How We Can Stop the Globalization That's Bleeding Us Dry

Shah Gilani

Earlier this week, I showed you how, after a generation of running amok, financialization of the U.S. economy is close to killing – forever – the once-mighty American middle class.

Well, these forces have "help."

Globalization, the long-armed henchman of financialization, is an insidious contributor to the widening income gap and wealth inequality in the United States.

It's essentially another nail in the coffin of the middle class.

Here's the thing: It's possible to stop both of these disasters before it really is too late.

Undoing their destructive effects will be hard, don't get me wrong. There's at least a generation's worth of damage and many powerful people who are profiting from the system being upheld just the way it is.

But, like I said, it can be done.

Here's what we need to do to arrest and reverse this crony capitalist-engineered nightmare…

The Trojan Horse in Our Government

Let me be clear – both American political parties bear the blame for this shameful situation.

It's a totally bipartisan crime.

Successive Democratic and Republican administrations were steadily spoon-fed cash and campaign contributions by crony capitalist compatriots commanding armies of law-writing lobbyists. Starting effectively in 1980, they deregulated America's banking and financial services industries, so bankers could securitize formerly low-yielding loans into the high-risk, high-profit, speculative tools of financialization.

The fruits of their efforts resulted in the banking and financial services share of corporate profits in America ballooning to more than 40% of all companies' profits by 2006.

While the leveraging of American borrowers and profiteering of the economy (evidenced by debt-fueled speculative profits outpacing economic growth) was a huge "win" for these people, their domestic profiteering was augmented by an even wider global campaign – under the guise of "free trade."

The series of so-called free trade pacts that resulted was effectively a globalized push to lower regulatory barriers and was engineered to expand American credit into overseas markets.

Crony capitalist cash and the "Great Credit Factory" – the U.S. Federal Reserve – successfully exported American capital, along with manufacturing and assembly jobs.

There were barely any crumbs left here in America; the historical engine of American prosperity – the fuel for a once-expanding and aspiring middle class – had been "globalized."

The ugly irony of free trade and cheap capital is that global competition has ultimately led to overcapacity and reduced profitability.

Bringing back jobs to the United States now would be even more expensive and eat into those corporate profits. All the while, global competition and overcapacity bring down labor costs and margins even in places like China.

So crony capitalists lit the fuse and gave the impetus, but on a functional, day-to-day level, the evisceration of the middle class, the widening income gap, and wealth inequality in the United States aren't the fault of free markets or globalization in its unadulterated form. The problem doesn't spring from the design of our money system, either.

Rather, the problems are caused by how all these systems have been leveraged through – you guessed it – financialization.

Again, on a functional level, fixing these problems is relatively straightforward. But the crony capitalists won't go down without a fight.

Four Simple Steps to Stop This Tragedy

Join the conversation. Click here to jump to comments…

Shah Gilani

About the Author

Browse Shah's articles | View Shah's research services

Shah Gilani is the Event Trading Specialist for Money Map Press. In Zenith Trading Circle Shah reveals the worst companies in the markets - right from his coveted Bankruptcy Almanac - and how readers can trade them over and over again for huge gains.Shah is also the proud founding editor of The Money Zone, where after eight years of development and 11 years of backtesting he has found the edge over stocks, giving his members the opportunity to rake in potential double, triple, or even quadruple-digit profits weekly with just a few quick steps. He also writes our most talked-about publication, Wall Street Insights & Indictments, where he reveals how Wall Street's high-stakes game is really played.

… Read full bio