by Naresh Jotwani

The surplus capital of any healthy society should, in theory, energize the economy, and enable the society to face present and likely future challenges. In the process, the surplus capital generates both consumption and employment. A king, for example, may build a dam, a road or a fort; a rich man may build a school. In all such ‘traditional’ cases, the nominal owner of the capital is directly involved in seeing that the capital is deployed beneficially.

This basic concept of surplus capital is neither new nor complicated. Over the last few centuries, however, several cunning ‘advances’ on this basic concept have, in effect, turned the concept on its head. Incredibly, surplus capital now adds not to the well-being but to the exploitation of a society!

(1) Fractional reserve banking: In conjunction with a fiat currency, fractional reserve banking introduces a huge layer of abstraction in the definition of money. New money is created through the very transaction of lending, with no longer a link to any physical resource. Therefore fiat money is now abstract, allowing the cunning to weave circles of deception and inflation around the rest of the population – all in the name of ‘managing’ the economy.

(2) Debt: Debt introduces a level of indirection in the deployment of capital. A banker lends money to the person or entity who will utilize it as the interest-bearing debt component of capital. Inevitably, conditions set by the lender influence the utilization of capital.

(3) Joint stock companies: This particular organization of economic activity introduces another level of indirection in economic activity – the share-holders and directors of the company employ ‘professionals’ for day-to-day operations, within defined business directions and goals.

(4) Technology & complexity: Adding to the effect of these structures is the explosive growth in technology witnessed over the past few decades. The indirections and the abstraction described, working with computer technology spanning the world, have changed the face of surplus capital.

Humongous amounts of surplus capital, in different abstract forms, are today sloshing around the world. Thousands of powerful computers run algorithms 24×7 sloshing this abstract capital around. Hundreds of millions of people imagine that they ‘own’ a slice of this capital, and naturally they seek a return on it. Abstract capital is obsessed with growth; to humour this obsession, all kinds of of ‘financial products’ are offered to buyers – hyped up stocks, credit cards, loans, calls and puts, ETFs, hedges … and more. Highly ingenious products are offered to buyers who do not read the fine print.

(5) Unproductive flows: Say a large amount of abstract money is loaned by A to B, and then by B to C, and so on … In each of the entities’ balance sheets, the amounts will show up as an asset and a liability. Interest, commission and service charges … et cetera … will add up towards GDP, within the so-called ‘financial sector’ of the economy. In this way, sloshing around of abstract money is considered ‘economic activity’ – even though no physical, usable product is generated thereby which people can use in their lives.

(6) Policy: Central banks play a key role, and more so the Bank of International Settlements (BIS). BIS coordinates strategies amongst central banks and – one assumes – settles disputes discreetly. The goal is to avoid any major losses or PR embarrassment to the ‘kingpins’ of global finance. The vast majority of mankind — over 99% — do not matter to the global financiers, except as mutts to be exploited.

The openly admitted official policy, that some banks are ‘too big to fail’, implies that bank bailouts are assured. This policy is nothing but an incentive to banks to gamble, bluff, cut corners, launder money, or anything else – so long as ‘the financial sector’ of the economy shows strong growth. If anything goes wrong, of course ‘Sugar daddy’ government will bail them out. It’s all in the family, right?

(7) One greedy family: As must happen in any large, greedy family, amongst the players of big capital there is jealousy, competition, fraud, opportunism, hype, sycophancy, back-stabbing … and more. ‘Anything goes’ is the mantra in the ugly, greedy scramble for abstract money. As the guy on Wall Street said: ‘Greed is good!’. It bears pointing out that a ‘wolf of Wall Street’ is raised and trained to growl, hunt and strut about only in that highly cocooned and privileged eco-system; that wolf would be totally helpless outside.

(8) Political power, PR & deception: Edward Bernays, known as ‘the father of PR’, was Freud’s nephew. In 1929, to increase tobacco company sales by getting women to smoke, he organized a Torches of Freedom march in New York. Marching women demanded the right to smoke, as a sign of their equality with men. Bernays described masses as ‘irrational and subject to herd instinct’, and outlined how ‘skilled practitioners could use crowd psychology and psychoanalysis to control them in desired ways’ [see Note].

Clever and polished deception is the indispensable tool of big business and big finance. Every statement has spin, and every policy has layers of deception. A simple example: Money printing by the Fed is called ‘quantitative easing’. In the old days, it used to be said that ‘All that glitters is not gold‘. Today it is more accurate to say that ‘All that glitters is deception‘. Academic gloss can be arranged easily, through deceptively named ‘research foundations’; Jeffrey Epstein’s association with Harvard University is an egregious example.

The public is fed myths and fairy tales about growth, progress, equality, ‘greatest country ever’, free market, strong economy … et cetera. That verbiage basically throws dust in everyone’s eyes, to hide the stealthy, non-stop accretion of wealth towards the centres of finance. Political leaders’ strings are pulled by puppet-masters holding the purse strings. Common people are treated exactly as the marauders of old treated the people of the territories they conquered.

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The global financial system has no obligations or answerability to anybody. The idea of patriotism is a joke. The system is of the insiders, for the insiders, and by the insiders. Their aim is to ruthlessly suck in wealth from resource rich regions and from simple-minded, thrifty and prudent savers.

In what precise sense, relatable to lives of people, does this financial system define progress in human society? The only relationship between this system and healthy, happy, thriving communities is one of ruthless exploitation.

It seems that ‘the west’ today cannot keep up with others – especially China – in manufacturing productivity. So how can ‘the western elite’ maintain the very high living standards they are accustomed to? Through financial shenanigans, of course!

When that fails, wars. All the wars of the recent past – and those currently in progress – have been against countries resisting the creepy pressures of global finance.

A few quotes

(1) Proud matriarch of a wealthy banking family, in the nineteenth century: If my sons did not want wars, there would be none.

(2) Wealthy, prominent banker, in the nineteenth century: Give me control of a nation’s money and I care not who makes its laws.

(3) Recent comments by a celebrity global fund manager:

The US jobs report for May is out, and it includes a big surprise on both:

Job creation: A significant beat at 172,000 versus the 88,000 consensus forecast (and “breakeven” rate of ~50,000); and

Revisions: The previous two months were revised up by a substantial 93,000.

Interestingly, the Household Survey an unchanged unemployment rate (4.3%) with constant labour force participation (61.8%) —both meeting consensus forecasts. Meanwhile, annual average hourly earnings growth came in at 3.4%, as expected.

The Bottom Line: Look for this jobs report to push market expectations toward a more hawkish stance from the Federal Reserve.

(4) Headline from a recent news article in the financial press: Leveraged ETFs, maxed-out hedge funds, momentum junkies and systematic funds walk into a market top.

(5) SpaceX objectives, from the IPO document: To build the systems and technologies necessary to make life multiplanetary, to understand the true nature of the universe, and to extend the light of consciousness to the stars.

These are only a few examples which indicate the mindset of ‘global financiers‘ playing with abstract money.

What does one make of all such verbiage? Note that the verbiage does not concern any real economy which generates useful products or services such as food, clothing, appliances, cars, patient care, education, houses … and so on.

Clearly, to ‘highly sophisticated and refined financial minds‘, real people making real things do not count.

The Greek origin of the word ‘economy‘ means ‘managing the home‘. So a ‘national economy‘ should be about people’s lives  and families. Right away, the phrase ‘financialized economy‘ sets off alarm bells. The added adjective totally changes the focus and the beneficiaries of the economy. Financial wizardry brings riches. Those who work hard for a living are impoverished. Any help offered to the needy is derided as handouts.

[Note] From the Wikipedia entry on Edward Bernays.