Wednesday, December 19, 2007

Ingenious Mendacity

The "subprime fiasco" (and almost every other financial crisis ever) in a nutshell:
The good times too of high price almost always engender much fraud. All people are most credulous when they are most happy; and when much money has just been made, when some people are really making it, when most people think they are making it, there is a happy opportunity for ingenious mendacity. Almost everything will be believed for a little while, and long before discovery the worst and most adroit deceivers are geographically or legally beyond the reach of punishment. But he harm they have done diffuses harm, for it weakens credit still farther.
From Walter Bagehot, Lombard Street: A Description of the Money Market (1873).

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