I'm tempted to just say "what Krugman said," and leave it at that. What he said is that just a generation or two ago in the not so boring 1960's, the boring banking and insurance sectors combined sucked out a seemingly reasonable 4% of American GDP for their services of greasing the wheels of capitalism, in a time of real growth at a pace never seen before or since. Fast forward to current times, and Professor Krugman notes, those sectors alone suck out a princely 8% of GDP... we won't even talk about immense fees paid to mutual funds, pension managers and so forth that makes the financial sector... which is nothing more than a giant croupier... so big and powerful.
The point made is that the justification for this immense growth in this sector, and its companion issue, the securitization of...everything... was supposedly the ability to reduce, systemic risk... when it has, of course, had exactly the opposite effect.
In effect, the financial sector (as noted by Prof. Roubini, cited in a recent post here) was and is a giant Ponzi scheme.
And, it seems, other than fixing the short term problems, there seems precious little overall vision by the Obama Administration that the whole bloody thing cannot go on as before... in short, the fears of many that we are putting off-- and worsening, btw-- an eventual day of reckoning (think, for example, of what happens the day that the rest of the world tires of loaning us money...) will only be worse.
Well, I don't know. Americans are an overall "irrationally exuberant" lot... preferring belief in, say, magic, or angels, or Santa Claus, over facts on which there is a scientific consensus... because they might be... hard or something.
Well... there you have it... we can all hope that, against good sense, and the evidence, we will come out unscathed, and everything will be wonderful. I don't know... given how powerful the croupiers are... I'm not so sure that's how you bet, or that I'd want to bet at all.