I've been reading lately about the "future of the financial industry" and I must say I'm both amused and alarmed. The Wall St. Journal had some sort of forum on this topic, but all the noted financiers and economists could think to talk about was regulation. The gist of it was that we had to regulate the industry in a meaningful manner -- but if we did, then the industry would no longer be in a position to make any real money. Which got me to thinking: how on Earth are any businesses of any size and scope in the USA going to make any sort of money in the coming months -- and years?
The backbone of our financial industry for the last 25 years has been all the uncontrolled trading. Money has been made, gobs of it, specifically because highly risky, highly questionable, but also high profitable (because the risk could be deferred almost endlessly) trades were not only permitted but encouraged. All the Wall St. "talent" the banks are now afraid of losing (unless obscene bonuses can continue to be awarded) were seen as talented only because they had mastered this highly dubious -- and dangerous -- system. If the system is going to be sensibly regulated from now on, that game will be over. So what are they going to be doing with themselves from now on? No wonder the bankers are lobbying like crazy against meaningful reform. With no possibility of gaming the market, there will be no "interesting" money to be made, the traders will get bored and the entire financial industry will be cut down to size. WAY down. Nevertheless, without such reform, the same gamers will be back in business and we'll soon be forced into yet another round of bluster cum bailouts. That can NOT be allowed to happen.
So forget the bankers for a minute and let's concentrate on some other businesses and where they might be after the eagerly awaited recovery? What businesses, exactly? you well may ask. The major US production industry has been the auto industry, which will never be the same and will for a very long time operate on a very limited basis. The computer industry? That's been outsourced for years. Other service industries? Also for the most part outsourced. The health industry? That's due for a very large haircut in the near future if our President has anything to say about it -- and he has.
Let's face it, the real engine of growth in this country over the last 25 years -- or more -- has been the financial industry, which has accounted for a whopping percentage of the GNP. And if it gets cut down to size, as MUST happen, then what will become the basis for the American economy during the "recovery"? Where will the jobs be? Any thoughts? Anyone at all?
I have an answer in mind, by the way. I always do. But I'm wondering if anyone else has any ideas on this topic.