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This is actually the clearest, simplest explanation I’ve read (including Matt Levine’s). I think this is the first time moral hazard made sense to me from an o
by obblekk 4y ago
This is actually the clearest, simplest explanation I’ve read (including Matt Levine’s).
I think this is the first time moral hazard made sense to me from an operational perspective. The fund manager who in old days would feel bad about risking retirees money, now legitimately feels okay knowing there’s no way they’ll go hungry.
Unfortunately there’s no easy way out of this.
- ColFrancis 4y agoSure, punish the recklessness to remove the moral hazard. You can both make sure people don't starve and align the incentives. If you don't then next time it will be worse.
- nopenopenopeno 4y agoThey will go hungry, though. “Socialise the losses” means bailing out the banks, not the workers.
- xadhominemx 4y agoWell it’s completely wrong
- dereg 4y agoIt’s a completely incorrect explanation. There’s no moral hazard here, they weren’t risking pension or funds through the swap agreement. The reason why the answer isn’t clear is because pension math is boring. The thing is, you can’t fully grasp the truth unless you’re willing to engage in it.