There is a basic lesson on financial crises that governments tend to wait too long, underestimate the risks, want to do too little. And it ultimately gets away from them, and they end up spending more money, causing much more damage to the economy.
Interpretation
Governments often delay taking action during financial crises, leading to greater problems and costs later.
The quote highlights a critical pattern observed in governmental responses to financial crises, where officials tend to procrastinate and underestimate the severity of the situation. This hesitance to act decisively not only worsens the economic fallout but leads to higher costs in the long run, as more extensive interventions become necessary to mitigate the damage that has spiraled out of control.
In practice
In a discussion about economic policy, this quote could underscore the importance of timely government intervention.
The perennial conviction that those who work hard and play by the rules will be rewarded with a more comfortable present and a stronger future for their children faces assault from just about every direction. That great enemy of democratic capitalism, economic inequality, is real and growing.
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.
Living capital, which has the special capacity to continuously regenerate itself, is ultimately the source of all real wealth. To destroy it for money, a simple number with no intrinsic value, is an act of collective insanity - which makes capitalism a mental, as well as physical pathology.
The most important single central fact about a free market is that no exchange takes place unless both parties benefit.
Close the weak banks and impose serious capital requirements on the strong ones...You see, it may sound hard-hearted, but you cannot keep unsound financial institutions operating simply because they provide jobs.
No very deep knowledge of economics is usually needed for grasping the immediate effects of a measure; but the task of economics is to foretell the remoter effects, and so to allow us to avoid such acts as attempt to remedy a present ill by sowing the seeds of a much greater ill for the future.
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