The Rich Get Richer Explained by the Bears

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For US substitute UK .. the financial sector is not bound by national borders.

The Rich Get Richer Explained

Published on Oct 10, 2012

An explanation of the growing disparity between the poor and the rich in America.
by Omid Malekan

“Through the tax code, there has been class warfare waged, and my class has won,” Buffett told Business Wire CEO Cathy Baron Tamraz at a luncheon in honor of the company’s 50th anniversary. “It’s been a rout.”

Between 1979 and 2007, the richest one percent of Americans saw their incomes rise by 275 percent, according to a recent report by the Congressional Budget Office. The bottom fifth of Americans experience only a 20 percent jump.

http://www.huffingtonpost.com/2011/11/15/warren-buffett-tax-code-l_n_1095833.html

Michael Hudson describes how the financial overclass suggest a solution to increase their wealth still further:

‘As TARP Special Inspector General Neil Barofsky has described, “saving the banks” has been a euphemism for saving Wall Street from losses, not to mention criminal prosecution.’

‘The U.S. and European governments assume that the solution to clean up the financial wreckage is for economies to “borrow their way out of debt,” by creating yet a new bubble. The new article of faith is that high finance cannot lose; only the economy can be made to suffer losses, regardless of responsibility.

There is an alternative, of course. It requires overcoming today’s tunnel vision to undo the economy’s tragic detour that led to the bubble, the bailout, austerity, and economic polarization between creditors (the 1%) and the 99% in debt to them. The bank lobbyists’ narrative underlying the claim that governments need to bail out the banks at the expense of the “real” economy is that austerity will enable debts to be paid down by enough so that people can begin to borrow again. A new bubble will rescue us – and this time it will be better managed.

The counter-narrative is to recognize the financial sector comprises the Liabilities side of the economy’s balance sheet of assets and debts. As such, it has become a separate and indeed a perverse mirror image of the “real” production and consumption economy. A new debt bubble cannot succeed as a solution based on the economy “borrowing its way out of debt” in an attempt to re-inflate real estate and other asset prices. More bank lending will only impoverish the economy more, indebting the bottom 99% further to the 1%.

The dream is that borrowing can become part of increas(ing) the Magic of Compound Interest, continuing to enrich a financial overclass. But this cannot go on for long. It is a fantasy for governments to accept the financial lobbyist’s dream that the way to pull the economy out of austerity and debt deflation is to create a new bubble – to restore real estate as a speculative activity, to “create wealth” by re-inflating asset prices. It cannot be done honestly.’

Interesting use of the phrase “borrowing its way out of debt” which the UK associates with the Tory jeer against the opposition.  Of course, the Tories are meaning government borrowing and not private sector borrowing.  In fact, they are extremely keen on personal and household borrowing to pull the economy out of its hole .. as Michael Meacher reported in 2011:

Incredible as it might seem, the last straw that the Chancellor is clutching at is a huge increase in personal and household borrowing, which is already at more than £1.5 trillion—well above the level of Britain’s entire gross domestic product. Although it was falling at the last election, the OBR is now forecasting that it will reach £2.13 trillion by 2015—half as large again as Britain’s entire GDP. That is an extraordinary admission. The Government’s only way of imposing massive public expenditure cuts is by pumping up a gigantic financial bubble in the private sector, which can only end in another colossal financial crash.

 

As Michael Hudson says this is the financial lobbyist’s dream of continuing to enrich the financial overclass at the expense of the real wealth producers, the 99.9%.

http://neweconomicperspectives.org/2013/01/the-delicious-irony-of-morris-greenbergs-aig-suit-against-the-us-treasury.html#more-4415

http://www.michaelmeacher.info/weblog/2011/06/the-osborne-budget-1-year-on/#more-2527

Related Think Left post:

Neil Barofsky: How Washington Saved Wall Street and Abandoned Main Street

Plutonomy – Invasion of the Political Body Snatchers.

Worrying Increase in Domestic Violence Across Nottinghamshire and presumably across the UK

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First posted January 9, 2013 

Worrying Increase in Domestic Violence Across Nottinghamshire

by Alice Grice

I have read worrying reports in a number of Nottinghamshire news publications that in the four years since the formation of the police force’s Public Protection Unit, the number of domestic violence cases reported has increased across the county. Whilst some optimistically point to an increase in reported incidents as a positive sign that victims are more willing to come forward, there is as yet no statistical evidence to prove this to be the case. Regardless of what has caused the increase, a single report of an incident of domestic violence is one too many and certainly not something to welcome.

A report by Prof. Sylvia Walby of UNESCO and Jude Towers of Lancaster University into the impact that cuts are having on services to prevent violence against women and girls, showed that nationally 9% of women are being turned away from refuges due to lack of places. In Nottingham a specialist service helping women and children from South Asian backgrounds to flee domestic violence, Roshni, has closed it’s doors after 26 years due to lack of funding and women’s services across the whole county are seeing cuts to their budgets.

On top of these cuts to local services, the impact of changes to the legal aid system are making it more difficult for women to leave an abusive environment. Last year the government made several changes to the eligibility for legal aid. As part of these changes they added an exclusion clause to say that women suffering domestic violence would still be able to get legal advice on issues such as housing and benefits. However, the government also narrowed the definition of domestic violence to mean physical violence which has been reported to statutory authorities, showing an alarming lack of understanding of the complex issues surrounding domestic abuse. After passing back and forth between the Lords and the Commons, further concessions were made including a revised definition of domestic violence however there are still gaps in the system including a time limit on reporting the incident and limits on the routes of reporting that mean that some women will still slip through the net.

Cuts to benefits such as working and child tax credit have also been shown to have more impact on single parent families making life for women escaping violence even more daunting. I write this on a day when the coalition have voted to cap an increase on benefits to 1% which in real terms is yet another cut. Various figures are circulating in the media as to just how much of a cut this adds up to for lone parent families but all agree that it is this group of society who are set to suffer the most from this bill.

In light of this constant erosion of benefits and services for women fleeing abusive relationships, it will not be surprising to see these figures continue to rise. There are organisations in the county and the city doing excellent work to protect and support women in abusive relationships despite having their funding cut but until this government stop their attacks on the rights and benefits of women, many will be too scared of what a future as a lone parent holds for them to seek help.

http://hucknalllabourcandidates2013.wordpress.com/2013/01/09/worrying-increase-in-domestic-violence-across-nottinghamshire/