predatory finance

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pages: 299 words: 83,854

Shortchanged: Life and Debt in the Fringe Economy by Howard Karger


big-box store, blue-collar work, corporate social responsibility, credit crunch, delayed gratification, financial deregulation, fixed income, illegal immigration, labor-force participation, late fees, London Interbank Offered Rate, low skilled workers, microcredit, mortgage debt, negative equity, New Journalism, New Urbanism, offshore financial centre, payday loans, predatory finance, race to the bottom, Silicon Valley, Telecommunications Act of 1996, telemarketer, underbanked, working poor

For some at-risk consumers, fringe financial services are like an addiction—there’s always money there when they need it. But, like most addictions, it comes at a high price. A final goal was to show how the modern fringe economy reflects a break from the past. The availability of high-cost predatory credit is hardly a new phenomenon in the United States. On the contrary, the nation has a long history of indentured servants, debt servitude, company stores, loan sharks, pawnshops, and predatory finance companies. For example, company stores in mill towns, coalfields, and migrant camps have traditionally kept poor workers in a cycle of perpetual debt. Black sharecroppers were held in debt servitude to landowners by land and crop mortgages carrying exorbitant interest rates.2 What makes the modern fringe economy different is the level of organization, the corporate control, the presumed legitimacy of these enterprises, the growing appeal to large sectors of middle-income households, and the geographic reach of these companies.

pages: 504 words: 143,303

Why We Can't Afford the Rich by Andrew Sayer


accounting loophole / creative accounting, Albert Einstein, asset-backed security, banking crisis, banks create money, basic income, Bretton Woods, British Empire, call centre, capital controls, carbon footprint, collective bargaining, corporate raider, corporate social responsibility, creative destruction, credit crunch, Credit Default Swap, crony capitalism, David Graeber, David Ricardo: comparative advantage, debt deflation, decarbonisation, declining real wages, deglobalization, deindustrialization, delayed gratification, demand response, don't be evil, Double Irish / Dutch Sandwich,, Etonian, financial innovation, financial intermediation, Fractional reserve banking, full employment, G4S, Goldman Sachs: Vampire Squid, high net worth, income inequality, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), investor state dispute settlement, Isaac Newton, James Dyson, job automation, Julian Assange, labour market flexibility, laissez-faire capitalism, land value tax, low skilled workers, Mark Zuckerberg, market fundamentalism, Martin Wolf, mass immigration, means of production, moral hazard, mortgage debt, negative equity, neoliberal agenda, new economy, New Urbanism, Northern Rock, Occupy movement, offshore financial centre, oil shale / tar sands, patent troll, payday loans, Philip Mirowski, Plutocrats, plutocrats, popular capitalism, predatory finance, price stability, pushing on a string, quantitative easing, race to the bottom, rent-seeking, Ronald Reagan, shareholder value, short selling, sovereign wealth fund, Steve Jobs, The Nature of the Firm, The Spirit Level, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, transfer pricing, trickle-down economics, universal basic income, unpaid internship, upwardly mobile, Washington Consensus, wealth creators, Winter of Discontent, working poor, Yom Kippur War, zero-sum game

Lawyers have profited handsomely from drafting secrecy rules that tax havens use to protect the businesses they hide. All this has happened in piecemeal fashion – again with no conspiracy or central organisation. At first it all looked unproblematic, in fact, the sector boomed: deregulation appeared to work. There were a few crises, but nothing to come close to 2007. The impressive expansion of the sector’s revenue seemed to justify everything. In the US, Michael Hudson comments, Predatory finance has concentrated wealth and used it to buy control of governments and their regulatory agencies. It even has taken over the Justice Department and the courts, so that financial fraud in America has been decriminalized. Bank lobbyists back the campaigns of politicians committed to deregulating banking and its major clients (real estate, natural resources and monopolies). So there is no regulation of outright criminal behavior even by the largest banks such as Citicorp and Bank of America where fraud was concentrated.88 The City’s and Wall Street’s escape from the threat of serious restructuring is a function not only of their control of the commanding heights of the economy and their colonisation of the polity and the networks influencing policy, but also of their success in constructing a story of success – in which, whatever the turmoil of the crisis, the sector remained vital to the future as the powerhouse of their respective economies.

pages: 700 words: 201,953

The Social Life of Money by Nigel Dodd


accounting loophole / creative accounting, bank run, banking crisis, banks create money, Bernie Madoff, bitcoin, blockchain, borderless world, Bretton Woods, BRICs, capital controls, cashless society, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, commoditize, computer age, conceptual framework, credit crunch, cross-subsidies, David Graeber, debt deflation, dematerialisation, disintermediation, eurozone crisis, fiat currency, financial exclusion, financial innovation, Financial Instability Hypothesis, financial repression, floating exchange rates, Fractional reserve banking, German hyperinflation, Goldman Sachs: Vampire Squid, Hyman Minsky, illegal immigration, informal economy, interest rate swap, Isaac Newton, John Maynard Keynes: Economic Possibilities for our Grandchildren, joint-stock company, Joseph Schumpeter, Kula ring, laissez-faire capitalism, land reform, late capitalism, liberal capitalism, liquidity trap, litecoin, London Interbank Offered Rate, M-Pesa, Marshall McLuhan, means of production, mental accounting, microcredit, mobile money, money market fund, money: store of value / unit of account / medium of exchange, mortgage debt, negative equity, new economy, Nixon shock, Occupy movement, offshore financial centre, paradox of thrift, payday loans, Peace of Westphalia, peer-to-peer, peer-to-peer lending, Ponzi scheme, post scarcity, postnationalism / post nation state, predatory finance, price mechanism, price stability, quantitative easing, quantitative trading / quantitative finance, remote working, rent-seeking, reserve currency, Richard Thaler, Robert Shiller, Robert Shiller, Satoshi Nakamoto, Scientific racism, seigniorage, Skype, Slavoj Žižek, South Sea Bubble, sovereign wealth fund, special drawing rights, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, transaction costs, Veblen good, Wave and Pay, Westphalian system, WikiLeaks, Wolfgang Streeck, yield curve, zero-coupon bond

Meanwhile, the Fed faces an interest rate quandary: if it keeps rates low, the financial sector will be forced to gamble to achieve the growth in asset values it needs; if rates rise, real estate values will fall and the banks and pension funds will be forced even further into negative equity. If Hudson is right, we ought to be witnessing the end of two myths. The first is about free markets. We cannot continue to believe that they are free when they support rent seeking rather than real GDP, reward banks for pushing junk mortgages, and use credit rating agencies to make predatory finance look like sound wealth creation. Free markets need to be protected from fraud and rent seeking. The second myth is that central banks cause inflation by monetizing public spending. They do not cause inflation if the spending in question goes toward new production and employment. Instead, such spending is being diverted to support inflated asset prices and continued financial speculation. CONCLUSION This chapter has traveled across a broad terrain: from the argument that it is debt that renders money social, to the prospect that, through money, today’s brutally one-sided debt relations pose a major threat to democracy.

Adaptive Markets: Financial Evolution at the Speed of Thought by Andrew W. Lo

Albert Einstein, Alfred Russel Wallace, algorithmic trading, Andrei Shleifer, Arthur Eddington, Asian financial crisis, asset allocation, asset-backed security, backtesting, bank run, barriers to entry, Berlin Wall, Bernie Madoff, bitcoin, Bonfire of the Vanities, bonus culture, break the buck, Brownian motion, business process, butterfly effect, capital asset pricing model, Captain Sullenberger Hudson, Carmen Reinhart, Chance favours the prepared mind, collapse of Lehman Brothers, collateralized debt obligation, commoditize, computerized trading, corporate governance, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, cryptocurrency, Daniel Kahneman / Amos Tversky, delayed gratification, Diane Coyle, diversification, diversified portfolio, double helix, easy for humans, difficult for computers, Ernest Rutherford, Eugene Fama: efficient market hypothesis, experimental economics, experimental subject, Fall of the Berlin Wall, financial deregulation, financial innovation, financial intermediation, fixed income, Flash crash, Fractional reserve banking, framing effect, Gordon Gekko, greed is good, Hans Rosling, Henri Poincaré, high net worth, housing crisis, incomplete markets, index fund, interest rate derivative, invention of the telegraph, Isaac Newton, James Watt: steam engine, job satisfaction, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Meriwether, Joseph Schumpeter, Kenneth Rogoff, London Interbank Offered Rate, Long Term Capital Management, loss aversion, Louis Pasteur, mandelbrot fractal, margin call, Mark Zuckerberg, market fundamentalism, martingale, merger arbitrage, meta analysis, meta-analysis, Milgram experiment, money market fund, moral hazard, Myron Scholes, Nick Leeson, old-boy network, out of africa, p-value, paper trading, passive investing, Paul Lévy, Paul Samuelson, Ponzi scheme, predatory finance, prediction markets, price discovery process, profit maximization, profit motive, quantitative hedge fund, quantitative trading / quantitative finance, RAND corporation, random walk, randomized controlled trial, Renaissance Technologies, Richard Feynman, Richard Feynman, Richard Feynman: Challenger O-ring, risk tolerance, Robert Shiller, Robert Shiller, short selling, sovereign wealth fund, statistical arbitrage, Steven Pinker, stochastic process, survivorship bias, The Great Moderation, the scientific method, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, theory of mind, Thomas Malthus, Thorstein Veblen, Tobin tax, too big to fail, transaction costs, Triangle Shirtwaist Factory, ultimatum game, Upton Sinclair, US Airways Flight 1549, Walter Mischel, Watson beat the top human players on Jeopardy!, WikiLeaks, Yogi Berra, zero-sum game

Someone who believes that fairness is the highest moral value will want to choose a vocation where they can exercise this value, perhaps as a public defender, a teacher of underprivileged children, or a sports referee. Those who believe, instead, that fairness is an unimportant value might fi nd themselves drawn to the prosecutorial side of the law, or high-pressure sales, or indeed, Gordon Gekko’s caricature of predatory finance. Not everyone in those professions will share those values, of course, but individuals with those values may find such professions more agreeable than others, and as a result will be overrepresented within them. The Adaptive Markets Hypothesis implies that a culture isn’t only an innate outcome of its members’ tendencies. Rather, its members interact with the environment in highly specific contexts.