and the US. And talk of war has risen to the top of the US political agenda. Why have we not learnt lessons from the past?

The “fount and matrix” (to quote Karl Polanyi) of the international financial system prior to its collapse in 1929, was the self-regulating market. The gold standard was the policy by which the private finance sector, backed by economists, central bankers and policy-makers, sought to extend the domesticmarket system to the international sphere – beyond the reach of regulatory democracy. In the event, the 1929 stock market crash put an end to the delusional aspirations of Haute Finance: namely that financiers could detach their activities from democratic, accountable political oversight. (Polanyi, The Great Transformation 1944).

Between 1929 and 1931 the losses from the US stock market crash were estimated at $50bn. It was the worst economic failure in the history of the international economy. Within three years of the crash millions of Americans were unemployed, and farmers were caught between rising debts and deflating commodity prices. In Germany between 1930 and 1932, Heinrich Brüning, the Chancellor, with the tacit support of Social Democrats, imposed a savage austerity programme that led to high levels of unemployment and cuts in welfare programmes. This in turn led to the demise of social democracy, the rise of fascism and ultimately a global war.

The question that arose during the Rethinking Economics debate was this: could bankers be blamed for the current period of financial crisis, austerity, political polarisation and the rise of fascism? Surely responsibility rests with politicians?

I boldly asserted that bankers (meaning the private finance sector) can be blamed for the Great Financial Crisis and for the economic policies implemented after the crisis. After all, it was bankers (backed by mainstream economists) that lobbied most successfully (both in the UK, the US and the EU) for laissez faire in the 1960s and ‘70s:  the deregulation of credit creation, and for the lifting of controls over interest rates and for cross-border capital mobility. (Duncan Needham, 2014).  By bribing and intimidating the political class, most notably in the US, financiers achieved, and still enjoy, self-regulating, global markets in finance.

After the Great Financial Crisis of 2007-9, it was the finance sector that lobbied politicians into bailing out the private financial system. The system was on the brink of collapse, with the very real threat that hundreds of millions of deposit-holders would not be able to withdraw funds from their banks in the event of systemic failure. Bailouts of individual banks (and other institutions including insurance companies) were both inevitable and, given the circumstances, right. After the Fed bailout, Wall St. bullied and blackmailed the US Congress and demanded a further $700 billion in bailout funds “to rescue Wall Street from its own chicanery and greed” to quote Matt Taibi.  Taibi reports that at

“one meeting to discuss the original bailout bill – at 11 a.m. on September 18th, 2008 – (Henry) Paulson (ex CEO of Goldman Sachs, and 74th US Secretary of the Treasury) actually told members of Congress that $5.5 trillion in wealth would disappear by 2 p.m. that day unless the government took immediate action, and that the world economy would collapse “within 24 hours.” “

While Paulson spoke, and politicians deliberated, money markets froze, and stock markets fell like a stone. As Jeremy Warner explained in the London Independent newspaper on 26 September, 2008: the sector had “warned of economic catastrophe if the Administration failed  to get its way.” Soon after, politicians agreed to the $700 billion bailout, and markets recovered.

But bankers went further. Not only did they want to be bailed out; they also wanted the systemic nature of the global, self-regulating financial system of laissez faire to be sustained and maintained. After the devastation of the crisis, there was public and political resistance to “business as usual”. The US Congress’s Volcker ‘rule’ – that banks could not use depositors’ funds for speculative bets on their own account, was in the banks’ firing line. With time and large sums of money, Volcker’s and the Dodd-Frank regulatory reforms were to be unwound. (According to Reuters, the financial sector spent $2 billion on political activity from the beginning of 2015 to the end of 2016, including $1.2 billion in campaign contributions – more than twice the amount given by any other business sector, according to the study from Americans for Financial Reform. That works out to $3.7 million per member of Congress and is the most ever tracked by the group, which analysed spending data going back to 1990.)

The most notable successes for the banks came as a new law was enacted: S.2155 – the Economic Growth, Regulatory Relief, and Consumer Protection Act. As the not-for-profit NGO Americans for Financial Reform point out:

“S. 2155 is a bank lobbyist’s dream: it contains over two dozen deregulatory gifts to the financial industry. These include provisions that roll back the rules on some of the biggest banks in the country, increasing the risk of financial disaster and a public bailout. Other provisions would expose home buyers to financial exploitation and predatory lending, as well as enable racial discrimination in mortgage lending…. This bill is a victory for banks and their lobbyists over the interests of virtually everyone else.”

I stand by the point made: the private finance sector can largely be blamed for both the de-regulation (‘liberalisation’), reckless greed and speculation that led to the Great Financial Crisis. They lobbied to ensure self-regulation of the system, and to thwart efforts to restructure the system (as opposed to tinkering at the margins) after the GFC. The austerity policies that were recommended by economists (for more see here) followed as governments tried (unsuccessfully) to reduce the volumes of public debt that had risen both because of falls in economic activity, and because of the bailout of the private sector. Those in turn have led to a rise in populism, and to the renewed popularity of fascist parties in Europe.

As I write, bankers continue to foment anger and resistance. FinReg Alert reports that the US’s  “biggest US banks made $2.5 billion from Trump’s Tax Law – in one quarter!”. After the law was passed, Gary D. Cohn, CEO of Goldman Sachs, resigned as adviser to President Trump.

So I repeat my point: global bankers and financiers (including those overseeing trillion-dollar Asset Management Funds) can be blamed for the rise of populist and fascist political parties after the Great Financial Crisis. And given their determination to evade democratic, regulatory oversight and management of the global financial system, we can expect bankers and financiers to be responsible for the next catastrophic, economic failure.

Comments

Common_Law hedgeless_horseman Mon, 05/14/2018 - 11:50 Permalink

You "can" blame anyone you want.

But if you use any of their services and legally consent to their tyranny through your actions, you should blame yourself too. 

www.sedm.org
http://sedm.org/Search/SubjectIndex.htm
http://sedm.org/Forms/10-Emancipation/CitizenshipDiagrams.pdf
https://famguardian.org/Subjects/Taxes/taxes.htm

The right or free path is rarely easy, especially nowadays.

In reply to by hedgeless_horseman

MoreSun lizzoilz Mon, 05/14/2018 - 13:56 Permalink

Yes, and blame Cuck Congress for this:

In yet another despicable demonstration of the total subservience the United States federal government has towards the organized Jewish community, the recently passed federal spending bill more than doubles the amount of tax payer money a number of Jewish groups will receive, Times of Israel is reporting.

 

An omnibus spending bill approved by Congress more than doubles spending for security grants that have been overwhelmingly tapped by Jewish institutions.

The $1.3 trillion bill approved Thursday includes $60 million for the security grants, up from $25 million last year. More than 90 percent of the grants have been used to harden security at Jewish institutions since the nonprofit security grant program was launched in 2005.

Nathan Diament, the Washington director of the Orthodox Union, one of the lead advocates for the grants, said a spike in threats on Jewish institutions over the last year drove the increase. According to the Anti-Defamation League, anti-Semitic incidents in the US in 2017 increased by 43 percent over 2016, not including a spate of bomb threats carried out against Jewish institutions by a Jewish man in Israel.

“We didn’t have to educate members of Congress that the past year has seen an increased set of threats and activity,” Diament said in an interview. […]

Also advocating for the security grants over the years were the Jewish Federations of North America and Agudath Israel of North America.

The bill also includes $175 million over the next 10 years to improve security at schools, a provision that was accelerated after the deadly school shooting in Parkland, Florida, last month. The bill will fund training in violence prevention, police-school coordination and crisis intervention, and will be extended to private and parochial schools as well as public schools.

JFNA praised the inclusion in the omnibus bill of $5 million for the Holocaust Survivor Assistance Program, double the amount of previous years. The program partners with Jewish institutions to deliver assistance to elderly Holocaust survivors.

“There are approximately 100,000 Holocaust (holohoax) survivors living in the United States today, with an estimated 30,000 living in poverty,” said William Daroff, the Washington director of JFNA, in a statement. “By doubling funding levels to $5 million, the program now will be able to provide immediate support to ensure that Holocaust survivors are able to live in dignity and comfort for the remainder of their lives.”

Also wrapped into the omnibus is the Taylor Force Act, which slashes funding to the Palestinians until the Palestinian Authority stops payments to Palestinians killed or arrested during attacks on Israelis. […]

As always, the Jews make out like bandits with every federal spending bill Congress passes and the president signs, no matter who is in office or what party controls Capitol Hill. And it’s all right in our faces, openly reported and documented by mainstream Jewish news sources. The Jewish tyranny ruling America could not be more obvious, yet most fail to recognize it.

http://therealistreport.com/federal-spending-bill-gives-big-boost-to-je…

In reply to by lizzoilz

Stackers DingleBarryObummer Mon, 05/14/2018 - 12:02 Permalink

" global bankers and financiers (including those overseeing trillion-dollar Asset Management Funds) can be blamed for the rise of populist and fascist political parties after the Great Financial Crisis. "

I would like to know what Ann's definition of "Fascism" and "Authoritarianism" is, cause I think she's full shit for about half this article and is guilty of the same revisionist history that is pushed around in text books these days. Are bankers and debt money system a large problem ? You bet. Is the current "populist" movement related to "facsist political parties" - fuck no. Quit redefining words to meet your political narrative.

In reply to by DingleBarryObummer

DuneCreature Graph Mon, 05/14/2018 - 13:03 Permalink

I DO! ............ I DO!

Pick me, PICK ME!!

 

Let me plug the good but wildly optimistic Dr Frog one more time.

The Petition To End The Federal Reserve Bank

I doubt even a Mean Seething Frog-O-Science will last very long in The Cesspool but my hat is off to him for trying.

Hear the good Doc's rap and pitch here

He bigger and meaner that Dr. Ron Paul.

Let's see how far this doc gets. ... Bets?

Live Hard, In Mass We May Be Able To Storm The Castle - End The Fed - The Petition, Sign It, Because We All Know What The Problem In America Is Don't We Fellow ZHers, Die Free

~ DC v8.8

 

In reply to by Graph

atlasRocked hedgeless_horseman Mon, 05/14/2018 - 12:19 Permalink

Democracy is the problem. The sheep voters keep voting to elect more and more irresponsible lying politicians who create the illusion of the economy being healthy.

The voters could have voted out all the lying Democrats and Republicans that allowed the meltdown policies to be implemented.

Numerous economist signed published petitions proclaiming TARP was bad.

No economics textbooks wrote printed money fixes economies.

The founders specifically implemented an appointed senate to preclude the majority voting for handing out money to everyone.

Then amendment 17 ended the senate and we became a bicameral democracy.

 

In reply to by hedgeless_horseman

Polynik3s cheka Mon, 05/14/2018 - 12:04 Permalink

This article's headline is as effective as a flacid penis.

Let's attack the "bankers". That was the call for the left-wing beta males in the Occupy Wallstreet movement, brought to you by Soros. Not once did Occupy mention Rothschild. Hmmmm. 

Call a spade a spade you facid penis of an author - Rothschild Banking Cartel is our mortal enemy.

P.S. Isn't ZeroHedge about 15 steps ahead of this author. I think she just graduated from University and is considering taking something called a red pill. 

In reply to by cheka

Endgame Napoleon cheka Mon, 05/14/2018 - 13:09 Permalink

Really? Is it hate speech to point out that our lawmakers are bought and paid for, with $2 billion in payouts from just one industry going to them “between 2015 — 2016.”

But I am not sure the banking industry is responsible for the 40-year trend of falling / stagnant wages.

I also see little austerity going on.

One contributing factor, driving wages down for citizens with no access to unearned income, is the very, very non-austere socialism-for-some programs that facilitate a workforce full of single moms and legal / illegal immigrants with male breadwinners and US-born kids.

Their free bills—compliments of Uncle Sam—make it possible for them to work part time for low wages, thereby undercutting 50 million working-age citizens out of the workforce (conservative estimate) and millions more citizens who are underemployed and non-welfare-eligible.

There are WAY more underemployed or out-of-the-workforce citizens now than during the Great Depression.

While many argue that FDR’s brand of socialism did not work to jolt the Thirties economy out of the Depression, forty years of multi-pronged, non-austere socialism for the womb-productive citizen / noncitizen workers at the bottom certainly HAS NOT budged wages in the Globalization Era, quite the opposite. 

It is just more hidden because  government pays millions of citizens and noncitizens to have sex and reproduce, bumping up their earned income from part-time / temp jobs, while citizens with no spousal income and no access to welfare and progressive-tax-code giveaways face rent that consumes more than half of their earned-only income.

Non-austerity measures for citizen / noncitizen womb producers in single-earner households, working part time to stay under the income limits for the programs: 

~ free EBT food ($450 per month on average) 

~ hundreds in monthly cash assistance 

~ free rent in Section 8 or subsidized rent that increases per birth in mixed-income apartment complexes, which are located in safer, nicer areas than most single, non-womb-productive college grads can afford 

~ free electricity 

~ nearly free daycare so that single moms can work part time, staying under the ultra-low income limits for welfare, and undercutting citizens whose earned income is not hoisted up by welfare 

~ refundable EITC child tax credits up to $6,431, which, at the maximum, equal 3 to 4 months of full-time wages in many jobs

Austerity: HAHA...It is the fake-feminist version of Womb Privilege Austerity, not just for the single-earner womb producers, either.

Non-austerity measures for womb-productive, married parents—concentrating two jobs (often with health insurance undergirded by a $260-billion employer tax exclusion) under one roof, and for divorced moms with child support that covers rent: 

~ non-refundable child tax credits in the thousands—even for the many moms working part time to add keeping-up-with-the-Jones’ money to a good spousal income who leave work every afternoon at 2:30 and for weeks of travel soccer, abandoning phones ringing off the hook with paying customers, heedlessly, and getting away with it due to crony-mom managers who do the same

~ “employer-provided” health benefits made possible by a $260-billion employer tax exclusion, because in most cases, crony parents make sure that other frequently absentee crony parents double up per household on most of the jobs with benefits, retaining the jobs despite enormous vats of absenteeism beyond PTO and government-mandated pregnancy leave(s) 

Austerity measures for the non-womb-productive, single citizens with no spousal income:

~ near-zero access to monthly welfare, not even to cover rent between low-wage churn jobs, even though most of them have only one, earned-only income stream to cover all household bills, including rent that soaks up more than half of their monthly pay

Austerity is a one-way street, applying only to the single, non-womb-productive citizens whose access to welfare is limited to 3 months / every 3 years of food assistance [only] in the amount of $144 per month (for 3 months). Some states offer this Sole Austerity Group even less food assistance (for 3 months only every 3 years).

The Sole Austerity Group of non-womb-productive citizens also receive negligible progressive-tax-code breaks.

Womb-productive [illegal] aliens, working part time to stay under the earned-income limits for welfare in [traceable] income, are granted billions every year in refundable EITC child tax credits up to $6,431, while childless, single citizens working full-time get nothing but a laughable and mocking kick in the head for hard work through a tax return that will not even cover one major household bill.

Sex, reproduction and part-time work pays in the USA—whether or not you are a citizen of this country, and whether or not you are legally in this country. That is NOT austerity; that is government paying citizens and noncitizens for having sex that leads to reproduction.

That is a Cash For ******* program. 

Unless you lie about the unemployment numbers———-leaving out millions upon millions of working-age US citizens who are out of the workforce, and counting all of the welfare-supported, part-time / temp workers as employed, including the illegal aliens———the pay-for-sex-and-reproduction Cash For ******* program is not working any better than the Cash For Clunkers program worked.

In part, the wage stagnation may have originated due to letting the bankers have their “cross-border capital mobility,” in that it made it easier for economic elites to offshore millions of jobs (and potential SS contributions) to Asia and Mexico, where labor is rock-bottom cheap. 

 

 

In reply to by cheka

DingleBarryObummer Bitchface-KILLAH Mon, 05/14/2018 - 11:50 Permalink

The President is using his bully pulpit to point fingers at everyone for America's problems, except the place he should really be pointing: The banksters.

It is his own fault for getting the blame on the coming crash/collapse.  He should have continued with his campaign rhetoric of how yellen and obama blew a huge bubble, which is true.  Instead, he flip-flopped and called a bubble a bull market, and celebrated DOW 20k, saying it needed to go up, up, up.  Now he owns this %100.

In reply to by Bitchface-KILLAH

Dragon HAwk Mon, 05/14/2018 - 11:56 Permalink

Replace the Banker on a Cross Picture with  a Banker tied to a post with lots of sticks and firewood at his feet.. and don't forget the pitchforks and Torches.

    Then start mailing the artwork to certain, lets say expensive residences & businesses.

Pumpkin Mon, 05/14/2018 - 11:58 Permalink

Trump should declare the Federal Reserve Bank a threat to national security and seize every penny from every associated person.  Wilson and Roosevelt sold our country long ago.

HaveDream Mon, 05/14/2018 - 12:24 Permalink

'Free trade' and free flow of capital during the last few decades of the British Empire (the 1st Age of Globalization) were simply the method to bail the British-led system out of the money bubble it had blown earlier on.

We're in the 2nd Age.  There's no way the state-bank alliance of elites will undo this 'freedom' at this point.  If the Third World were not bribed or forced to use their cheap exports to support the value of dollars and euro, the entire system would collapse.

Political problems and wars, as a result of this, will have to be dealt with by future elites.  These are not the concern of the current ones.

atlasRocked Mon, 05/14/2018 - 12:24 Permalink

 The problem can also traced back to the government regulated retirement savings  programs, because the government can now inflate the stock market under the claim they are helping senior citizens.

Sad to see hedgeless blaming only the bankers and not the policy voters.

In a democracy the voters control everything including ejecting Liars.

A new set of bankers will do exactly the same thing with the same policies the voters approved in place.

thats what socialists do!  

 

 

 

 

 

iLLivaniLLi19 atlasRocked Mon, 05/14/2018 - 14:25 Permalink

I have most of my 401k in ERUS (Russian Stock ETF).

 

I made 2% last year, beating the S&P 500 by about 8% (which lost 10%).

 

My "financial advisor" emailed me today saying my account has been flagged for having an "investment mix outside the range for someone my age and retirement horizon" and they will be calling me soon to tell me how to better invest my money.

In reply to by atlasRocked

Batman11 Mon, 05/14/2018 - 12:53 Permalink

The missed historical lesson.

You start with neoclassical economics that thinks real wealth is created from asset price inflation and doesn’t consider debt.

No one realised the US stock market was being artificially inflated with margin lending in the 1920s.

No one realised the US housing market was being artificially inflated with mortgage lending in the 1990s/2000s.

 https://cdn.opendemocracy.net/neweconomics/wp-content/uploads/sites/5/2017/04/Screen-Shot-2017-04-21-at-13.52.41.png

1920s/2000s – neoclassical economics, high inequality, high banker pay, low regulation, low taxes for the wealthy, robber barons (CEOs), reckless bankers, globalisation phase

1929/2008 – Wall Street crash

1930s/2010s – Global recession, currency wars, trade wars, rising nationalism and extremism 

1940s – World war.