Financial Crime Inc.

We have recorded a blow-off top in silver, and, to a lesser degree, gold and crude oil.  We have also arrived at a tipping point on the Euro and the stability of the European Union.  Credit spreads for Greece, Ireland, Portugal, and Spain are at or above those recorded prior the the 2008 meltdown.  Our own financial and budget problem continue to spin out of control with no relief in sight.

It is at moments like these that you can appreciate the awesome power of the financial elites.  Consider first the political scene.  In 2008, we repudiated the Republicans, and followed with a 2010 repudiation of the Democrats.  The Tea Party hovers as a potential third party.  You would expect that this environment would produce real "change."

True, the Democrats and Republicans are locked in a duel over spending and budgets.  The Democrats largely support the status quo on expenditures and want to "tax the rich."  The Republicans largely want to "cut spending and taxes" and "unleash the free markets."  But if you step back a bit and analyze the discourse, you find that very little has changed.  Good intentions aside, both of these positions essentially support the elite financial institutions, ultra rich, and elite corporations.  How can this be so?

Taxing the rich is harder than it seems.  When tax rates go up, the super rich and elite corporations suppress income; move income to more friendly jurisdictions; and pay politicians to create more loopholes, credits and exemptions.  Professionals and small to medium business take a direct hit.  This is a further advantage for the elite corporations, because their competition is weakened.  The primary effect is to reduce overall business activity and lower tax collections.  In any case, the math just doesn't work.  There aren't enough rich to tax.

Cutting spending is harder than it looks.  Witness the recent failed attempt to cut $38 billion from the multi-trillion dollar 2011 budget.  Now the Speaker of the House has upped the ante to "trillions" of dollars of cuts in the debt ceiling debate.  In truth, this is empty rhetoric.  Social Security, Medicare, Medicaid, and Interest are most of the budget.  And they can't be materially changed without a fundamental political shift. 

"Unleashing the free market" is code for lowering tax rates.  Fundamental reform of the tax code would trigger new economic growth.  But the elites profit from our convoluted tax code and regulation, and average Americans are split.  Reduction of the top rates is unlike to happen or matter, and fundamental reform is out of reach politically.

What be the result of this duel?  Probably a stalemate that leads nowhere.  Who profits from the stalemate?   The same old banks, elite corporations, and super rich.  They can avoid taxes, they are first in line for subsidies, they are first in line for credit, and they can maximize the use of leverage.  Best of all, when they screw up, the average taxpayer bails them out.  Just in case you think the Democrats (or Republicans) are the hope for reform, I'll remind you that the same people representing the same elite financial interests are in charge of the Federal Reserve and Treasury just as they were in 2007.

The top of this pyramid is the major financial institutions.  By allowing them to borrow at 0% interest rates, they have been subsidized to the tune of 100s of billions of dollars.  They are covering their massives losses from the financial meltdown on the backs of average Americans in the form of future taxation, reduced entitlements, and inflation.  Nobody is covering the losses of the average taxpayer.  The money has already been stolen.  The current action just arranges the form of wealth transfer. 

This piece is titled "Financial Crime Inc.  If the elites that are running the finances of our country do not qualify as a criminal enterprise...nothing does.   

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