The 5 Percent Solution: How 5 Percent of the Workforce Generated 40 Percent of U.S. Business Profits and all of it was a Ponzi Scheme.
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From 1948 to the early 1980s the financial industry in the U.S. generated from 5 to 15 percent of all U.S. business profits. In the early 1980s this started to creep higher and higher. It reached a triumphant climax generating over 40 percent of all U.S. profits at the height of our financial bubble. The only problem of course is the financial sector generated the largest Ponzi scheme known to humankind. The 2000s should go down as the decade of the Ponzi economy. It is almost fitting that the poster child of this excess ended up being Bernard Madoff who ironically was chairman of the board for NASDAQ at one point in his career.
If we only look at the actual financial employment data we can easily see how the last decade created a culture of Ponzi employment. While the smoke was blowing jobs were being erased off the paper of the U.S. economy. In the U.S. we currently have 132 million people in non-farm employment. Of this, roughly 7.7 million work in what is dubbed the “FIRE” sector (finance, insurance, and real estate). But when we look at the profits from this industry the bubble becomes more prominent:
It would be one thing if the financial sector actually produced a product. They tried and tried to convince the public that “financial engineering” was the wave of the future. After all, the public was able to go into massive debt to purchase homes and cars only to have them yanked away once the bubble imploded. No need for that MBA when all that was needed was a simple signature to control hundreds of thousands of dollars. Yet it was only on borrowed time. Not only where the artifacts of wealth taken away from many Americans, their jobs were also disappearing. Let us look at a few sectors:
The last decade was horrible for those that work in information services. We have 20 percent less people working in this sector even though our population has added 27 million people. Sure the tech bubble burst but the financial sector tried to convince the public that it was perfectly fine in letting good paying jobs slowly float away overseas. After all, the financial sector was more than willing to take you on. Apparently the core driving force of our GDP for the decade was selling homes to one another and allowing banks poetic license to create fancy Ponzi instruments to eventually implode the global economy. Their sophistication in blinding the public got to the point where they didn’t even need to produce a product to be the top money grossing industry. It was a casino economy.
As tough as the decade was for information service jobs, the manufacturing sector felt even more pain:
We now have 35% less manufacturing jobs even though our population has added 27 million people. The FIRE propaganda was that we would all be fine by simply off shoring every good producing industry in the country. Everyone would put on a suit and sell homes to one another or bang away on a Bloomberg Terminal. This was the new economy. But of course anyone with an ounce of common sense realizes that a sustainable economy is both balanced in the jobs it provides to its citizens. The FIRE economy cannibalized profits even though only 5 percent of the population works in this field. How did this sector do for the decade?
The FIRE economy still is net positive for the decade even though it is largely responsible for the credit and housing implosion that has devastated our economy. The fact that there is no contraction in the sector over the decade should tell you something. Did it fall from the peak? Of course but it got to ridiculous levels. It is the one sector where jobs are up for the decade.
This is a question we really need to examine. Wall Street and D.C. have attempted to convince the public that bailing out the banks was the important thing to do. But for who? The cost has been incredibly deep and the majority of the population has seen no benefit. But like the Wizard of Oz they tried to scare the public into handing over money with no questions asked or things would not go well. Yet the public never wanted these bailouts. Remember the early legislation for TARP? The public was outraged and called up their local representatives and it was voted down. The stock market imploded because the Ponzi game was up. Yet it was passed anyway and not because the public wanted it. Many politicians are simply puppets for the FIRE sector.
Most Americans probably think that these companies have their best interest at heart. They don’t. They are multinational. They follow the money and it doesn’t have to be only in dollars. Too bad for many since they are paid in dollars. The folks at the helm of the FIRE sector have offshore accounts and move money freely across international banks. They have no allegiance to anyone. They are happy with slave wage labor in China so long as they have the laws of the U.S. protecting them and the wallets of American taxpayers bailing them out.
Do people still believe that the bailouts were to help the average citizen? Just look at the above trends in employment. It is rather clear how the decade played out. And keep in mind things were “good” up until 2007! The stock market peaked, housing peaked, and all was supposedly good. But it was one giant bubble. Yet somehow the FIRE sector has managed to keep its power and its profits incredibly high with taxpayer subsidies. What is even more amazing is the corporatocracy has somehow managed to avoid any serious reform.
Noam Chomsky says it best:
“People cannot be told that the advanced economy relies heavily on their risk-taking, while eventual profit is privatized, and ‘eventual’ can be a long time.”
Something needs to radically change in this upcoming decade.