The elephant in the room … real talk on tax reform is a long way off. Photo: Tanya Lake
The bail-out of Wall Street during the global financial crisis in 2008 set in train a titanic transfer of debt from the financial sector to governments around the world.
The debt of the speculators became the public debt, our debt. But this gift for Wall Street and for speculators world-wide – indeed for these who had caused the crisis in the first place – did not end with merely a trillion-dollar goodie-bag of bail-outs. Arguing it would ignite economic growth and help everybody, the US Federal Reserve sent its printing presses into overdrive.
In the US alone, the money supply has since ballooned by $US2.6 trillion. This money-printing, or ‘quantitative easing’ as it is euphemistically described, has worked a treat for bankers and speculators. And it has pushed share markets up. But the prosperity in the finance sector has not been matched elsewhere. And government debt hovers at ever critical levels.
To this day the profits of the banks are privatised and their losses socialised. As bank profits hit new heights, hedge funds run amok, borrowing from the Fed near zero, gearing to the hilt, and speculating. High-volume algorithm traders ramp security prices and, existing beyond the realm of regulation, perpetually render markets susceptible to a crash.
In Australia, there was no cash bail-out as there was on Wall Street. Propped by government guarantees, and burdened by far less leverage, our financial system proved more robust during the financial crisis. Still, the level of corporate welfare for financiers has now extended to the point where the banks have been explicitly backed by the taxpayer – via a $380 billion Reserve Bank bail-out fund.
In light of the prosperity which the taxpayer is affording the banks – and given the banks’ capacity to pay, it is only fair for society to expect some payment in return, some recompense.
And so governments need to overhaul the tax