Two Ways The System Is Rigged: HFT And Oligarchic Inheritance
by
Tyler Durden
Mon, 01/21/2019 - 10:45
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Authored
by Charles Hugh Smith via OfTwoMinds blog,
The net result
of a rigged system is the vast majority of the gains in income and wealth flow
to the very tippy-top of the wealth/power pyramid.
We often hear
how the system (i.e. our economy) is rigged to benefit the few at the expense
of the many, but exactly how is it rigged? Longtime correspondent Zeus Y. recently highlighted two
specific mechanisms that favor the top 0.01%: high
frequency trading (HFT) and oligarchic inheritance, the generational transfer
of immense wealth and the power it buys.
High frequency
trading (HFT) is a mechanism only available to the few at the top of the
wealth/power pyramid to skim money from markets--please watch the videos below
for further explanation of how HFT works.
As for
inheritance--we're not talking about leaving a house or a small business to
one's offspring, or even a couple million of dollars; we're talking about tens
of millions or hundreds of millions of dollars. Some
states impose an estate or inheritance tax, but at the federal level, the
exemption of $11 million per person means a married couple can leave $22
million tax-free.
The number of
people with more than $11 million to pass on is extremely small:
Estate tax
in the United States
In 2018, the
exemption doubled to $11.18 million per taxpayer due to the Tax Cuts and Jobs
Act of 2017. As a result, only approximately 2,000 people (or 0.0006% of the
population) in the US are currently liable for estate tax.
The mega-bucks
families and billionaires practice the fine art of philanthro-capitalism,
leaving their vast fortunes in so-called charitable trusts that
enable power and wealth to be transferred generationally.
Here are
Zeus's video recommendations and comments:
These two
videos, four and two years old, brought something that had escaped my attention
about the fundamental distortion of high frequency trading (HFT). These
consequences have not come due yet, but it is a preview for how it will happen
(flash crash).
Michael Lewis: Nobody
Understands the Stock Market (13:19) (2014)
Brad Katsuyama:
The Stock Market had become an Illusion (18:44)
Here is
another video (Bill Moyers interviewing Paul Krugman)
on Thomas Picketty's book Capital in which Krugman admits he did not see the most important feature of
systemic inequality-- inherited wealth, which combined with the above, since
wealth gives access to asymmetric information that blatantly rigs the system,
generates oligarchy.
What the 1% Don't Want You
to Know (24:30)
Both of these
points really forecast a financial collapse in which the separation and
concentration of wealth reaches critical levels, and as Yanis
Faroukakis says "idle cash" has no where to go, as all the avenues of wealth generation are
monopolized by predators and regular people either become moribund or
victimized.
Progressive International: Yanis Varoufakis (20:28)
This goes back
to what my book Transforming
Economy: From Corrupted Capitalism to Connected
Communities forecast that the real change and turn will come when
people are "exhausted" in two senses:
1) "used
up" as all pension funds become savaged to pay fees and pretend to be
solvent without having backing capital to meet obligations when people actually
start drawing on them (which creates sell orders, received first by HFT and
then amplified as they sell first, leading into a death spiral), and
2) "being tired" as in fatigued to play and hope to win and
stay in a rigged game, thus bringing down the illusion of a sunny retirement.
This is just a matter of time, which is always the case when fundamentals no
longer exist and are increasingly substituted with opportunistic illusion. As
with all con schemes and pyramid games, they become unmasked and the illusory
wealth evaporates to be replaced by IOUs that can never be paid.
Once that
happens, it will be interesting to see how we respond.
I don't think
we have very many years until this reckoning thanks to Trump's almost autistic
savant abilities to unmask and blow up the facades surrounding the global
elites.
This does not
mean I favor him or the inevitable pain that will
result from this unmasking, but I can appreciate anything that casts light on
our currently bankrupt system.
The net result
of a rigged system is the vast majority of the gains in income and wealth flow
to the very tippy-top of the wealth/power pyramid where
it concentrates ownership of productive assets and political power.
Please note
that this is an apolitical reality; neither party has made any serious move to
eliminate HFT and similar skimming operations, or limit philanthro-capitalism or
onshore/offshore tax evasion--another mechanism that's only available to the
top .01% and above.
The
Hidden Wealth of Nations: The Scourge of Tax Havens (book)
United
States Net Worth Brackets, Percentiles, and Top One Percent in 2017(households)
Net Worth
Percentile 2016 Dollar Cutoff
90.0%
$1,182,390.36
95.0%
$2,377,985.22
99.0%
$10,374,030.10
99.5%
$16,115,373.00
99.9%
$43,090,281.00
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