By Stephen Davis, Jon Lukomnik, David Pitt-Watson
Each yr we pay billions in charges to those that run our economic system. the cash comes from our financial institution debts, our pensions, our borrowing, and sometimes we aren’t advised that the money has been taken. those billions might be justified if the finance does an outstanding task, yet as this publication indicates, it too usually fails us. monetary associations usually position their enterprise pursuits first, charging for recommendation that does not anything to enhance functionality, utilizing momentary paying for options which are corrosive to construction long term worth, and occasionally even concealing either their practices and their funding recommendations from investors.
of their prior prizewinning ebook, The New Capitalists, the authors confirmed how usual everyone is operating jointly to call for responsibility from even the main strong organisations. the following they clarify how a tyranny of errant services, naive law, and a misreading of economics mix to impose an enormous stealth tax on our reductions and our economies. extra vital, the trio lay out an schedule for curbing the misalignments that let the monetary to benefit at our fee. With our monetary destiny at stake, this can be a publication that analysts, economists, coverage makers, and an individual with a retirement nest egg can’t have the funds for to ignore.
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Extra resources for What They Do With Your Money: How the Financial System Fails Us and How to Fix It
In Britain, many people buy an annuity that will keep paying no matter how long they live. But annuities are expensive and give low returns. 4 In Amsterdam, though, Sarah has been enrolled into a giant, low-cost, nonprofit fund that will cover her for the rest of her life. 5 percent, so at age sixty-five she has a pension pot equivalent to $642,000. 5 Why the vast disparity? Rather than establish simple, commonsense, low-cost vehicles for collective savings and retirement, such as the Dutch have, financial institutions and policymakers in the United States and United Kingdom have engineered a system that has transformed worker savings into a virtual ATM for the financial industry.
It reduces risk for any one individual by sharing the risk among many people. For example, the bank where I deposit money may lend to some risky ventures, but as long as those ventures don’t all get into trouble at the same time, this lending may be quite profitable. Some of the risky borrowers will pay back their loans, and the interest charged can more than compensate for any losses due to defaults. Similarly, an insurance company can offer life insurance to many people, allowing the premiums from all and the returns from investing those premiums to cover the claims when individuals die.
Payments for order flow that year included about $100 million to Charles Schwab and $75 million to E*Trade. Ultimately, all these costs are a cost to other investors. ”10 High-frequency trading, payment for order flow, and internal pools at hedge funds are all very efficient if looked at from the point of view of the immediate participants, but they provide little for the companies seeking money to invest, and the savers seeking a return who are the ultimate customers. Perversely, the very developments we normally associate with well-functioning markets have added costs without returning much value.