If you owe your bank manager a thousand pounds, you are at his mercy. If you owe him a million pounds, he is at your mercy.
Interpretation
The level of debt you have to someone can determine who holds the power in a relationship.
This quote by John Maynard Keynes highlights the dynamics of power in financial relationships. It suggests that owing a smaller amount puts you in a vulnerable position, while being indebted at a larger scale can shift the balance of power, indicating that the one who owes more might have more leverage in negotiations or decisions.
In practice
This quote could be used in a financial literacy class to explain the implications of debt.
As time goes on, I get more and more convinced that the right method of investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes.
The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is generally understood. Indeed, the world is ruled by little else.
The disruptive powers of excessive national fecundity may have played a greater part in bursting the bonds of convention than either the power of ideas or the errors of autocracy.
We will not have any more crashes in our time.
This long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is long past the ocean is flat again.
The book, as it stands, seems to me to be one of the most frightful muddles I have ever read, with scarcely a sound proposition in it beginning with page 45 [Hayek provided historical background up to page 45; after that came his theoretical model], and yet it remains a book of some interest, which is likely to leave its mark on the mind of the reader. It is an extraordinary example of how, starting with a mistake, a remorseless logician can end up in bedlam.
A stock certificate is not a tool, like a shovel, or a commodity, like a pound of cheese. What we sell a customer is not a share in a business, but a view of the Elysian Fields. A financier is a creative artist. Our function is to stimulate the imagination. We are poets!
Credit is a system whereby a person who can not pay gets another person who can not pay to guarantee that he can pay.
While the move to central clearing has made the system safer, we need to make sure that the central counterparties have the resources and risk-management practices to withstand plausible but severe shocks.
It is vital for officials and regulators to have input from people within our businesses who understand the intricacies of how financial markets operate and the consequences of certain policy decisions.
I believe, in the stock market - that's one of my fields - that most people are irrational. And to be irrational, you can be irrational in so many different ways that, practically, the result is indeterminate.
There are no shortcuts when it comes to getting out of debt.
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