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Book Review: "The Greatest Predatory Attack of History"
The 1933 Glass-Steagal law created a firewall between commercial and investment banks and prevented speculators from gambling with the money of savers. Restoring Glass Steagal would help restore trust, public spirit and joy in life. Profit-making is not profit maximizing; speculation is not investment. Is economics monolithic or pluralist? Is mainstream economics brainwashing? How can incentives encourage more investments in the real economy? How can the public sector be expanded? How can workers, collective bargaining and unions be protected?
“THE GREATEST PREDATORY ATTACK OF HISTORY”
A Review by Hermann Zoller
[The title of the book “The Greatest Predatory Attack of History” sounds like an historical crime thriller. The two authors probe today’s international financial world and show “why the diligent become poorer and poorer and the rich become richer and richer.” The authors Matthias Weik and Marc Friedrich active as financial consultants tackle one of the most important current political questions. This review published on January 8, 2014 is translated from the German on the Internet, http://www.nachdenkseiten.de/?p=19862#more-19862.]
In their entertaining book, Weik and Friedrich introduce readers into the airs of worldwide speculators. With a pinch of humor, the authors admit the described consequences trigger more an outburst of rage than a smile. However they avoid minimizing the problems and even turn them into an entertaining detective novel. Readers can work on the complicated material and enter into the exciting journey into a world of madness, lies, fraud and the greatest predatory attack of history.
With all its amusement value, the book shows in a crystal-clear way who pays the bill left by the speculators and fraudsters in the casino. The explained facts are horrifyingly momentous so one can hardly withdraw to the position of the amused spectator. The consequences affect the large majority of the population. The majority is robbed of money and freedom and democracy is whittled down. The book reads like a crime thriller with the difference that there are millions of victims and the crooks or hoodlums do not land in jail.
This is an exciting book for citizens not very familiar with “the crisis” in the past. The hunger leads to more and more knowledge about how the “capital crimes” are committed and by whom. Citizens should be more informed. “The financial branch has learned absolutely nothing from the so-called Lehman crisis.” Politics has also learned nothing. Despite their gained insights, many politicians are not ready to use the instruments to turn the financial industry upside down.
“It is actually good that people do not understand our banking- and monetary system. If they did understand, we would have a revolution tomorrow morning,” Henry Ford said. This book provides enough evidence that people should take to the barricades. Politicians should seize control instead of being led through the circus ring by the nose rings of speculators and fraudsters.
How banks “create” money is described in an understandable way. The authors conclude “banks apparently have the right to commit massive fraud without legal consequences.” The reader learns how the madness of our financial system has taken its course. On October 27, 1986 the former British Prime Minister Margaret Thatcher recommended: “Throw away the rules that slow down success!” A worldwide race around deregulating the financial markets was sparked. On February 22, 1990 the German Kohl government resolved the abolition of the stock exchange tax. Its revival as a financial transactions tax has still not succeeded today. On November 12, 1999 US President Clinton rescinded a 1933 law (Glass-Steagal law) that enjoined the separation of commercial- and investment banks. From then on, speculators gained access to the assets of savers and no longer needed to commit fraud with their own wealth. “From that time, the madness took its own course,” the authors declare.
How the fraud got underway like the roulette in the casino and how politics although well-informed looked away or even supported the intrigues are outlined chronologically. Every freedom was given to the speculators. Even warnings from insiders like the investment-legend Warren Buffet were not heard. In a letter to shareholders of his Berkshire Hathaway holding company, he wrote: “We strive to be vigilant toward every risk of a mega-catastrophe. This attitude may seem excessively anxious. (…) In our view, derivatives are financial weapons of mass destruction. They conceal dangers that now are hidden but are potentially deadly.”
Jorg Asmussen’s machinations are described as one who triggered the financial market crisis in Germany… Asmussen pushed trade with ABS (asset-backed securities). According to the Sueddeutscher Zeitung newspaper, “that passage in the 2005 Black-Red coalition agreement to liberate the German financial market from “unnecessary” regulations and promote product innovations and new distribution channels can be referred back to him.”
How the liberated worldwide speculation rampage could function is depicted in the example of CDOs (collateralized debt obligations) “secured” by CDS (credit default swaps). That the nominal value of all CDS at $62 trillion in 2007 surpassed the value of the world social product shows how insane were the intrigues of the financial jugglers. The authors see this financial product as one of the main causes of the global crisis.
The descriptions in the book impressively prove that the role of the banks must be fundamentally reconsidered. Their machinations endanger the economic and social situation of millions of people. The authors even appeal to the statement of the former German financial minister Theo Waigel: “what happens on the international financial markets is fraud.”
In a detailed way, the book reveals how vast amounts of money are chased around the globe. The sums that taxpayers had to fork out in the stricken countries could only bail out the involved banks and speculators. This scandal is then topped by the compensations for the super-managers who played the wrong game. The CEO of Lehman Brothers Richard Fuld received approximately $250 million between 1998 and 2007. In the book, we read: “Fuld sold his $13 million villa to his wife for the symbolic amount of $100 before possible indemnification claims could be made against him.”
The authors offer a long list of proposals to end the madness. These are underscored with a statement by Heiner Geissler: “Western democracies in their present form cannot be rescued if politics does not finally successfully carry out the overdue reform of the international financial markets.” [Translator’s note: Justice Brandeis said we can have concentration of wealth or democracy but not both.]
There are several reasons not to be especially optimistic. As the authors report, the financial industry has long eluded the disastrous crisis of the last years and seeks new expansion possibilities. At best many money managers regard attempts of politicians and monitoring authorities to curb the growth as a sporty challenge. Risks in the billions are offloaded. They take minority shares or sell business divisions that cannot continue any more because of strict conditions on investors. (…) The profiteers of this change are above all hedge funds and private equity companies that in the branch jargon are part of the so-called “shadow banks.”
While the book refers to the intrigues of speculators in an informative way, the authors are very superficial in economic questions. In discussing the conduct of states and the economic handling of debts, the authors obviously forgot much of what they correctly analyzed about the international financial world. Here they follow the mainstream in an unreflective way. Many things about the situation in southern Europe sound like regular gossip. Greece is usually pilloried instead of any analysis of the country’s development and the causes of its predicament. The authors’ lack of analysis of pensions is an analytical shortcoming, more than a blemish.
On the other hand, the authors do clearly emphasize that the distance between poor and rich is becoming greater and greater and name the perpetrators. “In 1996 the Kohl government abolished the property tax. This costs the state 4.8 billion per year. The Shroeder government lowered the business- and top tax rates – at a cost of 30 billion per year. In the last 20 years, the tax rate for the very rich (annual income over 1.5 million euros) fell from 42.1 to 33.7 percent. The tax rate for the super-rich (annual income over 174 million euros) plummeted from 43.6 to 23.7 percent. 50 billion euros are withheld from the state year after year because of tax reforms around the year 2000.
The conclusion presented to the reader at the end of the book is shattering: “Past incidents show that politics is more and more an accomplice of financial management and mercilessly enforces their interests against the population…” Why has nothing changed? Very simply nothing has changed because the profiteers of this system do everything so nothing changes. All great western democracies are pitilessly indebted and thus purely and simply dependent on the operators of the private financial system.
We must not resign to this. Therefore we understand the last maxim in the book as a call to resistance. “A positive thinking person does not refuse to take note of the negative. He only refuses to submit to it” – pastor and author Norman Vincent Peale.
Tomasz Konicz, “The Crisis Explained,” 2010
VIDEO: “Dollarocracy” by John Nichols and Robert McChesney, BookTV presentation, 1 hr 30 min, January 12, 2014
FREE INTERNET BOOK: “Restoring Shared Prosperity” by Thomas Palley and Gustav Horn, December 2013, 211 pp
Hans-Jurgen Urban, “The Tiger and his Trainers,” Dec 2013