Tahir Junaid

U.S without Wall Street: A Good Idea! Student Name: Instructor Name: Course Code: Date: Executive Summary US economy suffered a critical decrease in its value because of Wall Street in 2008 which was the greatest crisis after the Great Depression. Wall Street quickly recovered from that crisis by receiving a huge public aid. Main Street continued its path of deterioration. Pundits and Politicians at that time hardly investigated the cause of this imbalance. If this thing was inquired, it would show that US is ruled by capitalism not Democracy and it will represent the anger of people on the design of institutional system which provides this power to Wall Street. The Wall Street in 2008 started a social experiment which will allow their control on the production and distribution of money so that they are not answerable to public. That experiment was the reason of direct and irresistible crises. In this experiment, their money system changed from funding in real investment so they it can be used for building community, instead they used it for financing those financial projects which will only allow enriching Wall Street instead of producing for Real State. The main objective of money is to aid the continuous and honest use of the resources to provide the basic demands of people, nature and society. For fulfilling this, we require a democratic and community based system that is accountable for its resources. The system’s main function is to produce and distribute money as a well-organized utility of public. We are talking about a system which resembles to the US Financial system that financed World War II victory, created extraordinary duration of economic growth and stability. This system was the reason that America became the powerhouse of World’s Industries. Everything was working very well until the financial experiment launched by Wall Street. Wall Street’s concerns actuated in 1970s to lead the start of policy actions which led the deterioration of Middle Class system, an intense absorption of wealth, a financial crash, bankruptcy, high unemployment, enhancement of environmental failures and the sinking of technological, research and industrial capability of US. This social experiment was announced as a great success as it profited them all the way. This report gives a six-part plan which can end this experiment of Wall Street so that a community-based system of money and banking system can be formed which is accountable and is reactive to requirements and opportunities of US in twenty-first century. The Current Fiscal System It’s an illusion that under Capitalism, economic expansion will wipe out poverty and will remove financial issues in society. We also believe in this illusion that this economy will finish poverty. We regulate our lives in this decaying and out-of-date economic infrastructure. Under our greed, we feed on such reckless expenditure that this earth cannot bear any more like we import products of oil and we know that we don’t have means to synthesize. These importing are financed by debts which are unplayable and we are still getting them by risking our children’s future. Still what we are doing here is that we are providing the tax breaks to the Wall Street Employers while the people living in the inner communities make efforts to survive in the economy where they have no future. We can still recover from all that. We can accept this crucial time and rebuild our economy system so that we can regain our identity as a world leader. We can create an energy competent, with green framework and manufacturing foundation 21st century America. We can fulfill the dream of Middle Class nation where everyone from every class who is willing to do hard work can get a job which can provide him and his family with the benefits like schools for children, shelter, food and a guaranteed retirement. We can create a new financial system which will ensure the efficient and viable use of our resources without spending on military resources which will ensure our access to other resources of other countries. For achieving success, we have to change a lot of things, among these one thing is to change our economic system so that production and distribution of money can be controlled. Wall Street A: - History The Middle Class system started to deteriorate in 1970 when Supreme Court gave order that banks can have customers all over the states and were allowed to charge the amount of interest according to the interest permitted in every state. This helped the banks to charge interests on the loans according to the permission given by each state. In 1980, DIDMCA cancelled these rates of interests. The AMTP act of 1982 again provided a way to interests whose rates can be adjusted. These interested loans were the main reason of 2008’ major crises. The Wall Street designed a system whose purpose was to stop investing money from finance/banking system into real wealth creation but to invest there where they could produce more money like market administration, unproductive projects. Community banks were buildup into bigger national and regional banks, banks started to transfer the risk of lending debts to investors in the bonding through such a process that wiped out their surety of checking the loyalty of the borrowers. The rebuild process was in the idea of market fundamentalism i.e. anything that was the providing profit to the Wall Street was actually providing profit to the society and it should be legal. This process also drove the tax policies that enabled to gain such a tax capital at a lower rate than an average salary. This divergence caused lot of changes. At first, many organizations diminished or excluded dividend payments which were considered as ordinary salaries when taxed and also on self-financed expansion with increase in the shared prices that at the end produced capital growth. Organizations like this had limited needs to rent. Also if they need to borrow, instead of borrowing from a bank they would borrow from the bond market as it was cheaper there. This thing had an impact on the Wall Street Banks. Despite that, financial organizations which were not subjected to the rules of banks like equity and hedge funds were making huge savings. As a result, banks planned to make such a system which will free themselves from restrictions but it will not allow lifting restrictions from their rival financial organizations. According to Wall Street, they established their developed financial system increased economic efficiency. From there point of view, it was more efficient as it provided them with more profits and reduced their borrowing prices for their own organizations. But as far as from public’s concern, this system was very inefficient as borrowing money for common people became difficult due to high costs. Company’s objectives changed from funding productive projects to the projects with maximum profit. As a result, players from Wall Street entered into the lists of billionaires and the poor people and economy deteriorate. B) Design Money system are basically human developed designs that can be changed e.g. it can be designed as a transparent financial system that funds those productive projects which can be benefit for all and is questionable by those people whose lives depends on this system or it can be designed to give power of using the wealth to the most powerful players which will cost the common people in the end. The Wall Street is the example of second type of design where everything is controlled by their big players. Reasons why Wall Street should not exist A: - Defects in Design The main approach and philosophy of business was ethically and logically defected. Their idea was that society does great only when each individual focuses on his own profit regardless of the consequences on the society. When everyone focuses on their own profit, it enhances greed among people and it was their design that even everyone knew about this still they were satisfied under working this system. The system is designed so that it can permit their disable their minds socially and will reward them in the form of more and more assets. As a result of this system, inequality, destruction of environment and corruption issues were created due to which morality and logical approach died a long ago. For building a best moral society, everyone should accept the consequences of their decisions and must develop such a system which wills everyone and the society, not benefit individual persons and are hazardous for others and society. This is taught in every faith and is the key approach for developing a moral society. These are the key rules that should be followed by all organizations as well as individuals. In the design created by Wall Street, earning plans developed are in such a way that it is easy for the managers to benefit themselves with the maximizing returns of shareholders. Similarly, bonuses are not given on the amount of work that employers did but with completing of target of required profit. B) Legal Processes Wall Street provides legal security to all the profit making organization in this law system. It was never proved in any court that a firm broke its own rules to make more and more profit. Providing them this legal security made them confident legally and morally. Wall Street did this by corrupting democracy and justice. They gave an agreed fee instead of facing prosecution and bought the judiciary which made everything legal for them. It worked very well for them as they were making profit but in the long term it had great consequences on the society. C) Moral Failure The system designed by Wall Street was full of fraud, greed and didn’t take account of the consequences on the people and society. There only purpose was their financial profit only. As judiciary had no issue with their agenda, the only people who suffered from these games were the common people who were hardworking and doing things in the right way. For example, many incidents of exclusion of properties without suitable documents by banks were reported. According to Paul Krugman, State Attorney generals have recently investigated these issues and they came with the fact that banks approach house owners whose homes are soon to be foreclosed, they offer them a handsome amount for the house which they don’t have the intension of approving. Basically, it is a trick they use to obtain more fee and money from the borrowers which will in the end finish them financially and they will be kicked from their own homes. It also states that how Wall Street give bonuses and incentives to the top management so that they can take those decisions in which they will surely get the profit and the risk of loss is transferred to other people and their shareholders. Wall street also played political game here i.e. instead of accepting their own mistake they financed and conducted campaigns whose purpose was to tell the people that this financial crisis was the failure of the Government and the policy of tax breaks and bank bailouts for people having income more than $250000 was because of greedy Government employers like police, teachers etc. Recommendations A) Community Based Banking System. We have to create a banking system which was before 1970s which is locally rooted and is accountable financially. When the baking systems are rooted locally, they provide local people the opportunities so that they can have good financial life. They finance projects locally which will be required to fulfill the basic needs of local people. Point is we still have more than 7600 community based banks in US. Due to the campaign of “Move your Money”, mostly people transferred their money from these banks to Wall Street banks where they can gain a large amount of profit from their money. Although their behavior with the customers can be unfriendly or discriminatory as compared to Wall Street Banks but their main purpose is to provide better opportunities to the local communities. Just like Wall Street, they also need adjustments in their social damaging projects but still a handful of these banks have designed new ownership structure which will support more social projects for local people. For example, they have started institutions whose purpose is to serve people of different colors or to serve those groups to who bank systems before didn’t pay much attention. Now these startup institutions play an important role in rebuilding the base of a new system which is community based which is transparent and has a body of strong public regulatory system. Here the banks have equal opportunities of gaining profit as well as risk of loss without even losing competitors or shareholders also these banks are accountable. It should be the rule that even for gaining profit; the assets of private ownership should be below 1 Billion Dollars. But this limit could be set higher when community based ownership are there as it will provide benefit to the whole community. Exception for non-profit foundations should be there that they can own for-profit institutions such that they invest the profit gained in this into the community projects or by lending or granting to local organizations. If we have to make America great again in the 21st century, we have to adopt Main Street banking system, not Wall Street Banking System. We have to design a Community Development Financial System which is accountable and whose main purpose is to spend on the local community instead of making themselves rich. B) Accountable Federal Reserve In any modern economy, a central bank is required whose purpose is to control all the management of money supply. This responsibility of United States I s fulfilled by US Federal Reserves. It has capability of creating trillions of dollars and then transfers that money to any beneficiary bank which it chooses. Now under Wall Street, the creation of the money is not accountable by public, instead it produces the only according to provide profit to Wall Street major banks. These banks after receiving the money will maximize the packages of their topmost managers and will have no concern in using the for community purposes for US or local citizens. William Grieder in an article wrote that this Federal Reserve is actually black hole of US financial system as it provides money to those institutions whose purpose to gain more and more profit without caring about local community. Its main power is that people who are doing this in Federal Reserve don’t have the actual understanding of what they are doing to US economy. In fact, this Federal Reserve System was one of the main reasons of financial crises of 2008. Their former chairman Alan Greenspan was the one who financed Wall Street Expenses. It was under his leadership that the Federal Reserve failed to obey its own rules and it just forgot about the need of local community banks. It disobeyed its own Free Market principles by providing aid and supporting Wall Street Banking Systems. When the crises came, it was this federal who backed up the Wall Street Banks and supported them so that they can get out of this crises. Now there is a basic need of central bank which is transparent and public accountable. C) Federal Recovery Creation In the current banking system, the new money first flows into the top banks of Wall Street and they hope to use this money in the availability of increasing the credit to real wealth economy of Main Street. Despite of that, Grieder gave a new plan of a system in which the new money is not transferred to Wall Street banks, instead it is directly used in productive economy for example to finance an infrastructure which will be productive thing for the community and also higher locals people from the community. It will give those jobs etc. When money is spent this way, it is directly given to local workers, wagers, contractors and a direct profit if obtained instead of transferring it to the banks. Now when money is directly transferred to these workers, it brings them food, shelter and fulfills their daily based needs. They pay their debts and taxes. When taxes are paid, money will get back to the banks but will enter from the lower level. So Government will use this money in funding more programs. In this way banking systems are restricted and the money is used in benefitting local people so money is used in community purposes instead of giving it to the top banks. Now if in a country with down economy, new money is used in infrastructure with very high rate of unemployment, this can solve both the issues. Now if during the crises of 2008, out of $12 trillion money created, if only $3 to $4 trillion should have been used in these constructive paths, we should have very high economy along with the bright future of children of America. D) Global Trade and Self Esteem The current condition of Global economy is that they prefer interest rates, power and rights of Global institutions over interests, power and rights of common people. They don’t care that the Government is responsible for the wellbeing of all communities. Money is invested in only those projects where there is a chance that it will be returned without considering its consequences on people and countries. Different countries are people are in global competition of gaining favor of those people who have the actual control on World’s Financial System. As a result, the gap present between rich and poor people is getting wider and wider. Those who have money are controlling the world. The people, institutions and countries having huge money in the banks are buying land, energy, water and resources of minerals. Global institutions stay away from paying taxes in those countries from where they gain the highest profit. This is done by creative planning and accounting by sending the profits to offshore tax heavens. As a result, prices increase and choices of poor people also decreases. According to the current set rules by Wall Street, government of other countries cannot interface in the process, no what how hardly their security and well-being of their communities have suffered. Conclusion Our future as a whole depends on global corporations and the development of such an economy by every country where the future of every child of that country is secured in spite of his race, color or religion. For achieving this, we have to define new rules in which people’s rights and interests are preferred over profit and power of institutions, promote equal division of power and accept positive values of intuition’s sharing. Now economy of any region needs the most funds because of local production and using available resources and to trade with their neighbors with what they cannot produce by themselves. The above mentioned is the exact model represented by David Ricardo as it brings balance in the community and ecosystem. People should learn that first they have to know about the place they live in and the resources present there and they have to decrease the destructive and wasteful use of resources. As a result, Increase in costs due to growth in population can be calculated. Human well-being will increase with the decrease in GDP. Humans will keep balance with themselves. Our children will have a secured bright future. Works Cited Bernie Sanders: We can create wealth without Wall Street. (2016). money.cnn.com/video/news/economy . Ip, G. (2016). The Economy’s Hidden Problem: We’re Out of Big Ideas. https://www.wsj.com/articles/ . Joseph Fuller, M. C. (2002). JUST SAY NO TO WALL STREET: PUTTING A STOP TO THE EARNINGS GAME. http://onlinelibrary.wiley.com/doi . Korten, D. (2011). How to Liberate America from Wall Street Rule. http://www.yesmagazine.org/pdf .