23 October 2008


"Banks would normally be wary of lending to someone whose liabilities were 50 times their net assets, but they happily lent to each other on that basis - until, one day, they stopped. If you want a one sentence explanation of the present crisis, that is it.

In business, capital is the stuff you have - to protect yourself, your customers and your creditors - when things go wrong. In good times, you may feel you do not need it and may resent paying for it. In bad times, you can never have enough. If you do not have it already you will find it very expensive or impossible to obtain. You may then go broke. If you want a one paragraph explanation of the capitalist system, that is it."
- John Kay, FT

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