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.
Never, ever invest money that you will need prior to three to five years - minimum.
Never pay the slightest attention to what a company president ever says about his stock.
If I was counselling an individual, and my purpose was to help that individual, the most important thing would be that you should save more. Because don't expect that your retirement will follow those trajectories that some advisers are telling you.
Earnings don't move the overall market; it's the Federal Reserve Board... focus on the central banks, and focus on the movement of liquidity... most people in the market are looking for earnings and conventional measures. It's liquidity that moves markets.
The very nature of finance is that it cannot be profitable unless it is significantly leveraged... and as long as there is debt, there can be failure and contagion.
After costs, only the top 3% of managers produce a return that indicates they have sufficient skill to just cover their costs, which means that going forward, and despite extraordinary past returns, even the top performers are expected to be only as good as a low-cost passive index fund. The other 97% can be expected to do worse.
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