The Powers That Be
They hang the man and flog the woman
That steal the goose from off the common,
But let the greater villain loose
That steals the common from the goose.
English folk poem, ca. 1764
It really can appear as if the state is there to facilitate the carve-up of the world and its transfer to increasingly consolidated private ownership, even more than it ever did in its history of legitimising the theft of the commons. It seems that the only time anything belongs to the people now is when things fail, then it’s completely owned by the people.
Are governments even still what we think they are? Is it all just a charade now? We may dimly perceive that they stopped really mattering years ago, but like Looney Tunes characters who run off a cliff but don’t realise it for a while, we carry on investing hope in elections of dashing, young, handsome heroes who are on our side and can see the way ahead. Were they ever what we thought they were? This all bewilders us like never before.
There is this long tradition of blaming the government for everything. If we were wearing a conspiracy theorist hat, we might surmise that it’s very much in the banksters’ interests that politicians are mistrusted. The political system is the lightning rod that attracts everyone’s attention when they’re looking to understand, and it serves the dual purpose of revenue collection. But there really is little point in blaming politicians, they are just being politicians; politicians respond to who has the power, that’s what politics is, it’s power broking. If the power was with people, politicians would respond to that, but power is with international capital and they have to respond to that power. Is that it?
Politics is terrifying now; it’s become a scarlet elephant with dangly earrings doing a trunkstand and playing piano in the room, that politicians work in the interests of the powerful rather than its own people. A weird kind of doublespeak is current, and it seems to work enough of the time and stands largely unchallenged. People don’t really know what they’re voting for or what is done in their name, or whether it’s in their interest or not.
Returning to the Stutsman essay mentioned earlier and to an observation he makes about the collective consciences of electorates. Having used the examples of Guatemala and Nicaragua, where egregious foreign policies were prosecuted, Stutsman made the point that nowhere in the US Constitution is US foreign policy restricted. The US government can’t abuse human rights on its own territory (hence Guantanamo Bay and other places) but has no restriction on what it can do outside of its borders. Therefore, the only limitation that is put on what actually happens in foreign policy is the collective consciences of its voting citizens.
He says that two questions arise from this: whose ends are being achieved? What happens when government actions are concealed or misrepresented to its citizens?
The example of Guatemala in 1954, among others, illustrates the cogency of these questions. The American people had absolutely no input into or knowledge of the CIA action which overthrew a democratically elected government and installed a military dictatorship.
One might have argued that U.S. citizens benefit by being able to purchase bananas at a reasonable price and that therefore it is in our interests to install a military dictatorship in a Third World country in order to oppress its majority populations, whose cheap labor and expropriated lands allow us to more easily afford bananas. I suspect that if this issue had been presented to and discussed by the American people their collective consciences would have prevented them from voting to carry out such a bloody atrocity, especially when the vast majority of us could still afford bananas purchased from peasant-owned cooperatives or from plantations whose workers were organized and paid a living wage. After all, we democratically supported workers’ rights and safety in our own country, even when it made consumer goods more expensive.
People don’t know what they’re voting for, and if they did, they wouldn’t vote for it. People don’t know what they’re investing their pension funds in. If you asked people if they wanted to invest in armaments, alcohol and tobacco, they mostly wouldn’t choose to. The Comic Relief charity pointed out recently that they are bound by legal guidelines to seek the best possible financial return, and this is where those returns are to be found. The obvious fact that this investment promotes activities which could produce a worsening in the conditions which the charity seeks to improve, and therefore cause a financial deficit of the funds they collect, doesn’t seem to be allowed for in the calculations of the law.
It clearly wasn’t the interests of the banana-loving American people that were served by the CIA-backed invasion of Guatemala in 1954 but the selfish interests of a few wealthy businessmen who had interests in Guatemala and had insider influence in the US government, and co-opted the power of the American state for their own gain. And this military backed group snatched the monopoly prize of being the middle men for Guatemalan bananas grown by Guatemalan people on the land they’d had stolen from them.
And our government got away with serving these business clients in a way which violated human rights and the sovereignty of another country, because it successfully hid its activities from its own citizens under the cloak of national security.
The use of the term national security has been developed somewhat since 1993 when the Stutsman essay was written and this cloak has become ever more capacious, though Communism is heard much less of.
So much for what happens in democracies and all that ever was. What exactly is the nature of the power that politicians must respond to?
Decades ago, in the UK, Tony Benn, old Labour heavyweight, described governments as having become merely managers for international capital, that governments are there to manage us, the people, on behalf of international capital. Benn was one of the people New Labour felt they had to get away from, but it’s looking now like a fair description. But what is this international capital?
Something that’s been there all through history but has only come to such vivid notice for most people in recent years, is the curious relationship between states and banks. And it set us wondering about the whole thing of money, what is this money? It’s quite a brain-teaser for us, what is this money thing?
Celebrated American economist and Harvard professor, John Kenneth Galbraith, sounded somewhat affronted when he said:
The study of money, above all other fields in economics, is one in which complexity is used to disguise truth or to evade truth, not to reveal it. The process by which banks create money is so simple the mind is repelled. With something so important, a deeper mystery seems only decent.
And more about money creation in a while. Earlier we were insisting that Economics is simple, truly. And it is. Financial trading, though, definitely isn’t. The meanderings of money is a deep mystery. The high priests of finance speak in mathematical tongues, wielding huge chains of algorithms.
Now, fair enough, the formula for the beta of an asset within a portfolio is:
But what you’ll really need to know is the regression line, which is then called the Security Characteristic Line (SCL), and it goes like this:
These are actually simple examples of the genre but it’s enough to put us off. When companies exit beta, we’re totally lost what that means. We tried a little. This shouldn’t put the reader off, though, we’re sure that if you carefully broke it all down it would be something understandable if you had a taste for it. Though we’ll happily doff our caps to anyone who can read this sort of thing, we'll labour the point, financial mathematics is complicated, economic analysis is complicated, but Economics is fundamentally simple.
Over the years, TV news programmes have focused our attention more on business, generally according a certain coolness and glamour to it, and central, critical importance. Company share prices are quoted daily, and there’s constant health checks on the markets, whether they are up or down in their different time zones around the globalised world.
And words like derivatives and hedge funds and financial instruments started to be heard every day. Derivatives are probably set to become a bigger story as time goes on.
Wikipedia says of derivatives:
A derivative is a financial contract which derives its value from the performance of another entity such as an asset, index, or interest rate -
Derivatives, futures markets, have been around for a long time. Back in the 1890s, the German Agrarian League had demanded the ending of the trading in grain futures in the stock exchange.
In 2002, Warren Buffett, considered the most successful investor of the 20th century, said:
In my view, derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal.
In 2011, The Economist reported that the world derivatives market was approximately £700 trillion, though these are notional values. And just as well they’re only notional values because when you consider that global GDP in 2012 was about $85 trillion, you can see the kind of dimensions Buffett might have been concerned about. There is something very scary there.
Another term which we came to hear about was short selling and even naked short selling. Short selling is when someone lends you their shares, on agreement to return them at a certain point in time. The idea is to sell their shares and buy them back at a lower price in order to return them and pocket the difference. So innocent were we that we were confused at first why someone would lend you their shares, before we caught on that it’s because they’re paid a fee to lend their shares. As already mentioned, this is what was done to the UK on Black Wednesday in 92, speculators short selling Sterling.
So, ever more sophisticated ways for people to gamble against each other, in high-velocity trading often completely unrelated to the real value of stocks. It came to be that a company could buy AAA-rated stock that they knew was junk, and insure themselves against losses on these stocks. Another neat idea.
The term casino banking was used earlier, and the world’s financial system can look like a huge casino, where all the activity is essentially people gambling against each other, completely divorced from the real world of things, gambling with the world’s money. But it’s really so much more complicated than a casino and holds a myriad of mathematical possibilities for basically theft.
Much of this financial engineering transpires to have been about finding ways to cheat the public, either directly or indirectly. Maybe there’s much else that will take longer to become apparent. One of the scams of this period which is starting to come to light was the manipulation of LIBOR rates on certain days, like when NHS PPI deals were going through. This is the London Interbank Offered Rate, the rate that banks lend to each other at, and tiny differences here can be worth hundreds of millions.
If people in general are anything like us and others we know, they go around with casual perception of things, and a casual perception of banking was of something staid and boring, and probably most of it ever was. We never thought very much about banks and banking until recently, they were just there.
We really were so innocent and blinkered about most things before we read Progress and Poverty and started to make us look around a bit closer. And then, looking for a little background about banking to try and understand a little more about the deeper mystery whereby complexity obscures truth, we started to become aware of a startling history and got drawn into it as if into the vortex of a black hole, an irresistible pull of interest, compounded by incredulity.
As we delved deeper, striving to be rigorous, we found that there are a fair few misquotes doing the rounds of WWW, but the quotes that do check out as being real are astonishing, from presidents, bankers, politicians, writers, scientists, great personages. Often this story as told on the Web is conjoined with notions which are easy to ridicule, and other times it is presented much more objectively and rationally. The basic history – and certainly history never presented in this way in mainstream history books – is compellingly interesting.
When we started looking at USA banking history, in particular – for the USA has certainly been the powerhouse of the modern world – we became increasingly astonished at what a story we’d stumbled into. Feverishly flicking through things, we came across researchers suggesting that just four banking groups, acting through various company names, own not only the major oil companies but are among the top ten stockholders of nearly every one of American’s top 500 companies. The claim is that they actually own a chunk of everything profitable, and much more than European states ever owned at the height of nationalisation, or that the Soviet state ever owned.
As far as we can tell, the detailed research we’ve seen seems to be sound and sourced. We’re not trained researchers by any means, but we’ll try. And please tell us if this is not so. There was a piece of research we read which showed this, but we somehow didn’t save it and couldn’t find it again. We own that that’s very flimsy.
But later we came across a piece from The Daily Mail, where Rob Waugh had reported that:
A University of Zurich study 'proves' that a small group of companies - mainly banks - wields huge power over the global economy.
The study is the first to look at all 43,060 transnational corporations and the web of ownership between them - and created a 'map' of 1,318 companies at the heart of the global economy.
The study found that 147 companies formed a 'super entity' within this, controlling 40 per cent of its wealth. All own part or all of one another. Most are banks.
There’s a nice graphic.
And Rob Waugh says:
Looking at 'connectedness' also puts paid to conspiracy theories about the world's wealth - companies connect to highly connected companies for business reasons, rather than world domination.
That’s reassuring. He also says:
The 'core' of 147 companies also represents too many interests to wield real political power - but it could act 'as one' to defend common interests. Sadly for market reformers, resisting change may be one such common interest.
So, ownership of the wealth of the world. There is so much intermeshed ownership, it’s very hard to know who owns what, it’s very complex and opaque. But, as Rob Waugh points out, if anything’s clear, ownership all leads back to banks; though, of course, there couldn’t be any political leverage in these concentrations of ownership.
If not as few as four, certainly small concentrations of wealth and power, with Byzantine ownership structures and many aliases, quietly owning large chunks of everything that’s worth owning. If power really is concentrated to this degree, it’s at least imaginable that such power would be absolutely dominant over everything else and democracy a charade and a façade.
On the World Wide Web there are many quotes from early American presidents warning about just this kind of concentration of influence; there are many shades of theory; there are theorists (probably secretly working for the money power) who assert that there’s a lineage of alien lizards behind consolidating the world; and you can read about it in The Daily Mail.
So, it really was a shock to consider this. The interests of banks go far, far beyond providing banking services, in fact, it seems they scarcely need to rely on any of that stuff we think of them as being there to do, banking for people is complete small-fry, maybe that’s just a front. Their interests go far, far beyond any entity that’s ever existed. Their influence must be, and must always have been, enormous.
They’ve really got an eye for the maximum return. It is they who own the big armaments companies, who in turn give huge finance more or less equally to both American political parties.
And it is they that own the energy companies, the largest corporations ever, the same names – the names don’t matter much, they seem to all own a part of each other - will come up as owners. There is something very interesting here.
How could such fantastic concentrations of power come to be?