# Financialism - making money from money



## Warrigal (Jul 3, 2014)

This article is talking mostly about Australian trends but I think there is scope for a general discussion about problems caused by self-regulation of banks and other financial institutions.

The Commonwealth Bank referred to in the article is one of the big four banks that have the lion's share of the financial advice market and some of their advisors have been found to have dispensed self serving advice and committed fraud, resulting in heavy losses for some clients. The financial regulator ASIC appears to have been asleep at the wheel.

Any and all thoughts welcome to kick start a discussion.



> http://www.eurekastreet.com.au/article.aspx?aeid=41659#.U7YlcpqKAqQ
> 
> Commbank plunder part of new world economic order
> 
> ...


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## WhatInThe (Jul 4, 2014)

Sounds like conflicts of interest. Similar to conflicts the US had with the big banks and firms selling the poor credit mortgages as profitable and hedging their so called investment betting the price would go down. 

The customer or client should be THE primary interest. The incentive should be the same commission on any product, not one company or company the adviser can make a profit on the back end by having his employer make more money.


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## Warrigal (Jul 4, 2014)

It does to me too, and I'm not Robinson Crusoe. There has been a call for a Royal Commission into the actions of the Commonwealth Bank and (the regulator) ASIC but the government isn't willing to go that far. The Commonwealth Bank is offering compensation but is appointing the group that will assess the claims. Conflict of interest writ large IMO.

Years ago Hubby and I had experience of a financial advisor who was charging us and also receiving commissions from the people whose products he was recommending. Over time I reckon it cost us the value of a new car. Since then some changes to legislation have required the advisor to act in the best interests of the client. Our current government intends to water this requirement down.


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## Warrigal (Jul 4, 2014)

I was interested in the idea that we are now less reliant on capitalism in that we invest less in making things and rely more on making money from money i.e.financialism. I'm economically illiterate but as someone who worked in the tertiary sector (education) I wonder how much risk we are taking if we allow the primary and secondary sectors to decline. More and more banks and other financial institutions seem to be investing the clients' money in thin air and fairy floss.

 I'm reminded of the biblical story of the statue which had a head of gold and feet of clay. Then there is the house built upon the sand. I think these metaphors have practical meaning that applies just as much as the theological interpretation.


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## Bajabob (Feb 28, 2018)

The way to "make money from money" is by investing.


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## Warrigal (Mar 1, 2018)

Sure Bob, but investing in what?

We all know that pyramid schemes are bad investments because they are not sustainable.
I always hope that at least some of the money I invest via my retirement fund will be used to build a future for my grandchildren in particular and Australians in general.


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## Aunt Bea (Mar 1, 2018)

Warrigal said:


> Sure Bob, *but investing in what?*
> 
> We all know that pyramid schemes are bad investments because they are not sustainable.
> I always hope that at least some of the money I invest via my retirement fund will be used to build a future for my grandchildren in particular and Australians in general.



Financialism is a new term for me so if I'm missing the point/definition please help me.

*"but investing in what?"*  Isn't that what financialism is all about, selling financial management advice, management of other peoples money, investment products, etc...

When I started working banks made their money by taking our deposits at 5% and lending them to people who needed money at 8%, pretty simple.  Then in the 80's bankers realized that they could make more money from fees than from lending, they became salesmen of financial services/products.  When dealing with people selling anything the old idea of caveat emptor should apply.  Caveat emptor - the principle that the buyer alone is responsible for checking the quality and suitability of goods before a purchase is made.  

IMO the average person should educate themselves and or seek out a financial advisor that has a fiduciary responsibility to them and be willing to pay for those services.


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## Ken N Tx (Mar 1, 2018)

A rancher down here said you can have a million dollars raising horses if you start with 2 million!!


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## Warrigal (Mar 1, 2018)

Aunt Bea, I am financially and economically illiterate so I looked for a definition.
These are several that I have found. They seem to be in harmony.



> *Financialization* is an increase in the size and importance of a country's financial sector relative to its overall economy.
> *Financialization* has occurred as countries have shifted away from industrial capitalism.
> 
> _*Financialization*_ is a term sometimes used to describe the development of financial capitalism during the period from 1980 until 2010, in which debt-to-equity ratios increased and financial services accounted for an increasing share of national income relative to other sectors.
> ...



This article explains why it is a problem for classical capitalism

https://www.google.com.au/url?sa=t&...-definitions&usg=AOvVaw2FXE3OK-Un8EwYiTjRD7OR


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## Aunt Bea (Mar 1, 2018)

I've read the links and I'm still a little confused.

It sounds like another name for the widening gap between the haves and the havenots.  

A move away from Lincoln's observation “Labor Is the Superior of Capital”.

I agree that diverting excess wealth into capital without any real sustainable growth will not work in the long run, it is the stuff that bubbles are made of and bubbles burst.

What's the solution?  

A person has to be willing to take some risk to strike out and create a new business that requires an investment in both labor and capital.  People like Elon Musk who want to create things.  Some people think that the reduction of taxes and regulation on business will help spark this type of investment, I'm not sure.

I think that this is interesting but I don't think that people like me have much control over this situation.  It will take a younger generation of people to come up with the ideas and make the investments that require both labor and capital.


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## Gary O' (Mar 1, 2018)

Carpetbaggers, gettin’ goin’ after whatever’s left
Don’t matter
Tricky these days
The rules have changed
What once proved good, isn’t
Folks point at China
Heh, China needs other’s economy to be robust just as much as anybody
It’s truly a world market now

Bottom line;
100 years ago an ounce of gold would buy a good suit
Today, an ounce of gold will buy a good suit

hard to dine on either, it turns out


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## Bajabob (Mar 1, 2018)

"Investing in what ?" is a good question. I study the pages of my weekly financial publication, and this gives me most of the information I need. I look for companies that are making money, are not too heavily in debt, whose stock has a low or moderate price/earnings ratio. I then go to me brokers website and look for other information and see if the entire picture is encouraging or otherwise. All this study of course proves nothing, but it does show which companies seem to be a good bet for investment.


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