The Financial Economy
The
financial economy is that part of the economy that is based not on the creation
of goods or services but on the movement and creation of money. Minting or
printing money is part of the real economy not of the financial economy because
it is the creation of a good that is used in the real economy. Finance is the
stock market, banking, the housing market the areas of the economy were by
investment and speculation live side by side. Investment is a means of
providing future wealth through the prudent use of money to help a business
grow or at least have the potential to grow.
But speculation is something
different, it is anything but prudent, it is taking a guess on what will make
money. Worst of all it hates doing wrong by itself and those who speculate
encourage others to join in. One example is to encourage people to invest all
of their investment in one stock, a particular favourite is to invest in
housing or apartments. There is no prudence shown here, by either party it must
be said, although the investor may be forgiven if they are ignorant of the true
cost of such an “investment”. They are rarely shown the true nature of such
speculation.
Why am I making such a fuss
about speculation? Because it seems that ethics in finance can be quite fluent,
more than once have I heard the battlecry “but everyone's doing it!”, in other
words how can it be wrong as it is now the industry standard. No matter how low
that standard has become.
The real problem with the financial economy is that
it has no other standard of success than making more money. It is not concerned
with social or political stability, unless those things harm the financial
economy. It is also true that many people, institutions, charities, businesses
and Governments rely on the financial economies success. Government should not
be reliant upon the financial economy as it should have it’s own reserves to
call upon.
Every great economic crisis of the past two centuries has been caused
not by the real economy but by the financial economy, normally by it giving out
more credit (loans) than could ever be paid back. A self- created pyramid
scheme. There is no need for this to be true, if the financial economy took as
it’s motto the word “prudence” it would be very hard for these excesses to
happen, let alone keep happening. Only when Governments, financial
professionals and investors take their responsibilities seriously can we be
protected from the excesses of the financial economy.
Upon Hope Blog - A Conservative Future
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