Global financial clout isn’t only going from West to East

1930s US bank robber ‘Slick’ Willy Sutton observed famously that he robbed banks “because that’s where the money is”

Just 24 hours after the Bankapologaeia tendency had been once more begging us to ‘stop bashing and start supporting’ the banking system, the London Financial Times reported that Deutsche Bank had plea-bargained its way out of a serious US rap. The bargain cost them over half a billion dollars, so you can imagine just how damning the Prosecution evidence was.

A couple of months back, RBS and Barclays were forced to do the same in the US regarding Iranian terrorist money-laundering. Every week, in fact, at least one major bank around the world faces criminal and/or procedural disobedience charges of one form or another. Goldman Sachs currently has thirteen class action suits pending against it.

But these high-profile cases are (if I can mix metaphors a little here) the tip of an iceberg big enough to sink every unsinkable government on the planet. What the objective observer needs to examine closely is not the near-universal mendacity of these folk, but The Money Thing: that is, where the real global financial muscle lies as we kiss 2010 a less than fond goodbye.

The total held in cash by US multinationals now stands at over $2 trillion, of which – it is estimated –  a good one third is held in overseas markets and primary tax havens….contributing zilch to the US Treasury. 40% of the total sits in just 20 companies. However, you have to multiply this by 3 to arrive at the total monies available to these lucky people: a huge amount of their cash is paid to wealthy shareholders and non-Government institutions as dividends. US website writes that

‘The balance sheets of U.S. non-financial companies are in good shape, in contrast to government and household balance sheets….but companies are looking for greater certainty about the economy, and signs of a permanent increase in sales, before they let go of their cash hoards…’

If we (ie the taxpayer and the Fed)  thought like this, nothing would ever happen. And obviously, one could suggest to these Scrooges that the main beneficiaries are going to be…um, them actually. But corporates in Western banking and multinational business don’t do sound sense, social awareness or patriotism: they amassed this mountain-range of cash in the first place by stopping all r&d – and reducing headcount. They don’t do that in China.

Big, rich Western businesses do indeed tend to create all the productive jobs. But today, they’re created in India and China. With EU and American government money. Of course, if the banks actually bothered to lend the small business sector a decent amount of money, they too would create jobs. I’m a capitalist and proud of it; but you have to recognise, once you get into the numbers, that bankers and other senior corporate suits don’t care a fig about ‘the economy’ or ‘the country’. They’re alright Jack, so we can all whistle Dixie.

Banks and multinationals do not recognise national borders; so by definition, they are disloyal to governments. The only nationally specific realities they recognise are taxpayer bailouts. In 2009, the UK taxpayer helped massively to bail out GM – a US company. Throughout 2008, Americans helped bail out foreign banks with no loyalty to them – as well as their own banks….who in turn used the money to fund Canadian mergers and Korean factories. Barclays alone took the US taxpayer for $240bn….and picked up Lehmans for tuppence ha’penny while it was at it.

The deals using equity for mega-mergers done by banks across borders would make a many a Ministerial mouth water. They topped $835.6 billion globally in 2010 alone. Morgan Stanley won the league with $80bn, followed by Goldman Sachs at $66bn….and over 60% were in the Asian theatre. You will notice – if you trawl through the accounts – that Fred Spleen & Sons, your local butcher, does not appear in any of the columns. (Last year in the UK, 558 planning permissions were granted to multiple supermarket outlets; so as you might imagine, Fred Spleen has two chances of getting anywhere).

As a result of this, both the average citizen and the Government are getting poorer, and small businesses are going to the wall – the very sector Britain especially needs to climb out of its morass of debt and loss-making banks.  The median household income in the US reached its all-time peak in 1999 at $52,388, in 2010 money. Ten years later the median household income is $49,777.


The British Government, by contrast, is some £850 billion worse off after bailing out its banks. The total liabilities of UK plc are over£2.3 trillion. The USA Inc figure is too big to fit in this column.

Bizarrely, all those corporate wiseassed dummies sitting on a Mount Everest of cash also owe a lot of money; some even borrowed more to increase the stash – a direct result of that fine (but to most people insane) policy, zero interest rates. They’d be far better off using the money to export their way out of trouble, and thus increase earnings to repay debt. But globalist bean counters don’t think in terms of risk any more: they are monopolist business conservatives pretending to be capitalists. Each morning they wake up muttering “Headcount, shareholder ROI, analysts, quarterly growth, my bonus….”

But even taking corporate debt into account, on Planet Earth there is no getting away from it: the net assets, cash and goodwill of globalist business and banking far exceed those of any government outside China.

The Friedmanite headcases would regard this as a good thing – and in principle, so would I. But the sale of socio-governmental assets – plus the cost of bailing out, stimulating and creating capitalist endeavour – has turned out to be the equivalent of selling iron ore to Germany and Japan in the 1930s. Give people the raw materials, and they will make weapons which might one day destroy you.

The sums we’re dealing with here apply across the globe, developed or otherwise. The Rothschild banking family alone is estimated to have a net worth somewhere between $100-300 trillion. That is but a small fraction of the total wealth of the banking sector. During 2009, for example, JP Morgan fired 2000 people and increased its revenue by 30%…to $100 trillion.

Is all this clout being put to good use? In July this year, Goldman Sachs refused (nice, huh?) the Financial Crisis Commission’s request to release figures of its proportion of business involved in derivatives….this despite Goldman having benefitted from a half-billion dollar Federal loan during 2008. Determined leaking showed the derivative proportion to be 35%. You would have to work very, very hard to explain to anyone what the hell good derivatives trading ever did the economies of the West – apart from helping to bankrupt them. But the astonishing reality is that the more they do it (and then need taxpayer loans) the more government coffers empty……and the more bank treasure chests fill to overflowing.

This is a shift in wealth as big as that from West to East – and perhaps even more important. Just as geopolitical ramifications follow debt and currency devaluation, so too does the beneficent and yet beholden State find itself increasingly at the mercy of corporate aims. Were these the relatively philanthropic Victorian times so beloved of Ian Hislop, we’d probably have a lot less to worry about. As things stand today, we should be afraid. Very afraid.