Archive for the ‘finance’ Category
on money and matriarchy
When I bring up the subject of a bonobo humanity in any public place I’m more often than not met with confusion or indifference. Bonobos are either unknown or seen as irrelevant to us super-smart, super-complex humans. So, though I don’t agree, I often skip to the issue of matriarchy. And that’s when I get the response, from women, that this female political leader/boss/family member/whatever, was useless/weak/disastrous etc.
THIS IS A CATEGORY ERROR – in my humble opinion. Nothing could be more irrelevant than this response. To explain, let me again quote the author Toni Morrison, who I’ve quoted before:
‘The problem is not men. The problem is patriarchy’.
To which I will add this correlated statement:
‘The solution is not women. The solution is matriarchy’.
And to be clear, we’re living in a patriarchy.
Of course I’m well aware that the human world is a hugely complex thing, and parts of it are more patriarchal than others, and maybe there’s even the odd tiny matriarchy buried somewhere in the hinterlands of our hinterlands, but it has occurred to me that there’s one powerful aspect of our world that attests to its patriarchal nature more than any other, and that’s finance. Money, I’ve been told, is power, and I’m inclined to believe it.
I’m not talking here about gender pay gaps, which sadly have remained much the same over the past three decades, I’m talking about the vast accumulations of wealth that bestow power. According to the Forbes list of the top 20 richest individuals, two are women, and of course they’re down at the bottom half, in 15th and 20th positions, and also of course the top, say, three, are exponentially richer than the bottom three on that list, though those comparative failures are richer than the wildest dreams you and I could ever concoct.
So – money, corruption, manipulation, genocide. It doesn’t always fall out that way of course, but there are some examples worth considering. First, let me replace the word ‘money’, which conjures up an image of coloured paper and round metallic stuff, with wealth, and its associated images of servants, palatial homes, international travel, manipulation of markets and such. And of something else which is hard to produce an image of – power.
The pursuit of wealth, almost exclusively by men, has led to some consequences worth contemplating. Take the soi-disant Democratic Republic of the Congo, for example. I won’t go into the complex pre-colonial history of that region, later known as sub-Saharan Africa’s ‘heart of darkness’, but from the 1860s onwards virtually all of sub-Saharan Africa became an intense battleground between various European states, with the USA often acting as a self-interested broker. And it was all about wealth, under a cloak of humanitarian-sounding verbiage. At the end of all the wrangling, Leo Victor, by family connections ‘Emperor Leopold II of Belgium’, had carved out a massive chunk of Central Africa for himself, which he named the Congo Free State. And let it be clear, this land didn’t belong to Belgium, it belonged entirely and exclusively to Leo. By the late 1880s, just about everything was in place…
But this isn’t a horror I want to revisit (suffice to say it was about as devastating to the Congolese as Genghis Khan was to Baghdad, all for wealth, booty, plunder and the power such things bring). It was around this time, towards the end of the 19th century, that the term ‘savage’ became just a bit out-dated, what with such newly fashionable studies as anthropology and sociology. Even so, the heart of Africa has remained too dark for the world to fully comprehend the sufferings visited upon its native inhabitants by white-skinned people and their proxies.
So, if we accept that wealth is power, and we accept that female empowerment, or female domination, is worth aiming for, what can we do about divesting in, or from, males and investing in females?
So I’ve looked it up, and, unsurprisingly, most initiatives start from the bottom, which is after all, where a huge percentage of women are found. World Vision highlights seven ways to empower women – ensuring clean water (women in Africa and elsewhere spend many hours in the day trying to find and collect the stuff), supporting women and girls in crisis (child labour, enforced prostitution…), mentoring (supporting women and girls into meaningful employment), empowering entrepreneurs (microloans), education advocacy (keeping girls in school for longer, awarding scholarships), supporting mothers (with essential items and a nurturing culture), and the seventh, perhaps most vague but also most vital, respect, support and advocacy for female-hood from the cradle to the grave.
This may not have to do with wealth, except in the broadest sense, but it’s really the only way to start. And it’s very likely that if the world continues to shift towards greater female empowerment over the next few centuries (and let’s face it, it’s going to be an excruciatingly slow process), the distribution of wealth will reflect this, with far fewer of the disgustingly rich and the distressingly poor.
Will this trend, if it continues over the next thousand years or so, end up in matriarchy? Well of course it will! I can predict this with the great confidence of someone who won’t be around to be proven right or wrong. But looking around at the world today, I can predict with depressing confidence that there will be plenty of setbacks along the way.
References
https://www.forbes.com/billionaires/
7 ways to empower women and girls
on private schools in Australia, the egalitarian nation
Geelong Grammar, Australia’s most expensive private school, apparently
When I was in my mid-twenties I shared a rented house in a small inner suburb of Adelaide called College Park. It was named after what was by far the largest piece of real estate in the area, St Peter’s College. Our street was called Harrow Road, after Eton and Harrow, get it? Other nearby street names were Oxford, Rugby, Trinity, Marlborough and Pembroke. Not a single Skank Lane or Black Boy Alley to be found.
I was reminded of this period on reading Jane Caro’s article, “Class Warfare” in The Monthly magazine for July 2024. So before tackling the article, here’s a story. Walking the streets of College Park I often crossed ‘in-roads’ leading to the high steel-mesh fence that defended St Peter’s College. On the other side of the fence was lots of green ‘sward’ as Alan Bennett would call it, with a very large mansion or palace in the distance, and a few smaller building dotted about – the servants’ quarters perhaps. It all seemed a little unAustralian to me. Anyway, some of these fences also incorporated gates that seemed not to be locked. That was a bit more Australian, and anyway the front of the College was accessible enough – it was a school, after all. So, noticing that there was a rather forlorn-looking asphalted tennis court, partly fenced and sans net, not far inside the palace grounds, I suggested to my house-mates that we might take our racquets and balls and have a few hits. This, I suppose, was an indication of how bored we were.
So we’d been knocking balls to each other for surely no more than twenty minutes (it was a long time ago) when I noticed a figure in the far distance, marching over the sward towards us, from the vicinity of the palace. Looked like trouble, but we carried on regardless. He appeared to be hailing us, but we waited to get a full view of this clearly colourfully dressed individual. By the time we could make sense of his exclamations, I was able to get a fuller picture of this slim forty-ish gentleman in check golfing trousers, grey-green cardigan, and a bright red cravatte which beautifully set off his flame of auburn hair (okay, I only clearly remember the cravatte).
“Boys, boys, you do realise this is private property?!” He may have said much more, but the words ‘private property’ and the sense of real astonishment in his voice is all I clearly remember, and the more my memory repeats to me those two words, the more Pythonesque his voice sounds. Of course we slunk off with a bad grace, but the memory, and my fantasy of hoisting the fellow with his own petard, is, for better or worse, the most persistent feature for me of that period – though I’ve since learned that a petard is a bomb, not a cravatte.
So the god of private property still looms large in ‘classless’ Australia – and the larger the property the more powerful the god.
Jane Caro’s article begins with a quote.
“We ask public schools to compete against private ones, but we do not give them the funding or resources to do so,” says the principal of a comprehensive public secondary school. “We then fill them with the most disadvantaged – and so most expensive to teach – students, including those rejected or expelled from publicly subsidised private schools. Then we blame public schools for struggling. No wonder so many of our principals and staff despair.”
Caro goes on to describe a scandalous funding situation regarding public v private schools, with remarks such as ‘no other nation funds education the way we do, yet most Australians remain blissfully ignorant of just what an outlier we are’, and ‘no other [private] schooling system anywhere enjoys such largesse for so little reciprocal cost’. Count me in as one of the blissfully ignorant, and I’ve been tsk-tsking about the USA’s underfunded public education system, and its role in letting down those who might otherwise have seen through Trump’s bullshit (but then there’s their awful public health system, their ultra-low minimum wages, their massive incarceration rates…).
Having said that, and being prepared to accept Caro’s analysis, I’m disappointed that there’s a lack of actual hard data or references in her article (or in any other of The Monthly’s articles). The magazine might employ the excuse that these are only opinion pieces – but they’re clearly not, they’re making factual claims. The Economist, another mag I read from time to time, cites references within its articles (‘according to x..’, ‘statistics from the bureau of y show…’), which might be inelegant, but useful for valiant truth-seekers like me.
So here’s a tantalising and shocking quote from The Australia Institute, a public policy think tank:
In 2024, the Commonwealth Government will spend an estimated $29.1 billion on schools in Australia. More than half of this – $17.8 billion – will go to private schools.
More than half that private money – $9.9 billion – is earmarked for Catholic schools, in a nation regarded internationally as one of the least religious in the world. How can this be happening?
According to the 2021 census census, just under 20% of our population identifies as Catholic. That number strikes me as unbelievably high (I’ve also met many who identify as Catholic but don’t ‘practise’ the religion), but it has been falling quite rapidly since the 70s.
Unsurprisingly, Independent Schools Australia – presumably an advocacy website for independent schools – claims that all this malarky about funding is just mischiefy myth-making. Here’s a quote from theirs:
FACT: On average, Independent schools receive around half the level of government funding of public schools.
Hmmm. So, one of these claims is not like the other. Clearly, one would expect independent schools to receive far less funding because they’re fee-paying schools which tend to advertise themselves as superior. And those fees can be pretty hefty – the still all-male St Peters College, with the swards and the cravattes, charges (in 2024) $17,770 per annum for Prep students (that’s pre-Reception!) up to $31,770 for year 12. And if you’re a boarder, that’s an extra $28,600 on top. I’m not sure if that includes uniforms and cravattes. So, while I’m skeptical of the above-mentioned ‘fact’, I have to wonder why independent schools receive any funding at all.
Thinking on this has dredged up another memory. The school I attended in my last three years of primary education – Elizabeth Field Primary – hit the headlines of South Australia’s principal daily paper, some years after I left the building, as the most violent school in the state, which came as a great surprise to me, as I’d noticed nothing more than the odd mumble or sneer in my time there. However I do recall, from those days, outlining to my sister a story I planned to write about a student uprising which left most of the teachers dead or dying on a field of gore. But isn’t that every schoolboy’s fantasy?
The evidence, in any case, appears to support Caro’s essay. ABC News reported late last year on an analysis by the Australian Education Union. It argues that ‘Australian private schools are overfunded by $800 million this year while there is a funding shortfall of $4.5 billion for public schools’, and finds that Tasmanian schools are particularly hard hit. Further, it finds that ‘chronic underfunding of public schools in every state and the Northern Territory is expected to worsen over the next five years’. It should be noted that centre-left Labor governments are in power in every state and territory in Australia, except for Tasmania.
So, what is to be done? Australia’s politicians, especially those in the top jobs, are mostly private school educated and reluctant to despoil their own nests – so it’s the usual situation of a politics run by elites for elites, which has long been a problem of ‘representative’ democracy as opposed to participatory democracy. So the problem won’t be solved, obviously, by voting ‘this lot’ out, as the conservatives are even more beholden to private school education. Being informed and making a fuss, a noise that can’t be ignored, is the best I can come up with, though I’m not much of a noise-maker myself. Education is so important, it’s the key to having as good, as informed an electorate as possible. And currently Australia’s education system, and its funding, makes a mockery of our claim to be an egalitarian nation.
I suppose I should send this to a politician, for what it’s worth.
References
Federal funding for private schools
DISPELLING MYTHS
a shallow dive into economics, and the discovery of a (possible) heroine
Shemara Wikramanayake, speaking at the G20 International Conference on Climate
Don’t know much about economics, to put it mildly, being constitutionally work-shy and generally impoverished in a rich country, so it seems absurd for me to occasionally buy and try to make sense of Britain’s internationally focussed mag, The Economist. To be fair to myself, it does have many interesting articles on international politics, reminding me that the bizarreries of the USA and our domestic difficulties re housing and mortgages (in Australia) are far from the most-life threatening issues on the planet. But when it comes to bond markets, IPOs, floaters, monetary policy and the like, I defer to the cognoscenti while suffering a touch of FOMO.
So, with all that, I’m going to present here an almost incomprehensible (to me) letter to the editor from the August 26 2023 issue, entitled ‘Do we need banks?’
I’m not sure what part of David Apgar’s piece on narrow banking was the most entertaining (‘By Invitation’, August 12). The idea that the ‘Chicago Plan’ was conceived with ‘the Depression fresh in mind’ must be viewed as quite original. However, almost equally amusing was Mr Apgar’s suggestion that bank lending ‘fuels credit to enterprising businesses’, when he realises that the problem with Silicon Valley Bank was that it had invested an awful lot of money in notes issued by the Federal Reserve, supposedly also to fuel commerce (and thus revealing the mockery underlying quantitative easing).
None of this has anything to do with supporting ‘enterprising businesses’ that increase prosperity. Banking is doing something else. Banks should go out and make money from the people who deposit money, assuming that they will keep it safe. Instead they are admonished to multiply paying services offered to those who trust them, and still go bankrupt. Do we need the banks or do the banks need us? And if the latter, then why do we need the banks?
I can’t really make sense of much of this, but the writer’s final ‘killer punch’ is surely ridiculous. We needed and used banks in the past because it was unsafe to keep our money ‘under the bed’ or stuffed in oversized wallets. Nowadays WEIRD society is pretty well cashless and we pay with cards or phones electronically connected to our bank accounts. How would we manage without this? And banks need us to pay for their staff, their buildings etc. Think mutual providence(?).
Of course, as someone who has never taken out a loan in my life, I was clueless about how banks make profits. And the fact is, some banks make eye-watering profits. The CEO of the ‘Macquarie Group’ (whatever that means, but I presume it includes the Macquarie Bank which I think is an investment bank, meaning it has nothing to do with me), one Shemara Wikramanayake, earned just under $24 million in the 2022 financial year, presumably due to the profitability of the ‘Group’ she heads. This is an obscene amount of money, and I find it hard to believe she lives on the same planet as myself. Her Wikipedia profile presents her and her ‘Group’ as a heavy hitter in the financing of low carbon emissions technologies, which is great, but I just don’t understand such super-massive wealth disparities…
Having said all that, my hope in starting this piece was to try and understand the concept of quantitative easing, without the apparent cynicism of the letter quoted above (its author tells us that banking ‘is doing something else’ other than supporting enterprising businesses, inferring of course that ‘banking’ is out to make money for itself, which of course is necessarily true, otherwise it wouldn’t have the funds to continue supporting other enterprising businesses). Here’s how Forbes puts it:
Quantitative easing—QE for short—is a monetary policy strategy used by central banks like the Federal Reserve. With QE, a central bank purchases securities in an attempt to reduce interest rates, increase the supply of money and drive more lending to consumers and businesses. The goal is to stimulate economic activity during a financial crisis and keep credit flowing.
Which leads me to further questions – what’s a ‘central bank’, what are ‘securities’, and what is monetary policy’? I’m sure I’ve heard somewhen that it’s the opposite of fiscal policy but that don’t help much.
I’m guessing that the ‘Federal Reserve’ is the USA’s equivalent of our RBA (the Reserve Bank of Australia):
‘We conduct monetary policy, determine payments system policy, work to maintain a stable financial system, issue the nation’s banknotes, operate the core of the payments system and provide banking services to the government’.
Looks like it’ll take me a while to get to QE, but safly safly catchee monkey. Here’s the RBA again:
In Australia, monetary policy involves influencing interest rates to affect aggregate demand, employment and inflation in the economy. It is one of the main economic policies used to stabilise business cycles.
Of course, I’ve heard of the RBA raising/lowering interest rates, and this affects both savings and loans, obviously. But why does this have to be fixed nationally, why can’t banks fix their own rates and let the customer decide which bank to go with? And is it necessary for private banks to follow the RBA’s decisions? (From what I’ve gleaned they don’t have to but generally keep close to the RBA’s settings). And how do interest rates affect ‘aggregate demand’ (defined as ‘the total demand for goods and services within a particular market’)? Does anybody really understand all this – apart from the magnificently named Shemara Wikramanayake?
I must admit to having only a modicum of interest (careful with that word) in the minutiae of economics, but at least my teeny research has brought to mind Ms Wikramanayake as a rare female in the world of financial movers and shakers. She’s Australia’s highest paid CEO due to the profitability of the Group she heads. Obviously I can’t speak to the economics of that, or any attached ethical issues relating to such massive profits, but these profits appear to be related largely to industries and start-ups in the field of renewable, clean energy. In a world of too many macho anti-feminist thugs like Putin, Xi and those who govern Iran, Burma and too many other countries, we need more positive, future-facing, can-do types like her.
I might actually return to trying to understand QE, corporate bonds and the like, in later posts, but maybe not.
References
The Economist, 26/8 – 1/9/2023
hedge funds, the stock market, and other unknowns
A GameStop shop in Florida – it’s a US thing, but with retailers in Australia
So there’s a big story in the USA to do with hedge funds, stocks and the little guys upsetting the big guys, finance-wise, or something like that. Time for a closer look, comme on dit (I know far more about French than finance).
Having been poor (in first-world terms) all my life – and work-shy, because I’m constitutionally anti-authoritarian, and when you’re a nobody and a know-nothing, you have to work for bosses – I’ve tried to salve my guilt for living mostly off the public purse by being a more or less prolific writer and reader. Of course I’ve had brief jobs – in factories, offices, restaurants, schools, a hospital and a farm – and I did eventually manage to get to university, again off the public purse, incurring a debt I’ll never be able to repay. So during this misfit life I’ve learned a lot, in a general way, about history, politics and the various sciences, but virtually nothing about finance, the province of the wealthy.
Some preliminary remarks. Most wealthy people, surely, come from wealth. They have wealthy parents, wealthy friends and associates. They get advice from those around them about increasing their wealth, minimising losses, investment, property and so forth. I’ve heard this kind of talk at restaurant tables and in wealthy homes where I did occasional gardening work. It was like listening to people speaking a foreign language, and as psychologists tell us, we feel anxious, and sometimes hostile, when we listen to a language we don’t understand. They even have a fancy name for it – xenoglossophobia.
The best way to overcome phobias, so I’m told, is to expose yourself, little, by little, to the fear-inducing thing. It’s never too late, so here goes.
What is a hedge fund? The ABC (Australia) business reporter David Chau tries to explain:
Essentially, it’s a fancy word for an “alternative” investment partnership that has the freedom to invest aggressively in a broad range of financial products. They’re actively managed, and more expensive to invest in, compared to other funds. Many of them use a “2 and 20” compensation structure. It means hedge fund managers are paid a 2 per cent commission (of the assets they’re managing), and 20 per cent of profits (above a certain benchmark) each year. Even if the fund manager does nothing (or worse, loses money on your investments), they’ll still get paid their 2 per cent. Their goal is to maximise investor returns, but only “sophisticated investors” can join. To qualify, you typically need to own about $2.5 million worth of net assets, or earn $250,000 per year in gross income (for the past two financial years). So a hedge fund’s clients tend to be rich people, or big institutional investors (like an insurance company or superannuation fund).
The idea, clearly, is to invest in a company that you think will do well in the future. Or one that you want to do well, because you think what it’s doing/manufacturing etc is positive for the community, or the world. I presume, for example, that Elon Musk’s fantastical personal wealth, which he derives from his companies, is a result of people investing in those companies because they believe in what he’s doing – though that may be a naïve view.
In any case, clearly, hedge funds are for the rich who hope to get richer. It’s like placing a bet (though presumably you can do this without joining a hedge fund), putting money into shares, calculating that you can make a profit by selling them later. This makes things a bit weird, though. You buy shares in a company because you believe it will do well, so then why would you want to sell those shares later? Presumably because you’ve lost faith in that company? Or is it just to make a profit, knowing that the shares you’re selling will be snapped up by others? But why not keep them, if the price is going up? But surely you have to sell at some time, to make a profit? To liquidate your assets?
Okay, more questions than answers. Short selling, or shorting, as David Chau and others explain it, involves somehow borrowing shares from the market and then selling them, believing or knowing that their value will tank. After it has tanked they buy the shares again and give them back to the market at their current reduced value, and pocket the difference. Which sounds like a very dodgy practice to me, an easy or lazy way of making money – looking for businesses that are failing, which given our rapidly changing economic and technological environment, wouldn’t be difficult to find, and cashing in on the misery of those businesses. So how is this allowed, and how can you get away with selling borrowed stock? How can it be your stock to sell? I’ve watched Sal Khan, who of course I hugely admire, talking about this, but his explanations about the possible benefits of shorting seem vague to me.
All of this attempt at understanding comes, of course, due to the ‘GameStop’ bubble which is bound to burst in the USA. Hedge funds and their rich customers have been shorting the stock of this gaming franchise called GameStop, as well as other brick-and-mortar companies that have been losing business, either due to the pandemic or to changing consumer practices. People on Reddit, a social website I’ve never used, have been doing the opposite, buying shares and doing everything to inflate the share price of these companies, and everyone’s awaiting the fallout, or the train-wreck as one pundit described it. These Reddit investors have been able to do this using an app called RobinHood, a name with obvious connotations. This has of course led to an outcry from the rich-getting-richer crowd, and the RobinHood CEO stepped in, banning the buying of these declining stocks, but not the selling. Which led to an outcry from the Reddit ‘rookie investor’ crowd, which led to RobinHood modifying its position and allowing some stock purchases. A number of financial pundits I’ve listened to, who seem largely sympathetic to the anti-hedge fund investors, are shaking their heads and predicting it will all end in tears, and not so much for the hedge fund zillionaires. Ain’t it always the way.
Meanwhile the the wealthy professional hedge fund types are decrying the behaviour on the Reddit subgroup WallStreetBets as ‘unsophisticated’, though it’s clearly because the newbies are, quite deliberately, upsetting the applecart of making a profit from business misery. Having said that, they’re clearly trying to cash in as well. So I really don’t know quite what to make of it all. Like just about everyone else.
Stop press (sort of): I’m not much of a gamer, so I didn’t have any idea whether GameStop had a presence here in Australia. Apparently, EB Games, which I’ve seen around, is our principal retailer for GameStop. This Crikey article, which clearly takes a much more negative line on hedge funds than Sal Kahn does, points out that EB games employs, or did before the pandemic, between 2000 and 4000 workers, and that they, like so many others, are impacted by hedge fund shorting. Here’s what the Crikey journalist, Christopher Warren, has to say:
Rather than leave matters to the actual marketplace of buyers and sellers, the masters of the universe in the financial markets decided to hurry on the collapse of retail by using “shorts”, borrowing shares to sell now, buy back (cheaper) later. The play has been hollowing out capitalism for 30-odd years in a five-step death spiral: manufactured share price collapse through shorting, which allows a cheap private equity buyout, who gut through sackings and closures, then relaunch or rebrand, before quietly closing. In journalism, movies and TV, the hedge funds are proudly the misunderstood anti-hero. Take the fictional Bobby Axelrod in Stan’s anchor program Billions: “We’re white blood cells scrubbing out bad companies, earning for our investors, preventing bubbles. A hedge fund like mine is a market regulator.” The reality is that hedge funds create no value. They’re money-sloshing machines that make money on turnover, not results. This means they’re incentivised to “do something” to maximise turnover, whether that’s moving the market through shorts, falsifying results (hello Bernie Madoff!) or offering, umm, alternative services like the late Jeffrey Epstein.
I’m inclined to take this line myself, but I’m not informed enough to be sure. And there are so many more interesting things to learn about than financial markets.
References
https://www.abc.net.au/news/2021-01-30/hedge-funds-the-gamestop-bubble-and-wall-street/13104846
Mehdi Hasan Gets a Personal Khan Academy Lesson on the GameStop Stock Squeeze | The Mehdi Hasan Show (video)
GameStop Surge Shows Power Shift On Wall Street | Stephanie Ruhle | MSNBC (video)
Represent US and ‘US democracy’, part 1
If there was one decision I would overrule, it would be ‘Citizens United.’ I think the notion that we have all the democracy that money can buy strays so far from what our democracy is supposed to be.
Ruth Bader Ginsburg
Leaving the weird awfulness of Covid-19 aside for a while, I must thank a good friend for sending this video my way. Jennifer Lawrence is an American actor none of whose films I’ve ever seen, but in this video she and Josh Silver, fellow member of the activist group Represent Us (with presumably a play on the US – and they’ve been making videos for years now), effectively focus on a problem of US politics I’ve largely neglected in my own analyses of the subject since the advent of the most recent incumbent in the white palace.
I’ve referred to it obliquely, for example when writing about the election cycle in that country, and my view that there’s at least one election too many – i.e. the presidential election. It all seems too much of an expenditure of time and energy, but I neglected to focus enough on the most insuperable problem – money.
So in this post I want to look at what Lawrence and Silver claim about the influence of money and wealthy lobbyists on government, especially federal government, and the corresponding lack of influence the relatively disadvantaged generally have, in spite of their vast numbers. Are there claims accurate?
l’ll try to fact check much of this – and their first claim isn’t directly about money, it’s the claim that the last two presidential candidates, Clinton and Trump, were ‘the least popular candidates since they began keeping track of such things’. Australia’s journalistic website The Conversation certainly confirms this about Trump. At election time, he ‘had the highest unfavorability rating in history, with over 61% of Americans having an “unfavorable” or “disapproving” view’. His victory, with fewer votes, says much about the electoral college system and how it favours less populated ‘red’ states, but I won’t go into that here. Clinton, though, was a ‘historically unpopular opponent’, with an unfavourable rating of 52%, the worst rating ever recorded for a losing candidate. So that checks out.
The next claim is that ‘only 4% of Americans have a great deal of confidence in Congress now.’ I imagine that the word ‘great’ is key here, as everything depends on framing. For example the question might be – how much confidence do you have in Congress? (a) no confidence (b) very little confidence (c) a fair amount of confidence (d) a great deal of confidence – or something similar. And how many constituents, anywhere, would say they have a great deal of confidence in their politicians, where there’s space to express skepticism? A quick check shows that the figure comes from a Gallup poll reported in The Atlantic back in 2014, and indeed it was a multiple choice question, but the most interesting/disturbing finding was that the attitude to Congress has suffered a massive downturn in recent decades, as shown by the graph below. So, unless there’s been an uptick in the last few years – and surely there hasn’t – Represent Us is right on this too.
The video next focuses on a Princeton study on ‘how public opinion influences the laws that Congress passes’. Represent Us presents this as a ‘thirty percent rule’. Any law has a 30% chance of being passed by Congress, regardless of its public support (from no support to complete support). The Princeton study concluded, apparently, that ‘the preferences of the average American appear to have only a minuscule, near-zero, statistically non-significant impact on public policy.’
So, the 2014 study, by two professors of politics and decision-making, Martin Gilens and Benjamin Page, is self-described as ‘tentative and preliminary’, but they are clear about their findings:
The central point that emerges from our research is that economic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy, while mass-based interest groups and average citizens have little or no independent influence.
I’ve just read the study, and, unsurprisingly it’s a lot more nuanced, complex and at times dauntingly technical than the 12-minute video. For example it points out that policies advocated by cashed-up lobby groups may well benefit most of the public in spite of their lack of popular support. However, the economic elites, who have the most influence on Congress through financial, quid pro quo support, favour policies which are generally non-beneficial to the poorer, and far more numerous, sectors of the population. In fact, a lot of the findings remind me of passages in a very different text, Robert Sapolsky’s monumental book Behave, where he examines class-based behaviour (he calls it socio-economic status rather than class, coz we all know that the USA is a classless society haha). Take this example:
… a culture highly unequal in material resources is almost always also unequal in the ability to pull the strings of power, to have efficacy, to be visible. For example, as income inequality grows, the percentage of people who bother voting generally declines.
R Sapolsky, Behave, p292
As Sapolsky also points out, the super-rich, and their children, tend to move in the limited circle of their peers and so reinforce each other in seeking to maintain and enhance their lifestyles. The super-poor, meanwhile, are more often in a battle with each other (and not with the super-rich who are invisible to them) for resources, and tend not to trust government, since it is run by ‘them’. So the more economically unequal the nation, the more political power falls into the hands of the wealthy.
Anyway, returning to the video, the next claim is an odd one: ‘politicians are spending up to 70% of their time raising funds for re-election’. The term ‘up to 70%’ could actually mean anything from zero to 70%, so let’s take that with a pinch of salt. Another Represent Us website quotes former Democrat senator Tom Daschle: ‘a typical US senator spends two-thirds of the last two years of their term raising money’. I’m not sure if this is meant literally, but of course time spent isn’t the issue, rather money raised is the issue. The video goes on to make this interesting claim: ‘in order to win a seat in some races, you would have to raise $45,000 every day for six years to raise enough money to win’. I’m not sure how to fact-check such a claim, though ‘in some races’ could be a warning sign of some exaggeration or over-simplification. Then again, the idea of those kinds of dollars being involved in any electoral race is a sure sign of shonkiness. In any case the claim has to be seen in tandem with the next factoid presented, that ‘only .05% of Americans give more than $10,000 to politics’, which suggests that this tiny sector – the super-rich and wealthy special interest groups – are the funders of election campaigns, generally with agendas that the pollies are politely commanded to comply with – with the inevitable result for the increasingly disengaged majority.
So, whether these facts are precisely correct or not, it’s clear enough that money is poisoning democracy in the USA. As the video goes on to say, Americans are leaving the major parties in droves, and some 42% are registered as independent, rather than members of the duopoly of Republicans and Democrats. And since there are virtually no independent candidates, the quote from Sapolsky above becomes all the more relevant.
I’ve only looked at about a third of the video, but I’ll post this lot and present my take on the rest in my next post. Keep well!
getting roolly rich in the USA 1: Jeffrey Epstein
The Jeffrey Epstein case, in terms of women, girls and exploitation, is something I’m far too squeamish to explore, and of course it’s very very sad and disgusting, but my interest was also piqued by the news that he was/is a hedge fund manager (but maybe not), with mansions and an island and oodles of moolah to invest in all sorts of science projects. This raised many questions. Was he obnoxiously rich to begin with, like little Donny Trump? And what is a hedge fund, and can you legitimately make millions from one?
I’ve never been rich and I’ve never invested in anything, unless you call giving money to Oxfam or UNHCR an investment, so I’m really starting from scratch here. The first definition I’ve found is that a hedge fund is ‘an offshore investment fund, typically formed as a private limited partnership, that engages in speculation using credit or borrowed capital’. So, if this is true, why invest ‘offshore’, and how are you able to do this with money you don’t really have or haven’t earned? I suspect I won’t find easy answers to these questions. The website Investopedia (which sounds immediately suss!) starts with another definition: ‘Hedge funds are alternative investments (?!) using pooled funds that employ different strategies to earn active return, or alpha, for their investors’. Alpha! What a lovely musical note that hits for investors (especially combined with ‘male’). But the mention of pooled funds (e.g. mutual funds and pension funds, as well as hedge funds) might explain how you can make money even if you have little personally to invest. Investopedia also tells us that hedge funds ‘are generally only accessible to accredited investors’, because they’re less regulated than other funds. And we all know that the wealthy are very very keen to have less regulation and oversight than what the Yanks call ‘regular folks’
However, it does seem that, to be an ‘accredited investor’, it helps to be already rich. The term applies to financial institutions such as ‘investment banks’ and corporations as well as individuals. Needless to say, this is a world of which I know absolutely nothing. All I’ve really heard about it is negative – high rollers, corruption, anti-government arrogance and the like – which says much about where I get my information from. Even so, the most objective analysis raises questions – for example, the Australian Corporations Act of 2001 ‘defines “sophisticated investor” [basically synonymous with ‘accredited investor’] so as to exclude them from certain disclosure requirements.’ That rings alarm bells for me – you’d think that these heavy investors would be the last people to be excluded from disclosure. The Act also says that such investors require an accountant’s certificate to the effect that they have a minimum of $2.5 million in net assets or a gross income of $250,000 over each of the previous two years. Presumably they’re not asked about how they acquired such income/assets. And the financial bar is considerably lower in the USA.
Hedge funds have grown in popularity, and as a proportion of the asset management field, over the years. After the GFC of 2007-8 there was an attempt (probably feeble) to rein in the sector. The essential hedge fund strategy (think ‘hedging your bets’) is to receive a positive return regardless of bear or bull markets, by spreading the risk in some clever non-risky way. If you get to be a hedge fund manager (which some reports have claimed Epstein to be, though Wikipedia doesn’t mention this in a fairly comprehensive bio) you get to keep a certain percentage of invested funds for yourself – generally a management fee (maybe 2% of assets) and a performance fee (a substantial percentage of any annual increase in net asset value). You can see how disclosure is essential in payment of such fees, and why the temptation to cook the books would be high.
Epstein seems to have ‘risen’ from humble beginnings. His mother was a ‘homemaker’ and one-time school aide, and his father was a groundsman and gardener, yet Epstein is described, at various periods in his career from the early eighties, as an options trader, a financial consultant, a limited partner (at the dodgy investment bank Bear Stearns), a finance manager and other such vagueries – all despite a patchy scholastic record (but as an autodidact and dilettante I certainly don’t hold that against him). However, one very interesting item stands out….
Back in the eighties, Epstein became an associate of one Steven Hoffenberg, who hired him as a consultant for his company, Tower Financial Corporation (TFC). Epstein was paid $25,000 a month, which to me is an absurdly huge amount for anyone to be paid, though in this world it’s probably peanuts. Even before joining TFC (a collection agency that bought up other people’s debts – and if you think that’s dodgy, read on), Epstein had been bruiting it about among the crooked rich that he was a ‘high-level bounty hunter’, sometimes working for governments or the super-rich to recover embezzled funds, sometimes working for clients to secure embezzled funds. He and Hoffenberg became very close, flying around the world to do their dodgy deals, done not so dirt cheap, but in 1993 TFC collapsed and was exposed as one of the biggest Ponzi schemes in US history, with some $475 million of investor funds vanishing. Epstein, though, had already left the company and managed to escape without charge. Hoffenberg was sentenced to 20 years’ jail, and has always claimed that Epstein was intimately involved in the scheme. In fact, Wikipedia’s brief entry on Hoffenberg ends with this fascinating line:
In July 2019, he claimed that the American financier Jeffrey Epstein was his co-conspirator in the Ponzi scheme.
That’s right now, folks. Presumably he has the evidence for that – so why wasn’t Epstein prosecuted way back then?
Anyway, it appears, surprise surprise, that Epstein’s criminality isn’t restricted to his treatment of the opposite sex, which makes you wonder how many super-rich types who don’t draw attention to themselves vis-a-vis sexual exploitation can be shown to be criminals. And how is it possible to buy what is presumably an American island to use as a tax haven?
Tax havens are always described as ‘offshore’. That’s to say, not a part of the country in which you want to avoid paying taxes. The US site Investopedia underlines its dodginess by providing plenty of info on tax havens (hey man, we’re just tellin’ stuff, not selling’ stuff, I mean, peace off man), as well as providing a list which includes the British (but not the US) Virgin Islands. Epstein owns two of the US Virgin Islands, Great Saint James and Little Saint James, where he has one of his mansions. Great Saint James cost him $18 million in 2016, pretty cheap for an island I would’ve thought, and I can’t find the price he paid for Little Saint James back in 1998. This tiny island was his principal centre of sexploitation, aka Orgy Island by the cognoscenti.
The USA has an international reputation as a bad actor in respect of tax disclosure. With monumental hypocrisy, it implemented the Foreign Account Tax Compliance Act in 2010, requiring or ‘forcing’ (dog knows how) financial firms everywhere in the world to report accounts held by US citizens to their IRS, while at the same time refusing to comply with the OECD’s Common Reporting Standard – the only major nation to do so. To be clear about this the USA demands that other countries share information about US citizens’ offshore dealings, but refuses to share the same information with those countries about foreign investment in the USA. As a result, the USA is arguably now the world’s biggest tax haven. How this works exactly for US citizens like Epstein I’m not sure at this point, but the USA has become, especially over the last decade, one of the easiest places in the world for successful tax evasion, especially through the use of LLCs or shell companies. We’re finding this out through examination of Trump’s criminal activities, but of course I’m far from understanding the detailed nature of LLCs, offshore trusts and the like. I need to lern more.
I’ll end this piece – almost – with a quote from an organisation and site that’s the polar opposite of Investopedia, the Tax Justice Network:
The United States, which has for decades hosted vast stocks of financial and other wealth under conditions of considerable secrecy, has moved up from sixth to third place in our index. It is more of a cause for concern than any other individual country – because of both the size of its offshore sector, and also its rather recalcitrant attitude to international co-operation and reform. Though the U.S. has been a pioneer in defending itself from foreign secrecy jurisdictions, aggressively taking on the Swiss banking establishment and setting up its technically quite strong Foreign Account Tax Compliance Act (FATCA) – it provides little information in return to other countries, making it a formidable, harmful and irresponsible secrecy jurisdiction at both the Federal and state levels.
Of course, none of this clearly explains how Epstein ill-got the wealth to be tax-liable in the first place. Certainly the Ponzi scheme he seems to have gotten away with was one, possibly the main, source, but he seems even before this to have ingratiated himself into the world of dodgy financial entities and personae, presumably through schmoozing and force of personality. Certainly his relationship with Ghislaine Maxwell, daughter of that supremo of repugnant dodginess, Robert Maxwell, is an indication of the world Epstein had become familiar with, a world in which everyone is advising everyone else on how to make money out of nothing and how to retain as much of that money as possible, regardless of anything so inconvenient as the law.
References
https://en.wikipedia.org/wiki/Jeffrey_Epstein
https://en.wikipedia.org/wiki/Hedge_fund
https://www.investopedia.com/terms/h/hedgefund.asp
https://www.investopedia.com/terms/p/ponzischeme.asp
https://en.wikipedia.org/wiki/United_States_as_a_tax_haven
https://www.investopedia.com/terms/t/taxhaven.asp
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