The propensity to swindle grows parallel with the propensity to speculate during a boom the implosion of an asset price bubble always leads to the discovery of frauds and swindles
Interpretation
The tendency to engage in dishonest behavior increases during times of economic speculation, especially when bubbles burst.
This quote by Charles P. Kindleberger highlights the correlation between economic booms and instances of fraudulent behavior. During a time of speculation, as asset prices soar, people are more likely to take risks that can lead to swindles; when the inevitable crash occurs, the truth behind these fraudulent schemes often comes to light, revealing the darker side of financial enthusiasm.
In practice
In a discussion about the housing market crisis, one could use this quote to illustrate how many fraud cases emerged.
I think a very good system in a world with a lot of passive investors is one in which there are at least a few entrepreneurial investors, prepared to say what they think, prepared to propose a change in management, change in strategy, change in cost structure, capital structure.
If you owe $50, you're a delinquent account. If you owe $50,000, you're a small businessmen. If you owe $50 million, you're a corporation. If you owe $50 billion, you're the government.
I am more and more impressed with the possibilities of history's repeating itself on many different counts. You don't get very far in Wall Street with the simple, convenient conclusion that a given level of prices is not too high.
Never, ever invest money that you will need prior to three to five years - minimum.
Our stay-put behavior reflects our view that the stock market serves as a relocation center at which money is moved from the active to the patient.
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.
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