Wednesday, December 16, 2009

The Vampire Squid

"The Great American Bubble Machine" is the title of an article by Matt Taibbi in Rolling Stone magazine that I have been meaning to read for a while. In it he describes how Goldman Sachs, "the great vampire squid wrapped around the face of humanity" is creating investment bubbles and squeezing the life out of the world's economy for it's own profit. If you have read this article already, good for you but I only got around to it this afternoon on my sickbed and it is astonishing stuff. So at last I understand why petroleum prices shot up last year...Even though I already understood the CDO issues Taibbi does a masterful job of explaining them in language anyone can understand. (If reading the word "fucked" in a magazine article bothers you, stick your head back in the sand and don't click on the link. Please). I keep thinking about how we will, some of us, look back and wonder how we allowed the United States of America to devolve into a Third World Oligarchy. Click on the link or Google Matt Taibbi and Rolling Stone to read the seven pages of amazing exposes for yourselves. It's well worth it and a better horror story than any teen vampire flick at the movies. Though I do enjoy thinking of Goldman Sachs ("doing God's work") that way.

An excerpt:

And here's the real punch line. After playing an intimate role in four historic bubble catastrophes, after helping $5 trillion in wealth disappear from the NASDAQ, after pawning off thousands of toxic mortgages on pensioners and cities, after helping to drive the price of gas up to $4 a gallon and to push 100 million people around the world into hunger, after securing tens of billions of taxpayer dollars through a series of bailouts overseen by its former CEO, what did Goldman Sachs give back to the people of the United States in 2008?

Fourteen million dollars.

That is what the firm paid in taxes in 2008, an effective tax rate of exactly one, read it, one percent. The bank paid out $10 billion in compensation and benefits that same year and made a profit of more than $2 billion — yet it paid the Treasury less than a third of what it forked over to CEO Lloyd Blankfein, who made $42.9 million last year.

How is this possible? According to Goldman's annual report, the low taxes are due in large part to changes in the bank's "geographic earnings mix." In other words, the bank moved its money around so that most of its earnings took place in foreign countries with low tax rates. Thanks to our completely fucked corporate tax system, companies like Goldman can ship their revenues offshore and defer taxes on those revenues indefinitely, even while they claim deductions upfront on that same untaxed income.

Click the link for more. I can't recommend it enough. There's stuff you know mixed in with stuff you don't and the mixture is entirely fascinating and toxic.