If we dare look at the plain facts of the matter, we must conclude the US is a kleptocracy not unlike Greece, only on a larger and slightly more sophisticated scale.
Here’ the evidence:
1. Neither political party has any real interest in limiting the banking/financial cartel. The original Glass-Steagall bill partitioning investment banking from commercial banking was a few pages long, was passed in a few days, and immediately had profound and lasting effects. Today our political oligarchy spends months passing thousands of pages of complex legislation that accomplishes almost nothing. What we are witnessing is a kind of political theater called Kabuki.
Here’s what Federal Reserve Bank of Kansas City President Thomas Hoenig recently noted in a rare admission by an insider like himself:
“The problem with SIFIs (“Systemically Important Financial Institutions,” a.k.a. too big to fail banks) is: they are fundamentally inconsistent with capitalism. They are inherently destabilizing to global markets and detrimental to worldwide economic growth. So long as the concept of a SIFI exists, and there are institutions so powerful, and considered so important, that they require special support and different rules, the future of capitalism is at risk, and our market economy is in peril.”
When he was asked if he really thinks Dodd-Frank and all the other “fooled by complexity” legislation has accomplished anything, Hoenig cut that fantasy off at the knees:
“As late as 1980, the U.S. banking industry was relatively un-concentrated, with 14,000 commercial banks and the assets of the five largest amounting to 14% of GDP. Today, by contrast, we have a far more concentrated, and less competitive, banking system. There are fewer banks operating across the country, and the five largest institutions control more than half of the industry’s assets, which equals almost 60% of GDP. The largest 20 institutions control 80% of the industry’s assets, which amounts to about 86% of GDP.
In other words, the domination of the political process and the economy, by the financial cartel, has been masked by a welter of purposefully obfuscating legislation. This is of course the exact same trick Wall Street used to cloak the risk of the mortgage-backed derivatives it sold as “low risk” AAA rated securities: By design, the instruments were so complex that only the originators understood how they worked.
That is the current legislative process in a nutshell. Much of the 60,000 pages of tax code are arcane because they describe loopholes and exclusions written specifically to exempt a single corporation or cartel from Federal taxes.
The US is a kleptocracy because its political leadership actually has no interest in limiting the banking/financial cartel which today all but owns our legislators. When questioned why their “reforms” are so toothless, these legislators wring their hands and bleat, “Honest, I wanted to limit the banks but they’re too powerful.”
2. Our stock markets are dominated by insiders who have an extremely unfair ( if not illegal ) advantage: It is estimated that some 70% of all shares traded are exchanged in private “dark pools” operated by the TBTF banks and Wall Street, and the majority of the remaining 30% of publicly traded shares are traded by high-frequency trading machines that hold the shares for a few seconds — however long is needed to skim the advantages offered by proximity to the exchange and the speed which that helps provide.
If that’s your idea of an “open market,” then you’re the ideal citizen for a kleptocracy, i.e. you’re someone who doesn’t think much, and who quietly accepts their losses.
3. The rule of law in the US has been divided into two branches: one is a branch of law in name only — it’s for the financial elites and corporate cartels. The other branch, which actually has some teeth, is for the rest of us, we mere “citizens” (so-called citizens). Between corporate toadies on the Supreme Court who have granted corporations rights to spend unlimited amounts of money lobbying and buying legislators, as a form of “free speech” — but how can something that costs billions of dollars be “free”? — and vast regulatory bureaucracies that saw nothing wrong with MERS and the complete corruption of land and mortgage transfer rules, the US legal system is now part and parcel of a very refined and perfectly functioning kleptocracy.
As economist Hernando de Soto observed in The Destruction of Economic Facts, the ForeclosureGate mortgage mess is not just a series of petty paperwork mistakes — it represents the actual destruction of the entire system of trustworthy transfer of property rights for non-elites:
Knowing who owned and owed, and fixing that information in public records, made it possible for investors to infer value, take risks, and track results. The final product was a revolutionary form of knowledge: “economic facts.” However, o ver the past 20 years, the American and European elites, who now all but own their/our respective governments, have quietly gone about destroying these facts . The very systems that could have provided markets and governments with the means to understand the global financial crisis–and prevent another one–are being eroded. Governments have allowed what we might call “shadow markets” to develop and reach a size beyond comprehension. Mortgages have been granted and recorded with such inattention that homeowners and banks often don’t know, and cannot prove, who owns their homes! In a few short decades the West has undercut 150 years of legal reforms that made the global economy possible. And we have yet to even begin to suffer the costs and repercussions of allowing this undercutting to take place.
The results are hardly surprising. In the U.S., trust has broken down between banks and subprime mortgage holders; between foreclosing agents and courts; between banks and their investors; and even between banks and other banks.
A political and financial coup, by kleptocrats
As described by Georgetown University bankruptcy expert Adam Levitin, in testimony to subcommittee of the House Financial Services Committee, “If mortgages were not properly transferred in the securitization process, then mortgage-backed securities would in fact not be backed by any mortgages whatsoever, and could obscure the title to nearly every property in the United States.” This raises the question of the legality of the resulting millions of foreclosures on American homeowners, since the banks often cannot prove “ownership” of the foreclosed properties.
The statement above gets to the elemental issue that apparently is lost on many otherwise intelligent people. This is not about frivolous claims based on technicalities. This is about securities fraud on a potentially catastrophic scale. These so-called securities (mortgaged-backed?) were sold to governments, pension funds and other financial institutions globally. Trillions of dollars in profits were made by banks selling what is becoming clearly understood to have now become worthless pieces of paper. And when the jig was up — which ultimately led to the destruction of economies globally — banksters made ordinary citizens the losers by cleverly sliding their worthless pieces of paper over onto the balance sheets of taxpayers worldwide. This is why they are called banksters, a name they richly deserve.
And while some quibble over whether someone should get a “free house’ from a bank, the banksters who have perpetrated the greatest swindle in the history of mankind are about to get away with it! Why? Because their behemoth banks are “systemically important,” i.e. they are TBTF (too big to fail).
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You think money laundering and tax evasion is a specialty only of Caribbean island “banking centers”? Think again; we have corporate oversight that is on a par with Somalia’s .
The “little house of secrets” on the Great Plains is the headquarters for Wyoming Corporate Services, a business-incorporation specialist that establishes firms which can be used as “shell” companies, i.e. paper entities able to hide assets so as to keep them from being taxed.
Among this firm’s offerings is something known as a “shelf” company, which magically comes with years of regulatory filings behind it, providing for a feeling of solidity:
“A corporation is a legal person created by state statute that can be used as a fall guy, a servant, a good friend, or a decoy,” the company’s website boasts. “It is a “person’ you control . . yet who cannot be held accountable for its actions! Imagine the possibilities!”
“In the U.S., business incorporation is now completely unregulated,” says Jason Sharman, a professor at Griffith University in Nathan, Australia, who is preparing a study for the World Bank on corporate formation worldwide. “Somalia has slightly higher standards than Wyoming and Nevada.”
No surprise then that the US was declared “non-compliant” in 4 out of 40 categories monitored by the Financial Action Task Force, an international group fighting money laundering and terrorism finance, in a 2006 evaluation report, its most recent. Two of those ratings relate to scant information collected on the owners of corporations. The task force named Wyoming, Nevada and Delaware as secrecy havens. Only three states — Alaska, Arizona and Montana — require regular disclosure of corporate shareholders in some form.
4. Just as in Greece, taxes are optional for our nation’s financial elites. In Greece, to avoid the “swimming pool tax, you simply don’t mention your swimming pool” when filling out your income tax forms. Here in the U.S., that sort of tax avoidance is against the law. So here you must hire a sharp tax attorney to escape taxation legally (well, mostly legally).
5. If you are unfortunate enough to be a successful small entrepreneur who nets a mere $100,000 a year, you pay 15.3% self-employment and 25% Federal tax on the bulk of your income, a combined rate of 40.3%, and a combined rate of 43.3% on all income above $82,400. By contrast, those who net millions pay less than half that amount, somewhere between 17%, for the top 1/10th of 1%.
In contrast to what is paid by the top 1/10th of 1% , the small businessperson in California earning $100,000 pays between 5% and 9% state tax, so their combined state and Federal tax burden on their highest earnings is a whopping 50%. Then there are property taxes and the 9.5% sales tax, and endless junk fees that are skimmed from small businesses. Add all that together and the total taxes paid rises to the 60% level, or roughly triple what the top 1% pay !
The Internal Revenue Service tracks the tax returns of the 400 highest adjusted gross incomes each year. The average income on those returns in 2007, the latest year for IRS data, was nearly $345 million. This means that their average federal income tax rate was 17%, down from 26% in 1992. That’s a 35% reduction in taxes.
Do you really think we don’t live in a kleptocracy ? If so, why do you think that? Is it because the truth hurts?
Author’s Website: http://www.TechEditingServices.com
Author’s Bio: Several years after receiving my M.A. in social science (interdisciplinary studies) I was an instructor at S.F. State University for a year, but then went back to designing automated machinery, and then tech writing, in Silicon Valley. I’ve always been more interested in political economics and what’s going on behind the scenes in politics, than in mechanical engineering, and because of that I’ve rarely worked more than 8 months a year, devoting much of the rest of the year to reading and writing about that which interests me most.
By Richard Clark