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...
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.
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Here's how to right the sinking ship and restore America's golden economic "mojo," the backbone of our economic growth - our manufacturing prowess, our middle class, and entrepreneurial spirit:
1. Replace the Federal Reserve System with a mathematical, automatic monetary expansion and contraction mechanism.
By acts of compliant, complicit Congresses, America's private central bank has been given, on a silver platter, the extraordinary power it possesses. They have made possible the artificial manipulation of interest rates, the bailing-out of the criminal enterprises America's "Too Big to Fail" banks have morphed into, and the centralized command and control of the economy.
To put it bluntly: The Federal Reserve System has to be exorcised from the body of American politics and economics like the cancer it is.
2. Break up America's big banks, separating commercial banks from investment banks.
The big banks in America, even without the backstopping and financing of a central bank, would still coalesce to preserve their power over government and the economy, and should be broken up.
Separating commercial and investment banking, as Glass-Steagall once did, is fundamental to safe banking and doesn't impinge one iota on the capital markets' ability to convene capital, slice and dice financial products, and transfer risk through free-market mechanisms.
3. "Localize" the availability of capital.
By localizing capital, bringing back old-school community banks, thrifts, and credit unions, borrowers of all stripes would have greater access to whatever they need, and lenders would have a much better handle on risk aspects of the loans they make.
4. Enforce term limits on Congress.
As it stands now, the career crooks of Congress have unlimited time to enrich themselves on the backs of their constituents, even as they profess to fight for them against globalization and big banks.
Finally, term limits would get these thieves out of Congress and pave the way for representatives who are judged by what they do in the short time they're given to do it.
[mmcallout type="pullquote" social="true" align="right"]To put it bluntly: The Federal Reserve System has to be exorcised from the body of American politics and economics like the cancer it is.[/mmcallout]
The American people can be unshackled from the New York-financed and Washington, D.C.-protected crony capitalist oligarchy that's been looting our wealth for decades.
We still have the same ingenuity and work ethic that made this country great in the first place. If we can cast out the thieves, the globalizers, and the banksters, our economy and the markets will be unleashed as never before. We just have to make it happen.
In the meantime, we'll have to "ride the tiger" and use the system as it exists now, and turn these crooks' own capital against them.
We'll make it work for our benefit.
I'm going to get in touch with my Insights & Indictments readers on Friday, June 2, with some specific investment strategies we can use to protect and grow our wealth in the meantime.
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