The crash of 2008 marked the beginning of the global economic crisis. The states kept up their production and citizens kept up working. Undoubtedly the economic crisis has not eradicated production and the global treasury, but this was the effect due to the bad management of the global wealth. Financial institutions like Goldman Sachs and Rating Agencies constructed a series of banking products without collateral, when simultaneously, the same agencies were betting on state economies, like horses running in a hippodrome.
Goldman Sachs was founded by Marco Goldman and Samuel Sachs in the US as a bank which was dealing with loan recoveries. The bank today is illustrated as the big Guru of global economy and its officials are in every round table of decision making in the world such as Governments, organisations and financial institutions. However the bank is criticised by numerous economists and thinkers as the invisible hand behind the bursting of the US housing bubble which was structured in high risk loans and led to the global economic crisis. Goldman Sachs is even το blame for the BP oil spill in the Mexican gulf.
From their headquarters in Manhattan and London, Goldman Sachs works globally through their government and economic associates. Marc Roche (2010) highlights in his book that Goldman Sachs is ‘’ a weird economic animal’’. He analyses that Goldman Sachs is an amalgamation of a Government and a bank. A bank that deals with every form of economic activity, such as advisor for Governments and businesses, deals with trade and asset management, hedge funds, private equity and even more. In the same time Goldman Sachs has a significant difference in comparison to other banks of the globe, which is the international and influential lobby in all levels.
The Goldman lobby does not only consist of bank officials, but a whole network of associates, politicians, a transnational economic elite, which promotes a market philosophy of antagonism. The reason Goldman Sachs is so successful arises from the engagement of intelligent and hard working individuals with devotion to the company, that will work beyond boundaries for some decades and in their 40’s will retire wealthy. People that are willing to sacrifice friends, family and a normal social life for the sake of the company. As the chief executive of Goldman Sachs Lloyd Blankfein said about the company ‘’ we are doing the God’s work’’. The average of working years in the company is 10 years, but even if you leave the company the relationship continues. Most of their officials are exploited after their retirement in major positions because they are seen as authorities of the market.
For instance after the 2008 crash, the whole methodology that was incorporated for the handling of banking sector in the US, was managed by people of Goldman Sachs in the Federal Reserve. Some examples of the authorities of Goldman Sachs are the Minister for Treasury under B.Clinton administration Robert Rubin, who was Vice President of the Board of Directors of Goldman Sachs before. Later on, the Bush administration replaced R.Rubin with Hank Paulson who was the President of Goldman Sachs. Other examples are the ex-President of the World Bank Robert Bruce Zoellick, the Governor of Central Bank of Canada Mark Carney, the President of European Central Bank Mario Draghi, the minister and Chief of the European Commission Romano Prodi, the Chairman of Organisation of Public Debt Management of Greece (ODIX) Petros Christodoulou and Otmar Issing the Chief Economist and member of board of European Central Bank.
Individuals today, invented new ways to maximise their profits by investing in products that have nothing to do with production, but they are mere banking constructs. The idea of fantastic products with real profits has been incarnated in the notion of ”creative finance” of the market economy. Moreover politics and lobbies have a major impact in this mode of production.
The traditional Capitalist system was operating while individuals were using their profits to invest in a continuous cycle of investment in order to receive more profits. The quintessence of the free capitalist market is seen by Adam Smith as a darwinistic race for survival of the successful. And just because the successful are succeeding, hence, initiatives are given to the society for innovative and productive efforts, that in the end of the day are maximising the wealth of everyone.
The reality of creative finance changed the face of Capitalism, because it broke the chain of normal production, which links profitability with development. Goldman Sachs has played a catalyst role in this new mode of production, through the import of stock market securities. Maybe this was the end of traditional Capitalism, but even the new model, remains the absolute economic model of humanity.
By Pantelis A. Poetis
- Mc Clatchy DC, How Goldman Sachs secretly bet on the US housing crash: http://www.mcclatchydc.com/news/politics-government/article24561376.html
- Forbes, The Evolution of Goldman Sachs: http://www.forbes.com/2010/05/21/goldman-sachs-fraud-case-personal-finance-gs.html
- Investopedia, Adam Smith: The Father of Economics: http://www.investopedia.com/updates/adam-smith-economics/
- Adam Smith Institute, The Wealth of Nations:
- The telegraph,Gulf of Mexico oil spill: BP may turn out to be the oil sector’s Goldman Sachs: http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/7687395/Gulf-of-Mexico-oil-spill-BP-may-turn-out-to-be-the-oil-sectors-Goldman-Sachs.html
- Roche, Marc. La Banque\. 1st ed. Paris: Albin Michel, 2010 pp 36-38
- New York Times, Blankfein Says He’s Just Doing ‘God’s Work’:
- New York Times, Foreign Affairs; Don’t Mess with Moodys: http://www.nytimes.com/1995/02/22/opinion/foreign-affairs-don-t-mess-with-moody-s.html
- Goldman Sachs image 1: http://www.businesspundit.com/wp-content/uploads/2016/01/Goldman-Sachs-work-life-balance.jpg
- 10) Goldman Sachs Image 2: http://www.gannett-cdn.com/-mm-/0c9085518555727893ce7894301be9aaee4119e9/c=308-0-3158-2143&r=x404&c=534×401/local/-/media/2016/08/21/USATODAY/USATODAY/636073765797353351-EPA