Instead of promoting capital investment in an alliance with industry and government, financial planners have sponsored a travesty of free markets. Realizing that income not taxed is free to be capitalized, bought and sold on credit, and paid out as interest, bankers have formed an alliance between finance, insurance and real estate (FIRE) to free land rent and monopoly rent (as well as debt-leveraged “capital” gains) from taxation.
The result is that today’s economy is burdened with property and financial claims that Marx and other critics deemed “fictitious” – a proliferation of financial overhead in the form of interest and dividends, fees and commissions, exorbitant management salaries, bonuses and stock options, and “capital” gains (mainly debt-leveraged land-price gains). And to cap matters, new financial modes of exploiting labor have been innovated, headed by pension-fund capitalism and privatization of Social Security. As economic planning has passed from government to the financial sector, the alternative to public price regulation and progressive taxation is debt peonage. (from Michael Hudson's article called From Marx to Goldman Sachs: The Fictions of Fictitious Capital)
How does Goldman Sachs manage to skirt the rules that are now being put into effect in order to prevent the next financial crisis? Read the article below:
Goldman Sachs Already Finding a Work Around for Volcker Rule
By DSWright - firedoglake
More evidence the Dodd-Frank reform law was an exercise in futility as Reuters reports Goldman Sachs may have already found a work around. Under the new law investment banks such as Goldman Sachs are supposed to be prohibited from making risky private equity investments under the Volcker Rule. But sources reveal that Goldman has simply altered some of the structure of the financing in order to bypass the rule.
The Volcker rule – named for former Federal Reserve Chairman Paul Volcker and part of the Dodd-Frank financial reform law – is expected to limit bank investments in private equity funds, but not necessarily private equity-style investments outside of a formal fund structure. The rule’s main goal is to prevent federally insured banks from gambling in the markets or taking on too much risk with hedge funds and private-equity funds.
In a bid to pool money for deals without raising a private equity fund, the Wall Street bank has been lining up clients who are willing to put money into accounts set up to invest in private equity-style deals, the sources said.
Goldman would also set aside some of its own money and partner capital into separate accounts for the same purpose, they said.
The difference being the money will not be pooled into a fund. That’s it. No real difference just a quick tweak and there goes the Dodd-Frank regulations.Under the new plan, Goldman would then make investments in a syndicate fashion, contributing investor money, along with its own capital and partner dollars, the sources said.
“It is the same pitch as before, ‘We are putting a lot of our own money in this,’” said a person familiar with Goldman’s marketing of the new business. “They are saying, ‘We are still in this business.’“…
Goldman is betting that its investments not tied up in funds will be protected from Volcker rule.
Read the full article here