Wednesday, April 6, 2011

"Too much finance? "

Jean-Louis Arcand, Enrico Berkes, Ugo Panizza summarize the conclusion of their research into the size of the financial system in relation to the economy in Too much finance? at

"Over the last three decades the US financial sector has grown six times faster than nominal GDP. This column argues that there comes a point when the financial sector has a negative effect on growth – that is, when credit to the private sector exceeds 110% of GDP. It shows that, of the advanced countries currently suffering in the fallout of the global crisis were all above this threshold."

Short and to the point. Useful read.

1 comment:

googleheim said...

look at the whole cow

if news took an aim to connect these events together with real examples, then they might take the economy more seriously

what about reserve levels ?

can Tom Matt and or Mike report on the swelling of the reserves at the Fed to see if they are gearing for an elastic response to economic crisis ?

if they do not, and the government shuts down, then a crash would not be softened and there could be a run on the banks in various forms again.

OR are we looking at April fool's opposite effects - taking this as a turn for economic strength ???

there seems no logic here at all.

Euro debt keeps the Euro stronger albeit via US Federal Reserve open swap lines to ECB so that GE, Pepsi, McDonald's, Levi, Ford and others can bring home big numbers but hold them offshore tax free too.

We are subsidizing a strong euro, and 10 week vacations in France, Germany, and elsewhere.

The dollar spiked in 2008 and Bernanke saves foreign institutions and swells reserves with elasticity as method of operation.

Now, following Republican austerity austrian logic - if there is a government shut down and there is a nickel saved - then the USD should get stronger right ?

Even the posturing should send currency markets to strength the Dollar right ?

But no.

US has less debt than listed Eurozone, Japan, and others but we still have a weaker currency.

This is the 90's repeat ?
Iraq War I followed by a government shut down followed by an impeachment.

Iraq war II followed by a government shut down followed by an another impeachment ?

If there is a run on the banks, and the FDIC is closed due to government shut down - then what happens ?