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> Attempts to artificially reduce instability can often have the opposite effect, by socializing the harmful effects of irresponsible risk taking, and thus crea
by throwawaymaths 4y ago
> Attempts to artificially reduce instability can often have the opposite effect, by socializing the harmful effects of irresponsible risk taking, and thus creating moral hazard.
Can we put this in less technical jargon that describes what happens based on the structural system of how the feds actions make its way to economy as a whole?
Attempts to reduce instability create stability for wealthy class, like wall Street and bankers, while socializing the cost of maintaining stability by increasing the cost of living for everyone else, which most disproportionately hurts people on fixed incomes, and makes social welfare harder to provide by government and private charity alike.
- ETH_start 4y ago>>Attempts to reduce instability create stability for wealthy class, like wall Street and bankers, while socializing the cost of maintaining stability by increasing the cost of living for everyone else, Yes. The short term stabilization brought about by the socialization of losses and due diligence costs also degrades the weeding out process that instills long term discipline on financial institutions.