Thursday, August 18, 2016


Researchers at the Roosevelt Institute decided to look at how dysfunctional our markets are by determining how much our financial sector actually costs the American economy. They begin by reminding us all that a healthy financial system is supposed to facilitate savings, funnel savings and finance to productive investment, reduce risk with viable insurance programs, and should act as a dependable medium of exchange. 

The Roosevelt Institute's report "Overcharged: The high cost of finance" nonetheless makes it clear that our financial system is no longer providing these services in a way that helps build an economy with a stable or secure market environment. 

Our problem today, as the report points out, is that after decades of deregulation the U.S. financial system has slowly been degraded into "a highly speculative system" that is failing spectacularly at facilitating efficiency or providing market stability. Today, American taxpayers, families, and businesses are being forced to pay for this failure in the form of higher fees, growing debt loads, and perpetual bailouts. 

Rather than helping the American economy create viable wealth structures for the long-term, America's financial sector is now siphoning off trillions of dollars - a process I've referred to as wealth extraction. As Joseph Schumpeter might have put it, it's the difference between playing monopoly and building them.

Overall, the Roosevelt Institute estimates that the financial sector costs the American economy - and you and me in the form of higher fees and bailouts - between $12.9 trillion and $22.7 trillion

If this stuff seems interesting - and it should since it's going to help bring down the economy again - you can read all about it here and here.

- Mark 

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