The USA leads the world, introducing innovation and change that spreads outwards. Some of this is good; for example most technology especially IT, and some of it is very bad – like toxic mortgages. The USA is one of the world’s most unequal countries; and is seen by the poor countries which harbour terrorism, as greedy and unworthy.
With the Euro slipping into poisonous waters, we look to the American economy to re-establish itself, to stabilise the rest of the world system. With its enormous geopolitical advantages and affluent consumer population, through its hard work and innovation, the USA usually succeeds.
But just when steady growth is desperately needed, we discover that over half of overall US equity trading is high-frequency; IT systems triggering sales and purchases very swiftly according to preset algorithms. The figure was 61% in 2009 – and 38% in Europe, as it follows in the USA’s footsteps. We are supposed to be reassured that these figures have declined by a few percentage points this year.
This is money being made out of nothing more than the slight and unpredictable fluctuations of share prices, and bears no relation to prosperity, job creation, innovation, or production. The last scam was over-pricing properties to inflate mortgage broker commissions. This present scam relates to nothing at all in the real world, and creams off the dynamism of the millions of hard-working people beavering away deep in the bowels of the system.
But it’s a house of cards that’s getting bigger and bigger, into which all our pensions, banks and the companies where we work are all invested and intertwined.
It also makes nonsense of the idea that we can defeat this recession if we all knuckle down to work hard, pay more tax, receive less in return and consume less.
No western government can allow its population to consume less, as the whole system depends on recycling. The problem is that we now need to borrow in order to consume enough to keep the system going – but the banks don’t dare to lend any more. So instead, our governments create extra money from thin air, and we take on the debt.
Meanwhile a very small number of people make huge amounts of money doing things that discourage growth and investment.
Over half of the investment market trading in the USA is this high-frequency churning, which risks turning the world’s economy into a deadly game of incredibly fast-moving musical chairs.
What’s needed is a spreading of resources, so that real-world projects can be funded and thrive – especially in poorer parts of the world. A redefining of the term “gambling’, then a tax on the high rollers would be a start.
This would help greatly in the struggle with Islamic militancy, by addressing its underlying causes – which stem from economic inequality.