John Kenneth Galbraith on financial innovation. An oldie but a goodie.

“As to new financial instruments, experience establishes a firm rule . . . that financial operations do not lend themselves to innovation. What is recurrently so described and celebrated is, without exception, a small variation on an established design, one that owes its distinctive character to the aforementioned brevity of the financial memory. The world of finance hails the invention of the wheel over and over again, often in a slightly more unstable version. All financial innovation invo lves, in one form or another, the creation of debt secured in greater or lesser adequacy by real assets. . . . All crises have involved debt that, in one fashion or another, has become dangerously out of scale in relation to the underlying means of payment.” 

 

 

—John Kenneth Galbraith, A Short History of Financial Euphoria

 

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s