The financial industry has become a terrible waste

Despite last year’s debacle in the stock and bond markets, young people graduating from university, even those with a graduate degree, still flock to the investment industry. That is a terrible waste of energy and talent.

Heretofore, the financial industry was an essential element in the functioning of our economy. In Europe and Asia, banks usually furnished the working capital for businesses. In contrast, in North America the investment industry usually raised the funds for business by issuing bonds or common shares that were sold to financial institutions or to the general public.

In other words, Bay Street in Toronto and its counterpart in the United Sates, Wall Street, were important. People knew they were a useful component in our economy. Financial markets for the most part were not like a gambling casino.

Over the past generation all that has changed. While businesses approached banks for funding, companies frequently tapped the financial markets to meet their capital requirements.

While that process continues, the financial markets’ character has been twisted beyond all recognition.

Sales personnel sit by a computer screen, and when a bond or common share deviates even by the most minute amount from what it perceived to be its true value, sales employees see this. They push a button to take a position and then realize a gain.

If they are correct, they earn enormous financial rewards. This goes on numbers of times a day (hundreds of times?).

For the most part these sales people are pushing buttons to take positions on stocks or bonds; that constitutes their day.

Does that trading make any contribution to the economy or to our community?

Sales people can amass huge financial rewards and that explains why so many seek employment in the financial industry, but society, as a whole, derives absolutely no benefits at all from that activity.

At the expense of social interaction, those computer geeks can “earn” immense sums, but without offering anything in return to the community or to the general public.

One could weep or condemn this occupation, but the potential for earnings seems to override any other consideration.

One would hope the education and training of these young people would be put in some more worthwhile endeavor.

Perhaps once “the great game” being played in the financial sector is put to rest by a financial collapse or a major change in the way markets operate, some reason will return.

People then would turn their talents into a more productive occupation. In the interim, the financial industry as presently organized will have a hard time justifying its existence.


Bruce Whitestone