An astonishing $32 trillion in securities changes hands every year with no net positive impact for investors, charges Vanguard Group Founder John Bogle.
Meanwhile, corporate finance – the reason Wall Street exists – is just a tiny slice of the total business. The nation’s big investment banks probably could work for less than a week and take the rest of the year off with no real effect on the economy.
‘The job of finance is to provide capital to companies. We do it to the tune of $250 billion a year in IPOs and secondary offerings,’ Bogle told Time in an interview. ‘What else do we do? We encourage investors to trade about $32 trillion a year. So the way I calculate it, 99% of what we do in this industry is people trading with one another, with a gain only to the middleman. It’s a waste of resources.’
Rent seekers
It’s a lot of money, $32 trillion. Nearly double the entire U. S. economy moving from one pocket to another, with a toll-taker in the middle. Most people refer to them as STOCK BROKERS,’ but let’s call them what they are – toll-takers and rent-seekers.
This post was published at David Stockmans Contra Corner on July 30, 2015.
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