tag:blogger.com,1999:blog-17232051.post3582941629660656109..comments2024-03-28T03:16:14.104-04:00Comments on Noahpinion: Is America's financialization China's fault?Noah Smithhttp://www.blogger.com/profile/09093917601641588575noreply@blogger.comBlogger10125tag:blogger.com,1999:blog-17232051.post-56800158466344275752011-11-22T11:54:46.764-05:002011-11-22T11:54:46.764-05:00You will certainly find a correlation between the ...You will certainly find a correlation between the amount of money financial institutions spend on lobbying and the size of the financial sector...Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-36707075727525833162011-11-21T18:20:54.807-05:002011-11-21T18:20:54.807-05:00I would be interested in seeing a breakdown by sub...I would be interested in seeing a breakdown by sub-sectors of the financial industry: banking, fire insurance, life insurance etc. It is hard to believe that finance could sustainably produce 25% to 33% of all corporate profits.Absalonhttps://www.blogger.com/profile/09131268683451462949noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-67595055055754028482011-11-18T13:59:13.943-05:002011-11-18T13:59:13.943-05:00"The first is that financialization is a natu..."The first is that financialization is a natural and inevitable part of economic development."<br /><br />Uh, if that were true, why is the period where financial profits move around an equilibrium a period of higher growth than the period where "intermediation" takes a greater share of the economy?<br /><br />I'll readily grant you that when you're well short of Kuznets Curve considerations, things such as growing access to financial intermediation, minimum wage, and employment protection are essential to growth. But the US of the late 1970s onward is not that model.<br /><br />The two major proximate reasons for the 2000 ff. spurt are the 2000 CFMA and the 2005 Biden Bankruptcy Bill, the first of which gave a full imprimateur to widespread gambling and the second of which gave it precedence (not just <em>pari passu</em>, but precedence) over real obligations. China is, at best, a distraction, usable as <em>trompe l'oeil</em> so that you don't see that the other hand is cheating you.Ken Houghtonhttps://www.blogger.com/profile/01440837287933536370noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-58571172146823872652011-11-18T01:39:23.587-05:002011-11-18T01:39:23.587-05:00It sort of looks like finance's share of profi...It sort of looks like finance's share of profits really takes off right at the end of Volcker's disinflation. I guess it makes sense that higher inflation benefits industries with fixed assets relative to finance. And maybe credit rationing ain't such a bad thing...Alexander Arnonhttps://www.blogger.com/profile/16890505720052980723noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-36302528690799542142011-11-17T18:39:28.230-05:002011-11-17T18:39:28.230-05:00I would guess from that data that the size of the ...I would guess from that data that the size of the financial sector is related to the degree of wealth inequality. Intuitively that's what makes sense to me -- the business of the financial sector is borrowing from those who have money and don't need it and loaning to those who don't have money and could use it, so the more inequality, the bigger the mismatch between where the money is and where it will be used, the more opportunity for the financial sector.Eric Lhttps://www.blogger.com/profile/17688525347746547529noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-55386514502272189692011-11-17T18:33:50.729-05:002011-11-17T18:33:50.729-05:00Thanks, Fred!!Thanks, Fred!!Noah Smithhttps://www.blogger.com/profile/09093917601641588575noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-84426062075149715492011-11-17T18:02:19.370-05:002011-11-17T18:02:19.370-05:00Yes! Yes! Yes!
Take a look at the University of ...Yes! Yes! Yes! <br /><br />Take a look at the University of Gronigen's data on FIRE employment and value added versus manufacturing for about 30 developed and developing countries. The inverse relationship holds almost everywhere: FIRE rises when Manf. falls and the revers. The data for South Korea and Japan ARE AWESOME -- especially S. Korea: In the pre-developmental state 1950's Korea had a bloated FIRE sector: After General Park Chung Hee seized power and heads rolled, the FIRE sector falls like a rock: and the Korean economic miracle is born...<br /><br />Here's the data: ABSOLUTELY AWESOME! <br />http://www.ggdc.net/databases/10_sector.htmFred Listhttps://www.blogger.com/profile/13768131066175257931noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-14525933437968136392011-11-17T10:00:00.493-05:002011-11-17T10:00:00.493-05:00I would take it that leverage and speculation lead...I would take it that leverage and speculation lead to consolidation and consolidation leads to greater opportunities for outsourcing (specialization) in genereal including offshoring (especially cheap labor). The relatively low tax burden on capital gains returns over an investment holding time window compared to interest and dividend income over such time leads to greater trading and speculation and eases consolidation of wealth and corporations. During the twenties credits on dividends tax for the corporate rate side of the double tax on dividends lessened the differential between the returns on selling and holding and credit was not big enough for leveraged offers, but soaring exuberance and the absence of limits on bank reserves stored in stock equity created a mighty bubble. So, there were other conditions that were different between then and now. So, like robbing a bank you look to finance because that is where the money is regardless of how capital and leverage are being distorted to the detriment of real economic productivity.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-62476727240409034702011-11-17T09:36:05.163-05:002011-11-17T09:36:05.163-05:00How about when the top tax rate is low, the ultra ...How about when the top tax rate is low, the ultra rich has money to play, where the natural playground is wall street? (Just like when a poorer person has extra money, they like to go to the casinos.)Leenoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-24392519298573934652011-11-17T06:12:36.740-05:002011-11-17T06:12:36.740-05:00This is a question that bugs me as well. But I thi...This is a question that bugs me as well. But I think an international comparison might suggest that the trade balance in not a central factor (buying huge loads of treasuries doesn't actually do much for the size of the financial sector - its very cheap in terms of resource use).<br /><br />My guess is that has to do with two factors. <br />1. The fashion in ango-saxon countries for running tight fiscal policy and relatively loose monetary policy which automatically pushes up private sector leverage. This if you like is a MMT perspective.<br />2. Overvalued exchange rates leading to a lack of real investment opportunities - which tends to result in financial asset booms as investors look for yield.reasonhttps://www.blogger.com/profile/10958786975015285323noreply@blogger.com