Joe Stiglitz - "most of finance does more harm than good"

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jeffyscott
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Joe Stiglitz - "most of finance does more harm than good"

Post by jeffyscott »

Article about HFT, near the end makes this larger point about finance in general:
As finance has taken over a greater and greater share of the economy, growth rates have slowed, volatility has risen, we've had a massive global financial crisis, and far too much talented human capital has found itself sucked into the financial sector rather than the real economy.

I tend to agree, the rewards for being involved in trading pieces of paper, etc. seem excessive.

http://blogs.reuters.com/felix-salmon/2 ... z-edition/
Levett
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Re: Joe Stiglitz - "most of finance does more harm than good

Post by Levett »

Paul Volcker agrees as well.

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Re: Joe Stiglitz - "most of finance does more harm than good

Post by NoVa Lurker »

One reason that I keep a simple, Boglehead-consistent asset allocation is that, if I were to invest in any complex financial instruments, I feel like I would be part of the problem.
hiddensee
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Re: Joe Stiglitz - "most of finance does more harm than good

Post by hiddensee »

I think this is more of a political argument than a technical one. Where's the evidence that reduced GDP growth rates are caused by the growth of the finance sector?
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bottlecap
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Re: Joe Stiglitz - "most of finance does more harm than good

Post by bottlecap »

Consider the source. He's got to find a boogeyman somewhere in this economy.

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Random Musings
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Re: Joe Stiglitz - "most of finance does more harm than good

Post by Random Musings »

IMHO, I don't think most of finance does more harm than good. However, I believe that a minority number of people in finance do so much damage that it outweighs the remainder of people who work in finance that have good intentions. The problem is that the minority group are those who are in power, have political connections and/or influence, hence they make the calls. Follow the trail of money, it just does not disappear but has been "reallocated".

Just think of the 0.05%. The net worth growth of that group is even making the bottom 1/2% of the 1% look like paupers. That's a fact.

RM
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dkturner
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Re: Joe Stiglitz - "most of finance does more harm than good

Post by dkturner »

I have lived in a town with a population of about 17,000 for nearly 40 years. When I moved here there were 4 "financial advisors" (they used to be called stockbrokers) and the population was more than 20,000. Today there are at least 16 stockbrokers and at least a dozen insurance salesmen who like to refer to themselves as "financial advisors" as well. Now, if the population has declined by 15% and the number of "financial advisors" has increased by 600% the 17,000 people in town are devoting a much greater share of their net worth to supporting the advisory community. How much extra return do you think the average person on the street gets from all this extra "help"? Stieglitz may be a knee jerk "progressive" but I think he's spot on in this case.
lawman3966
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Re: Joe Stiglitz - "most of finance does more harm than good

Post by lawman3966 »

dkturner wrote:I have lived in a town with a population of about 17,000 for nearly 40 years. When I moved here there were 4 "financial advisors" (they used to be called stockbrokers) and the population was more than 20,000. Today there are at least 16 stockbrokers and at least a dozen insurance salesmen who like to refer to themselves as "financial advisors" as well. Now, if the population has declined by 15% and the number of "financial advisors" has increased by 600% the 17,000 people in town are devoting a much greater share of their net worth to supporting the advisory community. How much extra return do you think the average person on the street gets from all this extra "help"? Stieglitz may be a knee jerk "progressive" but I think he's spot on in this case.
To me, this goes to the core of Bogleheadism. In the aggregate, the return of the markets to investors can't be improved by adding parasitic intermediaries. Thus, the success of these intermediaries seems to depend on a few key factors. One of these is the ignorance of the above by the masses. Another is the innumeracy of the clients with regard to the effect of fees. And, finally, there is the unfounded belief that the brokers and advisors have the ability to know in advance which are the good stocks and which are the bad ones.

An informed investor (such as a Boglehead) is always the worst enemy of the stockbroker crowd.
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Re: Joe Stiglitz - "most of finance does more harm than good

Post by Alex Frakt »

Locked. While most of the quoted article at least has some relevance to investing, the part emphasized in the original post is off topic (non-actionable).
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