From LF Economics, October 2:
The title of the article comes from a very interesting and
hard-hitting paper authored by a leading mainstream economist, Luigi
Zingales. He is a professor of entrepreneurship and finance at Chicago
University’s School of Business, with impeccable mainstream credentials.
The paper in question appeared in The Journal of Finance and can be found here.
The main argument made by Zingales is that while economies need
banking and finance facilities, this sector has clearly become too large
for the good of societies, with particular focus on the US. The
out-of-control financial sector siphons off an ever-increasing
proportion of economies’ surplus, levies odious fees and interest
charges, engages in unceasing control fraud (though that term is not
explicitly used), generates asset bubbles, rent-seeks, and buys off both
politicians and the economics profession.
The financial sector has become bloated relative to the size of the economy:
A competitive, efficient and honest financial sector can only exist
with public support. In contrast, Australia’s financial sector is the
opposite, with the media revealing control frauds on a regular basis and
a majority of the public in favour of a Royal Commission to investigate
its many crimes. It has become a loathsome, criminal leviathan whose
greed knows no bounds.
That the financial sector has made rent-seeking and the purchase of politicians into a fine art should come as no surprise.
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