The art of banking is always to balance the risk of a run with the reward of a profit. The tantalizing factor in the equation is that riskier borrowers pay higher interest rates. Ultimate safety - a strongbox full of currency - would avail the banker nothing. Maximum risk - a portfolio of loans to prospective bankrupts at usurious interest rates - would invite disaster. A good banker safely and profitably treads the middle ground.
James GrantI believe that there is an important kernel of truth in the idea that financial errors recur every other generation.
James GrantIt is an axiom nowadays that no bank fails for lack of capital; unprofitable lending is always the underlying cause.
James Grant[C]apitalism without financial failure is not capitalism at all, but a kind of socialism for the rich.
James GrantThe 1980s are to debt what the 1960s were to sex. The 1960s left a hangover. So will the 1980s.
James GrantThe art of banking is always to balance the risk of a run with the reward of a profit. The tantalizing factor in the equation is that riskier borrowers pay higher interest rates. Ultimate safety - a strongbox full of currency - would avail the banker nothing. Maximum risk - a portfolio of loans to prospective bankrupts at usurious interest rates - would invite disaster. A good banker safely and profitably treads the middle ground.
James GrantTo suppose that the value of a common stock is determined purely by a corporation's earnings discounted by the relevant interest rates and adjusted for the marginal tax rate is to forget that people have burned witches, gone to war on a whim, risen to the defense of Joseph Stalin and believed Orson Welles when he told them over the radio that the Martians had landed.
James Grant