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Financial Industry Run Amok

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  • Democrat
    Hot Springs Village, AR
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    Not only has the financial industry become "too big to fail" it has an outsized influence in our politics as well.

    economist.com/blogs/buttonwood/2015/02/...

    Finance no longer serves the real economy as it had for decades by providing financing for businesses that made things. It has become a behemoth that now accounts for about 30% of the nation's profits. It has come to the point that the term GNP is next to meaningless. We may as well replace the "P" in GNP with a "R" for revenue since product has nearly disappeared from the scene. Finance appears in spades in industries such as education and health care system where they never were before. The GOP can't wait to let finance get their paws on our Social Security fund. It appears that they would love to monetize and privatize everything at the expense of the common good. The crash of 2008 should have told us that they are a dangerous force in the American economy and need to be throttled.

    In that regard, I recommend a book "Makers and Takers" by Rana Foroohar. There are many others, of course, but this one gives examples most of us are unaware of. As ineffective in many cases as Dodd Frank is, the power masters in the financial industry are attempting to chip away at it.

  • Liberal Democrat
    Democrat
    Colorado Springs, CO
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    Yes it is difficult problem and much of it lies squarely with our Congress's unwillingness to make laws and regulations with more teeth to them. Yet we continue to elect members of Congress who do not act in our best economic interests. And now one Donald Trump who appeals to our worst instincts and would be a disaster for the economic being of the middle class, is somehow now a serious candidate for the presidency of the United States?

    I often read Rana Foroohar's articles in Time. As an Iranian-American she can provide a global perspective that sometimes escapes the insular views of many Americans. I haven't read her book yet, but your post has reminded me to order it.

    Amazon: Makers and Takers: The Rise of Finance and the Fall of American Business

  • Strongly Liberal Democrat
    Democrat
    Pensacola, FL
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    Low or zero velocity money is the problem . Stagnating money or low velocity money drops our GDP. Businesses go out of business and a dependance on imports grow. The amount of money not working has grown into trillions.
    Look at money, economy and capitalism.
    Money:
    Money is supposedly the tool to facilitate trading. When a farmer has milk and he wants barbed wire. He sells his milk for money and buys the barbed wire with money . That speeds up and facilitates the transaction that would have entailed trading a certain amount of milk for the desired amount of barbed wire.
    Economy:
    Economy is the name given to and is the definition of trading in goods and services. It is the study of and description of the movement of goods and services to fulfill the broad variety of goods and services needed by a population.
    Capitalism:
    Capitalism is the control of goods and services to fill the needs of business to establish the means to provide the goods and services for economies to produce and thrive.
    What has happened is that money is not being used for the purpose for which it was intended. Money has become the object of financial transactions. Traders are using money to generate incomes instead of using money to create goods and services to trade in an economy. This is a one way process. What is happening is interest is created in watching an activity. A position and a contrary position are established having no effect on the subject activity. As information creates positive and negative descriptions of the subject activity the desirability of the position and contrary positions changes. This creates activity and fees are charged for trading responding to the desirability. Some of the desirability is artificially created and traded upon in millionths of seconds. The end result is money is used to create more money without producing a product to sell. This happens at an increasing rate because of the desirability to create income cheaper, easier and faster than manufacturing a good or service to sell. That is why Wall Street is doing good while main street isn't. Wall Street has found out how to create an income without the draw back of hiring people.
    The trouble is the fees will eventually use up all the money and everything will come to a halt much in the same way it did in 2008. Money is making money without working. Money has to be put back to work. If money is used for what it was intended then goods will be made to sell and trade. Our present system will return to an economy and once again capitalism will actually become real capitalism. Investments will be made in producing goods and products to sell. The USA will once again be making goods and services that have universal desirability. Historically and traditionally crime and violence have been associated with and inversely proportional to income. A thriving economy will produce more jobs and more importantly good paying jobs. Everything will improve. The solution is simple. There are many transactions that were illegal according to states gaming laws. There have been federal laws passed that superseded those state laws making the illegal gambling transactions legal under federal jurisdiction. Repeal the Federal laws starting with the disastrous law that let the 2008 disaster happen, The Commodities Futures Modernization Act, CFMA. It is universally acknowledged that the CFMA played a major role in the 2008 disaster. A start to resurrecting the economy would be to repeal all laws similar to the CFMA. Put money back to work increasing its velocity and everything will get better.
  • Democrat
    Hot Springs Village, AR
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    All true,Chet.

    Notice also how our tax system overwhelmingly favors capital over labor. If that is supposed to be an incentive to spurring the "real economy" it's not working. Finance has taken advantage. Instead of investing in startups it underwrites massive mergers. The latest includes Bayer and Monsanto which would further strengthen Monsanto's strangle hold on agribusiness. M&A activity is all that is happening along with huge buybacks in major corporations.