How Financial Oligarchy Replaces Democracy, and How to Stop it


A World at Financial War

By MICHAEL HUDSON
Counterpunch

[Thanks to The Automatic Earth: Perhaps when you look at the ways in which the ECB and IMF are planning to drain and sell off Greece, you shouldn't just shudder, you should also realize that that gravy train will one day make a full stop in your country, city, community, load up all the goodies and leave with them. And why? Because you let them... We've handed the financial elites absolute powers over our economies, and thereby our lives and well being, as well as our childrens' futures. We’ll have to wrestle it back from their cold dead hands. And that's not going to be an easy one...]

[To really understand what is going on in world economics, this is well worth the time. -DS]

[...] The crisis for Greece – as for Iceland, Ireland and debt-plagued economies capped by the United States – is occurring as bank lobbyists demand that “taxpayers” pay for the bailouts of bad speculations and government debts stemming largely from tax cuts for the rich and for real estate, shifting the fiscal burden as well as the debt burden onto labor and industry. The financial sector’s growing power to achieve this tax favoritism is crippling economies, driving them further into reliance on yet more debt financing to remain solvent. Aid is conditional upon recipient countries reducing their wage levels (“internal devaluation”) and selling off public enterprises.

Regressive tax policies – shifting taxes off the rich and off property onto labor – cause budget deficits financed by public debt. When bondholders pull the plug, the resulting debt pressure forces governments to pay off debts by selling land and other public assets to private buyers (unless governments repudiate the debt or recover by restoring progressive taxation). Most such sales are done on credit. This benefits the banks by creating a loan market for the buyouts. Meanwhile, interest absorbs the earnings, depriving the government of tax revenue it formerly could have received as user fees. The tax gift to financiers is based on the bad policy of treating debt financing as a necessary cost of doing business, not as a policy choice – one that indeed is induced by the tax distortion of making interest payments tax-deductible.

Buyers borrow credit to appropriate “the commons” in the same way they bid for commercial real estate. The winner is whoever raises the largest buyout loan – by pledging the most revenue to pay the bank as interest. So the financial sector ends up with the revenue hitherto paid to governments as taxes or user fees. This is euphemized as a free market…

Full article here
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