Essence Of The Economic Crisis

In 2008, a financial crisis blossomed. It was caused by the rich, those who control the world. Some of the rich lost considerable amounts of money, mostly to other wealthy people and institutions (who had thus become even richer). So doing, the world financial system got destabilized: bankruptcies could propagate.

The most obvious way out was to recover as much money as possible from the rich. Instead, something else was decided, by the powers that be (themselves electorally financed by those who had set-up the system that crashed, and many of them had profited from).

Since 2007, The 1% Have Gone Off The Charts, Leveraging Crisis, Through Obama

Since 2007, The 1% Have Gone Off The Charts, Leveraging Crisis, Through Obama

To resolve optimally the near-destruction of the financial system in 2008, it was decided to make We the People pay. Saving the richest individuals and institutions was objective number one. So little savers saw their saving rates go down to zero. Workers, even productive workers, such as researchers in fundamental science saw financing go down drastically. Projects went unfinanced, researchers had to quit research. This happened in Great Britain, among nearly all other developed countries (Switzerland being an exception).

Thus “Austerity” is just about We The People going starving, in all sorts of ways and dimensions. Meanwhile, the richest people and institutions in the world kept paying no, or very little, taxes.

Google in Britain made billions, and paid very little tax (a “Google Tax” is supposed to come in, the Conservatives grandly declared, a few months before the elections). Hyper wealthy Brits claim to reside overseas, and thus pay very little tax, and it is perfectly legal.

All over we see the same problem. So question: why do not the richest people and institutions, those with the greatest means, who need very little of what they have, be the first to experience austerity?

Distributing their riches would augments economic activity overall.

Conversely, not distributing the riches of the hyper rich diminishes overall economic activity.

The graph above clearly shows that this entirely a political problem. Policies (at least in the USA) were not friendly to the hyper wealthy, after the crash of 1929-1930. During, and after the war, the USA was managed in a way that was, relatively speaking, socialist.

Reagan though surfed a wave of resentment by the wealthy that originated in California with Prop.13 (and Reagan’s election as governor, and Nixon as president, earlier than that).

So here we are. A few hands take all the decisions, and they are most happy, the more they can grab in money and power.

Larry Fink CEO of the fund company Blackrock (managing more than 4 billion dollars in investments) warned companies that they are demolishing societies by redistributing too much wealth to the wealthy, at the expense of everything else.

Carl Icahn, a plutocrat worth 24 billion dollars, hearing of Fink’s critique, agreed, and lashed out at the CEO class: …”What is even more dangerous and concerning is that so many of our companies do not have CEO’s that have the ability to make investments, let alone run the companies they are now charged with…”

It is even criminal: the hyper rich, and the CEO’s class serving it, are actually not just destroying the world’s socio-economy, but threatening the survivability of the biosphere (the CO2 crisis is a case in point: a handful of plutocrats, fully using their enormous powers, have poisoned world public opinion, and decision making; so we are adding 2% of the total content of CO2 in the atmosphere, every year, half going in the ocean. That was entirely avoidable).

Most very wealthy people are not amused by Fink’s and Icahn’s opinion. They would rather deny there is a problem, they will point out that we live in the best possible world, so far.

So did the passengers of the Titanic, enjoying the most luxurious, fastest trip ever, on a perfectly unsinkable ship.

Reality can be a most ominous fate. Even for plutocrats.

Patrice Ayme’

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10 Responses to “Essence Of The Economic Crisis”

  1. gmax Says:

    Excellent summary. You made a typo with Icahn fortune: it’s not quite in trillions yet…

  2. Ken Says:

    Here we are at worlds end, no more continents to discover and the world IS actually round(hence finite), Yet we keep with the fallacy of a perpetual growth of the economy and population. Compound growth is a terrible thing unless it involves your bank account I guess, Full steam ahead! The heads of state say today. even tho most of them are parents(future-less children). Glad I never had any children or would have had to become an activist instead of a bystander. Keep up the good words.

    • Patrice Ayme Says:

      Thanks Ken!
      I think there are a lot of dimensions in which to grow, just not those which are typically measured by GDP (far from it; GDP measures how rich the richest get..). Out “heads” of state are typically clueless at this point. Once again the CO2 disaster was entirely avoidable (and fully obvious by 1992 when Gore went to Rio, in a great eco-circus).
      I have a daughter, and that has made me even more extreme in defending the will-to-good-works…
      PA

  3. dimvisionary Says:

    Mongols conquered with compound bows, today’s weapon is compound interest. Part of the answer, it seems to me, is the molecular composition of money, or the lack thereof. Thanks for another great post!

    • Patrice Ayme Says:

      Hi Dimvisionary!
      The Mongols of Genghis Khan (13C) used indeed compound bows, a weapon invented a full millennium earlier. The Romans knew it well: its arrows pierced their armor. So the weapon was not new. Still the Romans did not adapt well to it.

      The problem with have now is beyond compound interest (the traditional way of building a plutocracy). Indeed the fractional reserve system allows bankers to create money ex nihilo (from nothing). That’s radical. Revolutionary. Outrageous. Unprecedented mass corruption.
      PA

  4. Martin Lack Says:

    Very good, Patrice, but I still prefer the this video from

    Hat-tip to Schalk Cloete’s Oneinabillion blog:
    http://oneinabillionblog.com/summary-2/collapse/

    • Patrice Ayme Says:

      Hi Martin! Glad to see you here. How can I compete with a funny video? I am NOT funny! I wish I could be funny, and still tell the truth. However I recently noticed that the total genius Buridan (fourteenth century) is still misunderstood because he tried to accommodate his critics too much ( he was not interested in being live roasted by the Church, for some reason). So I say things as they are, not funny.

      We are NOT dealing with a CREDIT crisis: that’s a LIE. Proof? Simple: France, Germany, Spain, Portugal pay NEGATIVE interest rates: when investors invest in these countries, they PAY for the privilege.

      However, the CRISIS is still on-going.
      Thus the crisis has nothing to do with debt.
      QED
      What do you say?
      PA

      • Martin Lack Says:

        Thanks, Patrice. Although I like the amusing animation of the video, I agree the subject matter is very far from being funny. My over-riding emotion, however, is one of frustration becuse I am so powerless. Even the Occupy movement and/or 350.org seem very impotent in the face of the current plutocratic stranglehold on power.

        Are negative interests rates therefore a form of bribery used to encourage investment where it would not otherwise be made? Or are they just a means of propping-up a failed EU superstate (i.e. ‘Tower of Babel’) project…?

        Either way, globally, I really do think the problem is very much debt. However, all sorts of other names are used for it in the hope that no-one will notice how unsustainable the situation is. It’s all very reminiscent of Hans Christian Anderson’s The Emperor’s New Clothes

        • Patrice Ayme Says:

          Hmmm… I better answer this on a separate comment, to avoid too much nestling (that can’t be read on many devices). Basically:

          Debt, if NOT taken seriously, does NOT matter. Greece can default.

          Agreed about stranglehold of plutocrats.

          There is no European Superstate, except to bother all the little guys about all their little ways…

          Today’s essay will address some of the related issues… On the largest scale.
          PA

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