APRIL 29, 2016

US Presidential Election: Beyond Lesser Evilism

by ISMAEL HOSSEIN-ZADEH

Although expertly obfuscated and mystified, the planned or premeditated mechanism by which redistribution of economic resources from the bottom to the top takes place is fairly straightforward. The insidious mechanism of redistribution in favor of the financial oligarchy is benignly called monetary policy. Private central banks (such as the Federal Reserve Bank in the U.S.) are the main institutional vehicles that carry out the monetary policy of redistribution. Central banks’ policies of cheap or easy money benefits, first and foremost, the big banks and other major financial players that can outbid small borrowers who must borrow at much higher rates than the near-zero rates guaranteed to the big borrowers.

By thus gaining privileged access to nearly interest-free money, the financial elites can enrich themselves in a number of ways. For one thing, they can snap-up income-producing assets at the expense of small borrowers who lack access to cheap money. For another, they can boost the value of their wealth by creating an artificial demand (such as stock buybacks) for those ill-begotten assets with the cheaply borrowed money. In addition, they can skim vast wealth by loaning out the cheap they obtain from central banks to everyone below the top of the wealth/income pyramid—at near four percent (mortgages), at seven or eight percent (auto, student and other loans), and above 15 percent (credit cards).

This shows how the proxies of the financial oligarchy, ensconced at the helm of central banks and their shareholders (commercial banks), serve as agents of subtlely funneling economic resources from the public to the financial oligarchy—just as did the rent or tax collectors and bailiffs of feudal lords collected and transferred economic surplus from the peasants/serfs to the landed aristocracy. Instead of regulating or containing the disruptive speculative activities of the financial sector, economic policy makers have in recent years been actively promoting asset-price bubbles—in effect, further exacerbating inequality.