Investment Banks Invest in Finance with Minor Impact on the Real Economy

March 17th, 2015
in News, econ_news, syndication

Econintersect: It was about one year ago that the Bank of England published a research report that documented the well known (but often obscured from view of the broad public) fact that banks create deposits by writing loans with money "created out of thin air" based upon the security of assets lent against. That paper, "Money creation in the modern economy" now has a companion of comparable importance: "Investment banking: linkages to the real economy and the financial system" by Kushal Balluck of the Bank's Banking and Insurance Analysis Division. This is a clear and complete summary of banking sector activities and an empirical assessment of the money volumes of various banking functions.

money.measuring.380x175

Follow up:

The study finds that the revenue of the largest global investment banks is 75% derived from interbank activities and only 25% from activities in the "real economy".  In other words, investment banking is much more about "making money" and much less about "making goods and services" than some may have heretofor thought.  Certainly those who proclaim that their bank is "doing God's work" would want to portray that just the opposite were true, unless, of course, money is their god.

The following two graphics from the report summarize investment bank activities, including how investment banks interact with the real economy.

investment.bank.activities

investment.bank.channels.real.economy

Click on the following infographic to read the complete report.

investment.bank.global.revenues.2013.600.775

 

Sources:









Make a Comment

Econintersect wants your comments, data and opinion on the articles posted.  As the internet is a "war zone" of trolls, hackers and spammers - Econintersect must balance its defences against ease of commenting.  We have joined with Livefyre to manage our comment streams.

To comment, just click the "Sign In" button at the top-left corner of the comment box below. You can create a commenting account using your favorite social network such as Twitter, Facebook, Google+, LinkedIn or Open ID - or open a Livefyre account using your email address.















 navigate econintersect.com

Blogs

Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day
Weather

Newspapers

Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government
     

RSS Feeds / Social Media

Combined Econintersect Feed
Google+
Facebook
Twitter
Digg

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution

Contact

About

  Top Economics Site

Investing.com Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2016 Econintersect LLC - all rights reserved