Credit – “to believe” – Quote of Note

The Financial Times’ Gillian Tett wrote an analysis piece in today’s AFR titled “Hard lessons of the financial crisis”.  One paragraph stood out as worth repeating on its own as a succinct reminder of human behaviour after our articles over the last couple of weeks in particularly speaking to the market sentiment and debt funded corporate buy backs.

“But whatever their statistical size, crises share two things. First, the pre-crisis period is marked by hubris, greed, opacity — and a tunnel vision among financiers that makes it impossible for them to assess risks. Second, when the crisis hits, there is a sudden loss of trust, among investors, governments, institutions or all three. If you want to understand financial crises, then, it pays to remember that the roots of the word "credit" comes from the Latin "credere", meaning "to believe": finance does not work without faith. The irony, though, is that too much trust creates bubbles that (almost) inevitably burst.”