Finance and Rents

[Jon Miller]

http://www.economist.com/businessfinance/displayStory.cfm?story_id=16274625&fsrc=scn/fb/wl/ar/rentcut

I have wondered about this. It doesn't seem as if the economy has been a lot better handled the last 30 years, although the finance sector has made much much more.

It isn't my area of expertise though.

Thoughts?

[DanS]

The citation to ROE can give a false reading -- it may just reflect increasing use of leverage in the banking system and will go away as leverage practices are cleaned up.

[Ghaladh]

Consider that through the debt-system a growing amount of cash is flowing into the financial sector. With the raising number of companies that go broken and the upsetting unemployement rate all over the world, the request for financial services are exponentially growing, letting the "money-mover" to enlarge their business while the world goes to the unavoidable demise.
Now, rather than saying that economy is better handled, I think it would more appropriate to say that economy is just more complicated and requires better handling-skills. Many saw the opportunity to save their lives by investing their money in the financial sector but the fact that small financial groups are joining in order to survive the competition, clearly states in which direction the economy is going. Small financial companies and ventures are bond to extinction, more likely used to make money in a rush before disappearing or being gobbled up by the big-fishes. Those big-fishes will soon possess everything. The more they possess, the more economy will be apparently "under control".

[loinburger]

My rent now is much higher than my rent five years ago, but I don't know how the price-per-square-feet compares - I'd guesstimate that my current apartment costs 20% more per square foot.

[Ghaladh]

My rent now is much higher than my rent five years ago, but I don't know how the price-per-square-feet compares - I'd guesstimate that my current apartment costs 20% more per square foot.

It's normal inflation, provided that along with your rent, the salary grows in a balanced way. In Italy, just so to speak, 8 years ago my salary was around 3,900€ net of VAT and my rent was 1,200€. Now my salary is 1,600€ net of VAT (although the job is still the same - I'm not joking) and my rent is 1,300€. I must be thankful that my landlord had shown some compassion towards me, but I would kill the Finance Minister.

[KrazyHorse]

http://www.economist.com/businessfin.../wl/ar/rentcut

I have wondered about this. It doesn't seem as if the economy has been a lot better handled the last 30 years, although the finance sector has made much much more.

It isn't my area of expertise though.

Thoughts?

What's Google's return on equity from its founding? Why is return on equity a poor metric for companies with large numbers of high-skill employees?

[KrazyHorse]

The citation to ROE can give a false reading -- it may just reflect increasing use of leverage in the banking system and will go away as leverage practices are cleaned up.

Hey dan: what's the return on equity to a law firm?

[Kuciwalker]

What's Google's return on equity from its founding? Why is return on equity a poor metric for companies with large numbers of high-skill employees?

I already made this point to him extensively

[KrazyHorse]

Different thread, I'm guessing.

[Kuciwalker]

IM.

[KrazyHorse]

You're teaching intermediate economics over IM now?

[Jon Miller]

The education level in the finance industry has increased a lot the last 30 years. However, it is still not clear to me that this is the only cause/effect.

I am still thinking about it.

JM
(Well, not at the moment, I stopped thinking about it to work/etc, and will think about it more later.)

[Al B. Sure!]

WHY do people who work in finance earn more than most other people?

But the degree doesn't get your ****!


(maybe an MBA does)

[KrazyHorse]

The education level in the finance industry has increased a lot the last 30 years. However, it is still not clear to me that this is the only cause/effect.

I am still thinking about it.

JM
(Well, not at the moment, I stopped thinking about it to work/etc, and will think about it more later.)

Education level isn't a particularly relevant proxy, Jon.

[Kuciwalker]

Yeah, the people from my school who got the serious finance jobs were not average CS majors.