Alan S. Blinder Quotes.

1. "Banker are arguing over whose profession is the oldest. The geologist points out that his science as as old as the Earth itself. The chemist scoffs at that: "Long before the Earth was formed, there were masses of swirling gasses--chemicals. Before that, there was just chaos." The investment banker smiles slyly, nursing a martini: "And who do you think created all that chaos?"
- Quote by Alan S. Blinder

2. "you don’t get far in political discourse with counterfactual arguments that it would have been even worse."
- Alan S. Blinder, After the Music Stopped: The Financial Crisis

3. "One other important footnote to history: On Sunday, March 16, the same day that JP Morgan Chase announced its purchase of Bear Stearns and the Fed announced its approval of the deal, the Fed’s Board of Governors created the Primary Dealer Credit Facility. The PDCF made it much easier to lend money to securities firms by, for example, broadening the range of eligible collateral. Bear executives maintained that they could have averted bankruptcy without requiring assistance, if they had been given access to the PDCF. Jimmy Cayne told the FCIC that the PDCF came just about 45 minutes too late to save his firm. No one will ever know."
- Alan S. Blinder, After the Music Stopped: The Financial Crisis

4. "KEYNESIAN ECONOMICS AND STIMULUS Keynesian economics is based on the notion that unemployment arises when total or aggregate demand in an economy falls short of the economy’s ability to supply goods and services. When products go unsold, jobs are lost. Aggregate demand, in turn, comes from two sources: the private sector (which is the majority) and the government. At times, aggregate demand is too buoyant—goods fly off the shelves and labor is in great demand—and we get rising inflation. At other times, aggregate demand is inadequate—goods are hard to sell and jobs are hard to find. In those cases, Keynes argued in the 1930s, governments can boost employment by cutting interest rates (what we now call looser monetary policy), raising their own spending, or cutting people’s taxes (what we now call looser fiscal policy). By the same logic, when there is too much demand, governments can fight actual or incipient inflation by raising interest rates (tightening monetary policy), increasing taxes, or reducing its own spending (thus tightening fiscal policy). That’s part of standard Keynesian economics, too, although Keynes, writing during the Great Depression, did not emphasize it. Setting aside the underlying theory, the central Keynesian policy idea is that the government can—and, Keynes argued, should—act as a kind of balance wheel, stimulating aggregate demand when it’s too weak and restraining aggregate demand when it’s too strong. For decades, American economists took for granted that most of that job should and would be done by monetary policy. Fiscal policy, they thought, was too slow, too cumbersome, and too political. And in the months after the Lehman Brothers failure, the Federal Reserve did, indeed, pull out all the stops—while fiscal policy did nothing. But what happens when, as was more or less the case by December 2008, the central bank has done almost everything it can, and yet the economy is still sinking? That’s why eyes started turning toward Congress and the president—that is, toward fiscal stimulus—after the 2008 election."
- Alan S. Blinder, After the Music Stopped: The Financial Crisis

5. "If your negligent neighbor falls asleep with a lit cigarette in his mouth, setting his house on fire, he’s irresponsible and guilty. But you don’t want him to perish in the blaze. Nor do you want his house setting the whole neighborhood on fire. So you call in the fire department, even though it will cost taxpayers money."
- Alan S. Blinder, After the Music Stopped: The Financial Crisis

6. "Why did so many smart people believe these laissez-fairey tales? It’s a good question. Some of the blame surely goes to the excessive faith in free markets that was the elixir of the day. Some goes to economists who believed and extolled the efficient markets hypothesis—and taught it to their students, many of whom wound up as financial engineers on Wall Street."
- Alan S. Blinder, After the Music Stopped: The Financial Crisis

7. "AIG’s Financial Products subsidiary (AIG FP), where its mammoth CDS business was housed, managed to get itself regulated by the Office of Thrift Supervision (OTS) because the corporate parent company had acquired a few small savings banks. Savings banks? Aren’t those the stodgy thrift institutions on the corner that take savings deposits and grant mortgages to homeowners? Seems like a funny place to lodge one of the world’s largest derivatives operations. Well, AIG FP was not actually lodged there, but merely lodged there for regulatory purposes. Call it skillful regulatory shopping."
- Alan S. Blinder, After the Music Stopped: The Financial Crisis

8. "Don’t overstate your likely achievements; when in doubt, understate them."
- Alan S. Blinder, After the Music Stopped: The Financial Crisis

9. "The consequences of adverse economics events are typically exaggerated by the Armageddonists--a sensation-seeking herd of pundits, seers, and journalists who make a living by predicting the worst."
- Alan S. Blinder, After the Music Stopped: The Financial Crisis

10. "The adjective efficient in efficient markets refers to how investors use information. In an efficient market, every titbit of new information is processed correctly and immediately by investors. As a result, market prices react instantly and appropriately to any relevant news about the asset in question, whether it is a share of stock, a corporate bond, a derivative, or some other vehicle. As the saying goes, there are no $100 bills left on the proverbial sidewalk for latecomers to pick up, because asset prices move up or down immediately. To profit from news, you must be jackrabbit fast; otherwise, you’ll be too late. This is one rationale for the oft-cited aphorism You can’t beat the market. An even stronger form of efficiency holds that market prices do not react to irrelevant news. If this were so, prices would ignore will-o’-the-wisps, unfounded rumors, the madness of crowds, and other extraneous factors—focusing at every moment on the fundamentals. In that case, prices would never deviate from fundamental values; that is, market prices would always be right. Under that exaggerated form of market efficiency, which critics sometimes deride as free-market fundamentalism, there would never be asset-price bubbles. Almost no one takes the strong form of the efficient markets hypothesis (EMH) as the literal truth, just as no physicist accepts Newtonian mechanics as 100 percent accurate. But, to extend the analogy, Newtonian physics often provides excellent approximations of reality. Similarly, economists argue over how good an approximation the EMH is in particular applications. For example, the EMH fits data on widely traded stocks rather well. But thinly traded or poorly understood securities are another matter entirely. Case in point: Theoretical valuation models based on EMH-type reasoning were used by Wall Street financial engineers to devise and price all sorts of exotic derivatives. History records that some of these calculations proved wide of the mark."
- Alan S. Blinder, After the Music Stopped: The Financial Crisis

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