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By now you are probably used to seeing and hearing the words “neo-liberalism” bandied about in the media.  It is also likely, if you are one of the elite five percent significantly increasing your wealth under the current neo-liberal economic conditions, you rather resent this term.  However, if you are part of the hapless 95% who are rapidly getting poorer, and know that the wretched bankers are somehow behind what’s going on, you’re probably using some very rude words indeed, never mind “neo-liberalism”.   Despite the media exposure, few people understand the meaning of neo-liberalism, and even fewer recognise the appalling damage to society this philosophy has already wrought, and its frightening implications for the future.  Let’s be specific here, what we’re really talking about is the peculiarly American form of neo-liberalism which considers that everything should be privatised for the benefit of the rich and powerful; regards any regulations as a hindrance; and believes that taxes are penalties to be avoided by them, and only paid by little (i.e. ordinary) people.  So you can appreciate that the elite five percent don’t like this phrase when it’s quickly becoming associated with a multitude of negative outcomes.  Quite rightly it’s now known that the ruthless application of this philosophy of American neo-liberalism led directly to the financial crash in 2008.  Naturally it also led to the inappropriate management of the post-crash situation which created the enormous debt deflation that has now resulted in The Great Depression we are all experiencing.  This destructive financial cascade has in turn produced the shock reaction of Brexit, and led to Donald Trump as American President elect.  The angry, frustrated and helpless majority who have seen their living standards decimated are reacting in the only way open to them - voting out any politician associated with the past, when they get a chance.   Who knows where this desperate behaviour will lead?   Disaffection is growing.  You can forget Britain and America, just wait and see what will sweep through Europe in the coming year, and be careful what you wish for. Of course beside the bankers and the brokers, the prospering five percent include politicians and even some who work in the media, and they are all having trouble comprehending what they see as increasingly irrational behaviour.   An elite banker working at Goldman Sachs finds it hard to grasp why the majority of Britons voted to leave a corrupt and undemocratic organisation like the European Union, and why Americans want a President with no previous political experience in preference to a debased and highly experienced Hilary Clinton.  Nearly everyone under-estimated the effect that millions of Americans were used to seeing a presidential-looking Trump on their TV screens for no fewer than 14 seasons.   The Apprentice was hugely popular and it showed Trump as a powerful business hero prepared to fire anyone he considered second rate.   Against the reality of their failing living standards, Tycoon Trump represented a champion of hope, someone capable of taking on the cocooned Washington elite, shouting: “You’re fired!” and actually bringing about some changes.   By comparison, Hilary Diane Rodham Clinton epitomised the exclusive face of neo- liberalism and the self-satisfied status quo.  The people who voted for Trump will certainly get more change than they would have done with Clinton, but they may not benefit as much from those changes as Trump himself does.  Whether Trump manages to meet his voters’ expectations or not will obviously emerge during the next few years.  Crucial to what happens will be Trump’s relationship to Wall Street and its elite bankers.  For the public the early signs do not look good at all.  First, there is the intention to repeal part of the Dodd Frank Act which imposed regulations on banks in the aftermath of the 2008 crash, and secondly, a Goldman Sachs banker has been appointed as Treasury Secretary.   I fear this is likely to mean a return to the pre-2008 days where lack of regulation allowed bankers to blow a big bubble before the inevitable crash.     Trump’s predecessor Obama bailed out the offending banks just as Britain’s government did, yet nobody in either country was forced to provide any debt relief for individuals or companies caught up in the bankers’ fraud.   And it really was fraud: banks parcelled up sub-prime mortgages into blocks (deliberately made too complicated to untangle) and passed them off as much higher quality debt to be bought by pension funds.  Obama at some time said that there was going to be some relief for indebted homeowners, but in the event only the guilty bankers and their shareholders were bailed out by the public purse.  You can easily discern an elite “five percenter” neo-lib if you happen across one because any economic discussion will quickly get around to talk of “free markets.”  What these people fail to notice is that one result of their philosophy means that now we all live in centrally planned economies, but economies that are planned by banks and not governments.  There is nothing free market about our current economic situation.  Any money we own is being devalued by Central Banks which, despite lacking democratic control, keep printing ever more digital money to give to national banks in the form of quantitative easing.  This goes to the heart of the discussion that Central Banks run by technocrats are so powerful they should be under political control rather than independent like The Bank of England, or semi-private companies like The Federal Reserve.  Central bankers have their own agenda because of blinkered thinking, primarily brought about by their time at Goldman Sachs, plus their gleeful participation in unbridled capitalism which propelled their careers forward to become elite five percenters.  Carney (Head of the Bank of England) and Draghi (head of the European Central Bank) are both ex-Goldman Sachs bankers.  And Yellen, an academic who hasn’t worked at Goldman Sachs, but undoubtedly will one day, is now in charge of the Federal Reserve Bank.   She’s clearly of a Goldman Sachs’ mind-set as when she served as an economic advisor to Bill Clinton she convinced him to repeal the Glass Stegal Act.   You might recall that it was this important regulating Act, passed in 1933, which was brought in after the bank crash of 1929 to keep retail banking separate from investment banking.  Clinton allowed the two types of banking to merge which led to a prescient testimony given to the House Financial Services Committee by economist Robert Kuttner: “…super-banks have been able to re-enact the same kinds of structural conflicts of interest that were endemic in the 1920s -- lending to speculators, packaging and securitizing credits and then selling them off, wholesale or retail, and extracting fees at every step along the way.”  This testimony was given in 2007, one year before the 2008 crash.  Kuttner observed very close parallels between the unregulated markets in 1929 and 2007 as virtually the same hard-nosed financial techniques were used.  This goes to the core of American neo-liberalism.  By “free markets” the neo-lib really means totally unregulated markets where unbridled capitalism is free to do anything that will benefit the five percenters who hold money capital.  Thus financial “engineering” puts the final squeeze on the ninety five percenters who can only trade their labour capital in a globalised world where labour can be bought very, very cheaply.   Just remember that any kind of regulation is a curse to the neo-liberalists.   Their greedy, self-centred philosophy means that they object to the safety controls in factories as it slows production down.  They want absolute control over food production so there’s no namby-pamby interference about nutritional levels or hygiene.  And it would be better for them if there were no inconvenient traffic lights so they could plough through regardless in their armoured SUVs.  The only traffic lights the neo-libs would happily consider would be those where they could install a monopoly gatekeeper to extract a toll from the masses.  You may think I’m exaggerating, but just you wait.  Given a chance, the Neo-libs would turn the clock back 200 years to when toll-gates made travel prohibitively expensive for the poor and, of course, well before social reforms made life infinitely more bearable for the masses. If you want an example of how much economic damage a corrupt and lightly-regulated bank, working under the neo-lib “free market” ideology, can create, then look no further than the Royal Bank of Scotland (RBS).  As I pointed out a couple of months ago, RBS has already taken over £52 billion of taxpayer funds.  But, almost needless to say, this hasn’t stopped the management team of 10 people topping up their generous salaries and perks by enjoying a share bonus of £17.4 million this year, based on their performance for “a job well done”. According to the National Audit Office (NAO) they expect the U.K. Government to sell their stake in RBS before 2020 for the princely sum of £23.6 billion.  I don’t know who on earth they imagine would be willing to pay this much for RBS, with its appalling reputation, yet even if it did sell at this high price it would still represent a huge loss for the poor old taxpayer.  It’s not surprising that since 2008 the British banking industry has been viewed by the general public lower than estate agents and car salesman, and RBS represents the dirtiest and most tarnished of all the British banks.  In the U.S.A. alone, in the two years between 2013 and 2015, the accumulated penalties for a range of misdemeanours including multiple cases of toxic securities abuse, several interest rate benchmark manipulations and foreign exchange market manipulation have cost RBS $1,899,800,000.   It’s shocking but it’s hard to think of an area of banking in which RBS hasn’t acted corruptly:  For example, they insisted that retail customers bought protection insurance when they took out loans.  Then the RBS board fraudulently raised money from their own shareholders by presenting the bank’s finances as very much healthier than they actually were.  Back in April 2008, when RBS was run by the now disgraced Fred Godwin (Fred the Shred), he asked existing shareholders for £12 billion to bolster the bank’s reserves after spending £49 billion in the disastrous acquisition of Dutch Bank ABN Amro.  You won’t be amazed to hear that just months later RBS shares lost 90% of their value and the British Government had, in effect, to nationalise the bank.  RBS has also been fighting litigation with five groups of shareholders and has now agreed with three of the groups to reimburse about 77% of what they have lost.  So far RBS has had to set aside £800 million for this, and they are still actively engaged in expensive litigation with the remaining two shareholder groups.  As if all this wasn’t damaging enough, the most destructive of the bank’s illegal actions was RBS’s secret scheme to hike their own revenues during the financial crisis at the expense of their own customers’ businesses.  Known as “the dash for cash” this ruined many viable and established companies, wrecking their owners’ and employees’ lives.  You can read about it in-depth here or watch some video interviews that explains what RBS did.  The huge financial damage to the U.K.’s economy and employment is hard to estimate because, at that time, RBS was the major lender to small British businesses.  Leaked memos show that RBS, who are still in blatant denial, have flagrantly lied to the public and parliament about the matter.   Obviously now a very weak bank with a shocking reputation, RBS has just failed the Bank of England’s 2016 financial stress test.  This is bad news for taxpayers as even more money will be required, further diluting the value of the public shareholding.   Will this miserable excuse for a bank ever publicly acknowledge the full extent of their corrupt business practices?  And would a devolved Scotland of just five and a quarter million people ever be able to repay Royal Bank of Scotland’s £52 billion and growing debt to the British taxpayer? November 2016
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Light touch regulation…

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Light touch regulation…

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By now you are probably used to seeing and hearing the words “neo- liberalism” bandied about in the media.  It is also likely, if you are one of the elite five percent significantly increasing your wealth under the current neo-liberal economic conditions, you rather resent this term.  However, if you are part of the hapless 95% who are rapidly getting poorer, and know that the wretched bankers are somehow behind what’s going on, you’re probably using some very rude words indeed, never mind “neo-liberalism”.   Despite the media exposure, few people understand the meaning of neo-liberalism, and even fewer recognise the appalling damage to society this philosophy has already wrought, and its frightening implications for the future.  Let’s be specific here, what we’re really talking about is the peculiarly American form of neo-liberalism which considers that everything should be privatised for the benefit of the rich and powerful; regards any regulations as a hindrance; and believes that taxes are penalties to be avoided by them, and only paid by little (i.e. ordinary) people.  So you can appreciate that the elite five percent don’t like this phrase when it’s quickly becoming associated with a multitude of negative outcomes.  Quite rightly it’s now known that the ruthless application of this philosophy of American neo-liberalism led directly to the financial crash in 2008.  Naturally it also led to the inappropriate management of the post-crash situation which created the enormous debt deflation that has now resulted in The Great Depression we are all experiencing.  This destructive financial cascade has in turn produced the shock reaction of Brexit, and led to Donald Trump as American President elect.  The angry, frustrated and helpless majority who have seen their living standards decimated are reacting in the only way open to them - voting out any politician associated with the past, when they get a chance.   Who knows where this desperate behaviour will lead?   Disaffection is growing.  You can forget Britain and America, just wait and see what will sweep through Europe in the coming year, and be careful what you wish for. Of course beside the bankers and the brokers, the prospering five percent include politicians and even some who work in the media, and they are all having trouble comprehending what they see as increasingly irrational behaviour.   An elite banker working at Goldman Sachs finds it hard to grasp why the majority of Britons voted to leave a corrupt and undemocratic organisation like the European Union, and why Americans want a President with no previous political experience in preference to a debased and highly experienced Hilary Clinton.  Nearly everyone under-estimated the effect that millions of Americans were used to seeing a presidential- looking Trump on their TV screens for no fewer than 14 seasons.   The Apprentice was hugely popular and it showed Trump as a powerful business hero prepared to fire anyone he considered second rate.   Against the reality of their failing living standards, Tycoon Trump represented a champion of hope, someone capable of taking on the cocooned Washington elite, shouting: “You’re fired!” and actually bringing about some changes.   By comparison, Hilary Diane Rodham Clinton epitomised the exclusive face of neo- liberalism and the self-satisfied status quo.  The people who voted for Trump will certainly get more change than they would have done with Clinton, but they may not benefit as much from those changes as Trump himself does.  Whether Trump manages to meet his voters’ expectations or not will obviously emerge during the next few years.  Crucial to what happens will be Trump’s relationship to Wall Street and its elite bankers.  For the public the early signs do not look good at all.  First, there is the intention to repeal part of the Dodd Frank Act which imposed regulations on banks in the aftermath of the 2008 crash, and secondly, a Goldman Sachs banker has been appointed as Treasury Secretary.   I fear this is likely to mean a return to the pre- 2008 days where lack of regulation allowed bankers to blow a big bubble before the inevitable crash.     Trump’s predecessor Obama bailed out the offending banks just as Britain’s government did, yet nobody in either country was forced to provide any debt relief for individuals or companies caught up in the bankers’ fraud.   And it really was fraud: banks parcelled up sub- prime mortgages into blocks (deliberately made too complicated to untangle) and passed them off as much higher quality debt to be bought by pension funds.  Obama at some time said that there was going to be some relief for indebted homeowners, but in the event only the guilty bankers and their shareholders were bailed out by the public purse.  You can easily discern an elite “five percenter” neo-lib if you happen across one because any economic discussion will quickly get around to talk of “free markets.”  What these people fail to notice is that one result of their philosophy means that now we all live in centrally planned economies, but economies that are planned by banks and not governments.  There is nothing free market about our current economic situation.  Any money we own is being devalued by Central Banks which, despite lacking democratic control, keep printing ever more digital money to give to national banks in the form of quantitative easing.  This goes to the heart of the discussion that Central Banks run by technocrats are so powerful they should be under political control rather than independent like The Bank of England, or semi-private companies like The Federal Reserve.  Central bankers have their own agenda because of blinkered thinking, primarily brought about by their time at Goldman Sachs, plus their gleeful participation in unbridled capitalism which propelled their careers forward to become elite five percenters.  Carney (Head of the Bank of England) and Draghi (head of the European Central Bank) are both ex-Goldman Sachs bankers.  And Yellen, an academic who hasn’t worked at Goldman Sachs, but undoubtedly will one day, is now in charge of the Federal Reserve Bank.   She’s clearly of a Goldman Sachs’ mind-set as when she served as an economic advisor to Bill Clinton she convinced him to repeal the Glass Stegal Act.   You might recall that it was this important regulating Act, passed in 1933, which was brought in after the bank crash of 1929 to keep retail banking separate from investment banking.  Clinton allowed the two types of banking to merge which led to a prescient testimony given to the House Financial Services Committee by economist Robert Kuttner: “…super- banks have been able to re-enact the same kinds of structural conflicts of interest that were endemic in the 1920s -- lending to speculators, packaging and securitizing credits and then selling them off, wholesale or retail, and extracting fees at every step along the way.”  This testimony was given in 2007, one year before the 2008 crash.  Kuttner observed very close parallels between the unregulated markets in 1929 and 2007 as virtually the same hard- nosed financial techniques were used.  This goes to the core of American neo-liberalism.  By “free markets” the neo-lib really means totally unregulated markets where unbridled capitalism is free to do anything that will benefit the five percenters who hold money capital.  Thus financial “engineering” puts the final squeeze on the ninety five percenters who can only trade their labour capital in a globalised world where labour can be bought very, very cheaply.   Just remember that any kind of regulation is a curse to the neo-liberalists.   Their greedy, self-centred philosophy means that they object to the safety controls in factories as it slows production down.  They want absolute control over food production so there’s no namby-pamby interference about nutritional levels or hygiene.  And it would be better for them if there were no inconvenient traffic lights so they could plough through regardless in their armoured SUVs.  The only traffic lights the neo-libs would happily consider would be those where they could install a monopoly gatekeeper to extract a toll from the masses.  You may think I’m exaggerating, but just you wait.  Given a chance, the Neo-libs would turn the clock back 200 years to when toll-gates made travel prohibitively expensive for the poor and, of course, well before social reforms made life infinitely more bearable for the masses. If you want an example of how much economic damage a corrupt and lightly-regulated bank, working under the neo-lib “free market” ideology, can create, then look no further than the Royal Bank of Scotland (RBS).  As I pointed out a couple of months ago, RBS has already taken over £52 billion of taxpayer funds.  But, almost needless to say, this hasn’t stopped the management team of 10 people topping up their generous salaries and perks by enjoying a share bonus of £17.4 million this year, based on their performance for “a job well done”. According to the National Audit Office (NAO) they expect the U.K. Government to sell their stake in RBS before 2020 for the princely sum of £23.6 billion.  I don’t know who on earth they imagine would be willing to pay this much for RBS, with its appalling reputation, yet even if it did sell at this high price it would still represent a huge loss for the poor old taxpayer.  It’s not surprising that since 2008 the British banking industry has been viewed by the general public lower than estate agents and car salesman, and RBS represents the dirtiest and most tarnished of all the British banks.  In the U.S.A. alone, in the two years between 2013 and 2015, the accumulated penalties for a range of misdemeanours including multiple cases of toxic securities abuse, several interest rate benchmark manipulations and foreign exchange market manipulation have cost RBS $1,899,800,000.   It’s shocking but it’s hard to think of an area of banking in which RBS hasn’t acted corruptly:  For example, they insisted that retail customers bought protection insurance when they took out loans.  Then the RBS board fraudulently raised money from their own shareholders by presenting the bank’s finances as very much healthier than they actually were.  Back in April 2008, when RBS was run by the now disgraced Fred Godwin (Fred the Shred), he asked existing shareholders for £12 billion to bolster the bank’s reserves after spending £49 billion in the disastrous acquisition of Dutch Bank ABN Amro.  You won’t be amazed to hear that just months later RBS shares lost 90% of their value and the British Government had, in effect, to nationalise the bank.  RBS has also been fighting litigation with five groups of shareholders and has now agreed with three of the groups to reimburse about 77% of what they have lost.  So far RBS has had to set aside £800 million for this, and they are still actively engaged in expensive litigation with the remaining two shareholder groups.  As if all this wasn’t damaging enough, the most destructive of the bank’s illegal actions was RBS’s secret scheme to hike their own revenues during the financial crisis at the expense of their own customers’ businesses.  Known as “the dash for cash” this ruined many viable and established companies, wrecking their owners’ and employees’ lives.  You can read about it in-depth here or watch some video interviews that explains what RBS did.  The huge financial damage to the U.K.’s economy and employment is hard to estimate because, at that time, RBS was the major lender to small British businesses.  Leaked memos show that RBS, who are still in blatant denial, have flagrantly lied to the public and parliament about the matter.   Obviously now a very weak bank with a shocking reputation, RBS has just failed the Bank of England’s 2016 financial stress test.  This is bad news for taxpayers as even more money will be required, further diluting the value of the public shareholding.   Will this miserable excuse for a bank ever publicly acknowledge the full extent of their corrupt business practices?  And would a devolved Scotland of just five and a quarter million people ever be able to repay Royal Bank of Scotland’s £52 billion and growing debt to the British taxpayer? November 2016
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