Yes, Virginia, Banking Contributes a Lot Less Value Than You are Led to Believe

[marmar]

from Naked Capitalism:


Yes, Virginia, Banking Contributes a Lot Less Value Than You are Led to Believe
Posted on March 4, 2014 by Yves Smith


One thing we’ve discussed repeatedly is that the activities of large banks, as presently constituted, are purely extractive. The reason is that they impose large costs on society as a whole in the form of periodic crises. Andrew Haldane of the Bank of England, using a simple back-of-the-envelope analysis, concluded that there was no way for banks to even remotely pay for all the damage they produce in terms of lost output. A mere 1/20th of a reasonable levy exceeded the entire market capitalization of all the major international banks. That sort of disparity between their worth as enterprises versus the losses they create means any intervention is justified to reduce the damage, including our preferred solution, regulating them as utilities.

Nevertheless, the banks have been quite successful in perpetuating the myth that they are particularly, indeed, uniquely valuable. So it’s important to look at that claim: pray tell what to they contribute?

One oft-cited measure is their contribution to GDP. It’s worth remembering that that’s a statistical construction as opposed to directly measured. And should anyone be surprised that the official approach makes banking look bigger, and hence more valuable, than it really is? .......................(more)

The complete piece is at: http://www.nakedcapitalism.com/2014/03/yes-virginia-banking-contributes-lot-less-value-lead-believe.html

[Octafish]

1. Concentrates Wealth.

Nothing of real value -- stuff that makes this a better world -- is created.