The Financialization of Capitalism (1 Viewer)

[Arsenal of Doom]

Long but thought provoking read:

American Capitalism’s Great Crisis

TL/DR: 

[T]he financial sector now represents around 7% of the U.S. economy, up from about 4% in 1980. Despite currently taking around 25% of all corporate profits, it creates a mere 4% of all jobs. Trouble is, research by numerous academics as well as institutions like the Bank for International Settlements and the International Monetary Fund shows that when finance gets that big, it starts to suck the economic air out of the room. In fact, finance starts having this adverse effect when it’s only half the size that it currently is in the U.S.

Or to put it another way, the financial sector has become a self-feeding entity that is actually crowding out new investment and growth at the expense of short-term equity profiteering that benefits only a small portion of the population.  

 

[Insomniac]

Long but thought provoking read:

American Capitalism’s Great Crisis

TL/DR: 

Or to put it another way, the financial sector has become a self-feeding entity that is actually crowding out new investment and growth at the expense of short-term equity profiteering that benefits only a small portion of the population.  

Some years back I worked with a recent MIT grad. He was in software but he told me most of his classmates were working on Wall Street. I can't blame them, the money in finance is far greater than it is in science and engineering. OTOH I wonder if having our best minds working on being a little more efficient in coming up with arbitrage algorithms is really the most productive use for society of their talents.

 

[Homer J Simpson]

Some years back I worked with a recent MIT grad. He was in software but he told me most of his classmates were working on Wall Street. I can't blame them, the money in finance is far greater than it is in science and engineering. OTOH I wonder if having our best minds working on being a little more efficient in coming up with arbitrage algorithms is really the most productive use for society of their talents.

It's definitely not. 

 

[hxperson]

Some years back I worked with a recent MIT grad. He was in software but he told me most of his classmates were working on Wall Street. I can't blame them, the money in finance is far greater than it is in science and engineering. OTOH I wonder if having our best minds working on being a little more efficient in coming up with arbitrage algorithms is really the most productive use for society of their talents.

It would be far more productive if they were out in silicon valley working on the next great app that can show all of your friends what you are having for dinner tonight better than the last one.

 

[Arsenal of Doom]

It would be far more productive if they were out in silicon valley working on the next great app that can show all of your friends what you are having for dinner tonight better than the last one.

This one area where I'm not sure the author's premise fully holds up. While the money spent on R&D may be falling in comparison to financial actions like stock buy-backs, it doesn't mean that is an either-or scenario or causal relasionship. There's been a lot of thought and writing about us being at a technology inflection point, where the rate of innovation is happening faster than most people can keep up. It possible that R&D spend is down simply because the work is faster and more efficient, and just spending extra on R&D may not speed up or improve anything. 

Of course, there are still probably better (from a societal viewpoint) things for companies to do with 10 Trillion dollars than have it parked in banks. Eventually we need to figure out how to get that money moving through the economy again, ideally in the form of jobs but technology and globalization are obviously factors there also. 

 

[SaintsInDome2006]

I haven't read the article, just the blurb but a good deal of the finance sector is devoted to government debt, with bonds and loans, and our federal debt has shot up to 21 trill under our last two presidents. If there's a real problem my first guess would be look there first.

 

[Dentist]

Some years back I worked with a recent MIT grad. He was in software but he told me most of his classmates were working on Wall Street. I can't blame them, the money in finance is far greater than it is in science and engineering. OTOH I wonder if having our best minds working on being a little more efficient in coming up with arbitrage algorithms is really the most productive use for society of their talents.

It would be far better if they were either working in health care, pharmaceuticals, or another type of science to further mankind.

Unfortunately the drive for healthcare costs to come down combined with people's hate for doctors profiting from their work lead to a culture where if my kid was smart enough I wouldn't send him into healthcare either when the money is way better and less hassles with something different.

 

[worrierking]

I remember reading something shortly after the financial crisis in '07-'08 about how the percentage of the recovery from after 9/11 until 2006 was about 60% in the financial sector.  Financials were a greater portion of growth than any other recovery and that it both made the growth illusory and vulnerable to the kind of collapse we had.  It was an interesting piece that probably goes along with this article.

I confess to not being economically educated enough to make a decent critique of the article, but my suspicions are that it is a political piece first and an economic one second (it blames a lot of the problems on deregulation).  I would not be a bit surprised to find that what it is saying is a problem is really a symptom of something else. I am guessing it has cause and effect problems.