We have been describing this phenomenon of the outsized growth of the financial component of the US economy and the distortions which this has produced throughout society for some time. Kevin Phillips description seems sound, and his talk "Bad Money" listed in the 'Apertifs' section of this blog. Greta Krippner of UCLA has a decent description as well.
Change is clearly in the air with the ascent of the candidacy of Barrack Obama. Our macro forecast from 2005 predicted the Bush Administration would take its policies to such an extreme that they would likely bring down the Republican party for many years, similar to that which occurred in the 1930s. The Republicans did not regain power until Eisenhower after the War.
Trends tend to extremes and then correct. Let's see if we get a solid Democratic lineup in the Executive and the Congress. We're not saying this is what we prefer; we are trying to assess the likely impacts of exogenous events on the economic environment. But change is in the air.
Currency War - The China Weekly
We can't help but note in passing that one of the best selling books in the emerging economy of the People's Republic of China is Currency Wars by Song Hongbing.
The thesis of this book is that: "the financial history of the world is simply a tale of conspiracies seeking domination and the uneven distribution of wealth in favor of the rich. He concludes that China should be prepared to fight ‘bloodless wars’ waged by evil forces like the US Federal Reserve aimed at destroying China’s economy.”
[this translation is poor] "Song is not denying his view that all Chinese families should produce 3% -5% of revenue to purchase gold in kind, to add their wealth with insurance, because when real turbulence come, we can guarantee wealth, rather than any government-issued letter with notes. In fact, when the government trusted, issued currency is valuable, and when the government was not strong sense of trust, it will devalue the currency, or even worthless."
Despite being dismissed as a conspiracy whacko by the Western press, his ideas seems to be finding fertile ground with millions of Chinese. His analysis seems naive given his reported concentration on the role of the Rothschilds as the center of the banking cartel, which is probably the stuff of the fringe Internet. We are not comfortable commenting on this or on the book further because there are no English translations to be found, even though it is in the top ten best sellers in China. We'll reserve our opinion until the translation is available in whole, but note again its huge popularity in China.
If millions of Chinese families start acting on his prescriptions for a gold and silver based producing economy with a strong yuan we'll call that irony enough to give any financial elite a headache.
Financialization is a relatively new term used to discuss the emergence of a new form of capitalism in which financial markets dominate over the traditional industrial economy.
Greta Krippner of the University of California - Los Angeles has written that “financialization” refers to a “pattern of accumulation in which profit making occurs increasingly through financial channels rather than through trade and commodity production.”
More popularly, however, financialization is understood to mean the vastly expanded role of financial motives, financial markets, financial actors and financial institutions in the operation of domestic and international economies.
In his 2006 book, American Theocracy: The Peril and Politics of Radical Religion, Oil, and Borrowed Money in the 21st Century, American writer and commentator Kevin Phillips presented financialization as “a process whereby financial services, broadly construed, take over the dominant economic, cultural, and political role in a national economy.” (page 268).
Change is in the air for financial superclass
By David Rothkopf
The Financial Times
Published: May 15 2008 19:26
Of the world’s elites, none has flown higher than those who have led the financial community. The re-engineering of international finance has been one of the transformational trends of our times – in just a quarter-century, capital flows became massive, instantaneous and controlled by a new breed of traders representing a handful of major financial institutions from a few countries. Their rewards have transcended any in history as shown by an estimate by Alpha Magazine that the top hedge fund manager last year made $3billion.
The concentration of power has also steadily grown. The top 50 financial institutions control almost $50,000bn (£25,600bn) in assets, roughly a third of the global total. Ten thousand hedge funds are estimated to account for 30-50 per cent of all equities trading worldwide but the top 100 control 60 per cent of hedge fund assets. When crises arise, regulators have been forced to seek the collaboration of the heads of the biggest institutions on a more or less voluntary basis. Typically, of the few they approach, the key executives are in the US and Europe, underscoring the transatlantic nature of this elite. 
Change, however, is in the air. The history of elites is one of their rising up, over-reaching, being reined in and supplanted by a new elite. Several recent developments suggest that the financial crisis could signal the high-water mark of power for this group.
First, the crisis is prompting a re-regulatory drive. The power of financial elites had been evident in their ability to argue that global financial markets and markets in new securities should remain “self-regulating” (how many of them would hop into a self-regulating taxicab?), then when crisis comes – as with mortgage-backed securities – these champions of less government involvement have then persuaded governments to cauterise their wounds.
Now, however, there are encouraging, if preliminary, signs of a push towards more effective collaboration between governments – the first steps towards creating the much needed checks on global markets that exist within nations. This could erode the agility of financial elites to play governments off against each other, with the weakest regulator setting the rules.
Second, the credit crisis is exacerbating the emerging backlash against corporate excess . Elites make billions on markets whether they go up or down and their institutions win government support while the little guy loses his home. Multinational chief executives 30 years ago made 35 times the wages of an average employee; today it is more than 350 times.
The crisis has focused attention on the obscene inequities of this era – the world’s 1,100 richest people have almost twice the assets of the poorest 2.5bn. There are signs of open and growing anger at this, as we have seen this week in the Netherlands with calls to address bonuses, and the attack on the world’s financial markets as “a monster that must be tamed” from Horst Köhler, the German president.
Third, the accumulation of financial reserves in the Persian Gulf, Russia and China underscores that the centre of gravity in global finance is also shifting. If gas prices remain high and Asian growth strong, sovereign wealth funds, which are concentrated in these regions, are forecast to surpass $15,000bn within a few years. The top creators of great new personal fortunes are in China, India and Russia. It seems unavoidable that the transatlantic elite that have been the habitués of Davos will be rivalled in influence by the Asian contingent – a group that has as little appetite for the Alpine gabfest as for the values and priorities of the western financial superclass.
So, are we at the beginning of the end of a golden era for transatlantic financial elites? Perhaps, but elites cede power reluctantly and there are signs of an effort to stave off decline. There is now a recognition of the need to accept some global market reforms to avoid more invasive legislation. Far-sighted leaders such as Tom Russo, Lehman Brothers vice-chairman, have actively encouraged changes in the way markets are supervised. Institutional investors could play a role by demanding more sensible pay packages from money managers. The rise of Asia probably cannot be resisted. But by recognising that there are public interests to which they must respond, the financial superclass can stall the fate of previous elites. To succeed at that they must shun their arrogant “leave-it-to-the-market” explanations for the inequality they have helped foster.
The writer is author of Superclass: The Global Power Elite and the World They are Making, and is a visiting scholar at the Carnegie Endowment for International Peace
