Financial reality break
James Howard Kunstler writes:
The underlying reality is that the financial sector of the economy has got to shrink. It ballooned from about five percent of the US economy to about 22 percent over the last two decades — mainly as a way to compensate for our declining real productive activity as we off-shored and outsourced and disassembled US industrial capacity.
Capitalism only works when it operates in the service of productive activity. Trading mere paper certificates (or digital simulacra of them) in ever more “innovative” (i.e. abstract and incomprehensible) ways is not a substitute for making goods. These practices reached such a grotesque level of unreality that they eventually poisoned what remained of our economic prospects. Now that their operations have been revealed as perfidious, these institutions have to be sliced and diced and, in some cases, punished, perhaps with extinction.
It will happen anyway. The only question is whether civilian leadership can guide the process within the rule of law. In the meantime, the derivatives rackets that made up so much of the fraud — especially the trillions of dollars vested in credit default swaps contracts — are ticking out there like bombs placed by madmen, and may bring down the entire global money system before an orderly downsizing of finance can occur.
The entire article is bang-on. Read it…