Whither finance?

It took a sub-prime/credit/derivatives debacle to make it happen, but it's finally starting to dawn on some people that you can't build a whole economy on the practice of moving money around.  "The role of finance in the economy is going to come down significantly
in the coming years," Carlos Asilis, chief investment officer at
New Jersey money manager Glovista Investments, tells the Wall Street Journal. "From a societal
standpoint, we got carried away with finance."

Wags might wonder if the Journal is deliberately playing down finance in keeping with its new emphasis on general news and especially politics now that it's an arm of the Murdochtopus.   But as the paper rightly notes, "The trend already has hurt companies beyond banks and
Wall Street firms. General Electric Co.'s first-quarter profits at its
financial-services businesses were 21% lower than a year earlier.
Retailer Target Corp., which got 13% of its before-tax profit last year
from credit cards, last month wrote off $55.5 million in credit-card
loans, 8.1% of its total portfolio at an annualized rate."

"I think you're seeing a clear inflection point," says
Tom Gallagher, an ISI Group analyst. "Whether it's financials as a
share of the stock market or financials as a share of GDP, we've

Indeed, the financials now account for over 21% of the S&P 500's market cap.  That's less than the 34% that technology represented at the height of the tech bubble in 2000, but the Journal is already calling the top.

For finance workers, this shift could resemble the 1980s, when
manufacturing lost its pole position in the U.S. labor market and
thousands found that skills they had honed over the years were less
marketable. The Bureau of Labor Statistics already counts 60,000 fewer
people working in finance than a year ago. Merrill Lynch & Co. is cutting 4,000 jobs, and Lehman Brothers Holdings Inc. is cutting 1,425. Many of Bear Stearns Cos.' 14,000 employees are expected to lose their jobs when J.P. Morgan Chase & Co. swallows the firm.

Left unaddressed in the article is this most uncomfortable of questions: If our manufacturing sector has been hollowed out and shipped off to Asia on the assumption that "we think, they sweat"… and if even our think-work in the tech sector has been abandoned because moving money around was much more interesting and lucrative… what happens now that moving money around has lost its luster?

I'm not sure of the answer, but the fate of empires past has hung on similar questions.