Wednesday, October 21, 2009

Moral Hazard Speech

Here is a link to an October 20 speech given by Mervyn King. The speech speaks of the concept of Moral Hazard:

Although there are various notable passages, I found this line perhaps most interesting:

"The massive support extended to the banking sector around the world, while necessary to avert economic disaster, has created possibly the biggest moral hazard in history."

I have commented on Moral Hazard previously on this blog. As I have noted, there has been very little (especially relative to the size of the issue) commentary or attention given to the issue. I believe the Moral Hazard issue is of the greatest importance.

Moral hazard should have been addressed via credible policy many years ago. I am certain that by neglecting this issue we will see immense damage.

SPX at 1098.22 as this post is written

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