This article discusses the contradictory role and place of finance in the post-1990 Canada economy. A central argument advanced is that the relationship between the real economy and finance economy(paper economy) has become increasingly more complicated and contradictory. Therefore, the distinction made between “real” and “financial” problems of the economy needs to be better qualified by taking into account the dynamics between the two.This article talks about the over development and over importance of the financial sector (the “paper economy”) relative to the real economy.
The idea that financial industry does not produce anything of a tangible value, but lubricates the growth and development of those parts of the economy which produce things of inherent value (the goods and services on which our standard of living is based). is is fundamental to our thinking. The author says that though finance adds value to the rest of the economy, it is sometimes detrimental to the rest of the economy. The author talks about the economic situation in Canada in the 1990s . There were two contrasting scenarios , one in which the stock market zoomed up, bank profits have ballooned, and the sales of mutual funds and derivatives have reached unimaginable heights.On the other side where most Canadians live, the personal disposable income, adjusted for inflation, has fallen and despite recent gains, unemployment remains high. So, this brings us to the question that if finance industry is so successful, then why is the rest of the economy so unsuccessful. So, the financial growth has not been of any use to Canadians in terms of prosperity. The author introduces new terms such as f=paper economy (creation, purchase and sale of stocks, shares, bonds,mutual funds) and the real economy(products and service sthat contribute to the material standard of living). Despite its growth, the financial sector 's contribution to real economic progress -- to real growth, jobs, and investment -- is in reality insignificant. The financial economy employs less than five per cent of the total paid workforce. It makes up just six per cent of GDP. It undertakes no real investments in machinery, buildings, factories, homes and infrastructure which …show more content…
Rapid growth of the finance market was not matched with the equivalent growth of assets and investments.. The rising share prices had no effect o the real economy.
The conservative economists say that the reason the real economy ‘s growth is stunted because of the government regulations. The best thing for the government to do is to smply cut off the regulations.The author also talks about the great irony where canada’s growing stock pile of papaerwealth is the fact that Canada has not become any better off in terms of national worth.But interestingly, the net financial wealth in the household sectors have been rising.
The author also talk about “corporate veil” where he says that the wealth is in hands of only a concentreated few in the society. In my opinion,high interest rates also picked the pockets of businesses in the real economy. Almost all companies carry some form of debt to finance their investments. However, as interest rates skyrocket, the cost of carrying that debt or financing new debt rises substantially. The result is that more corporate income is channelled away from possible investments in the real economy toward the paper
The idea that financial industry does not produce anything of a tangible value, but lubricates the growth and development of those parts of the economy which produce things of inherent value (the goods and services on which our standard of living is based). is is fundamental to our thinking. The author says that though finance adds value to the rest of the economy, it is sometimes detrimental to the rest of the economy. The author talks about the economic situation in Canada in the 1990s . There were two contrasting scenarios , one in which the stock market zoomed up, bank profits have ballooned, and the sales of mutual funds and derivatives have reached unimaginable heights.On the other side where most Canadians live, the personal disposable income, adjusted for inflation, has fallen and despite recent gains, unemployment remains high. So, this brings us to the question that if finance industry is so successful, then why is the rest of the economy so unsuccessful. So, the financial growth has not been of any use to Canadians in terms of prosperity. The author introduces new terms such as f=paper economy (creation, purchase and sale of stocks, shares, bonds,mutual funds) and the real economy(products and service sthat contribute to the material standard of living). Despite its growth, the financial sector 's contribution to real economic progress -- to real growth, jobs, and investment -- is in reality insignificant. The financial economy employs less than five per cent of the total paid workforce. It makes up just six per cent of GDP. It undertakes no real investments in machinery, buildings, factories, homes and infrastructure which …show more content…
Rapid growth of the finance market was not matched with the equivalent growth of assets and investments.. The rising share prices had no effect o the real economy.
The conservative economists say that the reason the real economy ‘s growth is stunted because of the government regulations. The best thing for the government to do is to smply cut off the regulations.The author also talks about the great irony where canada’s growing stock pile of papaerwealth is the fact that Canada has not become any better off in terms of national worth.But interestingly, the net financial wealth in the household sectors have been rising.
The author also talk about “corporate veil” where he says that the wealth is in hands of only a concentreated few in the society. In my opinion,high interest rates also picked the pockets of businesses in the real economy. Almost all companies carry some form of debt to finance their investments. However, as interest rates skyrocket, the cost of carrying that debt or financing new debt rises substantially. The result is that more corporate income is channelled away from possible investments in the real economy toward the paper