The issue is not finance per se, i.e., the process of intermediation between savings and investment. This we obviously need to some degree. But do we need a financial sector that now accounts 7 or 8 percent of GDP?
In other words: We need finance. But we don't need it to be such a big part of our economy as it is today.
I agree.
Here, from a year-old post by ContraHour on Seeking Alpha, is a glance at how big finance has become:
The topmost trend-line shows the accumulation of total debt. At the right-hand side, the next one down from the top is "Domestic Financial," equivalent to Simon Johnson's "modern finance."
At the right-hand side, the most recent numbers show domestic financial debt is the biggest component of the debt. At the left-hand side, the oldest information shows domestic financial debt as the smallest component. Clearly, domestic financial debt has been the fastest-growing component of debt.
Finance is the cancer.
I see we've lost the graph.
ReplyDeleteThis post is from before I learned to keep my own copies of stuff.
Found it!
ReplyDeleteI D/L the file back in 2010.