The world of fictitious value mesmerizes itself by using a strange
language. Financial operations refer to their "shop," as if they were
standing over a workbench shaping metal or wood. Then they talk about
"value creation."
What does that mean? Suppose I start a private equity company. People
give me money to create value. I can create this value by taking over a
company with very little of my own money. I need a banking accomplice
to give me a bridge loan and a compliant company management. Then I can
"unlock" the firm's value.
Once source of untapped value is a pension fund. Workers can be granted
stock in the company as compensation. I can take over the firm, then
use the pension fund to pay for some of the money I own. I can load the
firm up with debt and charge it exorbitant fees. Now I have begun to
"unlock" value.
Next, I can fire lots of workers, including those whose pension fund
financed my takeover. By doing so, I can show that I am creating
efficiencies. Once I cook the books to make the firm look profitable
and sell it to a unsuspecting public.
Should anyone be surprised that many of these companies have been going
bankrupt? And the workers whose pensions were central to the process?
Well, they have some pretty paper.
Ain't capital wonderful?
--
Michael Perelman
Economics Department
California State University
Chico, CA
95929
530 898 5321
fax 530 898 5901
http://michaelperelman.wordpress.com
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