I want to throw two more aspects of this economy into the discussion. First, money is created through debt. Only 4% of “money” is paper and metal, the rest is just an accounting entry on a computer. Banks make loans predicated upon the borrowers’ promise to repay; they don’t have the money in the vault awaiting a borrower. You sign the loan papers and you get an amount in your account to spend. This has consequences: banks don’t create the money needed to pay the interest due on the borrowed amounts; hence there always need to be new borrowers taking out new loans, or there is not enough money in “circulation” to service existing debts. This is important because, a) when credit is tight, the chance of foreclosure increases because fewer loans mean fewer new dollars created to cover interest, b) there must either be foreclosures and defaults, or new borrowers, neither of which are caring and compassionate ways to operate an economy (and is why this debt-based money is referred to as a “Ponzi scheme”), c) if your response to a tightening of credit is to increase government spending through bailouts to the banks using money that has to be borrowed, then the government is shifting the burden of repaying the loans onto the backs of taxpayers when the “profit” from the loans has already been claimed by banks, d) when you increase the money supply, in particular if you are using a fiat currency not backed by anything tangible, then you inevitably bring on inflation in the medium- and/or long-term, and e) if your response is to slash government spending then you are taking money out of the system and making workers/consumers/taxpayers scramble harder for the ‘dwindling’ funds needed to pay for their own debts. In other words, if you don’t fix money then you don’t fix anything.
Second, the issue of the financial sector being responsible for over 40% of corporate profits bears examination. These profits come primarily from 3 sources: interest collected, fees collected, and gains from a bank’s own trading, some of which is speculation and some just moving “financial products” which, because their value “derives” from something else and is thus very intangible and open to misstatement (some would say lie) and therefore creating “phantom” profit and not real wealth. Interest rates have been allowed to become usurious, often over 30%, which creates a fast way to funnel resources away from those who are resource-poor to begin with, hence needing loans, and giving those resources to those with the resources to lend. This widens the rich-poor income gap. Collecting (and increasing) fees, when you are already making huge profits, is just plain scandalous. And making money by speculating and shuffling “assets” that are two- and three-levels removed from anything real, and calling it “good” demonstrates how dysfunctional this system has become. I’d like to point to Charles Eisenstein, “Sacred Economics”, Chapter 12: “Negative-Interest Economics” for a very different perspective on what is possible. If you aren’t willing to go that far, how about at least letting the government compete with banks and lend to citizens at minimal, 0 – 5% rates (as the Federal Reserve already does with banks) so that interest goes back to taxpayers, not for-profit entities?