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Another view of the Wall St crisis

Financial Events, Leverage
By Paul Hodges on 02-Oct-2008

Ken Rogoff was Chief Economist at the IMF, and is now a Harvard professor. His view on Wall Street’s current problems is refreshingly different. Writing in The Guardian, he notes that ‘efficient financial systems are supposed to promote growth in the real economy, not impose a huge tax burden’. But, he adds, ‘the US financial sector, in greasing the wheels of the real economy, has been soaking up an astounding 30% of corporate profits and 10% of wages’.

Rogoff therefore wonders whether ‘significant shrinkage of the financial sector, particularly if facilitated by an improved regulatory structure, might actually enhance efficiency and growth?’