When Bankers Rule the World

In the lead up to the 2008 financial crash, Wall Street institutions discovered that the business of using money to make money through speculation, loan pyramids, inflation of financial bubbles, and the extraction of usury is more profitable than the business of financing the production of real goods and services. In their single-minded pursuit of financial profits and bonuses, they turned from providing financial services for the real wealth economy to creating and financing a phantom wealth economy. They showered financial speculators with money at favorable interest rates while denying affordable financing to productive community rooted enterprises. [See From Real Wealth to Phantom Wealth]

Meanwhile, Wall Street institutions found they could capture virtually all the benefits of productivity gains by using their financial and political power to suppress wages and force working people into increasing dependence on high priced consumer and mortgage credit to meet their basic needs in the face of rising costs.

A Failed System

The resulting distortion of society’s resource allocation priorities bears major responsibility for the disruptive cycles of economic boom and bust, the imperative for economic growth that is driving environmental collapse, and the social disruption caused by the growing wealth gap between those who control the money system and those whose labor produces society’s real wealth. [See A Politically Motivated Growth Imperative]

Start with virtually any dysfunction or injustice in our society and it traces back to a failed economic system. Follow the money and the failure leads ultimately to Wall Street.

A Failed Public Response

The U.S. federal government responded to the financial meltdown of 2008 by pouring trillions of dollars in bailout money into the predatory Wall Street financial institutions that created the crisis in the hope that some of the money would trickle through to the real economy. The bailout quickly restored Wall Street profits and bonuses as the assisted institutions used the money to fund acquisitions, dividends, speculation and financial rewards for their key players. Job loss, bankcruptcies, and foreclosures in the Main Street real wealth economy continued to mount.

Corrupt to the core, Wall Street’s abuse of power will not be corrected with marginal regulatory reforms. Reducing the abuse is not an adequate goal. We need a thorough system redesign appropriate to the needs of the living economies essential to our future as a nation and a species.