US financial sector costing US economy 2% growth a year

It happens when they try and make money out of money instead of out of real profits and goods. Anybody want a cheap mortgage?

Problems occur when the financial sector gets too big. When the financial sector loses interest in the “boring” returns from financing the real economy and instead devotes its efforts to activities that are more lucrative in the short-term, like playing zero-sum games, or even negative-sum games, through complex transactions aimed at making money out of money, then excessive risk-taking occurs, with mis-allocation of human and financial resources and periodic financial crashes. 

Throughout history, periods of excessive financialization have coincided with periods of national economic setbacks, such as Spain in the 14th century, The Netherlands in the late 18th century and Britain in the late 19th and early 20th centuries. The focus by elites on “making money out of money” rather than making real goods and services has led to wealth for the few, and overall national economic decline. “In a financialized economy, the financial tail is wagging the economic dog.” 

How Big Is Too Big? 

How big is too big? An IMF study in 2012 showed that “once the [financial] sector becomes too large—when private-sector credit reaches 80% to 100% of GDP— it actually inhibits growth and increases volatility. In the United States in 2012, private-sector credit was 184% of GDP.” So the U.S. financial sector is already way too big. 

And what’s the cost? The new IMF study quantifies the direct cost to U.S. economic growth of an oversized financial sector: 2% of GDP per year. In other words, if the financial sector were the proper size, the U.S. economy would be enjoying a normal economic recovery of 3% to 4% per year instead of the dismal 1% to 2% of the last few years. more

So the fat cats are getting rich not only at the expense of the lower and middle class, but at the expense of the economy itself. 

Bloody greedy bastards, they want it all.