Banking

In a previous post, I discussed how the finance industry had gotten out of whack- compensation was not in line with productivity. Look at how hedge funds make money- typically they take 2% annually as a management fee and then they take 20% of profits. If a fund has $1 billion in assets, the managers are taking $20 million per year as a management fee. The fund has to have an annual return of 10% for the managers to make more money off their share of the profits than they make from management fees. In 2008, there were damn few funds of any sort that returned greater than 10%, but the managers still took there 2% management fee.

In the NY Times, Paul Krugman writes about how when baking is "boring", bankers are not paid as well, but the economy is sounder. When we are in an era of superstar bankers, well, DUCK- we are in another gilded age.

Krugman says Obama isn't doing enough

It does feel like the government is a step behind in proposing solutions for the financial crisis. Krugman argues that a second stimulus plan is needed sooner rather than later. Every time I think we may have hit the bottom, things manage to get worse.

Here's Krugman's take.

There's a reason he won the Nobel Prize

Krugman nails it:

The American economy is on the edge of catastrophe, and much of the Republican Party is trying to push it over that edge.

He's not always the most cheerful read, but Krugman knows what he's talking about.