[lbo-talk] Goodbye to the export of surplus capital?

Doug Henwood dhenwood at panix.com
Mon Feb 7 10:49:18 PST 2011


On Feb 7, 2011, at 1:26 PM, SA wrote:


> So institutional investors want higher returns only when they have "too much money"? And bankers want to pump profitable garbage into the system only when the system has "too much money"? I thought these people were maximizers, not satisficers! Why didn't this stuff always go on?
>
> In the 50's interest rates were incredibly low across the spectrum. Thus, the banks were "awash with money." But that didn't lead to any speculative mania or insane degradation of credit standards (that I know of). There were institutional and psychological reasons why not (starting with memories of the Depression and the higher value of bank charters in a more monopolistic industry).

This stuff is circular and feeds on itself, so it's hard to identify a first cause. But financial assets were relatively minimal in the 1950s. And nonfin corps were transferring about 20% of internal funds to shareholders. Since 2000, it's more than three times that.

Why was there pressure for dereg and innovation?

Doug



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