I get to sit at a desk, use AutoCAD all day, and draw. (And they call this work!) And I create little utility programs in VBA, hook them up to toolbar buttons, and use those buttons to make my job faster and easier. Maybe not everybody would like this job. But I sure do.
I don't work for a company that makes drawings. I work for a company that makes stuff out of wood and metal parts. My job is to find out what the boss wants, or what the customer wants, and translate that into something useful for the guys in the shop, the guys who create the stuff we sell.
My job, really, is to make it faster and easier for the company to produce the stuff we produce. I don't produce the stuff myself. I facilitate production.
You have to know by now. This post is some kind of analogy. Yep: I'm like the finance industry, producing paper that helps the work get done.
In our economy we have the productive sector and the finance sector. The finance sector is like me, producing paper that facilitates production. The productive sector is like our shop, where the real work gets done.
My boss could decide to close the shop, and produce drawings for other companies instead. That would make our company like... like the Cayman Islands, say, where the only industry is finance. Some companies do that. But not every company can do it. If nobody's making things, then nobody needs the paper.
There has to be balance between production and facilitation, production and finance. If too many guys are making drawings in our economy, some will go out of business. That's the "invisible hand" at work.
But the invisible hand doesn't seem to work for finance. When Ford makes more money financing cars than it does making cars, it's a sign that finance plays too big a role.
For some reason when we get too much finance, finance becomes more profitable than production. This draws more people and more money into finance and makes the imbalance bigger. The imbalance grows until it is unsustainable.
And then you get a financial crisis.
If this is true -- if the imbalance between finance and production creates serious economic problems -- then there must be a Laffer Limit for finance. There must be a point at which continuing to do the same thing begins to have the opposite effect.
There must be a best point, or a best range, where we have just the right balance between finance and production. That is the point where finance facilitates the most production. Increase finance a little more, and the cost of finance begins to add too much to the cost of doing business. And then economic growth will be less than expected -- except in the finance industry.
I couldn't begin to guess what the perfect-balance point would be. But I know we have too much finance per unit of production. So I say set a target: shoot for cutting debt by half. Shoot for cutting finance in half. Simon Johnson of The Baseline Scenario says the same. He thinks finance should be about 4% of GDP, not 8% as it is today.