Wall Street Costs The Economy 2% Of GDP Each Year


Wall Street is back,” says the New York Times, and the economic cost is high. The excessive financialization of the US economy reduces the GDP by 2% every year, according to a new study by International Monetary Fund. That’s a massive drag on the economy–some $320 billion per year. Wall Street has thus become, not just a moral problem with rampant illegality andoutlandish compensation of executives and traders: Wall Street is a macro-economic problem of the first order.

The Financial Tail Wags The Economic Dog

How has this happened? Properly scaled, the financial sector is a good thing. The financial sector plays a healthy role in translating products and services into exchangeable financial instruments to facilitate trade in the real economy. Through deposits, banks channel citizens’ savings to businesses that can use them productively. Through mortgages, workers can trade their promise of future wages for a home. Through insurance, homeowners are able to share financial risks and avoid financial catastrophe…

Wall Street Costs The Economy 2% Of GDP Each Year

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