lance sjogren

The Upside of Moral Hazard

I saw the title on this article and thought, "hey, maybe someone has some novel concept on why these government interferences with the market are justified.

Nope, nothing there.


It does illustrate the inanity of all that the govt and fed are doing, however.

The whole concept of our government-run financial system is based on a circular chain of events.

1). Government/fed creates moral hazard by creating a government-controlled financial system.

2). The moral hazard leads to booms and busts.

3). The booms and busts are used as rationale for asserting even more government control over the financial system, hence even more moral hazard.


The obvious result will be even deeper booms and busts. In our case, since we are in a bust phase, what all these interventions will do is cause our economic downturn to be far more severe than it would have been.

But never fear, just have the fed print more money and inflate the bloated debt away. That way real estate can continue to go down in value while prices in nominal dollars will stabilize. Then defaults will slow down, the bailouts will not lead to massive taxpayer losses, and the economic gurus will declare victory.

Victory in this case will mean, however, a severely lowered standards of living for people in the US, much higher commodity prices, and the whole world will abandon any additional use of the US dollar as the world's reserve currency.

Got gold?