Capital in the Twenty-First Century: Introduction | Harvard University Press

Capital in the Twenty-First Century: Introduction | Harvard University Press.

From the Introduction to Capital in the Twenty-First Century, by Thomas Piketty

“Social distinctions can be based only on common utility.”—Declaration of the Rights of Man and the Citizen, article 1, 1789

Cover: Capital in the Twenty-First Century, by Thomas Piketty

The distribution of wealth is one of today’s most widely discussed and controversial issues. But what do we really know about its evolution over the long term? Do the dynamics of private capital accumulation inevitably lead to the concentration of wealth in ever fewer hands, as Karl Marx believed in the nineteenth century? Or do the balancing forces of growth, competition, and technological progress lead in later stages of development to reduced inequality and greater harmony among the classes, as Simon Kuznets thought in the twentieth century? What do we really know about how wealth and income have evolved since the eighteenth century, and what lessons can we derive from that knowledge for the century now under way?

These are the questions I attempt to answer in this book. Let me say at once that the answers contained herein are imperfect and incomplete. But they are based on much more extensive historical and comparative data than were available to previous researchers, data covering three centuries and more than twenty countries, as well as on a new theoretical framework that affords a deeper understanding of the underlying mechanisms. Modern economic growth and the diffusion of knowledge have made it possible to avoid the Marxist apocalypse but have not modified the deep structures of capital and inequality—or in any case not as much as one might have imagined in the optimistic decades following World War II. When the rate of return on capital exceeds the rate of growth of output and income, as it did in the nineteenth century and seems quite likely to do again in the twenty-first, capitalism automatically generates arbitrary and unsustainable inequalities that radically undermine the meritocratic values on which democratic societies are based. There are nevertheless ways democracy can regain control over capitalism and ensure that the general interest takes precedence over private interests, while preserving economic openness and avoiding protectionist and nationalist reactions. The policy recommendations I propose later in the book tend in this direction. They are based on lessons derived from historical experience, of which what follows is essentially a narrative.

A Debate without Data?

Intellectual and political debate about the distribution of wealth has long been based on an abundance of prejudice and a paucity of fact.

To be sure, it would be a mistake to underestimate the importance of the intuitive knowledge that everyone acquires about contemporary wealth and income levels, even in the absence of any theoretical framework or statistical analysis. Film and literature, nineteenth-century novels especially, are full of detailed information about the relative wealth and living standards of different social groups, and especially about the deep structure of inequality, the way it is justified, and its impact on individual lives. Indeed, the novels of Jane Austen and Honoré de Balzac paint striking portraits of the distribution of wealth in Britain and France between 1790 and 1830. Both novelists were intimately acquainted with the hierarchy of wealth in their respective societies. They grasped the hidden contours of wealth and its inevitable implications for the lives of men and women, including their marital strategies and personal hopes and disappointments. These and other novelists depicted the effects of inequality with a verisimilitude and evocative power that no statistical or theoretical analysis can match.

Indeed, the distribution of wealth is too important an issue to be left to economists, sociologists, historians, and philosophers. It is of interest to everyone, and that is a good thing. The concrete, physical reality of inequality is visible to the naked eye and naturally inspires sharp but contradictory political judgments. Peasant and noble, worker and factory owner, waiter and banker: each has his or her own unique vantage point and sees important aspects of how other people live and what relations of power and domination exist between social groups, and these observations shape each person’s judgment of what is and is not just. Hence there will always be a fundamentally subjective and psychological dimension to inequality, which inevitably gives rise to political conflict that no purportedly scientific analysis can alleviate. Democracy will never be supplanted by a republic of experts—and that is a very good thing.

Expert analysis will never put an end to the violent political conflict that inequality inevitably instigates. Social scientific research is and always will be tentative and imperfect. It does not claim to transform economics, sociology, and history into exact sciences. But by patiently searching for facts and patterns and calmly analyzing the economic, social, and political mechanisms that might explain them, it can inform democratic debate and focus attention on the right questions.

Nevertheless, the distribution question also deserves to be studied in a systematic and methodical fashion. Without precisely defined sources, methods, and concepts, it is possible to see everything and its opposite. Some people believe that inequality is always increasing and that the world is by definition always becoming more unjust. Others believe that inequality is naturally decreasing, or that harmony comes about automatically, and that in any case nothing should be done that might risk disturbing this happy equilibrium. Given this dialogue of the deaf, in which each camp justifies its own intellectual laziness by pointing to the laziness of the other, there is a role for research that is at least systematic and methodical if not fully scientific. Expert analysis will never put an end to the violent political conflict that inequality inevitably instigates. Social scientific research is and always will be tentative and imperfect. It does not claim to transform economics, sociology, and history into exact sciences. But by patiently searching for facts and patterns and calmly analyzing the economic, social, and political mechanisms that might explain them, it can inform democratic debate and focus attention on the right questions. It can help to redefine the terms of debate, unmask certain preconceived or fraudulent notions, and subject all positions to constant critical scrutiny. In my view, this is the role that intellectuals, including social scientists, should play, as citizens like any other but with the good fortune to have more time than others to devote themselves to study (and even to be paid for it—a signal privilege).

There is no escaping the fact, however, that social science research on the distribution of wealth was for a long time based on a relatively limited set of firmly established facts together with a wide variety of purely theoretical speculations. Before turning in greater detail to the sources I tried to assemble in preparation for writing this book, I want to give a quick historical overview of previous thinking about these issues.

Malthus, Young, and the French Revolution

When classical political economy was born in England and France in the late eighteenth and early nineteenth century, the issue of distribution was already one of the key questions. Everyone realized that radical transformations were under way, precipitated by sustained demographic growth—a previously unknown phenomenon—coupled with a rural exodus and the advent of the Industrial Revolution. How would these upheavals affect the distribution of wealth, the social structure, and the political equilibrium of European society?

Title page of the original edition of An Essay on the Principle of Population.

For Thomas Malthus, who in 1798 published his Essay on the Principle of Population, there could be no doubt that the primary threat to European society was overpopulation.

For Thomas Malthus, who in 1798 published his Essay on the Principle of Population, there could be no doubt: the primary threat was overpopulation.1 Although his sources were thin, he made the best he could of them. One particularly important influence was the travel diary published by Arthur Young, an English agronomist who traveled extensively in France, from Calais to the Pyrenees and from Brittany to Franche-Comté, in 1787–1788, on the eve of the Revolution. Young wrote of the poverty of the French countryside.

His vivid essay was by no means totally inaccurate. France at that time was by far the most populous country in Europe and therefore an ideal place to observe. The kingdom could already boast of a population of 20 million in 1700, compared to only 8 million for Great Britain (and 5 million for England alone). The French population increased steadily throughout the eighteenth century, from the end of Louis XIV’s reign to the demise of Louis XVI, and by 1780 was close to 30 million. There is every reason to believe that this unprecedentedly rapid population growth contributed to a stagnation of agricultural wages and an increase in land rents in the decades prior to the explosion of 1789. Although this demographic shift was not the sole cause of the French Revolution, it clearly contributed to the growing unpopularity of the aristocracy and the existing political regime.

Nevertheless, Young’s account, published in 1792, also bears the traces of nationalist prejudice and misleading comparison. The great agronomist found the inns in which he stayed thoroughly disagreeable and disliked the manners of the women who waited on him. Although many of his observations were banal and anecdotal, he believed he could derive universal consequences from them. He was mainly worried that the mass poverty he witnessed would lead to political upheaval. In particular, he was convinced that only the English political system, with separate houses of Parliament for aristocrats and commoners and veto power for the nobility, could allow for harmonious and peaceful development led by responsible people. He was convinced that France was headed for ruin when it decided in 1789–1790 to allow both aristocrats and commoners to sit in a single legislative body. It is no exaggeration to say that his whole account was overdetermined by his fear of revolution in France. Whenever one speaks about the distribution of wealth, politics is never very far behind, and it is difficult for anyone to escape contemporary class prejudices and interests.

When Reverend Malthus published his famous Essay in 1798, he reached conclusions even more radical than Young’s. Like his compatriot, he was very afraid of the new political ideas emanating from France, and to reassure himself that there would be no comparable upheaval in Great Britain he argued that all welfare assistance to the poor must be halted at once and that reproduction by the poor should be severely scrutinized lest the world succumb to overpopulation leading to chaos and misery. It is impossible to understand Malthus’s exaggeratedly somber predictions without recognizing the way fear gripped much of the European elite in the 1790s.

Ricardo: The Principle of Scarcity

In retrospect, it is obviously easy to make fun of these prophecies of doom. It is important to realize, however, that the economic and social transformations of the late eighteenth and early nineteenth centuries were objectively quite impressive, not to say traumatic, for those who witnessed them. Indeed, most contemporary observers—and not only Malthus and Young—shared relatively dark or even apocalyptic views of the long-run evolution of the distribution of wealth and class structure of society. This was true in particular of David Ricardo and Karl Marx, who were surely the two most influential economists of the nineteenth century and who both believed that a small social group—landowners for Ricardo, industrial capitalists for Marx—would inevitably claim a steadily increasing share of output and income.2

For Ricardo, who published his Principles of Political Economy and Taxation in 1817, the chief concern was the long-term evolution of land prices and land rents. Like Malthus, he had virtually no genuine statistics at his disposal. He nevertheless had intimate knowledge of the capitalism of his time. Born into a family of Jewish financiers with Portuguese roots, he also seems to have had fewer political prejudices than Malthus, Young, or Smith. He was influenced by the Malthusian model but pushed the argument farther. He was above all interested in the following logical paradox. Once both population and output begin to grow steadily, land tends to become increasingly scarce relative to other goods. The law of supply and demand then implies that the price of land will rise continuously, as will the rents paid to landlords. The landlords will therefore claim a growing share of national income, as the share available to the rest of the population decreases, thus upsetting the social equilibrium. For Ricardo, the only logically and politically acceptable answer was to impose a steadily increasing tax on land rents.

This somber prediction proved wrong: land rents did remain high for an extended period, but in the end the value of farm land inexorably declined relative to other forms of wealth as the share of agriculture in national income decreased. Writing in the 1810s, Ricardo had no way of anticipating the importance of technological progress or industrial growth in the years ahead. Like Malthus and Young, he could not imagine that humankind would ever be totally freed from the alimentary imperative.

His insight into the price of land is nevertheless interesting: the “scarcity principle” on which he relied meant that certain prices might rise to very high levels over many decades. This could well be enough to destabilize entire societies. The price system plays a key role in coordinating the activities of millions of individuals—indeed, today, billions of individuals in the new global economy. The problem is that the price system knows neither limits nor morality.

It would be a serious mistake to neglect the importance of the scarcity principle for understanding the global distribution of wealth in the twenty-first century. To convince oneself of this, it is enough to replace the price of farmland in Ricardo’s model by the price of urban real estate in major world capitals, or, alternatively, by the price of oil. In both cases, if the trend over the period 1970–2010 is extrapolated to the period 2010–2050 or 2010–2100, the result is economic, social, and political disequilibria of considerable magnitude, not only between but within countries—disequilibria that inevitably call to mind the Ricardian apocalypse.

To be sure, there exists in principle a quite simple economic mechanism that should restore equilibrium to the process: the mechanism of supply and demand. If the supply of any good is insufficient, and its price is too high, then demand for that good should decrease, which should lead to a decline in its price. In other words, if real estate and oil prices rise, then people should move to the country or take to traveling about by bicycle (or both). Never mind that such adjustments might be unpleasant or complicated; they might also take decades, during which landlords and oil well owners might well accumulate claims on the rest of the population so extensive that they could easily come to own everything that can be owned, including rural real estate and bicycles, once and for all.3 As always, the worst is never certain to arrive. It is much too soon to warn readers that by 2050 they may be paying rent to the emir of Qatar. I will consider the matter in due course, and my answer will be more nuanced, albeit only moderately reassuring. But it is important for now to understand that the interplay of supply and demand in no way rules out the possibility of a large and lasting divergence in the distribution of wealth linked to extreme changes in certain relative prices. This is the principal implication of Ricardo’s scarcity principle. But nothing obliges us to roll the dice.

Marx: The Principle of Infinite Accumulation

By the time Marx published the first volume of Capital in 1867, exactly one-half century after the publication of Ricardo’s Principles, economic and social realities had changed profoundly: the question was no longer whether farmers could feed a growing population or land prices would rise sky high but rather how to understand the dynamics of industrial capitalism, now in full blossom.

The most striking fact of the day was the misery of the industrial proletariat. Despite the growth of the economy, or perhaps in part because of it, and because, as well, of the vast rural exodus owing to both population growth and increasing agricultural productivity, workers crowded into urban slums. The working day was long, and wages were very low. A new urban misery emerged, more visible, more shocking, and in some respects even more extreme than the rural misery of the Old Regime. Germinal, Oliver Twist, and Les Misérables did not spring from the imaginations of their authors, any more than did laws limiting child labor in factories to children older than eight (in France in 1841) or ten in the mines (in Britain in 1842). Dr. Villermé’s Tableau de l’état physique et moral des ouvriers employés dans les manufactures, published in France in 1840 (leading to the passage of a timid new child labor law in 1841), described the same sordid reality as The Condition of the Working Class in England, which Friedrich Engels published in 1845.4

What we see in the period 1870–1914 is at best a stabilization of inequality at an extremely high level, and in certain respects an endless inegalitarian spiral, marked in particular by increasing concentration of wealth. It is quite difficult to say where this trajectory would have led without the major economic and political shocks initiated by the war. With the aid of historical analysis and a little perspective, we can now see those shocks as the only forces since the Industrial Revolution powerful enough to reduce inequality.

In fact, all the historical data at our disposal today indicate that it was not until the second half—or even the final third—of the nineteenth century that a significant rise in the purchasing power of wages occurred. From the first to the sixth decade of the nineteenth century, workers’ wages stagnated at very low levels—close or even inferior to the levels of the eighteenth and previous centuries. This long phase of wage stagnation, which we observe in Britain as well as France, stands out all the more because economic growth was accelerating in this period. The capital share of national income—industrial profits, land rents, and building rents—insofar as can be estimated with the imperfect sources available today, increased considerably in both countries in the first half of the nineteenth century.5 It would decrease slightly in the final decades of the nineteenth century, as wages partly caught up with growth. The data we have assembled nevertheless reveal no structural decrease in inequality prior to World War I. What we see in the period 1870–1914 is at best a stabilization of inequality at an extremely high level, and in certain respects an endless inegalitarian spiral, marked in particular by increasing concentration of wealth. It is quite difficult to say where this trajectory would have led without the major economic and political shocks initiated by the war. With the aid of historical analysis and a little perspective, we can now see those shocks as the only forces since the Industrial Revolution powerful enough to reduce inequality.

In any case, capital prospered in the 1840s and industrial profits grew, while labor incomes stagnated. This was obvious to everyone, even though in those days aggregate national statistics did not yet exist. It was in this context that the first communist and socialist movements developed. The central argument was simple: What was the good of industrial development, what was the good of all the technological innovations, toil, and population movements if, after half a century of industrial growth, the condition of the masses was still just as miserable as before, and all lawmakers could do was prohibit factory labor by children under the age of eight? The bankruptcy of the existing economic and political system seemed obvious. People therefore wondered about its long-term evolution: what could one say about it?

This was the task Marx set himself. In 1848, on the eve of the “spring of nations” (that is, the revolutions that broke out across Europe that spring), he published The Communist Manifesto, a short, hard-hitting text whose first chapter began with the famous words “A specter is haunting Europe—the specter of communism.”6 The text ended with the equally famous prediction of revolution: “The development of Modern Industry, therefore, cuts from under its feet the very foundation on which the bourgeoisie produces and appropriates products. What the bourgeoisie therefore produces, above all, are its own gravediggers. Its fall and the victory of the proletariat are equally inevitable.”

Over the next two decades, Marx labored over the voluminous treatise that would justify this conclusion and propose the first scientific analysis of capitalism and its collapse. This work would remain unfinished: the first volume of Capital was published in 1867, but Marx died in 1883 without having completed the two subsequent volumes. His friend Engels published them posthumously after piecing together a text from the sometimes obscure fragments of manuscript Marx had left behind.

Like Ricardo, Marx based his work on an analysis of the internal logical contradictions of the capitalist system. He therefore sought to distinguish himself from both bourgeois economists (who saw the market as a self-regulated system, that is, a system capable of achieving equilibrium on its own without major deviations, in accordance with Adam Smith’s image of “the invisible hand” and Jean-Baptiste Say’s “law” that production creates its own demand), and utopian socialists and Proudhonians, who in Marx’s view were content to denounce the misery of the working class without proposing a truly scientific analysis of the economic processes responsible for it.7 In short, Marx took the Ricardian model of the price of capital and the principle of scarcity as the basis of a more thorough analysis of the dynamics of capitalism in a world where capital was primarily industrial (machinery, plants, etc.) rather than landed property, so that in principle there was no limit to the amount of capital that could be accumulated. In fact, his principal conclusion was what one might call the “principle of infinite accumulation,” that is, the inexorable tendency for capital to accumulate and become concentrated in ever fewer hands, with no natural limit to the process. This is the basis of Marx’s prediction of an apocalyptic end to capitalism: either the rate of return on capital would steadily diminish (thereby killing the engine of accumulation and leading to violent conflict among capitalists), or capital’s share of national income would increase indefinitely (which sooner or later would unite the workers in revolt). In either case, no stable socioeconomic or political equilibrium was possible.

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Green Scare: Animal Rights Activists Face Terrorism Charges for Freeing Minks from Fur Farm | Democracy Now!

Green Scare: Animal Rights Activists Face Terrorism Charges for Freeing Minks from Fur Farm | Democracy Now!.

The government has unveiled federal terrorism charges against two animal rights activists accused of helping to free minks and foxes from fur farms in rural Illinois. In newly unsealed indictments, the prosecutors accuse Tyler Lang and Kevin Olliff of freeing about 2,000 mink from their cages on a fur farm and then removing parts of the fence surrounding the property so the mink could escape. The activists are also accused of spray-painting “Liberation is Love” on the farm’s walls. Lang and Olliff have been indicted under the controversial Animal Enterprise Terrorism Act (AETA), with each count carrying a maximum penalty of five years in prison and a $250,000 fine. We are joined by reporter Will Potter, who covers animal rights and environmental issues at GreenIstheNewRed.com. “It really doesn’t matter how you feel about animal rights groups or about these alleged crimes of stealing animals,” Potter says of the AETA, which he argues is too broad while criminalizing protests and civil disobedience. “This is really about a corporate campaign to demonize their opposition and to use terrorism resources to shut down a movement.” Potter also discusses his wildly successful Kickstarter campaign to purchase a drone for use in photographing abuses at factory farms.

 

To view the program and/or read the transcript please follow the link above. Or go to DemocracyNow.org

 

Posted in Economics, Government USA, News, News, Politics, Government USA, Politics, Socio-Political | Tagged , , , , , , , , , | Leave a comment

AN AMERICAN GIRL – Poetry Offering for July 4th, 2014

American GirlIt’s better.

It doesn’t hurt so much to see it now.

It is better…

as it waves– hello– goodbye.

Moving… always in motion,

here… where the incessant wind blows.

It will never mean all it once did to me

when it was hurled high, unfurling as it rose.

I, standing at attention, my little hand raised in salute.

My heart racing, silently screaming,

“I’m free, see, I’m free!

It is better,

constantly moving on the wind.

My heart aches less at the shame we’ve allowed;

as the one time symbol of my and the world’s

personal freedom, hope and pride dances with the wind.

Changed; I now know that only a People

can make a little girl’s heart move

to salute and cry out, “See my Flag?! See?! I’m Free! I’m FREE!”

Only a People who are not blown by any wind…

Only a People ever vigilant of little girls’ freedoms…..

Now I know, that little girls’ freedoms are blown away

by the winds of Fascism,

as in all times past…

Copyright 2008/14 by JD Adam
All rights retained by Author. An American Girl may be freely copied and freely distributed without request as long as this copyright notice remains in place.

Posted in Children, Economics, Government USA, News, News, Politics, Government USA, Poetry, Politics, Socio-Political, Veterans, Women | Tagged , , , , , , , , , , , , , , | 4 Comments

History Shows That NAFTA Is a Disaster | Economy In Crisis

History Shows That NAFTA Is a Disaster | Economy In Crisis.

History Shows That NAFTA Is a Disaster

NAFTA

When President Clinton signed NAFTA he promised that it would ensure that it would bring good jobs that paid well to the U.S. Ross Perot predicted it would have a different affect, saying that we would see a great sucking sound pulling jobs south to Mexico. After 20 years what has been the result of NAFTA on the economy and on the American middle class? Nothing short of a disaster, as it has taken away jobs and manufacturing from the U.S. leaving our economy on shaky ground.

As we said before, it has now been more than two decades years since the North American Free Trade Agreement (NAFTA) passed in the U.S. Before signing the agreement, President Clinton told us the lie that it would ensure good jobs for Americans, including 200,000 jobs in the first year alone. Instead it has only been the beginning of America’s fall from power. Instead of a favorable balance of trade, we now have significant trade deficits. Instead of jobs we have unemployment.

According to recent studies, NAFTA has caused a staggering $181 billion U.S. trade deficit with NAFTA partners Mexico and Canada and the related loss of 1 million net U.S. jobs. Once we consider also our growing income inequality, it is easy to see that NAFTA has been a terrible deal for us.

It is easy to see how this has affected wages in the U.S. The average household income in the U.S. in 1999 was $56,080, in 2012 it was $51,017, and today it is $44,900. The affects of NAFTA have taken their toll on the American worker. With these lost wages and jobs real unemployment has risen to 23%.

Support for NAFTA among Americans is very low. One survey found that 53% of Americans believe the U.S. should “do whatever is necessary” to “renegotiate” or “leave” NAFTA, while only 15% believe the U.S. should “continue to be a member of NAFTA.”

So why hasn’t anything been done about this? If NAFTA has been so terrible why aren’t we pushing harder to end it? Consider this – our media is controlled by six massive corporations. These corporations work hard to make sure that the issues that really affect Americans aren’t brought to light. If Americans were really aware of how terrible these trade agreements were there would be massive protests.

We must act now to restore America, and that begins with doing away with NAFTA. Contact your Congressional Representative today and tell them we must get out of NAFTA.

For more information on the state of the nation, and policies to strengthen our weakened economic condition, be sure to subscribe to receive our newsletter twice weekly.

Please link to Economy In Crisis to leave comments directly on their site for this article, and if you please, leave a comment here as well!  Many thanks to Economy in Crisis for their superb reporting on these very under-reported Treaties.

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The Banker’s Umbrella – Blog

The Banker’s Umbrella – Blog.

 

Picture

Picture credit: Flickr/Rebecca Schley
I believe the term Americans like to use is “I stepped up to the plate” This is exactly what I have done for you dear readers, I’ve stepped up to the plate.

While watching the World Cup yesterday I read through all 30 pages of legalise of the NY Attorney General’s charges against Barclays bankWhat follows is a summary of what it contains and what you need to know to sound like you’ve actually read it and you can appear smarter than your finance friends at Friday night drinks at the pub.

Shall we get started?

What has really been happening at Barclays?

They’ve been naughty, very naughty indeed, that’s what has been happening at Barclays. Specifically their dark pool known as “LX” which is run by their Equities Electronic Trading division deserves a proper spanking.

So here’s what is alleged that Barclays has done: When you, a Barclays client,  send an order to buy a stock, instead of routing it to the stock exchange they’d place it in their own dark pool (think of it like their own internal stock exchange). Nothing wrong with this so far, happens all the time and the idea is that you can get a better price. 

Problem is that when you operate a dark pool you need lots of buyers and sellers so that you have a working market. Otherwise your dark pool ends up being like one of those deserted shopping mallsBarclays didn’t have enough people at its shopping mall. 

Barclays needed more traders so they could match the trades in their dark pool. Why? When they matched trades in their dark pool they made money and also they wouldn’t have to pay exchange fees because this was their own little lemonade stand after all.

To get enough people to trade in their dark pool Barclays turned to high frequency trading (HFT) firms and invited them to their dark pool. The thing about high frequency traders is that they trade at a high frequency (clue’s in the name and all that). Thanks to these HFT firms throwing orders hither and yon Barclays had a working market, making them pots of money. Still nothing inherently wrong with this, but now we come to the real problems.

  1. To get these HFT firms to come and trade in their dark pool Barclays gave certain HFT firms information regarding their dark pool order flow.
  2. Barclays marketed their dark pool as being safe from “predatory” traders and “toxic” flow, both of which are often felt to be part and parcel of HFT.


As mentioned earlier, Barclays routed most of their trades into their own dark pool first. Information regarding these trades was then provided to certain HFT firms operating in the dark pool. Think about it like this: Certain firms operating in the world’s largest dark pool got information regarding most of the trade flow from one of the world’s largest banks. Even the deductive skills of Inspector Jacques Clouseau would tell you the value that can be gleamed from such information is priceless. Also it’s not really fair is it?

The duplicitous and possibly illegal activity that Barclays conducted is that they marketed aggressively the fact that they would keep investors safe from precisely the practices that it was subjecting its clients to.

I told you they’d been naughty, very naughty.

Was what Barclays did illegal?

Time will tell, but one thing is clear from the text of the summons. It’s not such an open and shut case as it first appears. It’s absolutely clear that Barclays shafted their clients. No doubt about it. Bringing them to justice on the other hand is a completely different kettle of fish, especially once Barclays’ lawyers have had a good go at it.

Here’s the problem from a legal perspective.

  1. Testimony based on former employees
  2. Marketing material
  3. Trial

A significant part of the summons contains testimony and comments from former employees. In fact the most interesting part of the summons was how toxic (pardon the HFT pun) the working atmosphere at Barclays Electronic Trading must have been. North Korean politics probably has nothing on this particular department in Barclays when it comes to intrigue, back stabbing and seething resentment.

If I was one of these “former employees” I’d be right royally scared at this point. If one thing is a cert in American legal circles it is character assassination. Barclays’ lawyers will rip apart the lives of these former employees and paint them as gargoyles in human form and do anything they possibly can to discredit them, they’ll probably succeed as well.

Then we come to the point about marketing material. The summons shows many good points and quotes from Barclays marketing material, which really do look like a smoking gun. BUT!!! is it really? I haven’t seen the marketing material in question in detail myself, but I am wondering what the small print disclaimers said. No one can promise you the stars in the big print while delivering you manure in the small print like a bank’s marketing brochure.

As for the trial. I’m no American legal eagle but what if this goes to trial? The issues of trade routing, dark pools, HFT etc. are hugely complex. Most finance pros don’t understand them, how on earth will a jury of ‘normal’ non-finance people ever comprehend it all?

Therein is Barclays strength: A long protracted trial with the aim of sending each and every juror to sleep each and every day with the minutiae of trade execution.

So as you can see, the whole thing is not as straightforward as the NY Attorney General makes out… and Barclays knows it.

The über smart quotes

One more thing. It always makes you appear plenty smart if you can quote a few legal terms in a discussion. Since I’m your friend and want to help you look like the smartest person in the room below are the two laws Barclays is alleged to have violated.

  1. The Martin Act Securities Fraud “employed deception, misrepresentations, concealment, suppression, fraud, and false promises regarding the issuance, distribution, exchange, sale, negotiation, or purchase within or from this state of securities. “
  2. Persistent Fraud and Illegality – Executive Law § 63(12) “Barclays (a) engaged in repeated fraudulent or illegal acts or otherwise demonstrated persistent fraud and (b) repeatedly violated the Martin Act in the carrying on, conducting or transaction of business within the meaning and intent of Executive Law § 63(12).

I thank this Blogger for their continued commitment and ability to educate even a layman to economics as myself!  Please read more and subscribe at http://www.bankersumbrella.com/blog    I do…:) jdadam

 

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If You’re Too Grossed Out To Share This Video, Then You’re Exactly Why It Exists

If You’re Too Grossed Out To Share This Video, Then You’re Exactly Why It Exists.

Posted in Mysticism, Poetry, Socio-Political, Women | 1 Comment

The Ruling Class (Full Film)

1jdadam:

It’s a lot less funny now….now we know we have yet to overcome …

Originally posted on Biblioklept:

View original

Posted in Socio-Political | Leave a comment