Yet another impressive effort from Adam in The Australian today (you will have to subscribe to read the entire thing), which contrasts with the reflexive cheer-leading of most other commentators. As I explained in considerable detail here, housing is both a consumption and investment good. Adam does not pull his punches:
Banks are meant to serve commerce, not undermine it, yet ballooning banks have been elbowing real production and exchange out of the way relentlessly since the 1980s, cheered on by regulators, governments and too many journalists.
Underpinned by valuable implicit guarantees and other government subsidies, banks' leverage levels rose to unprecedented heights, saturating society with credit in the process.
These days, "well capitalised" banks' assets need only fall in value by about 6 per cent for them to approach insolvency.
The Productivity Commission shows the finance sector receives more budgetary aid than the car industry: $615 million last year...
The BIS economist found also that banks had become a black hole for national productivity, sucking in the most educated and talented employees, which in turn stifled innovation in other parts of the economy, especially high-end manufacturing.
Large financial sectors make economies more vulnerable to devastating financial crises and direct swathes of the labour force into jobs in which the social benefits are questionable.
