"Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate... It will purge the rottenness out of the system. High costs of living and high living will come down .. enterprising people will pick up the wrecks from less competent people."
- Andrew Mellon, 1932
There is a price of anxiety or the price of insurance and that is embedded in interest rates. This was discussed by Ferdinando Galiani in his book On Money (1751). Of course, the rate of interest should be associate with the price of anxiety, but that price has been quite low because no one expects that the Andrew Mellon world will exist. There has been a limited term premium because there is no risk that we will have a liquidation event. The China policies is just the latest example.
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