Posts Tagged ‘finance’

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JPMorgan Chase’s Jamie Dimon knows something about manipulation. In a recent interview, he called the political environment “terrible,” and blamed talking heads on cable news for making it even worse: “They are just jazzing you up. You’re being manipulated.”

Which is exactly what Dimon did by way of a recent New York Times editorial, where he announced that he was going to raise “the minimum pay for 18,000 employees to between $12 and $16.50 an hour” (“depending on geographic and market factors”).

A pay increase is the right thing to do. Wages for many Americans have gone nowhere for too long. Many employees who will receive this increase work as bank tellers and customer service representatives. Above all, it enables more people to begin to share in the rewards of economic growth.

But as Annie Lowry [ht: sm] explains,

Were that it really benevolence, or that the raise was a meaningful one.

Wages have been rising as the unemployment rate has fallen below 5 percent and the labor market has tightened. Employers, in other words, are now competing to hire and retain workers, which means offering those workers more money and better working conditions more broadly. Dimon is doing what thousands of other corporate executives and managers are doing — and what all companies have to do when the economy is good. He just managed to convince the op-ed editors at the Times to give him some publicity for doing it.

Moreover, the raise is puny — $1.85 an hour, spread out over three whole years, meaning inflation will eat some of it up. “That’s a roughly 3.2 percent annual boost after taking projected future inflation into account,”noted Lawrence Mishel of the Economic Policy Institute, a left-of-center think tank. “This hardly seems to deserve a parade.”

Just to put things in perspective, total financial sector profits were more than $700 billion in the first of quarter of this year. JPMorgan Chase itself made a net profit of $5.4 billion during the first three months of 2016, which rose to $6.2 billion in the second quarter.

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Oh, and his own bank decided to pay Dimon $27 million (in cash and stocks) in 2015, up from $20 million a year earlier.

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I know all about how corrupt a city can by. I live in Chicago, the “Capital of Corruption.”

And I hear all the time about all those other corrupt cities, most of them located in countries in Latin America, Africa, and Asia, which often fall low in the corruption perceptions indices like the one produced by Transparency International.

But for all the talk about transparency and the need to tackle corruption at the 2016 Anti-Corruption Summit in London, the host country itself may be the most corrupt in the world.

As Joel Benjamin [ht: ja] explains, the indices produced and disseminated by groups like Transparency International “only measure perceived corruption based upon the abuse of public office for private gain, i.e. the payment of bribes.” What they don’t account for is the fact that “While nepotism and subservience to finance capital is rife in Britain and its overseas dependencies, it is not illegal.”

At least Chicago’s corruption is transparent. Donate to the mayor’s campaign chest and you get a city contract or assistance with a development project. In the city of London (and other such financial centers in Britain, the United States, and Western Europe), corruption is based on money laundering and financial secrecy.

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And if we measure those forms of corruption, then (as with the Financial Secrecy Index developed by the Tax Justice Network) the tables (so to speak) are turned: Switzerland ends up at the top, the United States rises to number 3, and the United Kingdom rounds out the top 15.

If anything, the bribing of public officials in Chicago, Lagos, Bogotá, and Bangalore is quite transparent—and often involves the siphoning-off of some of the surplus from the initial appropriators to their friends in high places in order to keep doing business. The corruption in Geneva, London, and New York is something quite different and even more pernicious: it involves the laundering of the surplus captured from the entire world so that the economic and political elites who capture it get to keep it and accumulate even more wealth, for themselves and their friends in high places.

All of it legal—and fundamentally corrupt.

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Lynn Parramore [ht: ja], in reviewing Rana Foroohar’s forthcoming book, Makers and Takers: The Rise of American Finance and the Fall of American Business, presents a memorable image (straight out of Dr. Terror’s House of Horrors):

Foroohar’s book explains how our financial system stopped funding new ideas and projects and started extracting precious resources from Main Street. Her writing leaves a vivid impression that once the financial wizards get their way, nobody is safe, from the young college grad next door drowning in debt owed to predatory lenders to the child halfway around the world whose dinner fell victim to commodities speculation.

As I turned the pages, I began to imagine Big Finance as a giant exotic vine from some florid disaster movie that has grown out of control, creeping onto the roofs of our houses, reaching into the food on our plates, tightening its hold on our wallets—even taking over our minds. I’m embarrassed to say how many times I hear phrases like “human capital” and “return on investment” issuing from my own lips: finance-originated concepts used to describe relationships and activities that have little to do with spreadsheets.

Still, it’s not quite as dramatic as Matt Taibbi’s reference to Goldman Sachs as “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.”

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Cartoon of the day

Posted: 21 March 2016 in Uncategorized
Tags: , ,

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Special mention

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Reuters

The members of the political establishment in the United States seem surprised by the astounding success of Bernie Sanders’s campaign. Reuters even has the democratic socialist now leading by more than 6 percentage points.

As it turns out, the political establishment in the United Kingdom has had a similar problem: they don’t understand how Jeremy Corbyn has come to lead the Labor Party.

Simon Wren-Lewis argues that the Left’s success on both sides of the Atlantic really shouldn’t be a surprise. That’s because of the growing importance of the financial sector, which has fueled obscene levels of inequality and created the conditions for the Second Great Depression.

The establishment on the centre left often seems too timid or ignorant to talk about the power of the financial sector, and is therefore unwilling to challenge it. Many ordinary people who support the left in the UK and US do have some understanding of what has gone on. It should therefore not be surprising that they have moved away from established leaders towards those – like Corbyn and Sanders – who are willing to talk more openly about the power of the financial sector and inequality.

Why were politicians and the media so surprised by this success? I think it tells us how insular the Westminster and Washington bubbles really are. Political commentators talk to politicians who talk to political commentators. It tells us how embedded the influence of the City and Wall Street is. The media relies on economists from the financial sector, and so tends to see the economy from their perspective.

The blind spot is mostly to the left, because we have the Daily Mail and Fox News. As a result, it came as a complete surprise that a crisis caused by the financial sector that left that sector unscathed but instead led to a diminished role for the state, might make many people rather angry.

Surprised? Don’t be.