Money Makes Money
January 28, 2015
“It takes money to make money”–the old adage continues to resonate in the 21st century as new capitalists use their funds to make mountains of mammon, climbing over the poor and the middle class as they do so. The New York Times has been running articles about a new form of loan “securitization” that bundles bad car loans made to the most desperate of the working poor. The technique was perfected by hedge funds during the financial crisis before 2008 with, you guessed it, mortgages to low income folks.
This shouldn’t surprise anyone; certainly not the New York Times or the Wall Street Journal, who watch Wall Street with awe and don’t usually probe too deeply into fraudulent practices or outright thievery. The Koch brothers are proving that with enough capital they can buy the entire US political system–they’re spending $800 million in an off election year to make sure things like the Keystone Pipeline (of which they are majority owners) will pass Congress without a veto.
I have been reading, slowly, the extraordinary book by Thomas Picketty, Capital in the 21st Century. Though I am no math whiz, it is clear from the simplest of his formulas that nothing we’ve seen since the 1980s will slow the inexorable march of crony capitalism, political corruption, and gaping inequality. This is because the rate of return on capital is higher than the national incomes and outputs of developed countries. When this happens, Picketty points out, capitalists with inherited or existing wealth will shake their moneymakers to the tune of billions, producing more billions. Only those with money will make money. The vast majority of us will starve.
The temptation, even necessity, of getting high returns from all sorts of portfolios–think securitized mortgage obligations–will drive the richest countries’ economies until we recognize that taxing these returns must happen in order to achieve a balance of income between the richest and the poorest in our world. Inequality is the result of our intransigence in the face of capitalist excess. If we govern by the people and for the people, we need to curtail this rampage by our “privileged few.”