Other people's money: masters of the universe or servants of the people

Table of Contents:

PART. I. FINANCIALISATION

1. History

• The road to Pottersville
• The rise of the trader
• New markets, new businesses
• From crisis to crisis
• The robber barons
• We are the 1 per cent

2. Risk

• Cows, coffee and credit default swaps
• Chasing the dream
• Adverse selection and moral hazard

3. Intermediation

• The role of the middleman
• Liquidity
• Diversification
• Leverage

4. Profits: Smarter people

• Competition
• The Edge
• Regulatory arbitrage
• I'll be gone, you'll be gone
• How profitable is the finance sector?


PART. II. THE FUNCTIONS OF FINANCE


5. Capital allocation

• Physical assets
• Housing
• Property and infrastructure
• Large companies
• Financing small and medium-size enterprises

6. The deposit channel

• Household wealth
• The payment system
• The activities of the deposit channel

7. The investment channel

• Stewardship
• A bias to action
• The role of the asset manager


PART. III. POLICY


8. Regulation

• The origins of financial regulation
• The Basel agreements
• Securities regulation
• The regulation industry
• What went wrong

9. Economic policy

• Maestro
• Financial markets and economic policy
• Pensions and inter-generational equity
• Consumer protection
• The British dilemma

10. Reform

• Principles of reform
• Robust systems and complex structures
• Other people's money
• The reform of structure
• Personal responsibility

11. The future of finance

We all depend on the finance sector. We need it to store our money, manage our payments, finance housing stock, restore infrastructure, fund retirement and support new business. But these roles comprise only a tiny sliver of the sector's activity: the vast majority of lending is within the finance sector. So what is it all for? What is the purpose of this activity? And why is it so profitable?John Kay, a distinguished economist with wide experience of the financial sector, argues that the industry's perceived profitability is partly illusory, and partly an appropriation of wealth created elsewhere - of other people's money. The financial sector, he shows, has grown too large, detached itself from ordinary business and everyday life, and has become an industry that mostly trades with itself, talks to itself, and judges itself by reference to standards which it has itself generated. And the outside world has itself adopted those standards, bailing out financial institutions that have failed all of us through greed and mismanagement. We need finance, but today we have far too much of a good thing. In Other People's Money, John Kay shows, in his inimitable style, what has gone wrong in the dark heart of finance.


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