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A new study by the Wall Street rating agency called Standard and Poor’s reveals what many already know. High income inequality suppresses the demand for goods and services, depressing GNP growth, and leading to more severe economic crashes than would otherwise be the case.

Here’s what the report won’t tell you. The rich invest their money in the political markets and in other investment areas such as stocks and bonds.

The money going into the political markets is used to convince politicians to pass legislation that redistributes income and wealth from the 99 to the 1 percent, such as free trade treaties. In other words, government corruption is far greater during times of inequality, and also because of it.

The investment money that goes into corporate stocks push up the value of those assets. It’s just a bidding process. So when more people purchase shares of any corporations than those who are selling their shares, the value of those shares go up. The same thing is true of bonds. None of these purchases add to GNP growth, and all of these purchases can result in redistributing income from the 99 to the 1 percent.

When corporate shares head down in value, CEO’s typically cut jobs or employee compensation, or ship jobs overseas to lower wage nations, which pushes profits higher, resulting in rising share and bond prices. The result is nothing more than income redistribution.

And so when inequality rises, it snowballs via the methods above, until such time as somebody decides such inequality is a bad thing. That only happens during the most severe economic crisis’s, such as during the Great Depression when there’s less money to go around to corrupt government.

Check out the story by clicking on the link below.

Wall Street Analysts Research: High Inequality Makes US Vulnerable to Crashes–Billmoyers.com

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Investment banks, such as Goldman Sachs, purchase student loans, just like they do home mortgages. Then they issue bonds against the debt, mostly to rich folks. Your payments go toward the principal and the interest, and the interest in the main heads straight into the pockets of the bondholders. Wall Street makes billions along the entire process of turning the loans into bonds. That’s why the US government doubled student loan interest rates from 3.4 to 6.8 percent last year. Wall Street and the 1 percent prosper at your expense, making student loans nothing more than an income redistribution scam. And that’s why neither political party intends to do anything about this scheme.

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The student loan bubble was due for a collapse last year as record defaults occurred. Wall Street investment firms found that investors were fleeing the bond market that backs student loans late last year due to fears of an impending collapse.

Investment firms buy loans from Sallie Mae and then issue bonds backed by these government guaranteed loans. It’s a profitable business when investors are buying.

In a remarkable coincidence last year, the government doubled the rate of interest students pay for student loans, from 3.4 to 6.8 percent. This doubled the return on investment for bond buyers, but also redistributed income from working class students to Wall Street bankers and investors. In other words, doubling the interest rate on students made the student loan backed bonds a more attractive investment.

We don’t know how many meetings Wall Street pirates had with President Obama, Senate majority leader Harry Reid, and House Majority Leader John Boehner to discuss raising rates on students, or what they said to get the government to jack up the  interest rates, but we can rightly suspect that meetings did occur, and the middle class was the victim of this income redistribution scam.

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Big business makes a ton of its money off of or through the government. Take student loans, for example. Thirty years ago, Wall Street con artists convinced federal legislators to cut back on federal grants for students and to increase student loans. That’s because they found a way to profit from student loans. Buy the loans, bundle them, issue bonds against them, and sell the bonds to rich investors.

The money you pay for your loans goes in great part to those investors. In other words, your student loan debt is greater than what it would’ve been in the absence of these bonds, and you’ve become an indentured servant to the investor class the moment you take out a student loan.

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Who owns the Federal Government? Hint. It’s not the voters.

Think about this. The Federal Reserve bails out rich investors even as these investors are sucking the middle class financially dry. See Breakdown of the $26 Trillion the Federal Reserve Handed Out to Save Incompetent, but Rich Investors. Also, the Federal government has gone out of its way to bail out the one percent, while the rest of America wilts.

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The United States Federal Reserve’s recently announced that it’ll continue “Operation Twist” by buying an additional $267 billion of long-term Treasury bonds during the following six months. That means they’ll have bought a total of $667 billion for 2012. So far, this policy has had virtually no impact on interest rates or equity prices. Those markets failed to respond. That means that monetary easing is no longer a useful tool for increasing economic activity.

The fed’s policies during the economic crisis that began almost five years ago have been extremely helpful in bailing out rich, but remarkably dumb investors, but the policies have been lacking in bailing out the 99 percent. That’s the purpose of the Federal Reserve.

Of course, the federal government has followed the same path; bail out the 1 percent, to hell with the 99 percent.

Don’t expect the Federal Reserve or the Federal Government to deal with the massive redistribution of income and wealth (that has been legislatively created by the Federal Government) from the 99 to the 1 percent during the last thirty-one years. That’s the real problem with the economy. The demand for goods and services is lower than 30 years ago because the 1 percent now receive 27 percent of the total national income compared to about 8 percent thirty years ago. That means the 99 percent has less cash to buy stuff. And that means the demand for goods and services will continue to be weak.

Related Stories

The Federal Reserve Has Run Out of Options–The Guardian

Breakdown of the $26 Trillion the Federal Reserve Handed Out to Save Incompetent, But Rich Investors,

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The folks at the Federal Reserve have a grim view of the United States economy. They won’t raise historically low interest rates until late 2014, at the earliest, and Fed Chairman Ben Bernanke is ready to expand the money supply by purchasing more treasuries.

This suggests Obama’s rosy outlook for the economy that he laid out in his state of the union address is substantial lunacy, essentially the ravings of a madman or a lying politician. It also suggests that neither the Fed nor Obama plan to do anything about the massive mal-distribution of income and wealth that has occurred via government policies over the last thirty years, and which has dragged the economy down and keeps it down. In fact, Obama’s policies have been to continue to redistribute income from working people to the rich. A prime example is the fact that he signed into law the South Korea free trade treaty.

Click here for the complete story

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