Tuesday, February 23, 2010

Doomsday cycle

Bailouts create incentives for others to take excessive risk (moral hazard).  Then when the economy slows, even more people require bailouts. We have to recognize--and then stop--this cycle.
The real danger is that as this cycle continues, the scale of the problem is getting bigger. If each cycle requires greater and greater public intervention, we will surely eventually collapse.
HT:  Merle Hazard

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