Financial Institutions Sucking the life out of our Economy

How much are executives of financial services corporations being compensated?   What value is being contributed to the economy for that compensation?

The Wolfram knowledge base of numbers and calculations might help us answer this question.  Let's look at the "Selling, General & Administrative Expense (SG&A)" reported by a financial services corporation.   


Now what is SG&A - Selling, General & Administrative Expense ?
source: investopedia.com (emphasis mine)
Reported on the income statement, it is the sum of all direct and indirect selling expenses and all general and administrative expenses of a company.

High SG&A expenses can be a serious problem for almost any business. Examining this figure as a percentage of sales or net income compared to other companies in the same industry can give some idea of whether management is spending efficiently or wasting valuable cash flow. For example, in the television industry businesses that depend on a great deal of advertising must carefully monitor their marketing expenses. A good management team will often attempt to keep SG&A expenses under tight control and limited to a certain percentage of revenue by reducing corporate overhead (i.e. cost-cutting, employee lay-offs).

It is interesting to note that advertising and operating retail stores is probably the biggest part of Apple's SG&A expenses.  We see the results of that in our malls and on our TV sets.  What about JPMorgan ... when was the last time you saw a commercial for JPMorgan?   Can we not conclude that most of that $36 billion that JPMorgan spent on SG&A went directly into the personal accounts of execuitives?  

How much money is $36 billion dollars and what did our economy get for that?

So why should we never never bail out financial institutions in the name of  the big lie that "they are too big to fail and would send our economy into a global depression" when there is a much better alternative to providing access to capital ?  Check this out ...




Tags

  1. banking
  2. money
  3. finance
  4. item 14578
  5. moral hazard
  6. financial sector
  7. rational item

Comments


Mark de LA says
It's an axe you grind quite often.
The financial institutions had to create such instruments because the were virtually forced to give loans to people who did not qualify. That's the nutshell.  I hope that comes out during the lawsuit I previously mentioned.  I think RS would have been amazed at the banking system & would probably have disagreed with most of it. Get money out of politics & politics out of the economy - that's the real solution.  The rest will work itself out as a result. It's true that money has become so abstract that it is mostly a ponzi scheme.

Seth says
M 2011-09-08 15:58:26 15486
I still don't understand your knee-jerk hate for banks. Is it just right out of the leftie play book or have you suffered some kind of hurt by a bank in the past?

Maybe if you would flush your thought that it is a "knee-jerk hate for banks", you might understand it better.  If you Look at the facts that i am talking about and forget that you think it is "lefty" then you might just be able to actually contribute to the conversation.  And just for your information there is no deep seated "hurt" that i have suffered from banks in my memory ... just the normal frustrations with their bureaucratic ways that we all have experienced.  

But the major corruption in our financial institutions are not just the the mechanical machine of commercial and personal banking ... they are more in the concoction of abstract financial instruments like derivitives and risk insurance and speculations which the institutions trade out of their own money, investing in nothing, with the only motive to make money on money.   These practices are out of balance and are adding nothing to our economy ... no wise shepherding of capital, rather just better ways to use capital to enrich the institutions themselves and of course their executives.   What is more when they go bust, our poiticians bail them out.  So there is no down side for them, we taxpayers get all that downside.   Someday i will find an article which expresses all of that quantitatively.  Hopefully by then you will have discarded your assumptions about my motives and will be able to examine the substance of what i am saying.

Mark de LA says
I would love to grok how a monetary system independent of politics could evolve out of what we have but I don't want to invent it myself. So far I have found nobody that wants to do that. Nobody with new ideas.


Seth says
M 2011-09-08 13:05:07 15486
seth 2011-09-08 12:48:08 15486
M 2011-09-08 12:27:55 15486
You should have stuck around to take a course in economics.

If you know of a flaw in my analysis, then by all means tell me what it is.
Until Obamunism comes, in a capitalistic society any corporation or entity can pay its board, executives & employees anything they choose subject to legal operations.  If the law slants what is legal for banks follow the money to the lawmakers & executives of the government to find the culprits.  Basically, if it's legal it's none of anyone else's business.  A bank reinvesting money makes more circulation of that money available. If they were bailed out then it was the Democrat Congress' responsibility to cap executive salary.  Only in crony capitalism, Big Government's contribution to society, does the market not work as it should.
 
Well i agree that politicians in the government are in the pocket of these financial institutions and hence laws get slanted in their favor.   That is a good part of the problem (i've given a partual solution to that elsewhere).  

I don't know what the solutions are yet ... rather i am just wanting to become aware of the magnitude of the imbalance.   My instinct tells me that making laws against these institutions or enacting more governmental regulations is probably not going to work ... if for no other reason than it is infeasible in today's political environment as exemplified by your attitudes above. 

My hope would be for alternatives like kiva.org to spring up and just do a better job.  Then eventually the old dead weight of the current financial institutions would just die off or adapt ... not, of course, without much talk of disaster and gnashing of teeth ... but that would  be just words because then the main stream economy would be frourishing driven by the health of reasonable access to capital.  We start on that course by recognizing where the drag actually is on our economy and comparing the magnitude of that drag to the drag of taxes and deficits.

In other words:  let us become aware of all the drags on our economy and their magnitudes so that a free market can find alternatives.

C says
I am not a Keynesian so your quote turns me off. I do not believe the government should be in the business of economics at all, let alone twiddle with the markets to perpetuate their reign of crony capitalism.


C says
     Another thing to ponder is who is supposed to be watching over such activities. Presumably it should be representatives of people - since not everyone is an expert on banks, or whatever doman is in question. But our representatives in Big Government are not doing their job - they are exacerbating the problems. Presumably the people s/b watching over their representatives via their votes & their ability to recall & impeach. That is not being done effectively these days because the people are either ignorant of what is really happening, uninformed, lied to by M$M or government or lazy. When we finally come to the end of the food chain we must ask just who is watching out for the people?
     Nobody?
     Can we afford a government that does not do its job?
     Transparency is a key to change.

Seth says
___________________________________
source: Kauffman Foundation: Financialization and Its Entrepreneurial Consequences

The U.S. financial sector expanded dramatically over the last hundred years in both relative and absolute terms. This expansion has had a number of causes and consequences ...

Having said the preceding, all observers of the U.S. economy should be concerned when the financial sector's activities increasingly feed back on the sector, rather than on the "real" economy. We have recently seen a consequence of the 2008 financial crisis. There are more and other consequences, and we focus on some of them in this paper—in particular, the effect of financial services growth and capital misallocation on young, growth companies. As John Maynard Keynes memorably said, "When the capital development of a country becomes the byproduct of the activities of a casino, the job is not likely to be well done."
...


Mark de LA says
The more business you have & the more capital available the better the economy grows up to the point that corruption begins to occur & bad products are produced. Your extraneous Keynes quote being justly declared as just a pollutant. Nothing is said about government sucking the life out of the GDP these days - was there?


Seth says
C 2011-09-10 13:00:23 15486
I am not a Keynesian so your quote turns me off. I do not believe the government should be in the business of economics at all, let alone twiddle with the markets to perpetuate their reign of crony capitalism.

The graph and the quote merely point to the quantification of a problem ... neither has any connection to the Keynesian assumption that governmental regulation is the solution.

Seth says
this may be another symptom of the problem: Wall Street Aristocracy Got $1.2 Trillion in Secret Loans

Mark de LA says
Accountability of our money supply seems to be notably absent all over the place - fire them all &/or put them in jaill!


Seth says
m 2012-07-17 22:57:25 15486
Think of it clearly, if you were balancing rights between individuals & groups like how much work should be done by two people & so forth why would you want economics to be the deciding factor? It is kinda like contract law. Fairness as humans has nothing to do with economics or money; current situations notwithstanding.

What are you talking about here?

Note i have declared this to be a rational item, no changes of topic, and no other logical fallacies.

Mark de LA says
seth 2012-07-18 06:07:39 15486
m 2012-07-17 22:57:25 15486
Think of it clearly, if you were balancing rights between individuals & groups like how much work should be done by two people & so forth why would you want economics to be the deciding factor? It is kinda like contract law. Fairness as humans has nothing to do with economics or money; current situations notwithstanding.

What are you talking about here?

Note i have declared this to be a rational item, no changes of topic, and no other logical fallacies.
In threefoldness, which relates to the whole problems in our economy, one of the hardest domains to understand is what RS calls rights.  He has the economy almost totally independent of government & labor & capital separate with labor not being a commodity as it is today; especially as it is moulded by labor unions.  If you understood matrix management where people manage not top down but collectively in all domains like capital, rights & goods & services you might be going in the right direction. We really need new thought not the recycled soulless ideas of the past. If all you do is bash capital you have no new ideas. More tax & more regulation in an already recessed economy will kill it. These are some thoughts you should consider.  If you are not using & thinking new thoughts you are merely playing the game as before seen as 16086. If that is the case then you can sing to the empty choir. I refuse to participate conversations funneled to go in the direction of the errors of the past.
 

Seth says
m 2012-07-17 22:52:12 15486
Interesting that you should resurrect this at this time. THis is what happens when the government (rights organization) and the economic sectors are tightly connected - both corrupting each other. I know which side you want to blame but it is the relationship between the two that I blame.

I  agree.

Mark de LA says
Think of it in different way.  It is the product of labor that is circulated in the economy not the labor.  Labor must not be a commodity.


Mark de LA says
In the spirit of those ignoring history condemned to repeat the past, it can be said that while the third reich was bubbling to the surface those in the Nazi party were demonizing the Jews for having all the money & controlling the banks & the economy: thus blaming them for WW-I & the depressions. In that dung heap the threefold state was born through Rudolf Steiner.  Unfortunately it was a bit too late & has yet to manifest enough to form a model.


Seth says
m 2012-07-18 06:34:26 15486
seth 2012-07-18 06:07:39 15486
m 2012-07-17 22:57:25 15486
Think of it clearly, if you were balancing rights between individuals & groups like how much work should be done by two people & so forth why would you want economics to be the deciding factor? It is kinda like contract law. Fairness as humans has nothing to do with economics or money; current situations notwithstanding.

What are you talking about here?

Note i have declared this to be a rational item, no changes of topic, and no other logical fallacies.
In threefoldness, which relates to the whole problems in our economy, one of the hardest domains to understand is what RS calls rights.  He has the economy almost totally independent of government & labor & capital separate with labor not being a commodity as it is today; especially as it is moulded by labor unions.  If you understood matrix management where people manage not top down but collectively in all domains like capital, rights & goods & services you might be going in the right direction. We really need new thought not the recycled soulless ideas of the past. If all you do is bash capital you have no new ideas. More tax & more regulation in an already recessed economy will kill it. These are some thoughts you should consider.  If you are not using & thinking new thoughts you are merely playing the game as before seen as 16086. If that is the case then you can sing to the empty choir. I refuse to participate conversations funneled to go in the direction of the errors of the past.
 

How can labor be separated from an economy as long as you must trade your labor for the other things you need?  That trade IS the economy. I think that first we need a vision of how this would work ... a clear one ... then a vision of how to get from here to there.  

That is the only idea i could extract from your you comment ... If i missed something, please do separate it from the ego personality stuff that is implied by the rest of your words.  But remember, this item is about the financial sector of the economy.  It is not even about government except perhaps how government is related to the financial sector.  Bear in mind that the financial sector is comprised of banks,  hedge funds, insurance companies, etc ... enterprises whose products are made of money.   Talking about other things is a change of topic.  Perhaps you could start another rational item where we could discuss how labor could be separated from the economy ... i really am curious how that could be done.

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