Wednesday, April 26, 2006

Finance's rise threatens economic stability

The Financial Times reports:
Adam Smith described money as the "great wheel of circulation". By facilitating economic expansion, the financial system plays its part in raising living standards. For these functions the banks have always taken their cut. However, this has increased dramatically in recent decades. US financial companies earned 10-15 per cent of total US corporate profits in the 1950s and 1960s, but now account for 30-40 per cent of the total. If profits from the financial activities of industrial and commercial companies are included, finance in this broader sense could soon account for a majority of US corporate profits.
We doubt it could go over 50%.