Help DUers what percentage of GDP had financial services gotten to

[roseBudd]

before the crash and what was it decaades ago?

I know I just saw this info somewhere (DU?) in the last couple days.

[GoesTo11]

1. It was over 40% of profits. Don't know about GDP

Probably lower - they don't actually make anything but they're good at taking. Too bad this crisis isn't going to clean them out of our system.

[roseBudd]

2. I thought GDP just meant money changing hands, so if people spend money

on investments they are doing an activity that is akin to buying stuff.

[GoesTo11]

3. Don't think so. They account differently for different things.

If a plumber does $100 work for you, that's $100 to the GDP. If someone builds a table for $100 and you buy it from them, that's $100. But I don't think if you go and resell that table for $105, it's another $105 of GDP, only another $5. So with finance, they aren't actually creating GDP with the stock sales, only with the service fees. If that's the case, they were sucking out a huge proportion of the profits compared to their contribution to GDP.

[ProfessorGAC]

7. Sorry, That's Not Correct

The GDP is calculated as the transactions that result in a transfer of ownership of goods, or completion of a service, at the final stage.

Most banking transactions do not meet the definition of "final stage". The reason is really pretty simple, i think. If i buy a CD from a bank, or stock from a brokerage, i can always sell it off to you, or sign it over to you. That means the transaction at the bank wasn't final!

So, most of those transactions are part of the other side of the economic tautology. These investments and transactions then affect the "m" and the "v", more than the "p" or "q".

As far as how they involve themselves in the GDP, since there is no consumption of money, there is no place for investments to go into the GDP. Brokerage fees would go there, because it's a service consumed. So, most of the investment values do not get included in GDP. Banking profits, however, do get included, because they come from fees (services consumed) and interest payments, (also consumption). But, the actual transactions don't.
GAC

[Democrats_win]

4. As of 2006 it was 31%, it had grown from 23% in 1990

http://www.bis.org/speeches/sp081119.htm

Note, the 40% figure was quoted by Obama on Jay Leno that the financial sector represented 40% of all our GROWTH over the past 15 to 20 years. Here's that quote:

"Well, and part of what happened over the last 15, 20 years is that so much money was made in finance that about 40 percent, I think, of our overall growth, our overall economic growth was in the financial sector.

The transcript is on a RW site, but the quote is correct as far as I can remember.

http://freedomeden.blogspot.com/2009/03/obama-and-leno-march-19-transcript.html

It should be noted that Harper's Magazine, the April issue, discusses the evolution of the financial industry and how it's demand for capital took money away from the manufacturing sector. That's one competitive disadvantage that we now have. The cycle will continue to get worse as banks offer big profits thus taking more money away from manufacturing. The article is called, "Infinite Debt."

[katanalori]

5. so says my economy expert hubby..........

appprox. 12% of GDP up from approx 4% 15 years ago.

[Karenina]

6. Another citation for that 40% figure at 0:22

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=385x291339

David Schuster interviewing Simon Johnson.