Arjun Jayadev at Triple Crisis provides a quote from Thomas Phillipon that somehow never sees the light of day in the financial press:
…the unit cost of intermediation is higher today than it was a century ago, and it has increased over the past 30 years. One interpretation is that improvements in information technology may have been cancelled out by increases in other financial activities whose social value is difficult to assess.
This of course is a very understated way of suggesting that the bankers have found new ways to sell or bundle other products or services along with the ones made cheaper by information technology, or create new ones of dubious additional value, so as to allow them to fatten their total pricing.
This is a big and important topic, so let me take just an initial slice at it, and I’ll hopefully come back to it in future posts. We can certainly see the net effect, which is the financialization of the economy, which suggest that IT (and other developments) have allowed the banks to move into an oligopoly position and are extracting economic rents. Simon Johnson, in his important 2009 article, The Quiet Coup, described how the financial sector had accomplished the surprising feat of increasing average worker pay packages and increasing their share of GDP. Wages rose from roughly comparable to average private sector worker wages from just after World War II through 1982. They increased to 181% of private sector worker wages right before the crisis. From 1973 to 1982, the financial sector never garnered more than 16% of corporate profits. By the 2000s, it hit 41%.Naked Capitalism
Thirty Years of Financial Inefficiency
Yves Smith
IS THE SELL SIGNAL FROM GOD HERE FOR UST BONDS, Timmah Geithner floated the idea of 100 yr house mortgage notes a few years back.
ReplyDeleteBernanke is an ass, who does he think he is kidding we will keep the 3 trillion on the balance sheet forever. What time frame is forever the next political wind change or when Bernanke leaves or when the markets crash. He is an ass.
Reuters News:
Fed's Fisher floats Texas century bond to exploit low rates
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NEW YORK | Wed Feb 27, 2013 4:29pm EST
Feb 27 (Reuters) - A top Federal Reserve official who has fought the U.S. central bank's efforts to push down borrowing costs on Wednesday suggested his home state should take advantage of historically low interest rates to borrow for the next 100 years.
"Might it make sense for Texas to issue ultra-long bonds at currently prevailing ultra-low rates to finance the state's longer-term infrastructure needs?" Dallas Fed President Richard Fisher said in remarks prepared for delivery at Columbia University. "I have in mind a Texas Century Bond....If ever there were a window for such an issuance, it surely would be now."
Fisher is among the Fed's most vocal opponents of the central bank's latest round of quantitative easing, warning that the bond buying will do little to boost job creation and could in fact slow the recovery.
But his discomfort with super-easy monetary policy has not stopped him from thinking that his own state might do well to exploit it.
Mexico, Coca Cola and the Massachusetts Institute of Technology are among a handful borrowers that have issued century bonds in recent years in a bid to capitalize on low rates.
"The public benefit would come from saving on interest payments that will inevitably rise over time from their unprecedented low levels - certainly sometime in the next 100 years - meanwhile financing highways, water projects, universities and the like that will be needed to continue serving the state's growing population and expanding economy," Fisher said.
The above article proves all price discovery in a free market is completely dead, and now the bubble starts again all over again, when you have to wait 100 years to get your money back on bonds this is not reality.
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