- Sep 24, 2012
- Reaction score
- Sacramento, CA, USA
- Political Leaning
- Libertarian - Left
Brad Delong said:Back in 2011, I noted that finance and insurance in the United States accounted for 2.8% of GDP in 1950 compared to 8.4% of GDP three years after the worst financial crisis in almost 80 years. “f the US were getting good value from the extra…$750 billion diverted annually from paying people who make directly useful goods and provide directly useful services, it would be obvious in the statistics.”
Starving the Squid by J. Bradford DeLong - Project Syndicate
In the article, he links to two studies that show a negative correlation between financialization and real economic returns:
http://www.bis.org/publ/work381.pdfStephen G Cecchetti and Enisse Kharroubi said:"This paper investigates how financial development affects aggregate productivity growth. Based on a sample of developed and emerging economies, we first show that the level of financial development is good only up to a point, after which it becomes a drag on growth. Second, focusing on advanced economies, we show that a fast-growing financial sector is detrimental to aggregate productivity growth.
http://courses.umass.edu/econ711-rpollin/Orhangazi financialization in CJE.pdfOzgur Orhangazi said:I discuss the impact of ﬁnancialisation on real capital accumulation in the US. Using data from a sample of non-ﬁnancial corporations from 1973 to 2003, I ﬁnd a negative relationship between real investment and ﬁnancialisation. Two channels can help explain this negative relationship: ﬁrst, increased ﬁnancial investment and increased ﬁnancial proﬁt opportunities may have crowded out real investment by changing the incentives of ﬁrm managers and directing funds away from real investment. Second, increased payments to the ﬁnancial markets may have impeded real investment by decreasing available internal funds, shortening the planning horizons of the ﬁrm management and increasing uncertainty
This certainly makes me stop and think.