At the risk of some oversimplification, if the skill composition of our work force meshed fully with the needs of our increasingly complex capital-stock, wage-skill differentials would be stable.
I believe that the general growth in large [financial] institutions have occurred in the context of an underlying structure of markets in which many of the larger risks are dramatically — I should say, fully — hedged.
Any onset of increased investor caution elevates risk premiums and, as a consequence, lowers asset values and promotes the liquidation of the debt that supported higher asset prices.
Clearly, sustained low inflation implies less uncertainty about the future, and lower risk premiums imply higher prices of stocks and other earning assets.
People dont realize that we cannot forecast the future. What we can do is have probabilities of what causes what, but thats as far as we go. And Ive had a very successful career as a forecaster, starting in 1948 forward.
Capitalism is based on self-interest and self-esteem; it holds integrity and trustworthiness as cardinal virtues and makes them pay off in the marketplace, thus demanding that men survive by means of virtue, not vices.
But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?
I made a mistake in presuming that the self-interests of organisations, specifically banks and others, were such that they were best capable of protecting their own shareholders and their equity in the firms.
To succeed, you will soon learn, as I did, the importance of a solid foundation in the basics of education – literacy, both verbal and numerical, and communication skills.
![Alan Greenspan Quote - I believe that the general growth in large [financial] institutions have occurred in the context of an underlying structure of markets in which many of the larger risks are dramatically — I should say, fully — hedged.](https://minimalistquotes.com/wp-content/uploads/2022/08/i-believe-that-the-general-growth-in-large-financi-683x1024.jpg)
