Friday, December 19, 2008

A world gone Madoff

Paul Krugman writes:

"The financial services industry has claimed an ever-growing share of the nation’s income over the past generation, making the people who run the industry incredibly rich. Yet, at this point, it looks as if much of the industry has been destroying value, not creating it. And it’s not just a matter of money: the vast riches achieved by those who managed other people’s money have had a corrupting effect on our society as a whole.

Let’s start with those paychecks. Last year, the average salary of employees in “securities, commodity contracts, and investments” was more than four times the average salary in the rest of the economy. Earning a million dollars was nothing special, and even incomes of $20 million or more were fairly common. The incomes of the richest Americans have exploded over the past generation, even as wages of ordinary workers have stagnated; high pay on Wall Street was a major cause of that divergence.

But surely those financial superstars must have been earning their millions, right? No, not necessarily. The pay system on Wall Street lavishly rewards the appearance of profit, even if that appearance later turns out to have been an illusion...

We’re talking about a lot of money here. In recent years the finance sector accounted for 8 percent of America’s G.D.P., up from less than 5 percent a generation earlier. If that extra 3 percent was money for nothing — and it probably was — we’re talking about $400 billion a year in waste, fraud and abuse."

1 comment:

julilly k said...

Kevin PHillips, the ex-Republican political commentator and historian, says that historically when a country 's financial sector becomes bigger than its manufacturing and production sector, that country is doomed to decline and to be overtaken by newer, more vigorous states....AND he believes this has happened during the past 8 years. He says when you stop creating wealth and just move it around, you're probably into terminal decline. See his book "Bad Money". We now support banks and money markets without thinking but rant, rave and blame when it comes to saving manufacturing jobs.
Also, see the U.S. INtelligence Report. that reports the loss of U.S. finanicial, military and political hegemony.