Let me explain what I mean. Productivity increases are great as long as it continues to facilitate more and more

Let me explain what I mean. Productivity increases are great as long as it continues to facilitate more and more

economic growth for each $1 of input. For example: When the railroad was laid across America it allowed for products

to be shipped farther and faster than had been previously available. Therefore, producers of goods, particularly

perishable items like food stuffs, could be sold to a greater base of customers. Therefore, the producer had to hire

more individuals to produce more products to meet a much greater base of demand. This is turn led to more economic

growth as now all those individuals that now had jobs had money with which to save and spend. So, for every $1 that

was invested in building a railroad

– the economic growth was multiplied many times over.

In today’s world of financial enginee

ring we are

continuing to find more and more ways to

increase productivity, however, in a financial

transaction very little growth gets translated to

the economy. For example: The banks

currently have $1.2 Trillion dollars with which to

conduct business. The proprietary trading

desks of the five major Wall Street firms can

move this money through the financial markets

with relatively very few individuals involved in

the process. Hundreds of millions of dollars in

profits are made from these transactions which

wind up immediately back on the balance sheets

of the banks. Effectively the $1 of input

through the system created $0 of economic

growth because it did not create more jobs or

effect economic output in the system.