On the most recent episode of the Keiser Report, Max and Stacy open the show with a discussion of the chart below, which shows that the top 1 percent of the world’s population owns half of the world’s wealth, and comes from a report discussed here: “Richest one per cent owns more than half the world’s wealth”:

Max Keiser explains one aspect of how this extremely inequitable situation came to be beginning at approx. 1:14:

“Let me give you a brief history on how this all took place and why it all happens.  You see, to make the comparison to the atomic age, when it was possible to split the atom.  You created atomic weapons, and the balance of power of the world changed, and we live in a new post-nuclear age.  Or a nuclear age. 

Now in the 1970’s and early 1980’s, it was possible to split risk and reward, with something called the ‘Options Volatility Formula.’  And thus began the age of the derivative contract.  And the derivative contract allowed for the top 1% to siphon off cash without taking any risk.  That’s how the top 1% becomes the top 1%—not by making more, but by taking less risk.

They put all of their financial risk into the public domain, where it shows up as infrastructure collapse, or taxes, or corrupt politicians, or corrupt police—and the concentration of wealth that is the result of being able to borrow at zero percent, grab assets without taking any risk is this [referring to the global wealth pyramid chart above].

The solution is to re-introduce risk in an equitable way into the global markets.  But that conversation’s not even taking place on any level because no policymaker in the world understands the history of derivatives, the options volatility formula, and the progress of this concentration of wealth in the top 1%.  So there’s nobody even talking about it, so I don’t see any solution happening, other than what we’re seeing, which is the youth of the world staging a global insurrection against banking occupation.  We’ve talked about GIABO [Global Insurrection Against Banker Occupation] on this show for years…and bankers are an occupying force, using…modern weapons of financial terrorism…derivatives.”

Here is the video of the above:

In other words, it is not “capitalism” that has enriched this 1% of the world’s population.  No, because capitalism is supposedly all about risk.  This is expressed rather succinctly and eloquently by British journalist Simon Heffer here:

“If you don’t want to accept that you might lose money at capitalism, then don’t play the game.

This ought to be self-evidently true for shareholders – but it applies to depositors, too. All capitalism is about risk. Rewards do not come otherwise. Sometimes risk is high; at others it isn’t.”

Indeed, we have written about this lack of risk before here at LRM, and the headline of the article dovetails very well with what Keiser explained above: BANKS PUT ALL RISK ON US, THEN TAKE ALL THE REWARD AND PRETEND THAT IS CAPITALISM.  An excerpt:

“Did you get that?  [The Bank of England] said it themselves—banks do not give “thousands of pounds of banknotes” when they make a “loan,” banks just credit an account with a bank deposit “of the size of the mortgage.”  In other words, bank “loans” are not cash, they are merely keystrokes in a database that says you now have money in an account whereas you didn’t have that money the few seconds before the keystrokes were made.  That’s it.

So since bank loans aren’t cash—says the Bank of England, not me—what risk is there in bank lending?  None at all.  But the idea that a bank “loaned” someone…money—and took a real risk to do so—is the entire logic behind punitive wage garnishment, foreclosure, debt collection, etc.  But that idea is totally false.

How many times have we heard those words—“did you borrow the money?”  That’s the justification for our entire system, but it is based on an entirely false premise.  The question should really be asked back—“did you loan the money, or did you just hit an ‘Enter’ key on a computer?”  Because the real answer to that question is the latter, and that means that there is no risk in bank lending, whether that be for a mortgage, education, car, credit card, or what have you.”

Since there was no risk taken by the banks, there is no cause for reward.  It’s very simple.  Max Keiser commented on this phenomenon before, perhaps nowhere more aptly than this exchange with the great Michael Hudson, transcribed in this LRM post headlined “THE BANK VS. YOU: ASYMMETRICAL WARFARE”:

Max Keiser (begins at 17:42):  If we look at the recent history of these financial predators going back 5 or 6 years, they were making these no-income, no-asset loans–NINJA loans–to people, really in a way that was completely asymmetric, if you will, in terms of their risk. Because the banks were able to sell that risk on whereas the homeowners accepted all the risk. They got these homeowners into enormous debt. Then all the banks decided, “You know what, we’re going to go into debt, we’re gonna have a banking crisis because we inflated a huge bubble.” Then they went in and they illegally foreclosed on these properties—they stole the property from these people that they fraudulently sold the mortgages to to begin with, trading on inside information against their clients as Goldman Sachs did. Now what you’re saying is, 5 or 6 years later, after basically throwing these people out in the street, they end up buying them for all cash, with money that they get at 0% interest rate. They charge them rent on people that were living there to begin with, and now they’re in a crisis again, which will probably lead to another bailout of the hedge funds like we saw with Long Term Capital Management. Is that about it?”

Michael Hudson (nodding in agreement during the entire breakdown above): That’s EXACTLY what’s happening, Max. You’ve got it.

Does this describe capitalism?  Because if it does, I want no part of it and don’t understand why anyone else would, either.  It’s a sucker’s game—a rigged casino.