Alan Greenspan Risk Quotations

History has not dealt kindly with the aftermath of protracted periods of low risk premiums.

We are seeing an evolving new international economy. We are in the process of learning how it works as we are doing it, ... Fortunately, the trauma that came out of the Russian default created so much risk aversion ... we probably have time to be deliberative in determining how the (international monetary) structure ought to be structured.

Until market forces, assisted by a vigilant Federal Reserve, affect the necessary alignment of aggregate demand with the growth of potential aggregate supply, the full benefits of innovative productivity acceleration are at risk of being undermined by financial and economic instability,

I believe that the general growth in large [financial] institutions have occurred in the context of an underlying structure of markets in which many of the larger risks are dramatically -- I should say, fully -- hedged.

Indeed, better risk management may be the only truly necessary element of success in banking.

At the risk of some oversimplification, if the skill composition of our work force meshed fully with the needs of our increasingly complex capital-stock, wage-skill differentials would be stable, and the percentage changes in wage rates would be the same for all job grades.

No matter how skillful the trading scheme, over the long haul, abnormal returns are sustained only through abnormal exposure to risk.

Clearly, sustained low inflation implies less uncertainty about the future, and lower risk premiums imply higher prices of stocks and other earning assets. We can see that in the inverse relationship exhibited by price/earnings ratios and the rate of inflation in the past. But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?

What we have found over the years in the marketplace is that derivatives have been an extraordinarily useful vehicle to transfer risk from those who shouldn't be taking it to those who are willing to and are capable of doing so.

Any onset of increased investor caution elevates risk premiums and, as a consequence, lowers asset values and promotes the liquidation of the debt that supported higher asset prices, ... This is the reason that history has not dealt kindly with the aftermath of protracted periods of low risk premiums.

The use of a growing array of derivatives and the related application of more-sophisticated approaches to measuring and managing risk are key factors underpinning the greater resilience of our largest financial institutions .... Derivatives have permitted the unbundling of financial risks.

Lower equity prices and higher financing costs should damp household and business spending, and greater uncertainty and risk aversion may also lead to more cautious spending behavior,

fully appreciate the risk that some households may have trouble meeting monthly payments as interest rates and the macroeconomic climate change.

helped to lower risk premiums on debt and have contributed importantly to the favorable investment environment.

History cautions that extended periods of low concern about credit risk have invariably been followed by reversal, with an attendant fall in the prices of risky assets.

The rapid growth and increasing importance of derivative instruments in the risk profile of many large banks has been a particular concern,

Without the needed restrictions on the size of the GSE balance sheets, we put at risk our ability to preserve safe and sound financial markets in the United States, a key ingredient of support for housing,

Because it is a highly leveraged operation and one which requires very sophisticated hedging of interest rate risk, it's imparting a significant potential systemic risk to the American financial system,

Any notable shortfall in economic performance from the exemplary standard of recent years runs the risk of reviving mistrust of market-oriented systems, even among conventional policy makers,

This period of sub-par economic growth is not yet over, and we are not free of the risk that economic weakness will be greater than currently anticipated, requiring further policy response,

It is risky, ... It's risky doing nothing. It's risky doing any other solution. ... I know no way to resolve this without risk.

Investing a portion of the Social Security trust fund assets in equities as the administration and others have proposed would arguably put at risk the efficiency of our capital markets and, thus, our economy,

These products could be cause for some concern both because they expose borrowers to more interest-rate and house-price risk than the standard 30-year, fixed-rate mortgage and because they are seen as vehicles that enable marginally qualified, highly leveraged borrowers to purchase homes at inflated prices,