I love this:

When he was asked what people would learn from the whole financial crisis, Jeremy [Grantham] said, “In the short term a lot, in the medium term a little, in the long term, nothing at all. That would be historical precedent.”

-James Montier to Kate Welling, via FT Alphaville

 

Category: Bailouts, Markets, Psychology

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

9 Responses to “Grantham on ‘What People Learn from Financial Crises’”

  1. faulkner says:

    I am a fan of James Montier for many years, and from him learned of the gentile Jeremy Grantham, and his quote makes no sense to me. What is the lot that is learned in the short term that has little effect in the medium term and no effect the long term? It seems to me much more likely what is learned in the short term misleads a little in the medium term and a lot in the long term.

    • @Faulkner – As I read it, he’s just describing the mechanics of the ubiquitous boom-bust cycles: In the short term after a crisis, everyone remembers the panic and doesn’t ever want to repeat the crisis again, so people appear to have learned a lot, and there’s tremendous impetus for systemic reforms. In the medium term, as the crisis fades into history (and investments rally), people forget about the panic, get back into the markets to avoid missing out, and competing interests derail or unwind the reforms. Over time the lessons from the crisis are forgotten, and those who had been prudent become complacent, taking on ever-greater risks because there appear to be no consequences to doing so. But inevitably a new crisis occurs after enough complacency develops.

  2. ch says:

    You should tag your post on fiat currencies from yesterday on this.

    They always end the same way, but in the long run, people never learn.

  3. willid3 says:

    it will be difficult to tell what we have learned. if it the result is like after the great depression, then bankers will really become stuffy. which will be really hard to see, with out banksters.

  4. It’s worse than that. What’s the real lesson of the financial crisis? It depends on who you are! To the extent people have learned anything, they have learned *different* things. Bankers have learned that crime pays if you’re too big to fail. Corporate leaders have learned that if your company doesn’t carry enough debt to be a menace to its own future, it’ll become a takeover target and someone else will own your future. Regulators and Washington denizens have learned that the revolving door can be a great career path. Ordinary citizens have learned that no matter what goes wrong, they’ll get the shaft, but they cannot get their “representative” governments to represent that viewpoint with adequate regulation and law enforcement.

  5. Crocodile Chuck says:

    Or, to reframe it, its Minsky’s ‘Stability:Instability Hypothesis’:

    http://www.levyinstitute.org/pubs/wp74.pdf

  6. [...] That brings us to this brilliant quote, which was recently telegraphed by his colleague James Montier (via Kate Welling, FT Alphaville and Barry Ritholtz): [...]

  7. [...] That brings us to this brilliant quote, which was recently telegraphed by his colleague James Montier (via Kate Welling, FT Alphaville and Barry Ritholtz): [...]

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