Shouldn't are best and brightest students pursue provide more meaningful careers in fields such as medicine, engineering, and education? Isn't Wall Street just about creating additional (superfluous) wealth for the 5%?
Shouldn't are best and brightest students pursue provide more meaningful careers in fields such as medicine, engineering, and education? Isn't Wall Street just about creating additional (superfluous) wealth for the 5%?
silversacks wrote:
Shouldn't are best and brightest students pursue provide more meaningful careers in fields such as medicine, engineering, and education? Isn't Wall Street just about creating additional (superfluous) wealth for the 5%?
'our' not 'are' and delete the 'provide'
Traditional activities like capital raising, whether it be in the debt or equity markets, clearly add value. Any company you can think of needs money to run their business. It's not efficient, or even possible, for all companies to do that on their own. Banks work as a valuable intermediary to connect investors with individual companies and ensure that businesses have the money to go about their daily activities.
Certainly there are gray areas when it comes to less traditional activities. I'm not sure banks trading for their own book create much value beyond what gets passed to shareholders and the individual traders.
Finance does not add value to an economy, any more than I add value when I lend my friend 10 bucks and charge him 12 later. It only adds value to one economy at the expense of another. Wall Street, for instance, sucks economic life out of other regional economies in the U.S., as well as other economies abroad. It's a net gain for the U.S., a net gain for New York and surrounding environs, but at a cost to areas with lower concentrations of financial services within the U.S. and worldwide.
Taxing financial transactions adds great value to federal tax revenues, however.
Since the USA is no longer a trade surplus nation, it requires the surpluses of other nations to avoid collapsing.
Ever since Paul Volcker, the USA has tried to attract money from around the world so that they can keep the party going. One way they attract this money is with clever financialization, like creating new weird markets like derivatives, and by betting on where prices go around the world.
So to answer your question, yes, they do. They prevent the USA from imploding. There's also the argument that the speculation they partake in helps to keep prices stable, but that's a matter of opinion.
Not of a lot of economic knowledge in this thread.
Finance doesn't benefit the macro economy.
If you think it does, next you're going to say that real estate agents do as well. Hint: they are both just intermediaries between the primary actors.
whatishouldcareabout wrote:
Not of a lot of economic knowledge in this thread.
Finance doesn't benefit the macro economy.
If you think it does, next you're going to say that real estate agents do as well. Hint: they are both just intermediaries between the primary actors.
Every country in history, when it has run out of trade surpluses, has collapsed. Except for the USA, for the reasons I mention above. This is actually the reasoning mentioned by Yanis Varoufakis in his book, And The Weak Suffer What They Must? (He is a professor of economics, and former finance minister of Greece).
Value is subjective. If people are willing to pay money for something, it therefore has value. Do you find value in having your country not implode?
Wall Street produces the capital that fund advances in medicine and engineering and that the parasites of education suck dry.
Profit is good wrote:
Wall Street produces the capital that fund advances in medicine and engineering and that the parasites of education suck dry.
The parasites of education...alrighty then. Apparently, education= a teacher's strike in a failing public school district to you. The more enlightened among us have a more well-rounded view of what education is. If we think about the maxim "Only the educated are free" that the stoic Epictetus preferred we start to touch upon what is truly at stake in every classroom and at all our institutions K-college, as well as outside those traditional spaces of learning.
whatishouldcareabout wrote:
Not of a lot of economic knowledge in this thread.
Finance doesn't benefit the macro economy.
If you think it does, next you're going to say that real estate agents do as well. Hint: they are both just intermediaries between the primary actors.
Not a lot of practical knowledge in this poster. If you think finance provides no benefit, perhaps you also think we should go back to a barter economy? Or maybe become hunter gatherers?
whatishouldcareabout wrote:
Finance does not add value to an economy, any more than I add value when I lend my friend 10 bucks and charge him 12 later.It only adds value to one economy at the expense of another.
If you lend your friend 10 and he's able to do something with it that makes an additional 5, then you have definitely helped to add value to the economy. Directing funds to where they can accomplish the most in certainly valuable.
In my experience, the erroneous zero-sum thinking that this poster manifested is surprisingly common. I had classmates in business school (with 4.0 GPAs, no less) who really did not seem to understand that economies grow. Economies (well, at least somewhat free ones) are not a zero sum.
whatishouldcareabout wrote:
Finance does not add value to an economy, any more than I add value when I lend my friend 10 bucks and charge him 12 later.
You added value to your friend by giving him the quick cash he otherwise wouldn't get. A mutually beneficial transaction. Do you really not understand that?
Also, you could argue that too many smart people are lured into Wall Street or software because there's less money to be made in engineering, medicine, etc thanks to high regulation.
It provides one means for companies to raise money. It also provides liquidity for those who invest their money in companies. These are vital to our economy. Yes, a lot of money is made on arbitrage and similar activities that don't seem to provide value.
The very act of borrowing money is what creates money.
A socialist will never understand that.
Totally agree with this. The terrible truth of Wall Street leading up to the financial crises is that they were not even lending money to the real economy. They were just using derivative financial products to create a gambling casino so investors could bet on which way other financial products would trade. The traditional Wall Street activities were still going on. But the fixed income and derivate business grew into huge monstrosities within Wall Street banks that overwhelmed the traditional business of Wall Street.
Casual observations wrote:
Traditional activities like capital raising, whether it be in the debt or equity markets, clearly add value. Any company you can think of needs money to run their business. It's not efficient, or even possible, for all companies to do that on their own. Banks work as a valuable intermediary to connect investors with individual companies and ensure that businesses have the money to go about their daily activities.
Certainly there are gray areas when it comes to less traditional activities. I'm not sure banks trading for their own book create much value beyond what gets passed to shareholders and the individual traders.
ryan foreman wrote:
Totally agree with this.
The terrible truth of Wall Street leading up to the financial crises is that they were not even lending money to the real economy. They were just using derivative financial products to create a gambling casino so investors could bet on which way other financial products would trade. The traditional Wall Street activities were still going on. But the fixed income and derivate business grew into huge monstrosities within Wall Street banks that overwhelmed the traditional business of Wall Street.
If they weren't lending money to the real economy how could the real economy go down?
You're a clueless idiot.
I've read all the post. Silversacks, you ask: Does Wall Street Provide Any Value? When people say, "Wall Street" that's informal for investment banks. Glass-Steagall of 1932 & 1933 were repealed, circa 1999. Prior to repeal, commercial banking and investment banking were separate. Eg. JP Morgan was broken up to JP Morgan (commercial) and Morgan-Stanley (investment). Banks on steroids from the time of Glass-Steagall repeal, circa 1999. Banks were acting within rules Prez Clinton and Congress of 1990's allowed. It took roughly a 1/2 dozen years for the disaster to start to hit (US banking was the Titanic hitting an iceberg circa fourth quarter 2005). Can you really say, medicine, engineering and education or banking? A society needs all four right careers right? [Obviously, plus many other careers.]
Wall Street are intermediaries. They add no value.
Wall Street could be disrupted by technology that matches investors and businesses in real time with razor thin transaction costs and vanish, and the lack of Wall Street transaction costs would cause growth to increase. I'm surprised by the ignorance on the board.
LR usually has more informed responses than the above.