Some pearls from Fixing Global Finance, by M.Wolf.
"...one thing is certain, that at particular times a great deal of stupid people have a great deal of stupid money" W.Bagehot.
"Finance rests on promises, which, by their nature, can be broken"
"...Finance provides a mechanism for shitting resources from those who own them but cannot use them productively to those who can use them but do not own them".
"Finance is a jungle inhabited by wild beasts".
"The vast bulk of banking assets are financed by short-term loans from money markets or liquid deposits, which the banks´ customers think of as equivalent to cash. But a large portion of the banks´ assets are long term () and illiquid. In addition to this inescapable maturity and liquidity risks, banks are also exposed to market, credit, currency and wide economic and political risk. Banks are () perilous. That is why banks typically have impressive premises. "Look", these buildings proclaim, "our institution is as solid as a mountain of stone..." But nothing could be further from the truth."
"...habitual human propensity to swing between an excess of greed and an excess of fear".
"Governments should not provide open-ended guarantees to private risk taking. They should insist on transparency. They should ensure that management and shareholders of failed institutions bear heavy loses".
"The smaller a company´s equity cushion, the greater the incentive to take risks, with less to lose and more to gain".
"Vendor financing: countries with surpluses of exports to sell finance their biggest market" (Translation: China is lending the US. the money to buy its products. For Spain, Germany was lending us the money to buy their Mercedes and BMWs)
"But higher prices of existing assets do not represent greater wealth to society as a whole: the gains of current owners match the losses of would-be purchasers".
"It is hard to imagine any plausible global rebalancing that does not include a substantial reduction in the Chinese surplus".
