The burden of our over-financialized economy

It is important to understand what an enormous black hole finance has become to the global economy over the past 30 years.  If we are to get the financial beast tethered in service to the real economy and families rather than devastating them, we have to understand what misguided policies and incentives have created the problems.

We also have to stop taking financial advice from the sales crowd.  If you have not figured this out yet, unfortunately you will earn your losses.  See an excellent overview of the issues here:  A black hole for our best and brightest

Wall Street is bigger and richer than ever, the research shows, and the economy and the middle class are worse off for it…

…the economy has suffered at the hands of some of its most skilled, most talented workers, who followed escalating pay onto Wall Street — and away from more economically and socially valuable uses of their talents.

The financial industry has doubled in size as a share of the economy in the past 50 years, but it hasn’t gotten any better at its core job: getting money from investors who have it to companies that will use it to generate growth, profit and jobs.

In perhaps the starkest illustration, economists from Harvard University and the University of Chicago wrote in a recent paper that every dollar a worker earns in a research field spills over to make the economy $5 better off. Every dollar a similar worker earns in finance comes with a drain, making the economy 60 cents worse off.

It’s not that finance is inherently bad — on the contrary, a well-functioning financial system is critical to a market economy. The problem is, America’s financial system has grown much larger than it should have, based on how well the industry performs.”

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