Flawed capitalism - lobbying and corporatocracy

Capitalism, which allows money to flow and be used without constraint, has led bankers to put money into where they get the 'greatest apparent return' ...

and unfortunately these places turn out to be ones where a community with any real moral code/values would not want it to go  ... e.g. 'money for nothing' schemes/scams ... and places where people can be exploited the most.

One might think in a capitalist system that any 'money for nothing' scam would quickly and naturally collapse, but this does not happen when the excessive profits generated are 're-invested' into lobbying Governments and policy makers to gain support/favour and put them into a position where their scam can continue to flourish and/or 'cannot' fail (e.g. as the Banksters did, and continue to do, hence the bailouts and continual pressure to water down any regulation).

The problem with capitalism is that money/wealth is naturally directed towards influencing those in power, to maintain/ further their position to exploit markets. For instance this occurred with banks persuading the Government to remove house prices from UK inflation figures, which created the house price boom (as interest rates would not longer have to increase due to a rise in inflation) and saw house prices triple in a decade.  

Some people argue that the problems we are now seeing are more to do with having a Corporatocracy rather than Capitalism, as corporations use money to unduly influence and control politicians in order to introduce/change rules in their favour (e.g. by relaxing financial regulations, changing food, health and energy policies ...).

Indeed before entering office David Cameron himself highlighted that Lobbying would be the next big scandal (post the scandal relating to politicians and the media), but on entering office he decided not just ignore it but to ensure that he benefited from it!

Lobbying is indeed a big scandal (e.g. banks 'invested' £100m into lobbying last year), but Capitalism creates an environment where a Corporatocracy can thrive, and creates many more problems besides (e.g. the movement of money to exploit people to the maximum, and the ability to move any wealth to tax havens in order to avoid paying any tax etc). 

Corporatocracy is indeed a big problem, but it only thrives due to the flawed and corrupt nature of capitalism.

Accounting loopholes used by bankers to 'inflate profits' (and their bonuses)!

Following on from my recent post about the locusts, leeches and vultures in our society (i.e. financial services companies and lawyers) a report has been published today by the Adam Smith Institute showing how banks (the locusts) use outdated/flawed accounting rules to fictitiously boost profits in order to maximise their bonuses.

The report highlights how technically insolvent banks are using IRFS accounting rule annomalies to report massive profits by using expectations of future values when calculating/reporting profits ... to make it look as if they are not insolvent and to make it look as if the bankers are making lots of money (in order to boost their own individual bonuses).  Yet many of these assets, contrary to increasing in value can easily, and in fact do (as we have seen!), become worthless.
  

The report highlights how the 'financial engineering' going on in banks is no more than a legalized scam/ponzi scheme (e.g. Credit Default Swaps) and how it's effectively fraud (which compliments/augments the legalized counterfeiting they also undertake)! It also highlights how politicians and regulators are doing nothing to tackle the anomalies in the accounting procedures to stop them from doing this in the future.  

The report also exposes how the ratings systems not only allow, but positively support, them making up and using 'fraudulent' financial vehicles to fictitiously drive up profits (by giving scam 'products' triple AAA ratings),  whilst making it very difficult for hard-working small/medium enterprises to get a loan (due to not giving them triple AAA ratings and/or no rating at all). This makes it easy, and much more lucrative, for banks to 'manufacture profits' from 'financial products' (or 'vehicles'), rather than generate profit by lending money to an enterprise working hard to manufacture 'real products' (e.g. real 'vehicles')!

So what are the Government doing? ... Well rather than tackling the problem at its source (e.g. by starting to address the flawed rules/systems that allow such scams to go on), they have instead said they are going to set a little bit of taxpayers money aside (i.e. your money!) for small/medium businesses (whipppeee)! ... and at the same time they are preparing for the next bank bailout - which will occur when the value of all these fictitious financially engineered products actually prove to be worthless (and when the current commodity boom they are currently pushing also goes bust). With 'ring-fencing' effectively put into the long grass by politicians*, nothing of any substance will have been implemented to protect the taxpayer before the next collapse (currently being driven by the bankers).

The end result ... mega-rich bankers/speculators ... bankrupt nations/taxpayers. 

The process ... legalized fraud, robbery and counterfeiting ... endorsed by corrupt politicians and law makers (n.b. lobby groups such the CBI also lobby heavily on behalf of banks, claiming they are the 'Voice of Business', when due to the vast amounts of money given to them by the banks, they are really the 'Voice of Banks').

In China such people would be tried for economic sabotage ... and, if guilty, hanged ...

So when will people in the Western World realize what is happening and start to demand action ... a couple more years perhaps? ... when the next bailout is required?

Well, whatever the timescale, the bankers are clearly looking to make hay while the sun shines (i.e. taking a shedload of your future wages - i.e. the taxes they will take from you in the future to pay for previous/future bailouts) ... whilst the politicians/lawyers try to put up barriers, blow up bridges, and get their lifeboats ready ... so when people do finally realise what's actually been going on they won't be able to reach them ... or their corrupt bank friends!

* David Cameron has put plans for any ring-fencing at least 5-10 years away, and he also put aside our national interests last week when trying to protect his banking friends in the City from any regulatory changes taking place in Europe.

Money & Banking: The Root Cause of Debt, Crisis and Poverty ...?

Does the fundamental design of the banking system automatically lead to an unstable, unproductive, unfair and unsustainable economy and society ...?

If the answer to the above question is yes, then the logical next question to ask is will society take the opportunity to truly fix the problem now...? or will it resort to superficial changes and start saving up for the next bailout ...?

If the best minds in the world were to get together to design a new banking system now ... could they create something better than what we've got ...? could they create something fair (the current system throws millions into debt unnecessarily) ...? could they create something stable? (the current system triggers a recession every few years) ...? could they create something sustainable (the current system requires infinite economic growth) ...? could they create something productive (the financial crisis is throwing millions of people into unemployment) ...?

More and more people are starting to believe money & banking is the root of most of our social and economic problems.  For instance, due to outdated/flawed banking laws, Fractional Reserve Banking currently allows private banks to legally generate 'money out of thin air' from debt, and use it to drive individuals, economies and nations further into debt (and debt slavery).  Is this true? ... Can this be right ...?  Is there a better way ...?  

Well the latest Zeitgeist movie starts to address such issues, and there are many groups now also demanding change ... e.g. one such group, Positive Money, is holding a conference next month in London (entitled "Banking Shapes the World"), on the 13th and 14th November 2010.