We have all had to learn more than we ever wanted to know
about the internal workings of the Finance Industry and its impacts on the rest
of the economy. After, literally, decades of viewing the industry as a magic
black box where super-intelligent wizards created wealth out of thin air we’ve
all learned, painfully, that the wizards had more in common with carnival
side-show hustlers out to make a fast buck by fleecing the next fool in line.
We’ve also learned, even more painfully and unfortunately, that Finance wasn’t
just another industry and part of the economy. Instead it was the lifeblood
who’s credit creation mechanisms kept the real economy flowing. Now we all know
that systemic risk means that the survival of the economy could be at stake.

We’ve been tracking the Finance Industry for over two years
now and following a learning curve of our own and translating those learnings
into various postings and discussions. Starting with early in 2008, in this
case, with the suggestion that the Industry was going to have to be re-thought.
And debunking other early 2008 fantasies that the credit crunch and the
problems with the Industry would go away soon. In fact they were just beginning
and as the crunch went to crisis we found out that the business models were
badly flawed.

This set of postings traced the evolution of the breakdown
and near-collapse of the Industry from early 2008 until the end of the year.
Sadly all of this analysis is far from out of date. The problems with
malfeasant behavior, willful ignorance, violations of fiduciary trust, lack of
understanding and badly flawed, even broken, business models are still with us
and will be for years. As we look back at the crisis perhaps the scariest thing
is that the leadership of the industry was in denial until the cusp of the
collapse. And would have taken us all over the edge of the cliff without
government intervention.

It will take years to contain, stabilize and repair the
damage within the industry and, more broadly, for the economy as a whole.
Perhaps the worst of all though is that it appears that the Industry is not
only still in denial but attempting to return to business as usual. Where this
is important to you is in several ways. First off, as a potential direct
stakeholder: investor, employee or supplier. Secondly as a customer and thirdly
as a member of society. Unless these problems are corrected and new strategies,
business models and services that are value-creating, instead of leverage
manipulating, result the Industry will perform poorly, credit will continue to
be restricted and society will remain threatened.

Put another way, by paying attention to the warnings and analysis at the time
you could have avoided loosing a lot of money, suffering a lot of pain and
could even made a lot of money with the right investment tactics. We think the
same thing will hold true in the future because all the problems discussed are
still in place, only in slightly different form....

....for the complete essay on the future of the Finance Industry see...

The Broken Finance Industry: Credit, Crisis, Collapase and Broken Business Models

on Scribd in downloadable PDF format.