Sunday 26 October 2014

Gene Kerrigan: Rich hiding 250 Croke Parks of cash

As the wealthy get richer, the poorest again bear the brunt of the bankers' mistakes, writes Gene Kerrigan

Published 29/07/2012 | 05:00

Imagine a million dollars. Imagine it sitting on a seat in Croke Park. Imagine every seat in the stadium had a million dollars wrapped and stacked on it. Altogether, that would be upwards of $82bn. Now, imagine 12 Croke Parks, each seat similarly decorated with money. Now, you've got a trillion dollars.



Now multiply that by 21. We're looking at over 250 Croke Parks, each holding $82bn. Now, unless the batteries on my calculator are dodgy, we're looking at something approaching the amount of money hidden offshore by the super-rich in 2010.

The figure of $21trn is the conservative estimate (it could be up to $32trn) in a report published last week by the Tax Justice Network (TJN). The research for the report was done by the former chief economist of McKinsey, a consulting firm that's hired by major corporations and governments.

The research is based on information drawn from the IMF, the World Bank, the Bank of International Settlements and various central banks. And this is just financial wealth, bankable lucre -- not including property. The research by TJN identified a black hole in the world economy, wherein increasing amounts of resources are sucked up by those already so rich they'll never live to spend a fraction of that money.

Those young semi-hippy folk, who call themselves Occupy This and Occupy That, are of course very naive and unfocused. And, as it happens, just about spot on, when they identified the problem -- the massive imbalance in the allocation of resources. There really is a greedy, wasteful one per cent, who are allowed to hoover up an enormous amount of what we produce. And an army of professionals who benefit from servicing them.

Now, you might imagine that offshore money is hidden using the favoured method of corrupt Irish politicians and officials -- flying to Jersey or the Isle of Man, with envelopes full of cash stuffed down their Y-fronts. And opening accounts using the name of their granny's poodle.

Not quite, though the morality of it is similar. These offshore trillions are managed by an array of

private bankers, who route their clients' money electronically.

And this isn't just a lot of money. This is a major portion of the world's wealth. The GDP of the USA is about $15trn. Therefore, the minimum amount hidden offshore, $21trn, is equivalent to the entire American economy. Plus the Japanese economy.

But, if this is true -- how come we don't see some tell-tale signs? Well, we do. Last week, as it happens, a committee of the US Senate reported on the activities of HSBC, the British monster bank -- in every sense of the term.

For some years, HSBC, Europe's biggest bank, has been channelling offshore the hot money of assorted criminals and dictators, as well as the swag taken by the corporate sector. This allows the criminals and dictators and various corporate chaps to go about their business, whether in business class or private jets, without worrying that some grumpy airport security type on minimum wage might pat them down and find a chunk of money.

Mexican drug gangs, for instance, ran $7bn into the US economy in 2007 and 2008, using a subsidiary of HSBC. More than 52,000 Mexican client accounts were accommodated by HSBC in the Caymans. Over a period of seven years, more than $19bn was channelled from Iran. Money from the Middle East and Asia, associated with terrorism, was similarly transferred into hidey-holes.

(Couldn't happen here, you say? Remember an Irish bank's involvement in back-to-back Cayman manoeuvres with a certain Fernando Pruna, later convicted of drug dealing? Moriarty Report, Part 1, page 502.)

The bulk of the $21trn, of course, is money accumulated quite legally, albeit depending on coercive business methods, manipulated tax regimes and the occasional bribe.

The extent of Irish wealth hidden within such funds is undocumented, as yet. For too much of the time, we fret about the detail of what's happening -- minor shifts in GDP, a decrease or increase in a deficit. The rise of one transient politician, a clone of countless political place-holders, is analysed as though it meant something.

The bigger picture includes a layer of super-rich, with other layers of cronies and helpers. And a financial sector that has taken on a role that's more significant than that of any government.

The collapse of Lehman Brothers affected more lives than the rise of Barack Obama. The collapse of Fianna Fail was no big deal. Fine Gael and Labour stepped briskly into their shoes. The collapse of Anglo Irish Bank, however, destabilised the country.

Banks used to be utilities, facilitating the flow of credit. They are now power centres with their own interests -- separate from and often opposed to the interests of the citizens.

At which point it's not just about power and greed -- such bankers become the enemy within. British bankers were recently caught falsifying interest rates that affect the rest of us. It's not long since Irish bankers were caught falsifying account details, to help clients defraud the Revenue of billions. They got a slap on the wrist. Many bankers are reluctant to indulge in actions that are questionable, probably dodgy, or unmistakably illegal -- but if they chicken out some competitor would step in, so they do what they need to protect market share. And they know any consequences will be minor and the rewards immense.

Quite openly, with no fear of chastisement, the wealthy transfer ownership of assets to spouses. They move assets to where they can't be touched -- sometimes they do this illegally. They transfer residency to the UK, to benefit from relaxed bankruptcy laws.

Less openly, politicians are persuaded to rejig legislation. Tax liabilities are magicked away. Money is run through several entities before going offshore.

Deferential politicians give a bank guarantee here, a Finance Bill there. Shane Ross TD argued in the Dail recently that the banks get "the same deference today as they were given in 2008". He denounced their "absolutely unacceptable input into legislation".

Social Justice Ireland, using the latest CSO figures, report a 4 per cent increase in disposable income for the top 10 per cent. And an 18 per cent drop in the income for the bottom 10 per cent. And that's not counting the hidden money.

Having wrecked their financial system, the wealthy and their bankers continue to make big bucks, and they trust the politicians to fix things. And the politicians asset-strip the great majority of us, to plug the holes in the system. They cut deeply into those at the bottom, while insisting on preserving the wealth of the elite -- sometimes known as bondholders.

A couple of weeks back, the IMF dropped in and instructed the Government that they must advance on two fronts. First, they must cut welfare benefits and medical cards. And they must "strengthen" the banks. They need to "enhance asset quality" and "regain profitability".

They demand we chop unemployment benefit, to force the unemployed to take jobs that don't exist. And simultaneously do whatever is needed to help the banks restore immense profits and sustainable bonuses. "Jump," said the bankers. "How high?" said the politicians.

Sunday Independent

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