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Fraud*
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

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Monday, January 14, 2013

Goldman Sachs: Rule by Rentiers

Goldman Sachs is a majority owner of LEG Immobilien GmbH, a residential real estate company.  House prices in Germany are rising and if rental controls are relaxed, Goldman could make good money in rentals; however, Goldman is choosing to cash in on its increased valuation--Goldman always has a nose for what is going to happen, it seems.

Goldman contributes to a housing bubble (and gets rich), then it securitizes MBSs (and gets richer), then it bets against the US housing market that it has helped to inflate (and gets richest of all!).  Now Goldman is taking advantage of German rental properties.  Goldman Sachs continues to extract wealth and we have "Rule by Rentiers."

As Paul Krugman says in Rule by Rentiers (The New York Times, The Opinion Pages):

Consciously or not, policy makers are catering almost exclusively to the interests of rentiers — those who derive lots of income from assets, who lent large sums of money in the past, often unwisely, but are now being protected from loss at everyone else’s expense.
. . . .And that explains why creditor interests bulk so large in policy; not only is this the class that makes big campaign contributions, it’s the class that has personal access to policy makers — many of whom go to work for these people when they exit government through the revolving door. The process of influence doesn’t have to involve raw corruption (although that happens, too). All it requires is the tendency to assume that what’s good for the people you hang out with, the people who seem so impressive in meetings — hey, they’re rich, they’re smart, and they have great tailors — must be good for the economy as a whole.

But the reality is just the opposite: creditor-friendly policies are crippling the economy. This is a negative-sum game, in which the attempt to protect the rentiers from any losses is inflicting much larger losses on everyone else. And the only way to get a real recovery is to stop playing that game.

Read the full article here
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Goldman Sachs outsmarts the world.  Again

We recently told you about how investors are turning German real estate into a new flight-t0-safety trade as they scour global markets for investments that are a) relatively safe and b) pay some sort of return, or yield.

And though many are just catching onto this trade and becoming buyers, everyone’s favorite investment bank now looks like a seller. Dow Jones reports:

German residential real estate company LEG Immobilien GmbH Monday said it plans to go public in the first half of 2013, allowing majority owner Goldman Sachs Group Inc. to cash in on improved stock market valuations …LEG owns around 91,000 housing units, located mainly in the north-western German region of North Rhine-Westphalia and is valued at around 4.7 billion euros ($6.22 billion) including debt, according to industry sources.

Read the whole article here

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