Friday, September 30, 2016

Entrenched Moral Hazard

"And I hate to tell you this, but it's a bankrupt business model. It won't work. It's systemic, malignant, and it's cancer."
--Gordon Gekko (Wall Street: Money Never Sleeps)

The muted market response to the DB situation demonstrates just how entrenched moral hazard is in the minds of investors. I've heard people ranging from professional investors to students this week uttering the same thing:

"There's no way that they will let it fail."

There seems to be near universal comfort in the 'authorities' and their capacity to bail out risky behavior.

Capitalism? No way. What we have here is the antithesis of capitalism.

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