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Tuesday, March 6, 2012

Of the unsuitability of a credit-control

Of the unsuitability of a credit-control

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Excessive profits and wages in the financial industry are not the result of free market forces. Rather, they are the symptom of a failed monetary policy.
For three years, already struggling with the Berne "rip-off initiative," the entrepreneur Thomas Minder. Now dominated by the bourgeois politicians States has presented an indirect counter-proposal - providing a new bonus tax - in addition to some adjustments to the stock corporation law. Wages over three million francs will therefore continue to be taxed as income of the corporations.
What effect is likely to unfold this tax on bonuses consistent practices? No, because bonuses are paid in the future could be affected even if the new tax pushes the corporate earnings. Anyone who wants to avoid this could circumvent the law simply by not using bonuses as holdings are granted in an innovative form of derivatives. At the end of the tax generated by the additional costs could simply be passed on to customers or employees. The credit-control belongs into the category of social icon of populist politics.
What would a reasonable counter-proposal to the counter-proposal? The bourgeois paradigm would actually like this: Bonuses are a matter for the markets, more precisely, the shareholders, and therefore should be left to their decision-making authority. Because in a competitive operation alone, the shareholders are harmed by excessive management salaries, politics has nothing to say here.
But wait - functioning in a competition? This is precisely the problem. Because this contest is not an illusion?
The massive increase in wages of bankers in recent years has been accompanied by an exponential growth of global financial flows. According to the Bank for International Settlements exceeded the sum of the daily traded currencies from 2004 to 2010 by over 90 percent, to around 4 trillion dollars.The volume of IPOs has multiplied since the 1970s, from $ 15.2 billion to 235 billion dollars in 2010 - rich fodder for the banking business. The share of the financial industry to the American corporate profits rose because even since 1985 from 16 to 41 percent, according to a study by Avenir Suisse shows. In Switzerland, the same trend can be observed.
To understand the relationship between exploding money, profits and payrolls, it is worth looking at the theory. Named after the French economist, "Cantillon effect" describes an important property of the state monetary system: a central bank equally Extends the amount of any money from, not the so-generated inflation hits all economic agents. Those policy oriented actors who get the new money first benefit at the hands, because they can purchase goods and services at current prices. The last bite then the dogs: apolitical economy actors face a higher price level faced before they can spend the new money. Inflation poor loser.
In today's monetary system is the financial industry, an extended arm of the state: the state throws the money to press, the banks get this money through credit creation among the people. According to Cantillon So these are the supposedly "private" (now in many places but also formally nationalized) commercial banks - by the politicians and government employees - the largest beneficiaries of our system built on paper money inflation. Excessive profits and wages in the financial industry are by no means the result of free market forces.Rather, they are the symptom of a failed monetary policy.
Neither higher taxes or forced enhancement of shareholders' rights are under these conditions, the credit-mania areas of financial speculators stop. The institutional stage is set wrong, helps no symbolic politics. Effective competition would be needed in the monetary system. But neither will the politicians - left as bourgeois - or their friends in the financial industry.
A version of this article was published in the "Swiss months."

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