Fixing the Weakness Inherent in the Financial System

Necessity of Return to Separation of Commercial and Investment Banking

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Whenever Mathematics is done right, it’s predictions are inviolate, hence, it’s characterization as ‘Language of God’.

Multiplier Effects are generated by investments in the Real Sector, cannot be generated by investments in Stocks or Securities.

Absent generation of Multiplier Effects within a society, arrival at sustainable economic growth and development is a pipe dream.

Whenever, in context of structure of banks as holding companies, deposits of commercial banking arms legally are applied to investments in stocks, as opposed to investments in the real sector, there potentially is a loss of {US$1[(1+x)+Q]} for the economy.

Whenever Deposits are applied towards trade-based speculation in securities markets, absent creation of any new real assets within the economy, Deposits generate a return, US$1(1+i) that, in entirety, is retained within the Bank Holding Company.

At some point, the Negative Balance for Society is bound to become too large to be sustained, with outcome there is arrival at an economic recession.

Lending by Commercial Banks cannot be supported in an economy that progressively moves away from creation of new technological assets in the real sector.

Diversion of Deposits towards investments in Stocks, with outcome stock markets are characterized by significant volatility and uncertainty, induces underinvestment within the real sector, and predicts a bust of the stock market at some future date.

Is it not reasonable that modern factories whose interior employees find inviting for work, and that produce new modern technologies provide opportunities for more productive labor than driving for Uber.

This is all rooted in Mathematics of Multiplier Effects. When done right, Mathematics don’t lie.

Educator and Researcher, Believer in Spirituality, Life is serious business, but we all are pilgrims so I write about important stuff with empathy and ethos

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