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Saving Jackpot Capitalism: The Real Reason Why the Banks Are Being Bailed Out
By Martha Rose Crow (about the author) Page 1 of 3 page(s)
For OpEdNews: Martha Rose Crow - Writer Regular return on investments is for the little people. The greedy elite and elite investor groups must have more. They must save their private, un- or under regulated way of making secret kings’ ransoms.
Shadow Financial Entities.
They stay out of the light as much as they can because they don’t want the world to know how Big and Powerful they really are and they don’t want the public to know how ruthless they are to make high returns on investments for their elite masters.
Last week, there were all kinds of brouhaha about Bernie Madoff’s trial and subsequent sentencing for 150 years in prison for operating a ‘Ponzi’ scheme. What Madoff was really guilty of was not investing his clients’ money in the murky, shadowy world of uber or super capitalism: Capitalism under a private umbrella that has few or no restraints.
Bernie Madoff’s business was a ‘market maker’. Wikipedia explains what a market maker is: A market maker is a firm that quotes both a buy and a sell price in a financial instrument or commodity, hoping to make a profit on the bid/offer spread, or turn.
This arena of secret capitalism is the world of the ‘Big Players’: hedge funds, private equity, market makers, real estate investment trusts and other esoteric and exotic investment clubs. It is a ‘private’ wealth-making world so it is not under public eye and government scrutiny like ‘public’ companies are. Investors are more ‘partners’ than stockholders. All investment ventures are limited partnerships so if the venture fails, the investors lose but the financial entity remains in business. Only the elite and elite investor groups can be members. Again, this economic game is not for the regular investor.
As manufacturing companies become more like financial players, real financial players such as private-equity funds, hedge funds and real estate investment trusts (REITs) have become significant short-term owners of manufacturing and services companies - acquiring, restructuring and disposing of these companie as liquid assets regardless of actual productivity and profitability. Over the past decade private-equity funds have mobilized trillions of dollars for the acquisition of companies in virtually every industrial and service sector, leading The Economist to declare: "Today, the private-equity industry has moved from the fringe to the centre of the capitalist action.”
Workers in virtually all sectors face the threat of rapidly changing ownership and the imposition of restructuring plans and short-term targets that are based on a financial market logic that places no value in real production, productivity or jobs. In just the first eight weeks of 2006, hedge funds and private-equity funds made over 4,000 deals involving the acquisition and disposal of US$473 billion in assets. Among the ‘assets’ exchanged were manufacturing and service operations employing hundreds of thousands of workers. click here
Ironic, if Bernie Madoff had invested all his clients’ money (minus management fees) and lost it all, he would never have gotten into any legal trouble. Hedge funds and private equities work the same way. They make money whether their investments make money. First, they get ‘management’ fees, then they get 20-30% of the profits and the investors get the rest.
In this world of dark predator capitalism, the money institutions of the elite are protected by other elite in government. These institutions have traditionally given the uber investors a 16-20% investment return. They are holy cows and holy cash cows that politicians hate to touch because most high politicians are invested in them whether directly and/or indirectly.
Politicians are under pressure by government investment groups (pension funds, ‘rainy’ day funds, so forth) to ‘do something’ to save their portfolios. There are over 82,000 of these groups and when they combine their assets together, they are a powerful investment force. To learn more about government as investor, see www.cafr1.com
Rich politicians are behind the reason why this shadow capitalism gets special tax treatment. They pay a capital gains tax instead of the normal tax percentage that investors of transparent investments pay. There have been attempts to change this special tax treatment of Jackpot Capitalism, but it hasn’t changed so far and probably won’t be changed unless enough people understand what is going on and pressure their rich politicians to change the laws.
Almost every member of Congress and the Senate is at least a millionaire. A few are billionaires. They protect their financial ass-ets over the assets of the people they are supposed to serve.
To keep and grow wealth can be a hassle. Banks are FDIC insured for $100,000 so if you put more than a $100,000 in a bank account and the bank fails, you lose it all but that $100,000 and you usually get that back after many years.
This means that all investments are risky: stocks, property, retail, bonds, so forth.
The views expressed in this article are the sole responsibility of the author
and do not necessarily reflect those of this website or its editors.
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