posted on Jun, 25 2013 @ 04:37 PM
This is it, the one word that describes what went wrong with the world's economies. It describes how investors went from investing their money in
productive companies that made goods that improved people's lives to investing in financial schemes designed to make money by gambling in the market
on increasingly more reckless financial instruments designed solely to skim the wealth off of the productive class.
Financialization = Inequality
There are a number of factors behind the widening canyon of economic inequality, but the primary driver is financialization.
Financialization has given those with capital and access to financier expertise ways to skim great wealth from the system without
creating any value whatsoever.
In other words, financialization isn't a consequence of having capital: it's the consequence of having access to unlimited credit, leverage and
low-risk, low-tax skimming operations (for example, tax codes enable hedge funds to declare income as low-tax long-term capital gains).
From the financier point of view, the upper-middle class tax donkeys who keep all their investment capital in mutual funds are the marks who supply
liquidity to the system. The wealthy who park money in hedge funds are marks of a higher order, as their cash enables fund managers to gamble with
other people's money and then return a thin slice of the gains (if any, after fees) back to the investors.
The super-wealthy have access to lines of credit that the normal mortal can only imagine and they use this credit to gamble in the market and to skim
the wealth out of the economy in order to increase their riches while making all the rest of us poorer.
Of two minds
The point is financialization is about leverage and skimming the existing system for immense profits. It's not about hedging legitimate
industries' risks or investing in productive enterprises; it's all about skimming wealth while providing no value to the real economy or
The hidden toxin in financialization is the resulting concentration of wealth can buy concentrations of political power. Financialization is thus
self-perpetuating: once the skimming operations generate billions of dollars in profit, it only takes a relatively small piece of these profits to
buy/influence the political class. Once the politicos are in your pocket, the regulators and judiciary fall into line or are marginalized by new
statutes or gutted budgets.
Financialization is the disease eating away the heart of the economy and what's left of democracy.
An economy infested with financialization can be recognized by these trends, all of which rob the wealth from the class that produces real products
and services of value and transfers that wealth to the leach class that sucks the life out of the economy while living the high life.
The corporate change during the 1980s to make shareholder value the ultimate goal.
The deregulation of Wall Street that allowed for the creation of a vast array of new financial instruments for gambling.
Allowing private equity firm to buy companies, load them up with debt, extract enormous returns, and then kiss them goodbye.
The growth of hedge funds that suck productive wealth out of the economy.
The myriad of barely regulated world financial markets that finance the globalization of production, combined with so-called "free trade"
The increased share of all corporate profits that go to the financial sector.
The ever increasing size of too-big-to-fail banks.
The fact that many of our best students rush to Wall Street instead of careers in science, medicine or education.
In short, financialization is when making money from money becomes more important than providing real goods and services.
Financialization is the sum of all the problems that brought us to the point of financial collapse in 2007 and seem to be rushing us back there at
breakneck speed today.
edit on 6/25/13 by FortAnthem because: