How Goldman gambled on starvation
by Johann Hari
The Independent (UK)
Speculators set up a casino where the chips were the stomachs of millions. What does it say about our system that we can so casually inflict so much pain?
By now, you probably think your opinion of Goldman Sachs and its swarm of Wall Street allies has rock-bottomed at raw loathing. You're wrong. There's more. It turns out that the most destructive of all their recent acts has barely been discussed at all. Here's the rest. This is the story of how some of the richest people in the world – Goldman, Deutsche Bank, the traders at Merrill Lynch, and more – have caused the starvation of some of the poorest people in the world.
It starts with an apparent mystery. At the end of 2006, food prices across the world started to rise, suddenly and stratospherically. Within a year, the price of wheat had shot up by 80 per cent, maize by 90 per cent, rice by 320 per cent. In a global jolt of hunger, 200 million people – mostly children – couldn't afford to get food any more, and sank into malnutrition or starvation. There were riots in more than 30 countries, and at least one government was violently overthrown. Then, in spring 2008, prices just as mysteriously fell back to their previous level. Jean Ziegler, the UN Special Rapporteur on the Right to Food, calls it "a silent mass murder", entirely due to "man-made actions."
Earlier this year I was in Ethiopia, one of the worst-hit countries, and people there remember the food crisis as if they had been struck by a tsunami. "My children stopped growing," a woman my age called Abiba Getaneh, told me. "I felt like battery acid had been poured into my stomach as I starved. I took my two daughters out of school and got into debt. If it had gone on much longer, I think my baby would have died."
Most of the explanations we were given at the time have turned out to be false. It didn't happen because supply fell: the International Grain Council says global production of wheat actually increased during that period, for example. It isn't because demand grew either: as Professor Jayati Ghosh of the Centre for Economic Studies in New Delhi has shown, demand actually fell by 3 per cent. Other factors – like the rise of biofuels, and the spike in the oil price – made a contribution, but they aren't enough on their own to explain such a violent shift.
To understand the biggest cause, you have to plough through some concepts that will make your head ache – but not half as much as they made the poor world's stomachs ache.
For over a century, farmers in wealthy countries have been able to engage in a process where they protect themselves against risk. Farmer Giles can agree in January to sell his crop to a trader in August at a fixed price. If he has a great summer, he'll lose some cash, but if there's a lousy summer or the global price collapses, he'll do well from the deal. When this process was tightly regulated and only companies with a direct interest in the field could get involved, it worked.
To Read the Entire Article
Showing posts with label Goldman Sachs. Show all posts
Showing posts with label Goldman Sachs. Show all posts
Saturday, July 03, 2010
Tuesday, May 25, 2010
John Bellamy Foster and Hannah Holleman: The Financial Elite
(I just got a subscription to Monthly Review and articles like this is why I support their efforts)
The Financial Power Elite
John Bellamy Foster and Hannah Holleman
Monthly Review Press
Only twice before in the last century—after the 1907 Bank Panic and following the 1929 Stock Market Crash—has outrage directed at U.S. financial elites reached today’s level, in the wake of the Great Financial Crisis of 2007-2009. A Time magazine poll in late October 2009 revealed that 71 percent of the public believed that limits should be imposed on the compensation of Wall Street executives; 67 percent wanted the government to force executive pay cuts on Wall Street firms that received federal bailout money; and 58 percent agreed that Wall Street exerted too much influence over government economic recovery policy.2
In January 2009 President Obama capitalized on the growing anger against financial interests by calling exorbitant bank bonuses subsidized by taxpayer bailouts “shameful,” and threatening new regulations. Journalist Matt Taibbi opened his July 2009 Rolling Stone article with: “The first thing you need to know about Goldman Sachs is that it’s everywhere. The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.” Former chief economist of the International Monetary Fund, Simon Johnson, published an article in the May 2009 Atlantic entitled “The Quiet Coup,” decrying the takeover by the “American financial oligarchy” of strategic positions within the federal government that give “the financial sector a veto over public policy.”3
The Financial Crisis Inquiry Commission, established by Washington in 2009, was charged with examining “the causes, domestic and global, of the current financial and economic crisis in the United States.” Its chairman, Phil Angelides, compared its task to that of the Pecora hearings in the 1930s, which exposed Wall Street’s speculative excesses and malfeasance. The first hearings in January 2010 began with the CEOs of some of the largest U.S. banks: Bank of America, JPMorgan Chase, Goldman Sachs, and Morgan Stanley.4
Meanwhile, the federal government has continued its program of salvaging the banks by funneling trillions of dollars in their direction through capital infusions, loan guarantees, subsidies, purchases of toxic waste, etc. This is a time of record bank failures, but also one of rapid financial concentration, as the already “too big to fail firms” at the apex of the financial system are becoming still bigger.
All of this raises the issue of an emerging financial power elite. Has the power of financial interests in U.S. society increased? Has Wall Street’s growing clout affected the U.S. state itself? How is this connected to the present crisis? We will argue that the financialization of U.S. capitalism over the last four decades has been accompanied by a dramatic and probably long-lasting shift in the location of the capitalist class, a growing proportion of which now derives its wealth from finance as opposed to production. This growing dominance of finance can be seen today in the inner corridors of state power.
The Money Trust
Anger over the existence of a “money trust” ruling the U.S. economy reached vast proportions at the end of the nineteenth century and the beginning of the twentieth. This was the time when investment bankers midwifed the birth of industrial behemoths, launching the new era of monopoly capital. In return, the investment banks obtained what the Austrian Marxist economist Rudolf Hiferding, in his great work, Financial Capital (1910), called “promoter’s profits.”5 Hilferding and the radical economist and sociologist Thorstein Veblen in the United States were the two greatest theorists of the rise of the new age of monopoly capital and financial control. Veblen declared that “the investment bankers collectively are the community custodians of absentee ownership at large, the general staff in charge of the pursuit of business….[T]he banking-houses which have engaged in this enterprise have come in for an effectual controlling interest in the corporations whose financial affairs they administer.”6 In the prototypical merger of the period, the creation in 1901 of the U.S. Steel Corporation, the syndicate of underwriters that J.P. Morgan and Co. put together to float the stock, received 1.3 million shares and over $60 million in commissions, of which J.P. Morgan and Co. got $12 million.7
The 1907 Bank Panic, during which J.P. Morgan himself intervened in the absence of a central bank to stabilize the financial sector, led to the creation in 1913 of the Federal Reserve System, aimed at providing banks with liquidity in a crisis. But it also led to charges, first issued in 1911 by Congressman Charles A. Lindbergh (father of the famous flier), of a “money trust” dominating U.S. finance and industry. Woodrow Wilson, then governor of New Jersey, declared: “The great monopoly in this country is the money monopoly.”
To Read the Rest of the Essay
The Financial Power Elite
John Bellamy Foster and Hannah Holleman
Monthly Review Press
You mean to tell me that the success of the [economic] program and my reelection hinges on the Federal Reserve and a bunch of fucking bond traders?
—President Bill Clinton
Only twice before in the last century—after the 1907 Bank Panic and following the 1929 Stock Market Crash—has outrage directed at U.S. financial elites reached today’s level, in the wake of the Great Financial Crisis of 2007-2009. A Time magazine poll in late October 2009 revealed that 71 percent of the public believed that limits should be imposed on the compensation of Wall Street executives; 67 percent wanted the government to force executive pay cuts on Wall Street firms that received federal bailout money; and 58 percent agreed that Wall Street exerted too much influence over government economic recovery policy.2
In January 2009 President Obama capitalized on the growing anger against financial interests by calling exorbitant bank bonuses subsidized by taxpayer bailouts “shameful,” and threatening new regulations. Journalist Matt Taibbi opened his July 2009 Rolling Stone article with: “The first thing you need to know about Goldman Sachs is that it’s everywhere. The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.” Former chief economist of the International Monetary Fund, Simon Johnson, published an article in the May 2009 Atlantic entitled “The Quiet Coup,” decrying the takeover by the “American financial oligarchy” of strategic positions within the federal government that give “the financial sector a veto over public policy.”3
The Financial Crisis Inquiry Commission, established by Washington in 2009, was charged with examining “the causes, domestic and global, of the current financial and economic crisis in the United States.” Its chairman, Phil Angelides, compared its task to that of the Pecora hearings in the 1930s, which exposed Wall Street’s speculative excesses and malfeasance. The first hearings in January 2010 began with the CEOs of some of the largest U.S. banks: Bank of America, JPMorgan Chase, Goldman Sachs, and Morgan Stanley.4
Meanwhile, the federal government has continued its program of salvaging the banks by funneling trillions of dollars in their direction through capital infusions, loan guarantees, subsidies, purchases of toxic waste, etc. This is a time of record bank failures, but also one of rapid financial concentration, as the already “too big to fail firms” at the apex of the financial system are becoming still bigger.
All of this raises the issue of an emerging financial power elite. Has the power of financial interests in U.S. society increased? Has Wall Street’s growing clout affected the U.S. state itself? How is this connected to the present crisis? We will argue that the financialization of U.S. capitalism over the last four decades has been accompanied by a dramatic and probably long-lasting shift in the location of the capitalist class, a growing proportion of which now derives its wealth from finance as opposed to production. This growing dominance of finance can be seen today in the inner corridors of state power.
The Money Trust
Anger over the existence of a “money trust” ruling the U.S. economy reached vast proportions at the end of the nineteenth century and the beginning of the twentieth. This was the time when investment bankers midwifed the birth of industrial behemoths, launching the new era of monopoly capital. In return, the investment banks obtained what the Austrian Marxist economist Rudolf Hiferding, in his great work, Financial Capital (1910), called “promoter’s profits.”5 Hilferding and the radical economist and sociologist Thorstein Veblen in the United States were the two greatest theorists of the rise of the new age of monopoly capital and financial control. Veblen declared that “the investment bankers collectively are the community custodians of absentee ownership at large, the general staff in charge of the pursuit of business….[T]he banking-houses which have engaged in this enterprise have come in for an effectual controlling interest in the corporations whose financial affairs they administer.”6 In the prototypical merger of the period, the creation in 1901 of the U.S. Steel Corporation, the syndicate of underwriters that J.P. Morgan and Co. put together to float the stock, received 1.3 million shares and over $60 million in commissions, of which J.P. Morgan and Co. got $12 million.7
The 1907 Bank Panic, during which J.P. Morgan himself intervened in the absence of a central bank to stabilize the financial sector, led to the creation in 1913 of the Federal Reserve System, aimed at providing banks with liquidity in a crisis. But it also led to charges, first issued in 1911 by Congressman Charles A. Lindbergh (father of the famous flier), of a “money trust” dominating U.S. finance and industry. Woodrow Wilson, then governor of New Jersey, declared: “The great monopoly in this country is the money monopoly.”
To Read the Rest of the Essay
Sunday, May 23, 2010
Best of the Left #364: Delusions of fascism, journalism and grandeur (Media)
#364 Delusions of fascism, journalism and grandeur (Media)
Best of the Left
Act 1: Glenn Beck’s Nazi Tourette’s – Daily Show
Song 1: Better be quite now – Elliott Smith
Act 2: The power of conservative media – Young Turks
Song 2: Everything In Its Right Place – Radiohead
Act 3: Dissecting NBC report on financial reform – Jimmy Dore
Song 3: Too much information – Duran Duran
Act 4: Bernie Goldberg fires back – Daily Show
Song 4: Knock yourself out – Jon Brion
Act 5: Fox News spins net neutrality – Young Turks
Song 5: So much more – Marc Robillard
Act 6: Jon Meacham on sale of Newsweek – Daily Show
Song 6: Who will buy – Oliver Twist
Act 7: Goldman defended in the media – Counterspin
Song 7: You’re a wolf – Sea Wolf
Act 8: Glenn to the mountaintop – Colbert Report
To Listen to the Episode
Best of the Left
Act 1: Glenn Beck’s Nazi Tourette’s – Daily Show
Song 1: Better be quite now – Elliott Smith
Act 2: The power of conservative media – Young Turks
Song 2: Everything In Its Right Place – Radiohead
Act 3: Dissecting NBC report on financial reform – Jimmy Dore
Song 3: Too much information – Duran Duran
Act 4: Bernie Goldberg fires back – Daily Show
Song 4: Knock yourself out – Jon Brion
Act 5: Fox News spins net neutrality – Young Turks
Song 5: So much more – Marc Robillard
Act 6: Jon Meacham on sale of Newsweek – Daily Show
Song 6: Who will buy – Oliver Twist
Act 7: Goldman defended in the media – Counterspin
Song 7: You’re a wolf – Sea Wolf
Act 8: Glenn to the mountaintop – Colbert Report
To Listen to the Episode
Friday, April 23, 2010
Wednesday, April 21, 2010
Saturday, April 03, 2010
Noam Chomsky: Globalization Marches On -- Growing popular outrage has not challenged corporate power.
Globalization Marches On: Growing popular outrage has not challenged corporate power.
by Noam Chomsky
Commond Dreams
...
Bringing Obama to Heel
Popular anger finally evoked a rhetorical shift from the administration, which responded with charges about greedy bankers. "I did not run for office to be helping out a bunch of fat-cat bankers on Wall Street," Obama told 60 Minutes in December. This kind of rhetoric was accompanied with some policy suggestions that the financial industry doesn't like (e.g., the Volcker Rule, which would bar banks receiving government support from engaging in speculative activity unrelated to basic bank activities) and proposals to set up an independent regulatory agency to protect consumers.
Since Obama was supposed to be their man in Washington, the principal architects of government policy wasted little time delivering their instructions: Unless Obama fell back into line, they would shift funds to the political opposition. "If the president doesn't become a little more balanced and centrist in his approach, then he will likely lose" the support of Wall Street, Kelly S. King, a board member of the lobbying group Financial Services Roundtable, told the New York Times in early February. Securities and investment businesses gave the Democratic Party a record $89 million during the 2008 campaign.
Three days later, Obama informed the press that bankers are fine "guys," singling out the chairmen of the two biggest players, JP Morgan Chase and Goldman Sachs: "I, like most of the American people, don't begrudge people success or wealth. That's part of the free-market system," the president said. (Or at least "free markets" as interpreted by state capitalist doctrine.)
That turnabout is a revealing snapshot of Smith's maxim in action.
The architects of policy are also at work on a real shift of power: from the global work force to transnational capital.
Economist and China specialist Martin Hart-Landsberg explores the dynamic in a recent Monthly Review article. China has become an assembly plant for a regional production system. Japan, Taiwan and other advanced Asian economies export high-tech parts and components to China, which assembles and exports the finished products.
The Spoils of Power
The growing U.S. trade deficit with China has aroused concern. Less noticed is that the U.S. trade deficit with Japan and the rest of Asia has sharply declined as this new regional production system takes shape. U.S. manufacturers are following the same course, providing parts and components for China to assemble and export, mostly back to the United States. For the financial institutions, retail giants, and the owners and managers of manufacturing industries closely related to this nexus of power, these developments are heaven sent.
And well understood. In 2007, Ralph Gomory, head of the Alfred P. Sloan Foundation, testified before Congress, "In this new era of globalization, the interests of companies and countries have diverged. In contrast with the past, what is good for America's global corporations is no longer necessarily good for the American people."
Consider IBM. According to Business Week, by the end of 2008, more than 70 percent of IBM's work force of 400,000 was abroad. In 2009 IBM reduced its U.S. employment by another 8 percent.
For the work force, the outcome may be "grievous," in accordance with Smith's maxim, but it is fine for the principal architects of policy. Current research indicates that about one-fourth of U.S. jobs will be "offshorable" within two decades, and for those jobs that remain, security and decent pay will decline because of the increased competition from replaced workers.
This pattern follows 30 years of stagnation or decline for the majority as wealth poured into few pockets, leading to what has probably become the greatest inequality between the haves and the have-nots since the end of American slavery.
While China is becoming the world's assembly plant and export platform, Chinese workers are suffering along with the rest of the global work force. This is an unsurprising outcome of a system designed to concentrate wealth and power and to set working people in competition with one another worldwide.
Globally, workers' share in national income has declined in many countries-dramatically so in China, leading to growing unrest in that highly inegalitarian society.
So we have another significant shift in global power: from the general population to the principal architects of the global system, a process aided by the undermining of functioning democracy in the United States and other of the Earth's most powerful states.
The future depends on how much the great majority is willing to endure, and whether that great majority will collectively offer a constructive response to confront the problems at the core of the state capitalist system of domination and control.
If not, the results might be grim, as history more than amply reveals.
To Read the Entire Essay
by Noam Chomsky
Commond Dreams
...
Bringing Obama to Heel
Popular anger finally evoked a rhetorical shift from the administration, which responded with charges about greedy bankers. "I did not run for office to be helping out a bunch of fat-cat bankers on Wall Street," Obama told 60 Minutes in December. This kind of rhetoric was accompanied with some policy suggestions that the financial industry doesn't like (e.g., the Volcker Rule, which would bar banks receiving government support from engaging in speculative activity unrelated to basic bank activities) and proposals to set up an independent regulatory agency to protect consumers.
Since Obama was supposed to be their man in Washington, the principal architects of government policy wasted little time delivering their instructions: Unless Obama fell back into line, they would shift funds to the political opposition. "If the president doesn't become a little more balanced and centrist in his approach, then he will likely lose" the support of Wall Street, Kelly S. King, a board member of the lobbying group Financial Services Roundtable, told the New York Times in early February. Securities and investment businesses gave the Democratic Party a record $89 million during the 2008 campaign.
Three days later, Obama informed the press that bankers are fine "guys," singling out the chairmen of the two biggest players, JP Morgan Chase and Goldman Sachs: "I, like most of the American people, don't begrudge people success or wealth. That's part of the free-market system," the president said. (Or at least "free markets" as interpreted by state capitalist doctrine.)
That turnabout is a revealing snapshot of Smith's maxim in action.
The architects of policy are also at work on a real shift of power: from the global work force to transnational capital.
Economist and China specialist Martin Hart-Landsberg explores the dynamic in a recent Monthly Review article. China has become an assembly plant for a regional production system. Japan, Taiwan and other advanced Asian economies export high-tech parts and components to China, which assembles and exports the finished products.
The Spoils of Power
The growing U.S. trade deficit with China has aroused concern. Less noticed is that the U.S. trade deficit with Japan and the rest of Asia has sharply declined as this new regional production system takes shape. U.S. manufacturers are following the same course, providing parts and components for China to assemble and export, mostly back to the United States. For the financial institutions, retail giants, and the owners and managers of manufacturing industries closely related to this nexus of power, these developments are heaven sent.
And well understood. In 2007, Ralph Gomory, head of the Alfred P. Sloan Foundation, testified before Congress, "In this new era of globalization, the interests of companies and countries have diverged. In contrast with the past, what is good for America's global corporations is no longer necessarily good for the American people."
Consider IBM. According to Business Week, by the end of 2008, more than 70 percent of IBM's work force of 400,000 was abroad. In 2009 IBM reduced its U.S. employment by another 8 percent.
For the work force, the outcome may be "grievous," in accordance with Smith's maxim, but it is fine for the principal architects of policy. Current research indicates that about one-fourth of U.S. jobs will be "offshorable" within two decades, and for those jobs that remain, security and decent pay will decline because of the increased competition from replaced workers.
This pattern follows 30 years of stagnation or decline for the majority as wealth poured into few pockets, leading to what has probably become the greatest inequality between the haves and the have-nots since the end of American slavery.
While China is becoming the world's assembly plant and export platform, Chinese workers are suffering along with the rest of the global work force. This is an unsurprising outcome of a system designed to concentrate wealth and power and to set working people in competition with one another worldwide.
Globally, workers' share in national income has declined in many countries-dramatically so in China, leading to growing unrest in that highly inegalitarian society.
So we have another significant shift in global power: from the general population to the principal architects of the global system, a process aided by the undermining of functioning democracy in the United States and other of the Earth's most powerful states.
The future depends on how much the great majority is willing to endure, and whether that great majority will collectively offer a constructive response to confront the problems at the core of the state capitalist system of domination and control.
If not, the results might be grim, as history more than amply reveals.
To Read the Entire Essay
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