Herb Stein, an economist, pointed out the truism that “if something cannot go on forever, it will eventually stop”. But no one paid attention. The financial sector just kept growing out of alignment with the real world. It will be useful to put some numbers on how, across rich countries, this misalignment kept on increasing. Take the case of the United States.
Over the last 50 years, the share of value added from manufacturing in GDP shrank by more than half from around 25 per cent to 12 per cent while the share of financial sector more than doubled from 3.7 per cent to 8.4 per cent. The same trend is reflected in profits too.