Few understand that the process of financialization has distorted economic conditions associated with the Real Economy.
Financialization led to more and more of our economy being based on the financial industry. Since 1980, the percentage of our GDP attributable to the financial sector went from under 10% to over 30%.
Money creation has benefited the banks. Their profits are up. Bonuses skyrocketed even in the depths of the '08 (and continuing) Recession. The huge sums made available to banks allows them to either lend it out or buy government debt, making free profits.
We can't ignore the Fed's connections to the banking industry. The Federal Reserve is not a governmental organization. If Americans knew how our monetary system worked, as Henry Ford said, there would be "revolution by morning."
Banks are able to make their huge profits through access to cheap credit. Money is not equally available to all, despite the specific right in the Constitution that allows Congress--not the Fed--to coin/mint money. There's no reason that interest has to be paid, other than the banks control over the issuance of new money which enters our system in the form of debt.
Statistics don't lie, people do
In conditions where there's an underlying recession, monetary flows through the financial industry mask the problems, cooking the books.
Want to lower the inflation figures? Base inflation on consumers and how much they're spending, what's known as demand inflation.
Want to blow up growth numbers? Look to the financial sector and capital flows. Use averages. Dig deep enough into a broad enough range of economic data and any conclusion can be made.
Give one group--the bankers, for instance--enough unrestricted control over the statistics defining an economy's health and you've created a massive opportunity for distorting real facts and trends to suit a predetermined agenda. What benefits that group need not benefit the whole of the body. Like a parasite, what happens to the host--the broader economy--is secondary and inconsequential--merely collateral damage, insignificant if the interests of that group can be preserved and protected.
Statistically, the average (or mean) can diverge wildly from the median, or middle number. One million dollar home sale can push up the average sale price of average-priced homes remarkably. The more money that congregates at the top, the easier it is to play games with statistics. Median numbers are harder to manipulate, and therefore are less appealing to those with an agenda.
Specifically, statistics serve a purpose to keep the focus on economic "growth," and even a definition of growth can be open to reinterpretation. In our present economy, financialized as it is, growth is essentially growth in the supply of money, which is best thought of as someone else's debt.
Somewhere in the process of converting from a production-oriented economy to one based mostly on capital flows, money became not an asset but instead debt. Wealth represents not a collection of assets (although the debt often manifests as physical assets) but rather means being owed more by others.
Derivatives are a method by which a future stream of capital flows can be securitized into financial instruments bought and sold on nontransparent markets. The total sum of these derivative has climbed to over 1 quadrillion (a thousand trillion) dollars.
If growth in the quantity of derivatives is used as a economic measuring rod, then our "economy"--not the real one but the financial one--is "growing" at a fast rate. Obviously the growth in financial assets has greatly benefited the top tier.
Inequity has reached unprecedented levels in our economy as result of abandoning the Real Economy in favor of the Financialized one. American manufacturing has been decimated by the Walmart economy and middle class jobs have been lost permanently, with a "service economy" toted as a better way.