Market Discipline Quotes

People who buy government debt deserve to be punished and taught a lesson

No nation, rich or poor, democratic or authoritarian, can escape the fundamental economic imperatives of the global market. No nation can escape its discipline. No nation can avoid its responsibility to do its part

It is worth noting that 'too big to fail' is not simply about size. A big institution is 'too big' when there is an expectation that government will do whatever it takes to rescue that institution from failure, thus bestowing an effective risk premium subsidy. Reforms to end 'too big to fail' must address the causes of this expectation.

The basic theory of bank regulation is that, left to their own devices, bankers would make banks too risky, so regulators and supervisors are there to make banks more boring. A bank is, roughly, a big pot of assets bought with depositors’ money; the bank owns essentially an option on those assets. If the assets go up, the bank gets a highly leveraged return; if the assets go down, the losses are largely the depositors’ (or the taxpayers’) problem. “Heads I win, tails you lose” … So banks have incentives to buy high-risk, high-return assets with as much leverage as possible, and risk-based capital regulation and prudential bank supervision counteract those incentives. The bankers — who own stock in their banks and get paid bonuses for making money — push for more risk and more volatility, and the bank supervisors push back.

Within neoliberal narratives, the message is clear: Buy/ sell/ or be punished.

What we have to find is the right level of regulation of our financial system so that it has the incentive to invest in things, but at the same time, it is sufficiently regulated so it can't get in the kind of trouble that we have seen in the past and we have seen recently.

The Federal Reserve has always recognized the importance of allowing markets to work, and government oversight of financial firms will never be fully effective without the aid of strong market discipline.

But nothing is better than the market, where the customer and the business deal directly with each other, because if you rip people off, word gets out. That business eventually loses its customers, and the good ones that serve people well get the business. You get government in there, and it's just more money for the lawyers who write the bills.

The best traders I know are also the most humble people I know, coincidence? Or has the market taught them some very valuable lessons?

For market discipline to constrain risk effectively, financial institutions must be allowed to fail. Under optimal financial regulatory and financial system infrastructures, such a failure would not threaten the overall system.

The consumers are asking for, they lose their office. Their task is service to the consumer. Profit and loss are the instruments by means of which the consumers keep a tight rein on all business activities.

We must limit the perception that some institutions are either too big or too interconnected to fail.

Young people increasingly have become subject to an oppressive disciplinary machine that teaches them to define citizenship through the exchange practices of the market and to follow orders and toe the line in the face of oppressive forms of authority. They are caught in a society in which almost every aspect of their lives is shaped by the dual forces of the market and a growing police state.

If any company goes and does something stupid, the market is going to address that, and the rest of the industry is going to go and address that and say that is not accepted behavior, that is not an accepted practice, and it will self-correct.

Businesses have no place being 'too big to fail.'

The best restraint is old-fashioned market discipline, in which financial traders know that they, personally, will lose a ton of money if they take risky bets that don't pan out.

Market discipline can only limit moral hazard to the extent that debt and equity holders believe that, in the event of distress, they will bear costs.

What Barack Obama calls bipartisanship is not moving to the right, but finding where people who consider themselves conservatives share these fundamental American values. When he talks about union, that's the kind of thing he means. That requires common responsibility. Individual responsibility is one of the hallmarks of conservative thought. In conservative religion, you yourself are responsible for whether you get into heaven. Or with fiscal conservatives, you are the market. It's your individual discipline and market discipline.

Capitalism without failure is like religion without sin. Bankruptcies and losses concentrate the mind on prudent behavior.

An efficient economy does not perpetuate the misallocation of capital - it punishes it.

Healthy competition places discipline on the market and should focus providers on providing the best service at a lower cost.

I think the market should reward banks that have been transparent in recognising their problems. I think the tendency of banks to hide the problem assets over a period of three or four years should not be allowed.

Let business oversee itself.

The idea that either individuals or organisations are 'too big to fail' or that the tech and start-up sector is somehow different is wrong.

The best traders are simply slaves to the market's price action