pathological finance

Simon Johnson:

Finance is win-win for everyone involved. And financial flows of some kind are essential to any modern economy – at least since 1800, finance has played an important role in US economic development.

Unfortunately, two hundred years of experience with real world finance reveal that it also has at least three serious pathologies – features that can go seriously wrong and derail an economy.

  1. The financial sector often acquires or aspires to political power.
  2. The financial sector can obtain disproportionate power over industry.
  3. Finance can also go crazy, running up speculative frenzies.

How crazy? In our global GDP of $60 Trillion, the derivatives market is a $650 Trillion hole left by the corrupt.