Anti-plutocratic Tirolean to Common Sense?

Is this site attributing the Nobels?

It sure looks like it: I approve strongly of three Nobels in a row. Amazing. On Friday, the Nobel was attributed to a French writer who worries a lot about Nazism, Modiano. Then there was the anti-sexist, anti-Islamist Peace Prize to Malala.

Today professor Tirole, a French economist at the public university in Toulouse, got the Nobel in economics. Mr. Tirole pondered the best regulations so that large, powerful firms in industries such as banking and communications would act in society’s interest. that’s one of my familiar themes, and I go much further.

It’s the first Nobel in economy in 10 years who is not a citizen of the USA. Are we in an increasingly terrible socio-economic situation just from that monopoly? Tirole is the most American of French economists: a “polytechnicien”, he got an economy PhD from MIT.

He is depicted as “liberal” (right wing pro-capitalist in French parlance), because he believes in share holders’ rights, and that corporations should just worry about profits. As an extreme left wing progressive nut, I, paradoxically, agree with both points.

However how do I reconcile this with what I call “governmentalism”? Well, they go hand in hand.

According to governmentalism, the main actor in economics is the government. That’s pretty much obvious and was even true on Caribbean islands ruled by pirates: pirates, too, had government, and it ruled their economy (and that’s true to this day, except the pirates use finance instead of swords).

Much of what passes today for the free market is little more than global monopolies, organized crime and deregulated madness.

Jean Tirole, defending the real owners, the shareholders, has done important work exposing executive overcompensation, what I call the CEO class, and over-greedy corporate hegemony.

Here is the introduction of Roland Bénabou and Jean Tirole’s “working” paper on the “Bonus Culture: Competitive Pay, Screening, and Multitasking”. (Executive overcompensation, etc.):

“Recent years have seen a literal explosion of pay, both in levels and in di¤erentials, at the top echelons of many occupations. Large bonuses and salaries are needed, it is typically said, to retain “talent” and “top performers” in finance, corporations, medicine, academia, as well as to incentivize them to perform to the best of their high abilities. Paradoxically, this trend has been accompanied by mounting revelations of poor actual performance, severe moral hazard and even outright fraud in those same sectors. Oftentimes these behaviors impose negative spillovers on the rest of society (e.g., bank bailouts), but even when not, the firms involved themselves ultimately suffer: large trading losses, declines in stock value, loss of reputation and consumer goodwill, regulatory fines and legal liabilities, or even bankruptcy.

This paper proposes a resolution of the puzzle, by showing how competition for the most productive workers can interact with the incentive structure inside firms to undermine work ethics–the extent to which agents “do the right thing” beyond what their material self-interest commands. More generally, the underlying idea is that highly competitive labor markets make it difficult for employers to strike the proper balance between the benefits and costs of high-powered incentives. The result is a “bonus culture” that takes over the workplace, generating distorted decisions and significant efficiency losses, particularly in the long run. To make this point we develop a model that combines multitasking, screening and imperfect competition, thus making a methodological contribution in the process.”

Philosophically it can be explained and said much more simply: a culture of greed has taken over.

One should even say a MOOD of greed takes over. Considering recent discoveries in ethology and epigenetics, hell itself is the bottom of that abyss.

Indeed. Just like some fishes, according to circumstances, modify their genetics, and females turn into males, and some males even in “super males”, the top officers of today’s society turned into predators predating onto the rest of society.

It was high time that some authorities (and the Nobel committee is a small sort of authority) recognizes something in that direction. The work of reflection is just beginning.

The philosophy of banking has not been mulled enough. Nor that, more generally, of mighty corporations.

Those are gigantic institutions with a para-governmental role. They are big enough to influence governments, society, law enforcement, and the law itself. The immensely rich heads of major corporations are received by heads of states, as if they were other heads of state.

Yet, officially, banks and corporations are not led by the social good, and other higher principles, but by greed. Just greed. When those greedsters are celebrated as if they were statesmen, “philanthropists”, or even philosophers or “geniuses”, greed is recognized as philanthropic, and genial.

The less we regulate those giant corporations, the more powerful they get, and the more they can change the mind of civilization itself, towards greed. For example executives of Google were loud, clear, and acknowledged by the British government itself, to be of great influence in deciding educational programs: they are credited for making coding mandatory at age 5 in all schools.

Are Britons to become all little googlers? Ogling the mighty founders of Google, who travel the world in their personal jumbo jets, while paying no significant taxes, and being received by heads of states on their knees, another proof of their genius?

Yet Google siphons its multi-billion Euros profits in Europe through Ireland, to lower its tax bill, and then send said profits to paradise islands with no taxation whatsoever. In other words, Google seems to be an organized crime corporation, as it avoids paying tax nearly entirely. Mafias, and other crime syndicates can only admire such brazen arrogance, and no doubt envy Google after tax profit margins.

European regulators condemned Google for cheating with its search engine, to bring itself even more profits, and now say that Google is ignoring their pleas. Yet, we are putting the fate of youngsters under Google’s maniacal guidance.

This is just Google, the Do Evil company.

All other mighty corporations are applying similar tricks. GE, the oldest company in the Dow Jones, paid no tax for years. Disneyland France, the number one entertainment center in Europe, claimed giant losses, and had to be rescued by Disney (while forgetting to say said losses were from paying giant fees to Disney itself, probably re-routed through some tax heaven).

The situation with the banking system is even worse. As Marx noticed, banks have a monopoly. He left it at that. Now we need to talk.

A monopoly of what? Banks create most of the money. Thanks to the states.

So here we have people, the bankers, unelected and unsupervised, who do not have to justify themselves, operating in secrecy, who, through credit, give most of the money which exists in the world, to whoever they like. It turns out, they love themselves.

And, officially, all the motivation that this sort of secret government, by corporations, for corporations, has, is greed.

Time to ask them question, observe, study, and regulate them.

Economy does not need any more equation to burnish its reputation as a pseudo-science. Economy needs a thorough rethinking, of a philosophical nature.

Otherwise the employment situation, which Tirole, after getting his prize, just described as “catastrophic” will only get worse.

Employment is, of course, a crucial pillar of democracy: no employment, no democracy. The economy is more now about plutocracy than anything else: Tirole and company have lifted just a little bit of the veil.

Patrice Ayme’

Swiss Fight Pluto!

Abstract: The Swiss People, in defiance to the Swiss plutocracy and its attached mob of greedy sycophants, has struck a blow against the extremely wealthy, self perpetuating class of those who rule corporations in defiance of their owners.

Most of these owners are (very) small investors. So this blow for ownership is actually a blow against one of the pillars of plutocracy. That pillar uses corporations to steal other people’s money in a particularly blatant way.

How? By creating what I long called the CEO CLASS the entanglement of corporate boards with executive power in corporations (See the essay of November 2008 on Reforming World Finance). Here is the graph of CEOs compensations versus average salary, USA. (It’s a French translation, because the Berkeley original has magically disappeared from the WWW!)

Rise CEO Class. Jump Under Clinton!

USA CEO salaries are the two top curves, with their logarithmic scale on the left. The (lamentable) average USA salary (not indexed by inflation) crawls on the bottom, with its scale on the right. Source: Anti-Plutocratic French site.

CEO payments climbed up to about 500 times that of the workers in top companies in the USA, but only 15 times in France, 12 times in Germany.

[Interestingly, I searched for days this graph in USA search engines; although of USA origin, Professor Saez, UCB, it is (not so) mysteriously unavailable in USA search engines; a friend suggested I look at Google.France, and there was plenty there! Clearly the USA plutocrats cleaned the World Wide Web carefully, so that their English bound sheeple read only appropriate information! Nothing like the happy bleating of the sheep to fill a sheperd’s heart.] 

The entanglement of CEOs and the corporate boards supposed to watch over them, is reminiscent of, and probably inspired by, the entanglement of political and business power in the USA. That public-private entanglement dates from the early 20C: think of JP Morgan intervening in the 1907 crash, or think of the diversion of German property towards USA plutocrats after 1918 (don’t worry, the building were all the giving of seized German property was given to USA plutocrats burned down around 1922, erasing the tracks of grand thievery…).

A behavior that is widely admired in the USA, that of the towering CEO with an astronomical salary bestowed on him or her by a board of co-conspirators, is now criminalized in Switzerland. Such CEO and director thugs will be punished by a mandatory confiscation of 6 years of income, plus three years in prison.

In the USA, CEOs and their boards are immensely admired. The connected ones sit on corporate boards at an early age, to be paid extravagant sums of money, while doing nothing, but allowing CEOs and their minions to steal all the companies profits, from small shareholders, and workers.

Thus, Americans will now know that, by admiring CEO and boards, the American way, they are admiring what Europeans are increasingly viewing as criminals, and criminal boards of directors. OK, as slave masters long admired, I guess they have trained hard, and they will not suffer anguish that way.

Yet, one can hope that this criminalization of a motive of admiration should help with a worldwide readjustments of values.

So far, so good. But there is a twist. Why is it that mutual funds of the USA have supported so much the CEO class and its interlocked boards? Worldwide?

Well, the CEO class part of a larger conspiracy with the financial sector, where the real money is made. It is my pleasure to give some pointers. Those pointers, in turn, will allow to criminalize further said vaster conspiracy.

Meanwhile, all democracies should pass laws similar to the one Swiss representatives are now constitutionally obliged to pass. It is, of course, a consequence of Switzerland having a higher democratic index than any other country that explains that such a popular initiative was taken there. It’s clearly not a case of a country being run by rabid leftists.

***

EVIL IN A FEW WORDS, & ITS IMPLEMENTATION BY CORPORATIONS:
Evil triumphs when good people do not fight it. Why? Because the default state of humanity is strife. This is the point rabid pacifists keep on missing, it’s also the point Obama made in Stockholm, when he got his Nobel. It has been well known since there are men, and they think.

Nothing personal: because of its domination, the genus Homo evolved to control itself, quite bit as wolves do, by killing each other. The Romans abstracted this as: Homo Homini Lupo, Man Wolf Of Man (more than 2,000 years ago). Just like wolves, only more so, because we dominate more.

All species need to be kept in check, and the check of man is man.

But how does man fight man? Like all other social animals, by mobbing, or tribal fighting. So tribal effects have to be watched severely. The most famous tribes are the 200 or so nations and territories more or less represented at the United Nations. But there are other tribes, all over. The most ubiquitous being corporations. (What is meant by “corporations” varies in time, nations and space, but the tribal effect is what unifies them.)

The founders, and early presidents of the USA, so called “Founding Fathers” were fully aware of this.

As president and thinker in chief Jefferson wrote: “I hope we shall take warning from the example and crush in it’s [sic] birth the aristocracy of our monied corporations which dare already to challenge our government to a trial of strength and bid defiance to the laws our country.”

The “example” is that of England (as the rest of the text makes clear). This is taken from a letter to George Logan, Nov. 12th, 1816. There’s a PDF file with scanned images of an edition of Jefferson’s works at this address.
***

WHY THE SWISS CRACK DOWN ON THE CEO MAFIA:
It is no coincidence that Switzerland, the most democratic country, was the first to ask We The People, in a referendum, what they think about the feudal class that is taking over, armed with neofascist ideology.

The answer, delivered March 3, 2013, is that 68% of the Swiss believes that the conspiracy of thieves that has come to dominate civilization, should be forcefully terminated.

Superficially, Switzerland is doing better than ever. GDP expanded in 2012. GDP per capita is nearly twice that of the USA (at nominal rates, not cheating PPP). But these good numbers and nice surroundings mask the fact that the wealthy have been doing incredibly better, while the plebs has lost ground. Most Swiss cannot afford to own there, to start with. Two-thirds of them rent (whereas 55% of French next door own their homes 100%). That way they are like the inhabitants of most “rich” cities of the West in that they can’t afford to live where they work.

An increasing inflow of tax avoiding and tax mitigating plutocrats makes the Swiss increasingly conscious of a feudalization of the country. For instance, most of the world oil trading is conducted out of Geneva, now that London is proving less tax friendly to the world’s richest sharks. That makes Swiss property values skyrocket, and also make average Swiss, like average Belgians, hold the tax bag.

Yet Switzerland is less subjugated by its elite than other “representative democracies”.

This has to do with history. Other places were typically founded by large imperial machines (France, Britain, Germany, USA, Ex British colonies, Portugal, Spain, Spanish colonies, Italy, Russia, Netherlands), and, or slave societies (Spanish colonies, Brazil, USA, Russia). Some countries may look small now, but degenerated from empires. The Netherlands even conquered England; Denmark, Portugal, and Sweden ran empires (Sweden thought it owned Ukraine and Russia for a millennium). The present Swedish regime was founded by Napoleon, etc…

Instead Switzerland started as a rebellion against the family that would run the “Holly Roman German Empire” for centuries. The birth of Switzerland was fundamentally an anti-plutocratic rebellion. Same in the USA, sure, but only that other revolution minded plutocrat, Louis XVI of France, made in possible (in more ways than one). The Swiss revolt was indigenous.

Any initiative signed by 100,000 people can be presented as a referendum in Switzerland.

***

SWISS CRACK-DOWN ON CEO CLASS:

Initiator of the “Rip-off Initiative” Thomas Minder is an entrepreneur industrialist, and right wing politician, who nearly lost his company when Swissair went bankrupt (from obscure financial maneuvers). In recent years, Mr. Minder observed that the world was put on its knees in the service of financiers. This is exactly the point demonstrators were making in Portugal this week.

As Portuguese demonstrators said, why should they sacrifice because infinitely rich bankers cheated? Or went mad? Or conspired with other rich fat cats to rob common people? Why is it that Portuguese people without money now have to pay to use the public hospital, when those who have caused the disaster keep on flying in private jets, shuttling among their mansions, worldwide?

As I said already more than 5 years ago, there is a CEO class. CEOs sit on each others’ board, and attribute each others’ salaries. OK, they are often more crafty, and use agents: relatives, or protégés. It is particularly clear in the USA, where it’s all about who you know really well: see the Summers-Clinton-Summer-Google-Facebook Ms. Sandberg (just a small example).

And it’s even more than a CEO class.

***

CEO CLASS AS A MULTIPLIER:

The CEO Class can be instrumentalized to divest power to talent that will serve plutocracy well.

A lot of people of power are able to transfer quickly and efficiently power to their children, or people they know will serve their children faithfully. It’s happening everywhere, especially in the USA.

Suddenly all powerful young people rise in the USA to seats on corporate boards: thus they are made to integrate the CEO Class, board side. Careful inquests always show connections with the powers that be. See Geithner, head of New York Fed, then tax cheating Treasury secretary, ah, but the son of Geithner (Geithner’s father was a Ford Foundation director who met with Obama’s mother… All and any connection with the painting behind Hitler in his Munich office will not be made, recommended an angel that passed by, dripping with finance…). Geithner was successfully vetted at Kissinger Associates, a plotting organization to connect plutocrats, corrupt politicians and other worldwide tyrants. He was put under the wings of Rubin and Summers (like Facebook’s billionaire woman, the genius feminist Sheryl Sandberg). Geithner was prepared to serve his masters well.

The CEO-boards Class systems enable the plutocratic machine to put large amounts of power to servile critters. This  is how ‘black’ women of the Rice class, such as Rice, Susan and Rice, Condoleezza, were all powerful by the age of 30 (the former a member of the National Security council, thanks to dad, a treasury director, the second on prestigious CEO boards all over, and a supertanker was named after her, because her masters at Stanford had determined she would serve her masters in the Dark Side well… still does: she is a towering member of the CEO class in 2013). Not that I have anything against blacks or “blacks”…

“Are they worth it?” Asked The Economist. While knowing very well the answer was no. One thing the extravagant growth of the CEO Class did not grow is corporate profits:

CEO Class Rising, Everything Else Lagging

***

WANT DEMOCRACY? CUT POWER IN TINY BITS, DISTRIBUTE WIDELY:

Minder’s “Rip-off Initiative” was designed to prevent bosses from receiving huge bonuses by decision of a CEO class. So it makes it harder to congeal a CEO class: board members should serve only a single year.

This, by the way, is something to meditate in a more general way… In the Roman republic, the judicial, military, economic and political executive was incarnated by the Consuls. They served just one year (although they could be elected again: Marius was elected Consul 7 times!). And even in that year, ultimate power switched from one to the other, every month.

Republican Romans knew how fragile the Res (Thing) Publica was. Don’t laugh. The Roman republic, in full, lasted five centuries. Still the world’s record.

Now what we have is, what would have been called in the times of Julius Caesar, (elected) kings. The immense powers the president of the USA are perfectly ridiculous, especially when, as Obama, he does not use them. (An apparent worshipper of Satan, complete with devilish smirks, such as G. W. Bush, did not have such reservations: such a creature never will, by definition!)

Minder’s anti-plutocratic initiative says that companies cannot decide to give their executives “golden parachutes”. Salaries of board members, and companies’ executives will have to be approved by the companies’ owners. That is, by the shareholders. That, by itself, of course, is not enough, because the plutocratic web is entangled in all power structures, and sucks the substantific marrow.

When Novartis gave 71 million Francs ($77 million) to its CEO, Vasella, to the fury of the very numerous small Swiss shareholders of Novartis. The small shareholders could not do anything as most of Novartis’ shares are held by plutocratic institutions, which are part and party to the plutocratic phenomenon.

What plutocratic institutions accomplice to the CEO Class and the financial rip-off sector, am I alluding to? A lot of them are mutual funds in the USA. Or funds for retirement funds. Those used to give rich returns, but, in recent decades, they have faltered. Why? How come? well it’s part and parcel of the worldwide take-over by rich money managers. It may sound strange that they strive towards subpar performance: it’s an apparent violation of the free market principle.
***

WHY MUTUAL FUNDS MANAGERS CONSPIRE WITH THE CEO MAFIA:
The naïve free market principle says that, when a mutual fund has subpar performance, the shareholder should move to another fund. Yes, sure, but what if they are all subpar? What if there is a conspiracy? Because, clearly that is what has been systematically going for like 20 years.

The funds are losing money right and left because the function of fund managers has become mostly to transfer money to the financial fat sharks of the plutocratic class. You know the ones they share the caviar toasts with. Thus small shareholders and retirees, present and future, make richer, ever more, the richest people in the world.

There is actually a closed circuit similar to that between Washington and private corporations and partnerships. Individuals operate as public fund managers for a few years, wasting a lot of investors’ money, and then they become “wealth managers”, “private bankers”, “hedge fund managers”, entangle themselves with the CEO class, and politicians, to make the really big bucks, extracting money from the public, including the public mutual funds for little people… or small shareholders of corporations such as Novartis. Don’t ask me for references: plutocratic universities such as Harvard, Stanford, are not too keen to study the subject, as those who profit from it, are their bread and butter.

Conspiracies to distribute People’s money to friends are all over the so called “representative democracies”. Why should not giant government spending be controlled by the People more directly? It can be done in… Switzerland.
***

SWISS DEMOCRACY VERSUS THE GIANT CORRUPTION IN AEROSPACE, F35 STYLE:
Plutocracy is encountering serious difficulties in Switzerland. Besides the “rip-off” initiative above, here is another example.

Some of the Swiss elite, probably paid under the table, had conspired to buy “Grippens“. The Grippen is an excellent plane made in Sweden. But the Swiss Air Force would prefer the superlative, stealthy Rafale, the world’s best omnirole fighter bomber, from the country next door.

The Swiss are going to be asked their opinion… about purchasing the Grippen. It’s pretty clear that, thanks to outfits such as this site, enough of them will know that they are been rolled in the flour, spending billions on underperforming planes (that actually does not exist in the version proposed to Switzerland). So they will vote against the Grippen.

Not so in the USA, And other countries where the people is supposed to pay hundreds of billions to purchase an entirely useless plane, the F35 Lightning II.

The F35 is already the world’s most expensive military project, ever, anywhere. Yet the plane is military incapable, and will stay so. The entire project is flawed (this kind of passive stealth does NOT work, the plane’s range, speed, acceleration, g loads, weapons capacity are puny).

The great peoples of the great democracies such as the USA, Great Britain, etc. are not consulted about whether they want to keep on going with that F35 corruption. The total program cost already more than 400 billion dollars with not one single plane that could go to war. It’s expected to end up costing about a trillion dollars with planes no better performing than the Vietnam war F105… And just as detectable.

But so far, while People go starving in several countries involved in F35 corruption (including in the USA’s Silicon Valley, where hundreds of thousands are on “food stamps”), nobody is exhibiting very much indignation.

***

PLUTOCRACY IS A SEVERE PROBLEM, IT SHOULD DEALT WITH SEVERELY:

The Swiss referendum forces the Swiss Parliament to draft a law giving shareholders the right to hold a binding vote on all compensation for company executives and directors. The law will also ban signing and leaving bonuses for senior managers and push greater corporate transparency. As said above, criminals will be punishmed by the confiscation of 6 years of income, and three years jail.

The Swiss have just struck a severe blow at the plutocrats, exposing them for the conspiring, manipulative thieves they are. Other European countries will be encouraged to follow, including Germany and Britain (in both countries laws on executive compensation are being elaborated, the German law may come up for a vote as soon as next week). The French Socialists will come back with a 75% tax law, that will pass muster with the French Constitutional Court…

The European Union in preparing a law cracking down on bankers’ bonuses. Great Britain is desperately trying to block it, as it will apply there, inside the very the den of thieves, too. But Great Britain will be overruled. It just revealing itself to be ruled by money. Plutocracy in fact, not just from crowned celebrities.

To have kings is bad. To have money as king, is worse.

It is high time that countries that call themselves democracies be as democratic as Switzerland. It would be a good start towards a more intelligent civilization.
***
Patrice Ayme

REFORMING WORLD FINANCE.

MAKING WORLD FINANCE SANE, EFFICIENT, AND DEMOCRATIC.

The new US government of Barack Obama should push to reform the world financial system. Clearly the old order was not just unsatisfactory, but it outright collapsed. It has also collapsed in a highly unfair way, with some of the richest even profiting from the crash. If the old system is not reformed now, it never will be, because the need to do so will never be as strong (see P/S).

What should the reform of the world financial system be made of? I suggest:

1) Regulate the market of any derivative so that it can act as a damper, not an amplifier of the fluctuations of the market function it is a derivative of (favor commercial operators, limit leverage, etc.). In other words, make sure that the tails do not wag the dogs, as they do now (see P/S).

2) Create MARKET EFFICIENCY and MARKET DEMOCRACY. As long as some operators have full information, and their computers are acting on it in the next microsecond, while most non professional market participants are doing other things, like working, sleeping or day dreaming, not all operators can take action in a fully informed way. In other words, one cannot have an efficient market as long as only a few are informed in a timely manner. We need time to allow most market participants to have equal access to information. In the age of individuals having a lot of their retirement in market equity, we need to make sure that MOST PEOPLE ARE INFORMED BEFORE PRICES MOVE SIGNIFICANTLY.

To do this: get inspiration from the foundations of physics, or from traffic safety. In both cases, there is a SPEED LIMIT (in physics the speed of light). So put a speed limit on any traded security (bond, stocks, currencies, commodities, etc.) by regulating a limit of say 3% a DAY on any security, up or down.

Another way to slow down the frenzy of transactions (which favors manipulators and speculators, and other similar parasites) is to put a not so tiny tax on each financial transaction. Such a Financial Transaction Tax would be most positive on government deficit too. Or one could try a combination of both speed limit and significant transaction cost.

Rich financial types will scream that this would kill “liquidity” (probably thinking allegorically about all the money they need to fill the moats around their castles). They will scream that trading could not occur, etc. But they can be answered, point by point. And the first answer is this: finance as the exclusive wealth making haven of the plutocrats would be over. Finance would now be first in the service of the real economy, and everybody, not the province of plutocracy. Limiting moves per day, or making them costly will limit excessive speculation. Small investors, that is, most investors, would welcome this.

3) The dangerous and abusive non sense of having people in non democratic regimes (China, Middle East, etc.) forcefully save so that their government and plutocrats can lend money to the USA, because Americans do not save enough, should be discouraged. Americans should be incited to save, like everybody else, so they can invest in their own country with their own money. So put high energy taxes in the USA and an Added Value Tax. The AVT recenters the economic activity towards saving, and away from frantic consumption. (In the European Union, the AVT is a minimum of 15%. By law. The British government just momentarily lowered its AVT from 17.5% to 15%, in the hope it will help with the UK recession… But other European countries did not touch theirs.)

4) In the USA, a CEO CLASS has appeared. These people sit on each other’s boards and give each others’ riches and perks. They have helped to transform the USA into a plutocracy: not only do they control Wall Street, but also industry. That allows them in turn to rig the work of politicians, by buying them off with the prospect of future riches. Then they tweak(ed) the tax code to their advantage. Look at the spectacle of ex president Clinton, now an immensely rich man, but not thanks to his past salaries or personal investments from said salaries. Clinton is now reaping the fruits of years of friendliness towards the hyper rich when he was president. The rise of a worldwide plutocracy is an extension of this. Ultimately, just as happened previously in the Imperium Francorum, the empire of the Franks, a feudal regime with lords will replace all democratic pretense. Fighting the plutocracy starts with breaking the CEO class. Putting representatives of unions on the boards (as done in Germany) could be a first step. Of course, for nationalized companies, civil servants should be disseminated in management and boards.

5) Raise taxes on the hyper rich, worldwide, and regulate fiscal paradises. (The largest fiscal paradise, many argue, is the USA itself! If the USA cooperates with the EU, there will be no more fiscal paradises.) Reestablish the financial reforms made to prevent a return of the Great Bubble and Great Depression that followed it (i.e. re-regulate banks stringently, reestablish the up tick rule, etc…).
***

Patrice Ayme

***

P/S 1: The list of proposed changes is not exhaustive: there will be other bits to tidy up. Bretton-Woods anchored currencies on gold. Nixon yanked the dollar out of its gold connection, anchoring currencies on the dollar thereafter. This needs to be looked at.

P/S 2:  In parallel to the financial reform, there should be a reform of the world economy, a reform of globalization, taking into account strategic goods (i.e., the world location of all high tech products, starting with… cars), agricultural subsidies (bad, except in starving areas), carbon emissions, and carefully maintaining strategic imbalances insuring the military domination of the powers that have imposed a rough approximation of peace in the last 63 years. And, of course, and first of all, making sure that the creation of new jobs somewhere does not mean the sheer disappearance of the corresponding, preexisting jobs somewhere else, but, instead the mutation of the later to comparable socioeconomic situations (that conservation law was not formally imposed so far, and would necessitate some new governmental machinery). 

P/S 3: If the world financial system is not changed now, people will get used to being abused by it. Their indignation will fade, they would adapt, and be profusely thankful for the first slightest improvement. We would move towards a return of greater plutocracy, or, in other words, the feudal system. 

P/S 4: In our interpretation of what caused the decline and fall of Rome, the original cause is the unsustainable rise of the Roman plutocracy.

Globalization the wrong way, plus various financial tactics, the most prominent being world wide tax evasion and huge leverage, have allowed the recent apparition of a plutocracy manipulating countries and populations against each other for its own benefit. This is a bit, but on a grander scale, what is going on presently in Russia, where tremendously rich oligarchs float above a miserable population distracted by fun and games like invading Georgia. Thus world financial reform should try to diminish the influence of world plutocracy (Russian plutocrats have a foot, or more, safely in the West, thus escaping the full might of the Russian government, a general tactic of plutocrats everywhere). The Gracchi brothers tried to pass wealth reform in Rome, to break the unbearable ascent of the plutocracy. They were assassinated, with thousands of their supporters.  Rome marched firmly into plutocracy, dictatorship and civil war, for the next six centuries.

P/S 5: To buy and sell with little liquidity would be child’s play in the computer age (it would have been very difficult before it, that is why it did not occur in history). A complex set of rules could allow trades, depending on who wants to do what. When a security is limit down (say) for the day, up-tick trades could be allowed (so investors could buy at limit down; for selling they would have to wait until next day in their place in the queue, considering their trading history; that would severely handicap extremely frequent traders (like “quant” hedge funds), but not the most sedate ones (like the most thoughtful mutual funds)). If the volume of trading is too huge, automatic lotteries could determine who gets in or out. 

P/S 6: Some people (Nobel Laureate Krugman, for example) have clung to the belief that speculation of the futures’ market cannot influence the price of the underlying commodity. That is completely wrong. They tried to hold to that argument as the price of oil futures shot up. Now they have fallen silent. Why? Because something even more grotesque happened. The price of oil in dollars collapsed from $147.5 to $50 in three months without any change in demand or supply (staying stuck around 86 million barrels/day). Two-third down: it was all a question of the futures collapsing, as hedge funds had to de-leverage (under the polite pretext that they anticipated a severe worldwide recession). The oily tail waged the oil dog.

P/S 7: The housing bubble collapse and its associated foreclosures should not have been a big deal for the banks (by themselves they would have just dented profits). Problems, such as the disappearance of some banks’ entire capital, came from the banks’ massive investments in derivatives, some of them unknown not only to regulators, but to the banks themselves. Pluto hides below the ground, in the Dark, indeed.

P/S 8: One of the master ideas of world financial reform is to make finance a slave to the People, and cut off the evil pathways plutocrats have been using to make themselves ever richer, on the back of the People.

Still another possible example of such an evil pathway is the “Carry Trade” where financial operators borrow in a country with low interest rates, just to transfer the capital to a high interest rate country. This has made some plutocrats very rich. It should be looked at very carefully to see if there is enough good in it, or if it should be mitigated, or outright outlawed. At first sight, it defeats the purpose of providing “liquidity” (i.e., money) to the low interest country (the fundamental reason why the interest rates are low there). Such an inquest would not be a wild attack against riches and capital a la Marx: legitimate pathways to get richer who profit the People by motivating exceptional individuals should be encouraged (and would be encouraged even more, since the evil pathways would have been closed, thus funneling more activity and creativity towards what profits to all, and not just a few parasites).