Friday, March 5, 2010

Voelker Interview

Voelker clearly attacks the Casino Economy. He asked an inventor of financial engineering who won a Nobel Prize, "What all the financial engineering does for the economy and what it does for productivity." He said that "it does nothing." It "moves around the rents in the financial system--and besides, it's a lot of intellectual fun." Rent seeking is economist-speaking for doing something that exploits rules, bureaucracy or the financial law. And in the words of Wikipedia, it is NOT "production of added wealth.

He cited the statistics that the financial sector generates fourty percent of all the profits in the country, rising quickly of 2.5 percent to 6.5% of the GNP

Yet, Volcker says that the commercial banks do provide a real service, and run the payment system. I will address whether there are not more efficient alternatives.

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