In 2003 some four years before the credit crunch a good friend of mine, Frank Dunn, a polymath and hedge fund expert told me he’d been researching the causes of financial collapse by examining detailed records from stretching from the first Wall Street crash (the Great Depression) to the Dutch tulip disaster and beyond. It turns out the key cause of financial meltdown is when there is too high a concentration of wealth in too few hands. When this happens, calamity, chaos and collapse aren’t too far away; mathematically, they are a sure thing.
In America, the top 1% of the population own 40% of the wealth. To put this in perspective, that’s the same level of inequality seen in countries ruled by dictators and oligarchs or roughly the equivalent wealth inequality seen in Iran and Russia.
“A recent report by the International Monetary Fund destroys the myth that the current economic crisis—the worst in almost a century—was caused by fancy financial instruments, government intervention in the housing market or Main Street greed. It concludes, rather, that the global brush with economic depression was the result of the colossal gap in incomes between rich and working Americans.
The sadly obscure paper argues that a dramatic concentration in wealth at the top—at levels not seen anywhere else in the industrialized world—created a fundamental imbalance that brought the entire system down on itself. The document shows that the origins of America’s last financial implosion, in 1929, were almost identical to those of 2008. In both cases, income inequality was the culprit. And even in the collapse’s wake, the chasm between the top 10 per cent and the remaining 90 per cent appears to be widening further.”
Not long after the most recent financial crash, the so called Credit Crunch, I noted in 2009 here;
During routine scanning of the London job boards throughout 2009, specifically Jobserve I've noticed a number of positions advertised by investment banks for a wide variety of skill sets to build applications for the very financial instruments that caused the meltdown of the global financial system in the past eighteen months.
With the global financial markets in turmoil again and the prospect of more bail outs for European countries, most notably Italy maybe another credit crunch is the boil that has to burst?
But the masters of the universe, Tea Party activists and the ruling elite should beware. As noted by Joseph Stiglitz: “The top 1% may have the best houses, educations, and lifestyles, but their fate is bound up with how the other 99% per cent live.”
I won’t be at all surprised if we see Middle East style uprisings in the West over the next few years as more and more people start to awaken and realise the economic crimes against humanity that have brought about this ‘colossal inequality’ . Indeed this is the only thing the 1% fear.