Financial crisis

“ The economic crisis we face is unlike any we've seen in our lifetime. It's a crisis of falling confidence and rising debt, of widely distributed risk and narrowly concentrated reward; a crisis written in the fine print of sub-prime mortgages, on the ledger lines of once mighty financial institutions, and on the pink slips that have upended the lives of so many people across this country and cost the economy 2.6 million jobs last year alone. ”

“ The term financial panic is frequently used as a synonym for financial crisis. A crisis in the narrower sense has to do with prices—is always connected with money in some way. While, therefore, crises may be divided into industrial, speculative, and financial, according to their immediate occasion, all of them are financial in the sense that they have to do with a change in the general price level. ”

“ Americans from all walks of life are continuing to feel the effects of the financial crisis. In recent weeks, concerns about the availability of credit, the safety of financial assets, and the volatility of the stock market have made many families understandably anxious about their economic future. ”

“ For the past three and a half years, we’ve been fighting our way back from an historic economic crisis – one caused by breathtaking irresponsibility on the part of some on Wall Street who treated our financial system like a casino. ”

“ The fall in the value of many stocks and securities held by the banks forces many brokers and speculators to convert their resources into ready money. This is the moment of danger; weak enterprises find their foundations crumbling, and there are many failures. [6] The falling prices, the shattered credit, and the financial losses force many factories to close, and many workmen are thrown out of employment. This moment of widespread loss is the crisis, It is followed by another period of low prices and of small output, and therefore of profits small or negative in many industries. ”

“ Few families have escaped the pain of this terrible recession. Rarely does a day go by that I do not hear from folks who are hurting. That is why we have pushed so hard to rebuild this economy.
But even as we work tirelessly to dig our way out of this hole, it is important that we address what led us into such a deep mess in the first place. Much of the turmoil of this recession was caused by the irresponsibility of banks and financial institutions on Wall Street. These financial firms took huge, reckless risks in pursuit of short-term profits and soaring bonuses. ”

“ But it was a crisis that began in our financial system. Large banks engaged in reckless financial speculation without regard for the consequences – and without tough oversight. Financial firms invented and sold complicated financial products to escape scrutiny and conceal enormous risks. And there were some who engaged in the rampant exploitation of consumers to turn a quick profit no matter who was hurt in the process. ”

“ This is an extraordinary period for America's economy. Over the past few weeks, many Americans have felt anxiety about their finances and their future.
I understand their worry and their frustration. We've seen triple-digit swings in the stock market. Major financial institutions have teetered on the edge of collapse, and some have failed. As uncertainty has grown, many banks have restricted lending. Credit markets have frozen. And families and businesses have found it harder to borrow money. ”

“ The profound financial crisis, which affected the country in 1890, had no other cause. Everything is risked by the abuses of official expenditure. We have the proof of this in the fact that the economic possibilities of the country have never been so great as in these moments of financial crisis. ”

“ The financial crisis must be looked upon as an economic disease which brings many evils in its train. The need is not merely to mitigate the severity of the brief period of crisis, but also to smooth out the curve of the business cycle so as to reduce periodic unemployment, the lottery element in profits, and the number of unmerited failures in business. Several measures may aid toward this end. In the past the crisis has been more severe in America than in Europe because of certain well-recognized defects which now have been largely remedied in the Federal Reserve Act. ”

“ That step, enabling the directors of the Bank of England to issue notes unsecured by bullion, had the effect of gradually restoring confidence. But a grave commercial crisis of this character is often attended with other than financial consequences. The stringency of the money market increases the distress of the industrial classes by diminishing the demand for work; and, when labour suffers, political agitation flourishes. ”

“ Risky bets were made with other people’s money. Some folks made a lot of money taking advantage of consumers. It was wrong. And this irresponsible behavior on the part of some contributed to the worst financial crisis since the Great Depression. ”

“ The very severe and extensive liquidation that we have witnessed, not only in Wall Street but all over the country, has made the financial situation sounder and therefore safer than it has been for several years, for it must be confessed that many of our speculative captains of industry and finance passed far beyond the bounds of conservatism in their operations, and invited the crisis we experienced by their reckless assumption of inordinate risks and liabilities. ”

“ The problems that led us into this crisis are deep, they're widespread, and so we're going to have to do a lot of different things to get the economy moving again. We need to stabilize and repair our financial system. ”

“ The fact that at the present moment loans are comparatively easy in the money market has been referred to as contradicting this view. It does not contradict it at all. The crisis has crippled enterprise generally, and especially speculative enterprise. ”

“ Broadly the community has cooperated to meet the needs of honest distress, and to take such emergency measures as would sustain confidence in our financial system and would cushion the violence of liquidation in industry and commerce, thus giving time for orderly readjustment of costs, inventories, and credits without panic and widespread bankruptcy. ”

“ Again, the financial crises with which our country has been afflicted at regular periods of her existence, lowering thousands at one moment from a condition of ease and comfort to one of the most pinching want, changing merchant princes to beggars, and spreading ruin far and wide, have owed their origin, not to a wild spirit of speculation, but to the over inflation of bank issues, which is itself the cause of that reckless speculation. ”

“ I've practically no capital to enlarge the business, and I don't care to mortgage what I have and pay a high rate of interest when, just at the critical moment, we might have a commercial crisis and I would then lose everything. ”

“ This, the greatest economic catastrophe that the modern human structure has known, immeasurably more calamitous than any other that ever occurred, was borne by the financial system of the United States almost without a tremor. ”

“ There is the indisputable fact that there is the same amount of currency as before the crisis; that the banks have for a year been full of money, and that so much of it lies unemployed. Why is it that, even after the liquidations which have taken place since last September, the general stagnation continues virtually unchanged, that business can not get a new start, and does not at present even show a prospect of improvement? Why do not confidence and enterprise revive? ”

“ So grave were the financial disturbances that several of the States were swept from their honest moorings by the cheap money craze, and irresponsible banks were created almost without limit or restraint, all of which brought speedy and fearful disaster to the people. ”

“ The crash brought on ruin by closing weak banks, building and loan companies, and financial houses. It wiped out the savings of millions of people through bankruptcies and foreclosures of an unprecedented panic. The result was a large world wide depression which lasted for years.
"And when you, the public, had finished throwing over securities at the bottom of market prices, who purchased them? Why, those who originally sold them to you.
"Not content to rig the stock markets, they also trade and [Pg 92] corner in futures of your most staple commodities. ”

“ Inflation and uncertainty in values, whether in stocks or real estate, alternating with the return of prosperity, seem to have marked the commercial and financial history of this country during the last fifty years, more than that of any other nation under the sun, and given rise to the spirit of extravagant speculations, both disgraceful and ruinous. ”

“ Having their vast corporate stock and bond interest to protect, being engaged in constructing railroads, having created large debts upon their roads by reckless and dishonest watering of stock and loose issuing of bonds, they seek to compel all commercial and industrial pursuits to pay tribute to them, and they accomplish this object by controlling the currency of the country. A financial system that can be controlled by one interest, or in the interest of one class of men, is bad. ”

“ What are called financial crises are merely an extension of this critical condition to the larger business community. Financial panics which sometimes follow upon financial crises are a precipitate of this critical condition. ”

“ Official INACTION is as conducive to the inflation of financial bubbles as is official ACTION. By refusing to restructure the banking system, to introduce appropriate bankruptcy procedures, corporate transparency and good corporate governance, by engaging in protectionism and isolationism, by avoiding the implementation of anti competition legislation – many countries have fostered the vacuum within which financial crises breed. ”

“ It's not news to say that we're living through challenging times the worst economic downturn since the Great Depression. Credit crisis it's made that downturn worse in the fiscal disaster that is accumulated over a period of years. ”

“ The failure of the financial system would cause banks to stop lending money to one another and to businesses and consumers. That would make it harder for you to take out a loan or borrow money to expand a business. ”

“ I desire to go on record right here in declaring that all financial institutions which in any way are engaged in taking from the people the money that is their surplus earnings or their capital, for the ostensible purpose of safeguarding it, or putting it in use for them, or exchanging it for stocks, bonds, policies, or other paper evidences of worth, are a part of the machinery for the plundering of the people. ”

“ But look, we are going through the toughest time economically since the Great Depression, and it's going to be -- it's going to be tough, and we're going to have to work through a lot of these difficulties, these structural difficulties that built up over many decades, some of it having to do with the financial industry and the huge amounts of leverage, the huge amounts of debt that were taken on, the speculation and the risk that was occurring, the lack of financial regulation ”

“ The financial crises of the present day are short-lived and confined to commercial centres, but three centuries ago they ruined whole peoples. And what singular speculations they were! Of all things in the world in which to make a corner, to excite a speculation, to be puffed by brokers, it would seem as if flowers would be the last. ”

“ All of the large business institutes, and Technocracy as well, will know within 100 days of the time of the ultimate end, when all stocks and bonds depreciate to zero and the financial structure of this country is due to fall. ”

“ On the other hand, occasional extraordinary industrial activity, coupled with the annually recurring demands for money during the crop-moving season, causes money stringency, and the calling of loans made to the stock market; an abnormally high interest rate results, attended by violent reaction in speculation and abrupt fall in prices. The pressure to retain funds in the speculative field at these excessively high interest rates tends to a curtailment of reasonable accommodation to commercial and manufacturing interests, frequently causing embarrassment and at times menacing a crisis. ”

“ His need is specifically for money, not for commodities or capital. It is the demand arising from this cause, which produces almost all the great and sudden variations of the rate of interest. Such a demand forms one of the earliest features of a commercial crisis. At such a period, many persons in business who have contracted engagements, have been prevented by a change of circumstances from obtaining in time the means on which they calculated for fulfilling them. These means they must obtain at any sacrifice, or submit to bankruptcy; and what they must have is money. ”

“ It was caused by a crisis, a collapse of speculation, grown up under the auspices of that same paper-money system which you now strive to confirm and strengthen in all its iniquitous influences, to bring on other crashes and collapses; and who will be the man to be ground to powder by them? The poor man, not the rich. ”

“ When insisting that we needed more currency, they evidently did not consider that during a crisis business contracts itself; that people reduce their expenses; that demand falls off, and thereby production is necessarily discouraged; that capital becomes more than ordinarily timid in its investments; that enterprise grows very circumspect, and confines itself to the safest ventures ”

“ From the general account given above of the successive phases of a credit cycle, it is possible [119] to summarize the course of interest rates and the course of business conditions. Money rates become suddenly easy after a crisis, remain low or grow easier for a period of several years, and then rise continuously until the next crisis, advancing with great rapidity toward the close of the cycle. Business conditions remain poor or grow worse a few years after a crisis. Liquidation is taking place, prices are going down, and the uncertainty of the outlook causes diminished activity. ”