If the financial system has a defect, it is that it reflects and magnifies what we human beings are like. Money amplifies our tendency to overreact, to swing from exuberance when things are going well to deep depression when they go wrong. Booms and busts are products, at root, of our emotional volatility.
Interpretation
The financial system highlights our emotional responses, leading to economic highs and lows.
Niall Ferguson's quote emphasizes that flaws within the financial system are rooted in human emotions. It suggests that money acts as a magnifying glass, amplifying our natural inclinations to react strongly to both success and failure, causing cycles of economic boom and bust that reflect human volatility.
In practice
This quote can be used in a discussion on economic policy at a financial conference.
It's all very well for us to sit here in the west with our high incomes and cushy lives, and say it's immoral to violate the sovereignty of another state. But if the effect of that is to bring people in that country economic and political freedom, to raise their standard of living, to increase their life expectancy, then don't rule it out.
Civilisation is partly about restraining the male of the species from engaging in the violence of the hunter-gatherer period. But it doesn't take an awful lot to unleash it.
For 500 years the West patented six killer applications that set it apart. The first to download them was Japan. Over the last century, one Asian country after another has downloaded these killer apps- competition, modern science, the rule of law and private property rights, modern medicine, the consumer society and the work ethic. Those six things are the secret sauce of Western civilization.
The West may collapse very suddenly. Complex civilizations do that, because they operate, most of the time, on the edge of chaos.
Over time, the welfare state has become dysfunctional in a surprising way. But in a way it became a victim of its own success: It became so successful at prolonging life, that it becomes financially unsustainable, unless you make major changes to things like retirement ages.
Today, the average Korean works a thousand hours more a year than the average German. A thousand. ... That is the end of the Great Divergence.
Political economy came into being as a natural result of the expansion of trade, and with its appearance elementary, unscientific huckstering was replaced by a developed system of licensed fraud, an entire science of enrichment.
The gold standard did not collapse. Governments abolished it in order to pave the way for inflation. The whole grim apparatus of oppression and coercion, policemen, customs guards, penal courts, prisons, in some countries even executioners, had to be put into action in order to destroy the gold standard.
The real tragedy of minimum wage laws is that they are supported by well-meaning groups who want to reduce poverty. But the people who are hurt most by higher minimums are the most poverty stricken.
If you're totally illiterate and living on one dollar a day, the benefits of globalization never come to you.
The collapse of the global marketplace would be a traumatic event with unimaginable consequences. Yet I find it easier to imagine than the continuation of the present regime.
The only way America can reduce the long-term budget deficit, maintain vital services, protect Social Security and Medicare, invest more in education and infrastructure, and not raise taxes on the working middle class is by raising taxes on the super rich.
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