For the past two months, I’ve argued that our current economic crisis was not caused by technical defects in our economic theory or a failure to properly manage interest, inflation or unemployment rates. Instead, I’ve argued that the current economic crisis is the result of a collapse in our nation’s moral values. I’ve argued that institutionalized immorality in government (political campaign contribution laws; deficit financing), finance (fiat money), the church (state-incorporated churches rather than real “churches of God”) and the people (no-fault divorce, abortion, and a “something-for-nothing” mentality) has degraded too many Americans to the status of greedy, unconscionable fools who’ve refined their capacity to predate and lost their capacity to produce.
Category Archives: Short Selling
The Moral Hazard of Selling Short
If I bought a house for $200,000 and insured it for $1 million, that insurance policy would create a “moral hazard”. I.e., the $1 million insurance policy against my $200,000 house being destroyed by fire would, in fact, provide an incentive for me to burn my house. Why? Because I could never hope to gain much more than $200,000 for selling the house, but I could instantly gain $1 million from burning it down. A “moral hazard” is something done for a seemingly good reason (to protect against destruction by fire) that nevertheless creates an incentive to do wrong (cause the fire).
