A tale of loose morals and how the rich got richer and the rest of us didn’t.
After the end of World War II, 1945 ushered in a reforming Labour government which effectively set the scene in the UK for the next 25 years. They introduced the NHS, free at the point of use, and expanded Social Security provisions with the objective of providing a safety net for all families “from the cradle to the grave”. I know it will be hard for younger readers (ie. anyone under 50) to believe that Labour were once a reforming party, but I can assure you it was once true. Labour used to be led by people who weren’t as right wing as Tony Blair, who weren’t as foolish as Gordon Brown and who weren’t as plain stupid as Tricky Dicky Leonard. Really, they were. Honest, it is actually true. Would I lie? Even when the Conservatives replaced Labour, the provisions introduced by Labour were largely retained because there was a general consensus in the country that they were the ‘right thing to do’.
However, step on a few decades and things started to change. Since Thatcher’s government of the nineteen eighties, the UK has become a different country. Instead of the production of goods, the emphasis in the UK economy has been changed to concentrate on the creation of money. Those not concerned in the production of money were often discarded; manufacturing jobs were cut, supposedly to reduce the power of the manufacturing unions, and unemployment rose, funded largely by the newly discovered North Sea oil. It is interesting to contemplate what Thatcher would have done without North Sea oil. How could she have funded the changes? Her need for North Sea oil provides a clear explanation of the reason behind the lies told to Scotland about its value. If they had been told how much it was worth, the Scots might have wanted some of it for themselves and that would never have done. Oil was not for the bare-arsed, kilt-wearing lower classes.
The banks were given practically free rein to do what they liked, as long as it generated money; as long as it increased profits. Banks, whose local branches used to look after Granny’s savings and would lend money to small companies to help them grow, now became addicted to gambling in a big way and it seemed they were good at it as it certainly made their profits, and the bonuses of the gambling employees, grow. In the United States, the gamble of choice was the subprime mortgage. These were loans to folks who wanted to buy a house, but who couldn’t really afford one. So they weren’t such a good credit risk, but the banks quickly found that the more risk you were prepared to take, the more mortgages you could sell, the more money you made and the bigger bonuses you could pay yourself. In many cases, it was fake money because even more money was produced by moving batches of mortgages around while adding a bit on to the price each time it moved, generating profits for the bank and bonuses for the bankers without really increasing the value of the mortgages. Of course, though nobody realised at the time or, if they did, they didn’t care, this couldn’t go on for ever. The goods went round and round the merry-go-round, like a game of pass the parcel, sellers making profits and buyers happy to buy knowing they could sell to someone else at a profit, until the music stopped and the company left holding the parcel had to unwrap it to find out what was in it. And often they found out that, by the time it reached them, there was nothing left, or at least, nothing to justify what had been paid. But the fake ‘profits’ made at each stage had been used to justify the huge salaries and bonuses that the money men were able to pay themselves. To make matters better, for them, but worse, for the rest of us, they would have enough money to afford accountants who would make sure they didn’t have to pay any tax.
The crash was bound to come and when it finally came in 2008, banks all over the world were in trouble, some going bust and many others close to. What was to be done? Should the ones who caused the problem and had benefitted from the racket be made to pay or should those with no involvement and no power be made to foot the bill? As this isn’t a Grimms’ fairy story, I’m sure you can guess the answer. In one of the biggest transfers of wealth of all time from the poor (the taxpayers) to the rich (the bank executives and shareholders), the government bailed out the banks with our money. With the exception of one or two sent to the gallows so the government could pretend that it was taking action, those who caused the problem were able to retain their immoral earnings, while those who didn’t, lost out. The government said at the time that the money used to fund the bailouts would be returned, with interest, when the banks returned to profitability, but we all really knew it was a lie and, indeed, that was the way it turned out.
Handing all this money to the banks left the government a bit short, so they had to come up with ways to increase their income or reduce their outgoings. The option of increasing general taxation to raise extra money was quickly dismissed, bad politics with an election coming up. A windfall tax on bankers’ bonuses was considered, but not implemented before the 2010 election, and there was no way a Conservative government would do such a thing. So again they turned to a soft target, the Social Security system. Changes were introduced to ‘tighten up’ the system, and with the Conservative media ramping up stories about benefit fraud, the Labour government were free to introduce one of the biggest changes, Work Capability Assessments, run from the start by ATOS, a French based private company who set targets for the number of claimants they could screw. Why do Westminster governments always target the weakest and poorest and let the strongest and richest off scot-free? Why did no one in government care about the impact the changes were having on those least able to defend themselves? Why did no one in government care about the number of deaths the changes caused? Though the changes were introduced by Labour, the Tories, who followed in 2010, with the willing assistance of their little yellow LibDem helpers, made things even worse for claimants at the same time as they were dishing out tax cuts to the rich.
The ATOS contract followed the usual government plan of handing taxpayers’ money over to rich companies. As more and more private companies are brought in to carry out parts of what used to be public sector functions, more and more of our money is being handed over to multi-national companies owned by rich money men. Yet more transfers from the poor to the rich.
Unfortunately (for the money men), governments were forced to introduce rules to prevent the bank scam which caused the 2008 crash happening again, so that was the end of that money making scheme. Something had to be found to replace it, because the money men needed to keep the money rolling in. They may already have enormous wealth, but it was important to add to that wealth, because you can never have too much. As things stand, the world’s richest 1% have as much wealth as the rest of the world’s population combined (see Fairtrade Foundation). Even though they already have more money than they could possibly spend in several lifetimes, they still want more.
But there’s no shortage of inventiveness among rich people in search of further riches, so it wasn’t long before a new scheme was hatched, and this was even better, because nobody would lose, or at least nobody who counted. It had long been known that betting huge sums on the movement of currencies caused by the outcome of significant political events could produce enormous profits, at least if you were right. But if you were wrong, you could make an enormous loss, which obviously wasn’t such a good idea. You certainly didn’t want to get it wrong. But what if you knew someone who was in a position to influence what was happening, and what if you could strike a deal for them to take an action which would be very likely to produce a beneficial result. An action that would be likely to minimise or even remove the possibility of making a loss. Betting on a sure thing?
Who do you think would be in a position to influence what was happening in the political arena? Could that be a politician? Could that be the politician in the position of the greatest power, the one being punted by the media?
Before looking at the current situation, let’s think of an event that happened three years ago, the EU referendum. As the referendum approached, large numbers of hedge funds took short positions, ie. they bet on the outcome being leave. At the time, the expectation was that remain would win and, as the vote approached, polling data appeared to confirm this view. Immediately after the polls closed, Nigel Farage, the effective leader of the leave side, appeared to concede defeat for leave and this view was confirmed by YouGov saying that the latest trends were towards remain. As a result, sterling soared. However, as we all know, the result was somewhat different. Sterling tanked and the hedge funds which had bet on sterling falling made huge profits. Several hedge fund managers have described 24 June, 2016, the day after the referendum, as the most profitable day in their history.
There have been many investigations into what happened that night, but it seems fairly well accepted that the profits made by the hedge funds were the byproduct of the comments made by Farage and other politicians and with the information provided by several polling companies. Vast profits were made because of an alleged arrangement between the money men and those who had the ability to influence events.
So now let’s think about today and the outcome of the Brexit negotiations. What immediately strikes you is the similarity between what’s happening now and what happened in the run-up to the referendum. This time, the main man seems to be Boris Johnson, who is leading the negotiations between the UK and the EU, though his interest in securing a deal seems at least to be in some doubt. We know (thanks to Carole Cadwalladr) that the hedge funds who were funding Johnson and the Leave campaign have already taken in excess of £8bn of short positions on a no deal Brexit (ie. betting that it’s going to happen). Interestingly, a large part of the money was placed after the result of the Tory leadership election was announced, the result of which was influenced by these same companies bankrolling Johnson’s leadership bid to the extent of nearly half a million pounds. Obviously, hedge fund managers must really like Boris Johnson. They seemed very keen for him to win. I wonder why.
So if things work out as planned, we will see a few very rich people getting even richer. But what will they do with the money? Maybe they’ll spend some of the money to buy a few more houses? Or a few more cars? Or maybe they’ll give their staff a rise to share out the good fortune? Or will they simply put the money into a bank vault to join the rest of their millions, taking it out of circulation where it won’t do the rest of us any good? It is estimated, based on information contained in the Panama papers, that, worldwide, the equivalent of about $8 trillion is held in offshore accounts, mainly for tax avoidance purposes. Of course, the whole Brexit fiasco came about because of the EU plan to crack down on such tax avoidance schemes, which the money men were very keen to avoid, for obvious reasons.
Should we be trying to do something to stop this latest money making scheme from succeeding? Is there anything that realistically can be done? What do you think? Suggestions welcomed.
3 thoughts on “You can never have too much money …… allegedly”
The future conduct of the banks, post-crash, was beautifully illustrated by the fact that the first tranche of money (£50Bn) given to them by Gordon Brown as a bailout, all went to pay end-of-year bonuses. That’s right, the British banking establishment awarded themselves £50Bn in bonuses for going bust! Then had the cheek to justify it by arguing that this had to be done to ensure confidence was maintained in the system. It went downhill from there.
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Of course, it was considered (by the banks) necessary to pay large bonuses so they could retain the best people. Allegedly the best.