The More Things Change The More They Stay The Same

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This is the text of a remarkable lecture given by Nobel Laureate James Tobin in 1984. He was discussing whether a more simple Economic System would provide most if not all that is needed in a modern society.

“I suspect we are throwing more and more of our resources, including the cream of our youth, into financial activities remote from the production of goods and services, into activities that generate high private rewards disproportionate to their social productivity. I suspect that the immense power of the computer is being harnessed to this “paper economy”, not to do the same transactions more economically but to balloon the quantity and variety of financial exchanges…I fear that, as Keynes saw even in his day, the advantages of the liquidity and negotiability of financial instruments come at the cost of facilitating nth degree speculation which is short-sighted and inefficient.”

It seems to me that this gentleman saw the current situation developing 25 years ago.

Let’s not lose sight of the fact that it is taxpayers and savers who pay the price for the recurring financial crises, not the whiz kids who benefitted most generously from its complexity.

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