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According to the Collins English Dictionary 10th Edition fraud can be defined as: "deceit, trickery, sharp practice, or breach of confidence, perpetrated for profit or to gain some unfair or dishonest advantage".[1] In the broadest sense, a fraud is an intentional deception made for personal gain or to damage another individual; the related adjective is fraudulent. The specific legal definition varies by legal jurisdiction. Fraud is a crime, and also a civil law violation. Defrauding people or entities of money or valuables is a common purpose of fraud, but there have also been fraudulent "discoveries", e.g. in science, to gain prestige rather than immediate monetary gain
*As defined in Wikipedia

Saturday, November 17, 2012

Beware: What Goldman Sachs Recommends. . .

Now, whenever a Goldman Sachs guy makes recommendations in the press about what should be done in this country or that country, you can be sure that doing the opposite would be the absolute correct thing to do.  The financialization of the economy, with Goldman Sachs leading the way, is in its later stages of consolidation of wealth and power and the benefits that will accrue will go to the banks (and the FIRE sectors), not to the ordinary citizens of any country.

Take, for example, the article in Bloomberg Businessweek written by Boris Cerni that suggests in its title that Slovenia Should Sell Assets to Lure Investors, Goldman Says:

Slovenia should sell state-owned companies to attract investors from outside the country, Goldman Sachs Group Inc. (GS)’s Alexander Dibelius said. 

“As a small country you have the advantage to be adjustable and quick in adopting changes,” Dibelius, who runs the bank’s operations in Germany, Austria, Russia and central Europe, said in an e-mailed statement from industry body AmCham Slovenia today. “Slovenia has good companies, excellent people, geostrategically, you have access to all parts of Europe and the chances to change for the better is in your own hands.” 

Slovenia, the first post-communist nation to introduce the euro in 2007, is struggling to avoid the need for a bailout from international lenders as political gridlock grips the nation of 2 million people. The government of Prime Minister Janez Jansa is pushing ahead with an overhaul of the economy with some measures threatened by a possible referendum.  (You can read the whole article here.

The article goes on to describe how Goldman's toady suggests creating a bad bank for loans in order to continue lending.  Why would you create a "bad" bank for such purposes when Slovenia can nationalize the bank and create a public bank to serve its public interest?  Remember:  Goldman Sachs is not interested in the fate of the people;  it does not care about democracy (a referendum is considered a "threat"); it is a profit-making entity concerned only with accumulating its own profits.

There are many agile minds out there thinking through what these kinds of recommendations by Goldman Sachs really mean to the people of Slovenia and elsewhere.  Here are excerpts from a blog called "Debt" "land grabbing" and "property" posted by Judith Dellheim and linking to a PDF file that summarizes ideas from Michael Hudson about financialization in the European Union and has some discussion of its evolution and remedies:

FINANCIALISATION IN THE EUROPEAN UNION – the Basic Systemic Problems, and Possible Policy Solutions

Financialisation is a process in which the FIRE economy (Finance, Insurance, and Real Estate) takes up an ever larger share of transactions, and FIRE beneficiaries take an ever larger share of aggregate claims on the money supply. Prof. Michael Hudson goes into considerable detail of how financialisation works in his new book, ‘The Bubble and Beyond’. A useful shorter summary is an article by Dirk Bezemer and Michael Hudson, ‘The Bubble Economy and Debt Deflation’.

A key feature of financialisation is that FIRE sector professionals are successfully diverting an increasing share of total global (and European) income and wealth to their own accounts, by putting in place ‘toll booths’ that allow them to take economic rent from real-economy activities to which they contributed no productive impulse. The principal mechanism by which this occurs is through loading the household sector of the economy down with ubiquitous debt, generated by banks and quasi-bank financial companies in ever larger quantity: credit card debt for every-day purchases; consumer debt for larger purchases such as automobiles; ever higher levels of mortgage debt in self-reinforcing housing price bubbles; and student loan debt, so that students training for a professional career are encumbered by a heavy debt load even before they begin their careers, enabling the banking system to garnish their wages from their first day of work. In essence, the banking system, through its power to create credit and debt, has figured out how to levy privatised financial taxes on nearly every human activity.  (Page 1 of Financialisation in the European Union)
. . . .
 Members of the FIRE sector’s informal guild have also dominated regulatory enforcement and law-making, through a revolving-door relationship between the banking sector and government. For example, many of the most senior officials in regulatory agencies in the USA, and many of its Treasury secretaries, are alumni of companies like Goldman Sachs, the most powerful and successful financialisation organisation in the USA. In Europe, both Mario Monti and Mario Draghi are Goldman alumni. Mr. Draghi, new head of the European Central Bank, is the former managing director of Goldman Sachs International.

FIRE professionals have become very skilled at manipulating the global monetary and banking system to generate the outcome they seek – which is to arrange for their own benefit, in favour of their own personal and corporate accounts, an increasing burden of legal claims to ownership of a portion of a huge variety of different cash-flows (‘toll booths’ on the financial-flows data highways). Again, this is achieved in large part by making sure most people are in permanent debt.  (Page 5 of Financialisation...)

You can read the whole essay here


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