March 27, 2017

Wall Street key to inequality fight

Wall Street key to inequality fight

The global financial industry is one of the few institutions with the capacity to help address society’s growing income inequality, says Cole Reifler.

As the gap between societies richest and poorest continues to widen, the stark reality is that Wall Street is one of the few institutions with the ability to tackle this.

Government has failed time and time again to improve the lives of ordinary Americans. Relying on charity won’t solve the root cause of inequality either; it usually only papers over the cracks. If anything, it could make things worse by perpetuating dependency.

It’s time to get over the financial crisis

It’s easy to blame Wall Street for people’s financial struggles. We hear the same things over and over again: bankers’ irresponsibility caused the financial crash in 2008. Hard-working Americans were left with nothing, while Wall Street executives walked away with big bonuses. Wall Street executives are greed and excess personified.

Let me be clear. It’s shameful that people lost out in the financial crash, but we can’t afford to stigmatize Wall Street any more. The recklessness of a few shouldn’t write off our whole financial system. After all, America’s prosperity was built upon free enterprise and wealth creation, with Wall Street leading the way.

But rather than arguing that Wall Street is the bane of our lives; that it is structurally incapable of doing anything but make the world worse, let’s ask some difficult questions. Let’s ask, instead, how we can funnel the power of Wall Street to help more people out of poverty; help more people pay for college; help more people go on vacation; help more people buy houses.

Government isn’t working

Finance is remarkably powerful. It decides who makes more money, and who makes less. The system can allocate more money and capital to one part of the country or segment of the population than another. This is a risk, but it is also an opportunity. It is an opportunity to shift the dynamics, and make sure that more money reaches our most hard-working people.

The real travesty is that millions of hard-working people in America are unable to afford to pay for their children’s education. In many families, there are two parents are in full-time employment; they save the little bit of money they have left after food, rent, and bills, and they still can’t seem to pay for healthcare or education. After 10 years of saving for their children’s education, they end up with much less than they expect. No college. No vacation. No upgrade on your car or house.

One diagnosis of this problem is that these people aren’t making enough money to begin with. That the government needs to shift money from wealthier people in the form of taxes. But another one is that they are not getting the returns on their savings that they deserve in the first place – so all their hard work is going to waste.

Due to the miserly interest rates that many savings accounts now deliver, many families’ earnings and savings are being eroded by inflation rather than the opposite. They end up with less money rather than more.

Equality starts with equality of opportunity

How do we solve this problem at its root? How do we make sure that inflation doesn’t continue to erode the savings of millions of people? We need to give Americans the opportunity to make the most of their money. The best form of equality is equality of opportunity. Everyone deserves an equal opportunity; everyone deserves a fair chance to realise the American Dream.

For the last century, Wall Street hasn’t done this.  It has offered the wealthy access to special, high yielding investment opportunities, while limiting the middle class from participating in the same opportunities. The government allows the middle class to gamble and play lotto, but limits them from investing in specific opportunities that have outperformed 401ks and pension plans for years. If one could level the investment playing field by giving everyone access to the same opportunities it would make a big difference.

Over ten years, a compound interest rate of one per cent on a base of $20,000 will become $22,092. One per cent is good for a saving account right now. Over that same period a compound interest rate of eight per cent on a base of $20,000 will become $43,178. The difference is incredible. It is huge. It is the difference between paying for college and not paying for college.

But investment opportunities at the 8 per cent mark have been keep off the books for many banks and investment companies, reserved only for wealthy investors.

The democratisation of good quality investment opportunities will be a truly disruptive force in finance over the coming years. This has been denied to millions of people for generations but several Wall Street firms are now trying to step into the void to change this.

Recognise the good in Wall Street

Wall Street has been blamed for our desperate financial situation, but it also holds the solution. The average American has been neglected from specialised investment opportunities for years, limiting their return stream, and making them less likely to pay for college, buy a new house, or take the vacation they have always dreamed of.

Wall Street can change that. But it also demands a new perspective from the government and the public. We need to recognise that as well as creating problems, finance has the potential to do a lot of good too.

5.00 avg. rating (93% score) - 1 vote
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Cole Reifler
Cole Reifler is President and Co-founder of Forefront Income Trust. He founded the organisation in 2014 to give the middle class access to investment opportunities typically reserved for the one per cent. Cole serves on multiple corporate and advisory boards, including Arora, a financial platform whose mission is to empower the world to be equally powered by women.
  • Shadow Warrior

    Hammond is continuity Brown. He is a hand-wringing lefty looking for clever wheezes to raise more tax in ways that people don’t immediately notice.

  • captainslugwash

    I predict the Budget will attempt to show the Left how caring the Tories are, and it will be funded by screwing over the working man.
    If Corp Tax comes down, I bet Divi tax will be going up.
    I would love to be wrong.

  • skynine

    We really need to look at tax credits, in particular in work tax credits that encourage people to work part time to preserve the benefits. 45% of women work part time and I would hazard a guess that tax credits are the main cause. This leads to low pay, low skill work in supermarkets and the retail sector including coffee shops. The government needs to get back to the employer paying people to do a job for economic reasons rather than to get onto the tax credit ladder. Like all government benefits it distorts the market and diverts government expenditure into non productive areas.
    The refrain that the government has cut expenditure is not true, it increases every year as more and more goes into welfare.

  • MrVeryAngry

    fat chance

  • MrSauce

    So, when wouldn’t we want a ‘budget for growth’?

  • Rob

    I note that the UK Government has just slapped on a 25% tax charge for anyone moving abroad and wishing to move out their private pension from the UK.

  • SonofBoudica

    The Remoaners will do their utmost to sabotage the Government’s negotiating position. They do not want a successful outcome; they want a failure. They want to be able to scream “Told you so!” from the rooftops.

  • EnglandLaments

    Thank goodness for Andrew Neil, the one media hack who scares the pants off the established politicians. He was spot on with Heidi Allen!

  • joshuafalken

    I had a very long, hard, studied and considered look at the hope, care and aspirations of all Europeans, before I voted to get the UK out of the toxic grasp of Brussels.

    The European Union and it’s charge of “ever closer union” has borrowed and spent its way to oblivion, whilst enslaving the working and middle classes in debt.

    The central control mantra of the unaccountable Brussels ruling elite, delivered through a mixture of socialism, globalism and corporatism is entirely responsible for the populist revolt by the millions of “Just About Managings” across Europe.

    We must remember the ultimate goal of socialists, globalists and corporatists is control, not prosperity. see https://mises.org/blog/goal-socialists-socialism-—-not-prosperity.

    Social equality and economic growth always fail under central control and fighting against the Brussels doctrine on behalf of all Europeans is why I voted for Brexit.

    Britain has a long history of helping Europeans depose tyrants and Brussels is just the latest incarnation.

    Britain is the most racially advanced and accepting society on the planet. We welcome those in need and those that can help us with open arms and a smile; that will not change.

    We are also one of the most innovative, talented and open societies in the world, which why everyone wants to live here. However, we cannot fit everyone in, so we have to have clear, balanced and fair immigration policy which is where the arguments start between the monetarists and humanists will never be reconciled.

    I thought long and hard before coming to the conclusion that leaving the EU was in the best interest of all Europeans, as Brussels is toxic and cannot be reformed from within.

    Also, I find it insulting that people who voted Remain have insufficient faith in British ingenuity, compassion and skill to get a good deal for us and see the Europe that we love get a better deal from Brussels and the reform that European people deserve. https://mishtalk.com/2017/03/29/bad-brexit-deal-better-than-no-deal-mathematical-idiocy-odds-of-no-deal/ and https://www.worldheadlines.info/2017/03/after-brexit-9-reasons-to-be-bullish-on-great-britain/

    The politics of left verses right are dead because neither have delivered the promised economic growth and social mobility for anyone, but themselves. The populists are not selfish per-se, they just want to take back control of their own destiny that left/right politicians have freely given away and/or exploited for their own ends. In my constituency, the local residents group are taking over the councils as politicians ignore voters, so Westminster should beware of the well-organised, local resident independents at the next election. This is a peoples revolution which should be shouted from the rooftops, but liberals remained deafened by the socialist, globalist and corporatist “vested interests” that have spectacularly failed us and are obediently crying foul and fake.

    There will be an initial unpalatable inflationary cost to fighting globalism and rolling back central control that few appear to have factored in, but dismantling failed left/right vested interests should eventually free libertarian socially-conservative capitalism from the shackles of TBTF corporatism to feed economic growth and social mobility.

  • agdpa

    The EU usually makes the wrong decision – on immigration, on freedom of movement, on the euro, on the Ukraine, etc. etc. Little hope it will get Brexit right.

  • brownowl

    Eh? Reference please!

  • Neil2

    Sod caring. Screw the spongers and breeders. Kill HS2. Stop all “green” subsidies. Slash “foreign aid” and walk away from the EUSSR with immediate effect.

  • Rob
  • John C

    What a confused article. It conflates surveillance by the security services with poor defences against fraud.

  • John C

    Err, it’s the UK that’s leaving the EU, not vice versa.

  • John C

    Me, now. ‘Growth’ is a manic obsession.

  • La Face Nord

    Mr Redwood – are you aware of the Biased BBC website? It’s been exposing their agenda for a long time, but I imagine you’ve been well aware of the BBC’s agenda for quite some time…

  • Contact Rvtech

    The post is great

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