Maurice Allais Quotes
In principle, junk bonds are basically useful, but they are used excessively and irrationally, notably in takeovers.
Allais, Maurice. "Nobel Laureate Says Wall Street Operates Like a Casino." Associated Press, 24 Oct. 1989.
It was the souped up nature of the credit default swaps that was in part responsible for the souped up melt down of the economy of 2008 and the great recession thereafter. A credit default swap is an insurance policy that a company will pay off its bonds and not go bankrupt. It is a cross between an insurance mechanism and a stock exchange type security mechanism and through heavy lobbying escaped any kind of regulation. It cost a company no money to write a credit default swap and they were paid to do so. As long as business and the economy was good, it was a terrific business but there was no way of ever knowing how much risk they were taking. So companies who wrote credit default swaps did not have to have the money to pay to back them up if they business was bad. When that happened in 2008 even the largest insurance company in the world collapsed because of the risk of having to pay the credit default swap and the U. S. Government had to take over the insurance company. In 2010, the Obama administration passed a financial reform bill that began to regulate credit default swaps.
Maurice Félix Charles Allais was a French physicist and economist, the 1988 winner of the Nobel Memorial Prize in Economic Sciences "for his pioneering contributions to the theory of markets and efficient utilization of resources", for Maurice Allais contribution, along with John Hicks (Value and Capital, 1939) and Paul Samuelson (The Foundations of Economic Analysis, 1947), to neoclassical synthesis. They formalize the self-regulation of markets, that Keynes refuted, while reiterating some of his ideas.
