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• Wednesday, April 2, 2008 08:27 AM

  Income Disparities

  ... are actually about more than just 'injustice' or exploitation. Income disparities arise in societies that are near the end of their social life. Most historical studies show that. In the immediate sense, the more money moving up the food chain results in more speculation, more financial instruments, more luxury goods spending, and 'dislocates' a whole economy. It creates a financial overhang that is fatal to actual economic facts.

  The biggest sector in the U.S. economy, since 2005 or so, is now 'finance' not manufacturing, not services. This is a function of the disparity of wealth. Speculation is what is behind the securitization of sub-prime mortages and now the immense unregulated "credit default swaps" market. The financial capitalist 'gas' of unfettered billions has nowhere to go but 'up.' And from speculation comes ... possible collapse.

  Greenspan, aka Ayn Rand, approved of these bubbles and helped create them. He specifically approved of the $45.5T 'credit default swaps' market, because he said it spread risk around. It certainly did ... it made risk 'systemic.' You need firewalls against private risk, not inviting it into everyone's home. There are no firewalls anymore. The Fed is bailing as fast as it can, but it might not be able to 'balance' the ship. That is why economic disparity is a financial risk, not just a social risk. It gives the billionaires a license to speculate. And if they fail, that will certainly 'trickle down.'

  —ELYDOG Read ELYDOG's other letters
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