Finance needs stewards, not toll collectors

Thorsten Beck, Hans Degryse, Christiane Kneer, 8 April 2013Growing the financial sector was viewed as a viable 21st-century competitiveness policy for small, agile nations in the 2000s. Things have changed. This column reviews the empirical literature arguing for a distinction between two roles: finance as intermediation or facilitator, and finance as a growth sector in itself.

Article written by Prieur du Plessis, editor of the Investment Postcards from Cape Town blog.The July’s edition of Donald Coxe’s Basic Points research report (subtitled “Existential Financial Risks”) was published a few days ago. His investment recommendations, as summarized in this document, are listed in the paragraphs below, but I do recommend you also read the full report at the bottom of the post.

At one level and in most economics textbooks, this is an easy question with a rather encouraging answer.  The financial sector connects savers and borrowers – providing “intermediation services”.  You want to save for retirement and would obviously like your savings to earn a respectable rate of return.  I have a business idea but not enough money to make it happen by myself.  So you put your money in the bank and the bank makes me a loan.  Or I issue securities – stocks and bonds – which you or your pension fund can buy. 

The UK coalition should renegotiate or buy back many existing PFIs and adopt simpler outsourcing structures, writes John Kay

The risks that the financial sector has devised techniques to manage are not the everyday risks of an uncertain world: they are risks almost entirely created within the financial sector itself, writes John Kay

We need to increase the scope for structured and independent inquiry outside government, but with the kind of authority that only official status can confer, writes John Kay