romeo juliet sierra

Starting in the early 80’s the notion that the U.S. could become a service economy, dominated by the financial sector was promoted by everyone from Alan Greenspan to Jack Welch. Welch’s eagerness to move our greatest manufacturer, GE, into the financial services field, essentially commoditized half the firms revenue base. The disastrous results were revealed yesterday for all to see. Today, the financial sector makes up more than 20% of the S & P 500. Whereas the rise of the American economy since GE was founded by Edison in 1876, has been built on innovation, that differentiator is hard to apply in the financial services business. Beyond the credit card and the ATM, the innovations of late have been in the creation of $500 trillion of exotic derivative securities, so complex that regulators and rating agencies have no idea what they are looking at. And as any holder of the $43 trillion of Credit Default Swaps can tell you, these innovations can quickly turn into valueless commodities.

Hollowed-Out Economy « Jon Taplin’s Blog