by Brian T. Lynch, MSW

This five-minute video message of actor Matthew Cooke, below, is worth a listen. It is a reaffirmation of faith in our republic at a time when it is most threatened and vulnerable. It articulates our founding principles, which contrasts sharply with current Republican behavior in Congress.

I try not to refer to Republicans as a “party” anymore because, despite any philosophical differences, political parties always maintain their fidelity to the nation’s constitution. That isn’t true of Congressional Republicans. Under Mitch McConnell, Republicans in Congress are more of a political movement to replace democracy with a plutocratic autocracy, a single “party” system that mostly represents a small but wealthy minority. So, it is time for each of us to stand up in unity to depose those for whom democracy, with its equitable distribution of power, is an obstacle to their corrupt designs.

by Brian T. Lynch

The New York Times recently asked each of the Democratic primary candidates for President a series of identical questions. The last question on their list was, “Does anyone deserve to have a billion dollars?”

The trivial framing of that question bypassed the grave urgency for asking it in the first place. In a variant form of the question the Times was essentially asking, “Isn’t it OK to be a billionaire if you played by the rules and worked hard to earn it?”

The wording of the question pre-supposes that the laws and social rules in place, by which a person may accumulate a billion-dollars, are fair and open to anyone. It ignores whether inherited wealth is also deserved.  Most importantly, it treats wealth as if it is only a money count and not a measure of privilege and social power. By doing so, the question as it was posed ignored the essential problem that extreme private wealth is toxic to human society regardless of a person’s character or how they obtained it.

A more salient question would have been, “How many more billionaires can this human society sustain before it collapses?

In the 50,000-year history of human civilization, the concepts of private ownership and private wealth are recent developments. The full ramifications of these constructs on our social cohesion and collective welfare are still being revealed. The written history of civilizations offers no comfort. There are no examples of a happy, stable society where extremes of wealth inequality existed. The lessons of history seem to be that a suitable balance of power is required to sustain a healthy and stable society. Human populations simply cannot tolerate distributions of wealth/power that either force unnatural equality or permit unlimited extremes of private wealth.

There is no question that we crossed the Rubicon into a world where extreme wealth inequality is corrupting world governments and destroying the balance of nature. The questions we should be asking candidates for President and all our elected officials are, “What are your plans to rebalance the distribution of wealth and social power in America?”   And then the follow-up question, “What are you going to do to stabilize and rebalance the Earth’s damaged ecology?”

by Brian T. Lynch

The New York Times recently asked each of the Democratic primary candidates for President a series of identical questions. The last question on their list was, “Does anyone deserve to have a billion dollars?”

The trivial framing of that question bypassed the grave urgency for asking it in the first place. In a variant form of the question the Times was essentially asking, “Isn’t it OK to be a billionaire if you played by the rules and worked hard to earn it?”

The wording of the question pre-supposes that the laws and social rules in place, by which a person may accumulate a billion-dollars, are fair and open to anyone. It ignores whether inherited wealth is also deserved.  Most importantly, it treats wealth as if it is only a money count and not a measure of privilege and social power. By doing so, the question as it was posed ignored the essential problem that extreme private wealth is toxic to human society regardless of a person’s character or how they obtained it.

A more salient question would have been, “How many more billionaires can this human society sustain before it collapses?

In the 50,000-year history of human civilization, the concepts of private ownership and private wealth are recent developments. The full ramifications of these constructs on our social cohesion and collective welfare are still being revealed. The written history of civilizations offers no comfort. There are no examples of a happy, stable society where extremes of wealth inequality existed. The lessons of history seem to be that a suitable balance of power is required to sustain a healthy and stable society. Human populations simply cannot tolerate distributions of wealth/power that either force unnatural equality or permit unlimited extremes of private wealth.

There is no question that we crossed the Rubicon into a world where extreme wealth inequality is corrupting world governments and destroying the balance of nature. The questions we should be asking candidates for President and all our elected officials are, “What are your plans to rebalance the distribution of wealth and social power in America?”   And then the follow-up question, “What are you going to do to stabilize and rebalance the Earth’s damaged ecology?”

by Brian T. Lynch, MSW

A State Senator in New Jersey fears a $1 raise for the working poor in this state will be too much of a hardship for businesses if the economy slows down a little.

by Brian T. Lynch, MSW

A Caribean Island Resort

A new global financial regulatory agency, the Financial Stability Board (FSB), quietly emerged from the dust of the Great Recession of 2007. “The FSB’s creation came after the G20 Summit in London in April 2009.

Headquartered in Basel, Switzerland, the board includes all G20 major economies. The FSB consists of 68-member institutions. It comprises several central banks, ministries of finance, and supervisory and regulatory authorities from 25 jurisdictions, as well as 10 international organizations and six Regional Consultative Groups (RCGs). It’s stated purpose seems to be, “… policy work to enhance the resilience of non-bank financial intermediation… [focusing] on those parts of non-bank financial intermediation that perform economic functions which may give rise to bank-like financial stability risks.”

In other words, global shadow banking and finance networks have grown so large and powerful that they pose a threat to the whole nation-based international banking and finance system.

The Financial Stability Board says they are responsible for:

· Preparing annual reports on the implementation of reforms and their effects

· Coordinating financial sector policies

· Conducting outreach activities [To WHOM?]

· Building resilient financial institutions

· Addressing SIFIs [Systemically Important Financial Institutions]

· Making the derivates market safer [Which was the epicenter of the financial collapse in 2007]

· Enhancing the resilience of non-bank financial intermediation [NBFI]

· Formulating additional policies on specific areas of the global financial market

· Preparing progress reports to the G20

.  Conducting peer reviews

· Analyzing the effects of reforms

So, this is an autonomous international agency reporting to the G20, yet it is independent of the G20 or any other democratically elected government authority. It analyzes and proposes and monitors non-government enforced regulations of cross-border financial interactions between traditional international banking institutions and the global shadow banking institutions. It exists to keep the global economy on an even keel, and it prepares reports. Here is their 2018 report on the health and extent of global, non-standard financial institutions.  Global Monitoring Report on Non-Bank Financial Intermediation 2018 

Have you ever heard of NBFI, “Non-Bank Financial Intermediation?”

I first came across this term looking for information about a high-end tourist destination, a small, self-governing island in the Caribean, one of many such places. In addition to high-end tourism, its economy is also dependent on offshore financial services. Among the financial services listed on the internet about the Island’s economy is the ‘financial intermediation sector. (The what, I ask? )

Section #4 of the FSB report explains that financial intermediation: “… focuses on those parts of non-bank financial intermediation where bank-like financial stability risks may arise. The narrow measure of non-bank financial intermediation, which reflects an activity-based “economic function” assessment of risks, grew by 8.5% to $51.6 trillion in 2017, at a slightly slower pace than 2011-16. The narrow measure of non-bank financial intermediation, which reflects an activity-based “economic function” assessment of risks, grew by 8.5% to $51.6 trillion in 2017, at a slightly slower pace than 2011-16.

Since 2011, the Cayman Islands, China, Ireland, and Luxembourg together have accounted for over two-thirds of the dollar value increase. The narrow measure represents 14% of total global financial assets. Key components include:

· Collective investment vehicles (CIVs)

· Non-bank financial entities engaging in loan provision that is dependent on short-term funding

· Market intermediaries that depend on short-term funding or secured funding

· Securitisation-based credit intermediation

Section 2 provides an overview of, “Other Financial Intermediaries” (OFIs) aggregate, which includes all financial institutions that are not central banks, banks, insurance corporations, pension funds, public financial institutions or financial auxiliaries. These alt-financial entities grew by 7.6% in 2017. OFIs’ growth exceeded that of banks, insurance corporations, and pension funds. With $116.6 trillion, OFI assets represent 30.5% of total global financial assets, the largest share on record.”

These invisible, unaccountable entities are apparently a go-to source for loans by the global banks and nation-based financial institutions. In November 2010, the FSB defined shadow banking as “credit intermediation involving entities and activities (fully or partly) outside of the regular banking system”

Then, On 22 October 2018, the FSB announced its decision to replace the term “shadow banking” with the term “non-bank financial intermediation,” a less sinister sounding accommodation.

So, what is really going on here? 

It seems that billionaires, oligarchs, and their self-dealing minions are growing an alternate financial network that is fully or partially outside of national boundaries. It is certainly outside the direct control of the traditional international banking and finance systems. Traditional international bank institutions appear to be both fearful of, and increasingly dependent on this dark money network the reach of nations. The FSB says, “Non-bank financing provides a valuable alternative to bank financing for many firms and households, fostering competition in the supply of financing and supporting economic activity.”

Competition indeed. The OFTs alone account for close to a third of all the world’s financial wealth. This appears to be a socially malignant private treasury of wealth with no direct productive value. It is accessible only to wealthy corporations and the very rich. The capital gains of this private wealth cannot be taxed for the benefit of any global society.

This whole development may be more than a financial risk to the global economy. It may be a burgeoning threat to the sovereignty of nations and the sanctity of self-governing democracies everywhere. It is a development worthy of our attention and vigilance.

Read the full FSB report here:https://www.fsb.org/wp-content/uploads/P040219.pdf

by Brian T. Lynch, MSW

by Brian T. Lynch, MSW

by Brian T. Lynch, MSW

Enhancing the human dignity of employment is an obvious, self-evident social benefit of raising minimum wages. It is both empowering and ennobling when breadwinners are able to provide for the needs of their family on their own, without government or extended family supports. This is reason enough to enact a living wage law. The minimum fair exchange for a full-weeks work ought to be a self-sufficient minimum wage. The burden for this minimum standard of living should rightly be on employers and not on the taxpayers who currently help support full-time low wage earners.

Corporations and business owners enjoy the benefits of government-subsidized labor and don’t want to give it up. Most of their arguments opposing higher wage standards rely on business-friendly economists whose academic theories and scholarly studies plum the detrimental impacts on businesses from higher labor costs. It is current practice to treat workers as a labor commodity separate from workers and their families as consumers and social beings with basic human needs. It is also current practice to take a business view of the economy without consideration of the broader context of the overall social economy within which commerce operates. All this results in flawed and biased arguments against self-sufficient minimum wages.

The overall beneficial impacts of increasing the purchasing power among poor families are rarely studied. Now a major new study has found that the ripple effects when direct, substantial cash assistance is given to poor families have, “… large positive spillovers on non-recipient households and firms, and minimal price inflation. The researchers in this large-scale experiment in Kenya estimated that a direct cash payment of $1,000 US dollars to poor families within randomly selected communities resulted in a local fiscal multiplier of 2.6 times within the local communities.

In addition to measured improvements in the welfare of the children and families who received an infusion of cash, the experiment reinforced the relationship between income and increased consumption to the benefits of both businesses and the families who did not receive cash payments. Here is an excerpt from the study:

“A large-scale cash transfer program in rural Kenya led to sharp increases in the consumption expenditures of treated households, and extensive broader effects on the local economy, including large revenue gains for local firms (that line up in magnitude with household consumption gains), as well as similar increases in consumption expenditures for untreated and treated households approximately a year and a half after the initial transfers. Local firms do not show meaningful increases in investment, and there is minimal local price inflation, with quite precisely estimated effects of far less than 1% on average across a wide range of goods.” [snip]… The consumption expenditures of untreated households and firms rise substantially in areas receiving large cash transfers…”

The infusion of cash payments to poor families in the study did not come from employers, and the economy of Kenya is very different than the economy here in the US. Directly extrapolating the results isn’t possible. Nevertheless, these findings are hopeful. The high fiscal multiplier stimulus effect on local businesses from increased consumption by poor families appear to mirrored results found here within states and municipalities that have raised minimum wage standards. While the burden of cash transfers from higher minimum wages is on businesses, the literature I’ve seen so far suggests there is still a positive fiscal multiplier within the business community coupled with little increase in unemployment and negligible increases in inflation.

A broader look at the spillover effects of increased base wages might show similarly positive results for the business economy and those workers who are already self-sufficient wage earners. Future studies of communities where the wage base is improved should also look at the wellbeing and overall welfare of children living in low wage households as well as the social wellbeing of the wage earners themselves.

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Further Reading

Debunking the Myth That It’s Your Fault You’re Poorhttps://aseyeseesit.blogspot.com/2015/09/debunking-myth-that-its-your-fault.html

Myth Busting Data RE: Minimum Wage Increaseshttps://aseyeseesit.blogspot.com/2012/09/myth-busting-data-re-minimum-wage.html

Making the Case for a Living Wage  https://aseyeseesit.blogspot.com/2012/07/making-case-for-living-wage.html

NPR –

Researchers Find A Remarkable Ripple Effect When You Give Cash To Poor Families

 https://www.npr.org/sections/goatsandsoda/2019/12/02/781152563/researchers-find-a-remarkable-ripple-effect-when-you-give-cash-to-poor-families