Monday, February 12, 2018

The real "laundromat"?

A lot of people are wondering how exactly the stock prices have gotten so high. Most point to a low interest rate and a steady flow of capital into the hand of corporations that prefer to use it to drive up their stock prices instead of improving actual product quality or investing in real innovation.

I think that part is true, but the there is another factor to consider. ICIJ has been doing some brilliant reporting on the Panama Papers. And the one thing that stands out from this reporting is that the global financial elite, including the leaders of most of the major publicly traded corporations use the exact same places to dodge corporate taxes that the drug dealers, illicit arms traders and human traffickers use to launder their ill-gotten wealth.

There is a lot of paperwork to sort through, but one wonders if the massive surge in speculative investment in the stock market is correlated to a kind of "constructive interference" between the flow of ill-gotten wealth (form drugs, arms and human trafficking) and flow of tax dodging revenue. As both revenue streams end up in the same geographical locations and people who live together invest together, I wonder if these flows are ending up doing the same thing in the major markets.

I suspect that the laundromats operating in places like the Bahamas, Cyprus, Iceland, Mauritius etc... tend to move conflict capital out of the shadows and into the open market by buying up financial instruments.

The legally tax dodged capital produced in major corporations similarly loops around the same off-shore institutions and finds it way back into the market as fuel for speculative transactions. It has the same "free money" feel that conflict capital has.

It would not be too hard to imagine a banker in Panama or the Bahamas using earnings on speculation with tax dodged money to fill out the lumps in the cost of transacting ill-gotten cash from criminals and vice versa.

Is that what the real "laundromat" is?


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