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This is the reason that history has not dealt kindly with the aftermath of protracted periods of low risk premiums.

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Aftermath History Period Premium Protract Reason Risk

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Popular Authors

Marilyn Monroe Paulo Coelho Abraham Lincoln C. S. Lewis Khalil Gibran Charlie Chaplin Gautama Buddha Isaac Newton

Excessive optimism sows the seeds of its own reversal.
ALAN GREENSPAN

Excessive Optimism Retrospect Something
When trust is lost, a nation’s ability to transact business is palpably undermined.
ALAN GREENSPAN

Ability Business Loss Nation Palpably Transact Trust Undermined
I have long argued that paying down the national debt is beneficial for the economy.
ALAN GREENSPAN

Beneficial Debt Down Economy Long National Pay
In the absence of the gold standard, there is no way to protect savings from confiscation through inflation.
ALAN GREENSPAN

Absence Confiscation Good Inflation Protect Saving Standard
The more flexible an economy, the greater its ability to self-correct in response to inevitable, often unanticipated, disturbances and thus to contain the size and consequences of cyclical imbalances.
ALAN GREENSPAN

Ability Correct Economy Flexible Greater Inevitable More Response Self Unanticipated
The companies could hire the educated workers they need. And those workers would compete with high-income people, driving more income equality.
ALAN GREENSPAN

Equally High Income People Drive Those Workers
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.
ALAN GREENSPAN

Capital Composition Force Meshed Need Oversimplification Risk Skill Stock Work
Rules cannot take the place of character.
ALAN GREENSPAN

Character Place Rule
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?
ALAN GREENSPAN

Asset Escalate Exuberance Irrational Unduly Value
The number one problem in today’s generation and economy is the lack of financial literacy.
ALAN GREENSPAN

Economy Financial Generation Lack Literacy Number Problem Today
Fear and euphoria are dominant forces, and fear is many multiples the size of euphoria. Bubbles go up very slowly as euphoria builds.
ALAN GREENSPAN

Dominant Euphoria Fear Force Many Multiply Size
The use of a growing array of derivatives and the related application of more-sophisticated approaches to measuring and managing risk are key factors underpinning the greater resilience of our largest financial institutions…
ALAN GREENSPAN

Application Approach Derivative Grow More Relate Sophisticate Use
How do we know when irrational exuberance has unduly escalated asset values?
ALAN GREENSPAN

Escalate Exuberance Irrational Unduly Value
A decline in the national housing price level would need to be substantial to trigger a significant rise in foreclosures, because the vast majority of homeowners have built up substantial equity in their homes despite large mortgage.
ALAN GREENSPAN

Bank Decline Foreclosure Housing Level National Need Significant Substantial Trigger
Market financed withdrawals of home equity in recent years.
ALAN GREENSPAN

Equity Financial Home Market Recent Withdrawl Year
We are in the midst of a once-in-a-century credit tsunami. Central banks and governments are being required to take unprecedented measures.
ALAN GREENSPAN

Being Central Century Government Midst Once REquired Tsunami

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