"Success breeds excess"

The longer the period of macroeconomic stability, the greater the underlying excesses in investment and borrowing are likely to become.


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Easy Money, High Rollers, and the Great Credit Crash

Trillion Dollar Meltdown:
Easy Money, High Rollers, and the Great Credit Crash, by Charles R Morris
thought-provoking for experts and a readable primer for the layperson
Review by Gillian Tett, FT, September 23 2007

“We are accustomed to thinking of bubbles and crashes in terms of specific markets – like junk bonds, commercial real estate and tech stocks,” he observes.
“A credit bubble is different. Credit is the air that financial markets breathe and when the air is poisoned there’s no place to hide.”

In addition to this gloom, Morris offers a timely – and eminently readable – potted history of how we got into this mess. In his eyes, the story starts back in the 1970s,
when Paul Volcker, chairman of the Federal Reserve, killed the inflation demon and restored confidence to the financial markets.

Morris considers this to have been a fabulous achievement ... But Morris concedes that Volcker’s success formed the seed for today’s mess, because the new climate of stability left banks confident enough to crank up their leverage and risk-taking.

Morris’s book is both thought-provoking for experts and a readable primer on events for the layperson.

Full text

Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism
by Kevin Phillips

Why have markets reached their exposed position? The answer is that success breeds excess.
This is the argument of a fascinating new paper from William White, economic adviser to the Bank for International Settlements.
Martin Wolf, Financial Times 24/5 2006

If the Financial Times' Gillian Tett were hit by a bus, I'd be in a lot of trouble.
With all due respect to her colleagues, she is the best source of financial news.
naked capitalism blog, August 13, 2007