From: <KAfrica33@aol.com>
Date: Mon, Apr 21, 2014 at 10:25 PM
Subject: ||NaijaObserver|| Re: The Meritocracy Myth.. How the super-rich make their money
THE UNITED STATES CONSTITUTION
(Preamble)
We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.
WHEN ARE WE AFRICANS GOING TO BE ONE PEOPLE UNDER ONE FLAG, ONE GOVERNMENT THAT CAN SPEND FIVE TRILLION DOLLARS A YEAR TO BUILD AFRICA AND AFRICANS.
Join us at www.sadainc.org and www.sada54.org
Kofi Agyapong
Warren Buffett once claimed that the "genius of the American economy, our emphasis on a meritocracy and a market system and a rule of law has enabled generation after generation to live better than their parents did." The Economist suggested that "people succeed through brains and hard work." Economist Tyler Cowen believes in a "hyper-meritocracy" in which wealth is created by the most intelligent and motivated people.
That all sounds very inspirational. But the super-rich tend to make their money in less meritorious ways.
1. Betting on Food Prices to Rise
Chris Hedges noted that Goldman Sachs' commodities index "is the most heavily traded in the world. The company hoards rice, wheat, corn, sugar and livestock and jacks up commodity prices around the globe so that poor families can no longer afford basic staples and literally starve." Numerous sources agree that speculation drives up commodity prices. Wheat, for example, rose in price from $105 to $481 in just eight years.
2. Betting on Mortgages to Fail
In 2007 hedge fund manager John Paulson conspired with Goldman Sachs to create packages of risky subprime mortgages, so that in anticipation of a housing crash he could use other people's money to bet against his personally designed sure-to-fail financial instruments. His successful bet against American households paid him $3.7 billion.
Adding to the insult is that much of a hedge fund manager's income is considered carried interest, which is taxed at the lower capital gains rate. How do they merit this? They don't. As Dean Baker explains, "Carried interest...has no economic rationale. With most other tax breaks there is at least an argument as to how it serves some socially useful purpose."
3. Renting Houses Back to People Who Lost ThemPrivate equity firms like Blackstone are buying up foreclosures and renting them back at higher rates while waiting for home prices to rise. As absentee landlords they have little interest in long-term community issues.
They go for even bigger money by packaging the rental agreements into rental-backed securities, which are disturbingly similar to the mortgage-backed securities that brought down the economy in 2008.
4. Being a Banker
Almost all of the big names have participated. HSBC Bank laundered money for Mexican drug cartels. Countrywide and Wells Fargo targeted Blacks and Hispanics for unaffordable subprime loans. GE Capital skimmed billions of dollars from its customers.Bank of America and JP Morgan Chase hid billions of dollars of bonuses and losses and loans from investors. Banks fixed interest rates in the LIBOR scandal, and illegally foreclosed on millions of homeowners in the robo-signing scandal.
5. Making "Can't Lose" Bets on Wall Street
With high-speed computer trading, programs can identify 'buy' orders, purchase the stock in a few nanoseconds, and then sell it to the identified buyer for a few pennies more. By doing this millions of times per hour, billions of dollars can be extracted from the stocks that make up our retirement accounts.
Some evidence of the strategy's effectiveness comes from the astonishing performance of Virtu Financial, which made money in the stock market on 1,277 out of 1,278 days over a five year period. That is, only one bad day in five years.
6. Checking the Stock Portfolio Every Morning
In one year the Forbes 400 'earned' more than the total combined budget for SNAP, WIC (Women, Infants, children), Child Nutrition, Earned Income Tax Credit, Supplemental Security Income, Temporary Assistance for Needy Families, and Housing. These lucky 400 were the main beneficiaries of a stock market that grew by $4.7 trillion in just one year.
7. Having the Right Friends and Relatives
Like having Fred Koch or Sam Walton as your daddy. The authors of The Meritocracy Myth say it well: "In the race to get ahead, the effects of inheritance come first and merit second, not the other way around." Much of the individual wealth in our country was taken by individuals who had the right connections. The CEOs of Silicon Valley, the alleged mecca of self-made tech visionaries, are no different. A Reuters analysis concluded that a prestigious degree and personal connections to power-brokers are "at least as important as a great idea" for Silicon Valley entrepreneurs.
None of these money-making methods are productive, or praiseworthy, or suggestive of a meritocracy. Perhaps demeritocracy is more apt.
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