The disconnect of funding from wealth creation

World Economics Journal, Vol. 23, No. 2, June 2022

20 Pages Posted: 19 Dec 2019 Last revised: 4 Jan 2023

See all articles by Savvakis C. Savvides

Savvakis C. Savvides

Queen's University - John Deutsch Institute for the Study of Economic Policy

Date Written: May 28, 2022

Abstract

The paper identifies concentration of money and power and loosely regulated financial markets as impeding the efficient allocation of economic resources. The pursuit of return without risk inevitably leads to the transfer of wealth through a failing banking system which collaborates with hedge funds and global wealth management groups who constantly seek low risk and high returns for the benefit of their wealthy clients. It is further argued that conditions conducive to economic development hardly exist in highly indebted countries and that wasteful finance inevitably brings about financial crises and recessions. The promise of a “return without the risk” leads financial intermediaries in the direction of an elusive quest whereby the only way to attain this is through directing funding towards the capture of existing assets rather than it being invested back in the real economy to create new wealth.

Keywords: economic development, repayment capability, project evaluation, corporate lending, credit risk

JEL Classification: D61, G17, G21, G32, G33, H43

Suggested Citation

Savvides, Savvakis C., The disconnect of funding from wealth creation (May 28, 2022). World Economics Journal, Vol. 23, No. 2, June 2022, Available at SSRN: https://ssrn.com/abstract=3489546 or http://dx.doi.org/10.2139/ssrn.3489546

Savvakis C. Savvides (Contact Author)

Queen's University - John Deutsch Institute for the Study of Economic Policy ( email )

Canada

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