The Growth of Modern Finance*Robin GreenwoodHarvard Business School and NBERDavid ScharfsteinHarvard Business School and NBERJuly 2012
Abstract The U.S. financial services industry grew from 4.9% of GDP in 1980 to 7.9% of GDP in 2007. A sizeable portion of the growth can be explained by rising asset management fees, which in turn were driven by increases in the valuation of tradable assets, particularly equity. Another important factor was growth in fees associated with an expansion in household credit, particularly fees associated with residential mortgages. This expansion was itself fueled by the development of non-bank credit intermediation (or “shadow banking”). We offer a preliminary assessment of whether the grow the of active asset management , household credit, and shadow banking – the main areas of growth in the financial sector – has been socially beneficial.
All 51 pages of the report may be fine and dandy, I dont know and I am not reading it. They missed something in the abstract, namely what is the relationship between financial growth and the rise in federal debt to nearly 100% of gdp over the same period.
There may be no connection, there may be a theory of neutral government debt; but the potential connection has to be addressed, dismissed and noted in the abstract. Otherwise, to the uninitiated reader the response is 'Say What??
No comments:
Post a Comment