Finance creates cost.
To the extent that finance is non-productive it creates cost-push pressure.
To the extent that finance is productive at the micro level by the extraction of rent, it creates cost-push pressure.
To the extent that finance is 100% productive, the growth of finance beyond its economies of scale creates cost-push pressure.
And to the extent that financial income comes from the nonfinancial sector, it creates cost-push pressure.
Cost-push pressure slows economic growth.
1 comment:
"... to the extent that financial income comes from the nonfinancial sector, it creates cost-push pressure."
Come to think of it, it creates cost-push pressure in the nonfinancial sector, and demand-pull asset inflation in the financial sector.
So it goes (sigh).
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