Moral Hazard

[SIUYA 11]

This thread I thought might become an interesting collection of resources to show the pros and cons of bailouts, examples of moral hazard and the decisions of humans as a result of it.

eg;

for those in the markets who cannot help themselves.

for those in the market who should know better

for why we as humans will never learn

debates as to weather or not we should have the government to bail us out.

 

(now I would hope that this does not become a thread full of arguments that we either let everything be unregulated, or about attacks on others ideas.....more about a collection of articles, resources or points of view that can be a collection of examples related to the topic.....and yes its a very varied, wide and multi-faceted one - so if it gets legs it may spawn some interesting articles.)

 

Moral Hazard (wikipedia)- In economic theory, a moral hazard is a situation where there is a tendency to take undue risks because the costs are not borne by the party taking the risk. A moral hazard may occur where the behavior of one party may change to the detriment of another after a transaction has taken place.

 

Random questions....In these days of bailouts by governments are we as humans ever going to learn? Is there a mis-match between what we want to be protected from, how we wish that to occur, where do we draw the line?

Why is it as traders we want free markets with transparency and more participants (ideally unsuccessful ones) and yet we rile against people selling claims to these participants. Why do humans despite being told, there is no secret sauce, there is no one right way, no holy grail, but when a claim that there is arises some people attack it, others pursue it?

(and while it might not all revolve around moral hazard as its known....i for one definitely think its related)

This is very topical and was mainly was spurred on by this article below...as well as the debate on TL that people need to be protected from sales vendors, automated trading models promising riches etc; (I have no particular allegiances, prejudices or examples in this regard) when maybe all the protection in the world is really a waste of time for some.

 

The article....Basically an advertised scam that still sees people invest even though they are told it is a pyramid scheme.

 

http://www.bloomberg.com/news/2012-06-06/is-global-finance-a-ponzi-scheme-ask-a-russian-expert.html

 

Lets see if we can find other examples (and there are plenty there).....

 

and you know what - if someone posts an opinion and others resort to name calling if they dont agree then maybe that is the best (and sadly most pathetic and piss poor response you can have) argument you have....go and join parliament.

[ame=http://www.youtube.com/watch?v=fadIvRtayts]BBC World News: Ukraine parliament fight 0020 25 May 2012 - YouTube[/ame]

Edited June 11, 2012 by SIUYA

[Obsidian 10]

noone blames politicians or economists because their main duty is to lie...do you really believe someone would spend six digit $$ just to serve their country :rofl:

 

I personally believe who lend Greece a cent more is crazy but the market does not care what I think...hope is our strength and weakness...

[MadMarketScientist 11]

Wow interesting article ... personally, I believe people need to have consequences to their actions. We *should* be good citizens and try to help by warning people when there is an obvious scam going on but it is not our place to police if whatever they are doing is not illegal. If they want to take the gamble and lose their house after repeated warnings ... well that is their problem.

 

Same thing goes for trading ... sometimes people need to lose some money on some stupid vendors and indicators before they learn ... its part of the process. As traders, isn't it actually beneficial to us there are less knowledgeable people to trade against?! I don't want to trade against Goldman! Just like in poker, I don't want to be the fish at my table.

 

MMS

[SIUYA 11]

and the ironic thing becomes that a lot of the free marketers who push the government to get off our backs usually cry the most when they are scammed.

 

How often are the extremists of freedom and free markets the first to want help and self policing and regulations, ask for bailouts, and other subsidies that more often hinder competition and distort markets...... They often don't accept the logical consequences of the system that is promoted

 

Happens a lot - if you know the history of art (The great cycle of life).....the revolutionary becomes the establishment......world trade....the biggest promoters of free world trade are often the biggest subsidizers....:crap:

 

:crap:...sorry off topic....stick to moral hazard.