In the run-up to the financial crisis of 2008, the rich got a whole lot richer. But they must have taken a hit in the years since, right?
Not in America, they haven’t. Writing for Business Insider, Henry Blodget tells it like it is:
As a result the share of the nation’s wealth owned by the richest 7% has increased from 56% to 63%.
How can this be happening? And under that nice Mr Obama too!
But why are shares doing so well when the economy is doing so badly? As we’ve noted before on the Deep End, quantitative easing is driving demand for stocks and securities – and, therefore, pushing up their prices. And that’s not the only way in which governments are effectively giving money to the rich.
Consider the case of Apple – one of the biggest and richest companies on the planet – which is borrowing $17 billion to buy back its own shares when it’s sitting on savings of $145 billion. ‘Buttonwood’, of the Economist, asks and answers the obvious question – “why doesn't [Apple] just use its cash to do the same thing?”:
Good for Apple, not so good for the ordinary American taxpayer:
And that’s not the end of the bonanza. Apple’s bond issue will generate lots of lovely fees for Wall Street bankers – “the same bankers taxpayers helped support five years ago.”
So, whether in term of QE or a distorted corporate tax system, the state is merrily shoveling cash into the gaping maws of the wealthy.
It’s time to do something about this blatant injustice, but what?
Well, our elected governments could borrow even more money and shovel it down some other throats in the hope of evening things up. This is Labour’s solution. It won’t work and will make the state even more dependent on the money men than it is now.
Instead, we need tax reform that advantages real wealth creation, not accountancy tricks; and, if we must have quantitative easing, let it be in a form that puts money in the hands of ordinary people, not just the rich.