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There's a well-trodden argument that much of financial innovation has little positive effect or even negative effect on the larger economy. Jack Bogle, founder

There's a well-trodden argument that much of financial innovation has little positive effect or even negative effect on the larger economy. Jack Bogle, founder of Vanguard Group: "The job of finance is to provide capital to companies. We do it to the tune of $250 billion a year in IPOs and secondary offerings. What else do we do? We encourage investors to trade about $32 trillion a year. So the way I calculate it, 99% of what we do in this industry is people trading with one another, with a gain only to the middleman. It’s a waste of resources." http://time.com/money/3956351/jack-bogle-index-fund/ http://time.com/money/3956351/jack-bogle-index-fund/ Paul Volcker, former chairman of the Federal Reserve: "Echoing FSA chairman Lord Turner's comments that banks are 'socially useless', Mr Volcker told delegates who had been discussing how to rebuild the financial system to 'wake up'. He said credit default swaps and collateralised debt obligations had taken the economy 'right to the brink of disaster' and added that the economy had grown at 'greater rates of speed' during the 1960s without such products." http://www.telegraph.co.uk/finance/economics/6764177/Ex-Fed-chief-Paul-Volckers-telling-words-on-derivatives-industry.html http://www.telegraph.co.uk/finance/economics/6764177/Ex-Fed-... IMF: "...the effect of financial development on economic growth is bell-shaped: it weakens at higher levels of financial development." http://www.imf.org/external/pubs/ft/sdn/2015/sdn1508.pdf http://www.imf.org/external/pubs/ft/sdn/2015/sdn1508.pdf OECD: “...above a certain point, further financial expansion is associated with slower growth.” http://www.oecd.org/eco/How-to-restore-a-healthy-financial-sector-that-supports-long-lasting-inclusive-growth.pdf http://www.oecd.org/eco/How-to-restore-a-healthy-financial-s...

aianus 11y ago
> "The job of finance is to provide capital to companies. We do it to the tune of $250 billion a year in IPOs and secondary offerings. What else do we do? We encourage investors to trade about $32 trillion a year. So the way I calculate it, 99% of what we do in this industry is people trading with one another, with a gain only to the middleman. It’s a waste of resources." Very few people would invest in IPOs or secondary offerings without a secondary market for the shares.

aianus 11y ago

> "The job of finance is to provide capital to companies. We do it to the tune of $250 billion a year in IPOs and secondary offerings. What else do we do? We encourage investors to trade about $32 trillion a year. So the way I calculate it, 99% of what we do in this industry is people trading with one another, with a gain only to the middleman. It’s a waste of resources." Very few people would invest in IPOs or secondary offerings without a secondary market for the shares.