Given our inevitably incomplete knowledge about key structural aspects of our ever-changing economy and the sometimes asymmetric costs or benefits of particular outcomes, a central bank.
ALAN GREENSPANWhat we have found over the years in the marketplace is that derivatives have been an extraordinarily useful vehicle to transfer risk from those who shouldn’t be taking it to those who are willing to and are capable of doing so.
More Alan Greenspan Quotes
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No one has ever eliminated any of that stuff.
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It keeps interest rates lower than they otherwise would be and frees savings to finance increases in the capital stock, thereby boosting productivity and real incomes.
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Clearly, sustained low inflation implies less uncertainty about the future, and lower risk premiums imply higher prices of stocks and other earning assets.
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What we have found over the years in the marketplace is that derivatives have been an extraordinarily useful vehicle to transfer risk from those who shouldn’t be taking it to those who are willing to and are capable of doing so.
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The problem is not lack of regulation but unrealistic expectations. What we confront in reality is uncertainty, some of it frighteningly so…
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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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The need for values is inbred. Their content is not.
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It is this superlatively moral system that the welfare statists propose to improve upon by means of preventative law, snooping bureaucrats, and the chronic goad of fear.
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The very nature of finance is that it cannot be profitable unless it is significantly leveraged… and as long as there is debt, there can be failure and contagion.
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There is nothing to guarantee the superior judgment, knowledge, and integrity of an inspector or a bureaucrat-and the deadly consequences of entrusting him with arbitrary power are obvious.
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I’ve been in and out of Wall Street since 1949, and I’ve never seen the type of animosity between government and Wall Street. And I’m not sure where it comes from, but I suspect it’s got to do with a general schism in this society which is really becoming ever more destructive.
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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?
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How do we know when irrational exuberance has unduly escalated asset values?
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Need to consider not only the most likely future path for the economy but also the distribution of possible outcomes about that path.
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Unfortunately, Senator, nobody knows where the next innovative idea is coming from.
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If prices go down, we will have problems – problems in the sense of spillover to other areas.
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I must say, I never expected to see the day where I would be talking about anything other than reducing the debt, I’m running into the tyranny of zero, which is where you can’t reduce (the debt) any more
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We will have more crises and none of them will look like this because no two crises have anything in common except human nature.
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Even though some down payments are borrowed, it would take a large, and historically most unusual, fall in home prices to wipe out a significant part of home equity.
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While local economies may experience significant price imbalances, a national severe price distortion seems most unlikely in the United States, given its size and diversity.
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American consumers might benefit if lenders provided greater mortgage product alternatives to the traditional fixed-rate mortgage.
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There are no easy choices. Easy choices are long gone.
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If we are to remain preeminent in transforming knowledge into economic value, America’s system of higher education must remain the world’s leader in generating scientific and technological breakthrough, and in meeting the challenge to educate workers.
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No matter how skillful the trading scheme, over the long haul, abnormal returns are sustained only through abnormal exposure to risk.
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I’m a better economist than I was a sax player.
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Anyone willing to do what is required to become president of the United States is thereby barred from taking that office. I’m only half joking
ALAN GREENSPAN