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OpEdNews Op Eds    H2'ed 4/28/14

Piketty Is Rickety On Government Complicity

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The big banks ("primary dealers") loan money to the Fed, and charge interest for the loan. This is in contrast to what the Founding Fathers intended, and a massive redistribution of wealth ... unnecessarily transferring extra money on every loan to the big primary dealers.

Lawlessness Is a Core Cause of Inequality

Joe Stiglitz said:

"Inequality is not inevitable. It is not ... like the weather, something that just happens to us. It is not the result of the laws of nature or the laws of economics. Rather, it is something that we create, by our policies, by what we do. We created this inequality -- chose it, really -- with [bad] laws."

Conservative Ron Paul points out that the system is rigged for the rich and against the poor and the middle class:

We asked the top regulator and prosecutor during the S&L crisis, who obtained over 1,000 felony convictions for major white collar fraud -- professor of law and economics, Bill Black -- what are the core causes of inequality. Professor Black told Washington's Blog:

"The industry that is the largest single driver of surging income inequality is finance. Finance dramatically increases inequality through three primary means. The obvious means is the massive flow of profits out of the productive sector and into finance, particularly compensation for finance elites. We know that a very large amount of that compensation is the product of the 'sure thing' of accounting control fraud. They have been able to lead the fraud epidemics with absolute impunity. No Wall Street elite officer who led the frauds that caused the crisis has ever been prosecuted. [Background.] There are virtually no cases of 'claw backs' from the C-suite perpetrators' compensation even when it is now inescapable that the 'income' they reported to 'earn' their bonuses were lies and they were actually creating horrific losses.

"The second means is that the three most destructive epidemics of financial fraud in history caused our financial crisis and hyper-inflated the bubble. This too was a 'sure thing' because of the fraud 'recipe.' The household sector's wealth loss was over $11 trillion. Over 10 million Americans lost their jobs. The productivity loss is estimated at over $21 trillion. Each of these actions caused a vast loss of wealth suffered disproportionately by the 99%.

"Third, finance, even absent fraud, is a major cause of increasing inequality. It is the means of tax evasion, which is (in $ terms) a crime that is all about the 1%, hedge funds, and large corporations. It is also the means, and the excuse, for outsourcing American jobs in the productive sector and extorting domestic tax giveaways by putting U.S. states and cities in competition to induce them to locate in a particular city.

"In the savings and loan debacle we sought to remove all the proceeds of fraud from the guilty elites."

Indeed, the big banks continue to manipulate every market and commit crime after crime and ... profit handsomely from it, while law-abiding citizens slide further and further behind. Yet Obama is prosecuting fewer financial crimes than Bush, or his father, or Ronald Reagan. Indeed, the government has actively covered up for -- and encouraged -- criminal fraud.

Indeed, there are two systems of justice in America ... one for the big banks and other fatcats, and one for everyone elseHolding the little guy to the letter of the law -- while letting the fatcats run around immune to the law -- is making inequality much worse.

Black points out that we should claw back ill-gotten gains from criminals under well-established fraud principles.  Specifically, the government could use existing laws to force ill-gotten gains to be disgorged (see this and this) and fraudulent transfers to be voided.

Economist Michael Hudson also criticizes Piketty for failing to address crime and fraud as core causes of inequality:

"The other thing that is left out of the income tax statistics is of course how fortunes are really made, and that's crime and fraud. The good thing about Piketty is he points out, why is it that French novelists and English novelists tell you much more about wealth than economics? And he points out that in the 19th century novels by Jane Austen and Balzac, the way to make a fortune is to marry into it. That's true, but what Balzac also said is that behind every fortune is a great theft."

Government Subsidies to the Biggest Fatcats

The government shovels mass quantities of money to giant corporations through direct and indirect subsidies.

This includes subsidies to:

Why You're Paying Too Much In Taxes Today: Because the Ultra-Rich Pay Nothing ... Or Get Tax Refunds

The big boys use loopholes -- including claiming their profits in foreign countries -- to pay little or no taxes ... or to get tax refunds. The middle class gets saddled with a heavier tax burden because the richest avoid taxes.

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