Michael Lewis has returned from writing about Jim Clark, technology, baseball and football to his first
topic; finance. (Liars Poker is still the best book about Wall Street ever) His two part piece with hedge fund manager David Einhorn this weekend in the NY Times is one of the best things I’ve seen on the current financial crisis and what to do about it.
It’s called The End of the Financial World as We Know It and How to Repair a Broken Financial World. (I recommend reading them both straight through). And yes, Lewis wants more transparency and more regulation.
Paul Krugman estimated last month that the share of GDP going to the financial sector increased from 5% of GDP to 8% of GDP over the past 30 years or so. What did exactly we get for the extra 3% of the economy that was extracted by Wall Street? The answer is pretty evident. And of course lots of other sectors of society, generally inhabited by people earning significantly less money, have suffered pretty directly as a result.
Of course, there’s another sector of the economy that’s increased its share of the GDP by an even greater amount in roughly the same time period (from about 9% to about 17%). No prizes for guessing which one.
Anyone care to justify what value that sector has provided?
Categories: Matthew Holt