RE: Moral hazard, what is it? And how it can negatively impact you.
Dear @fijimermaid
Finally I've found some time to catch up and read few previously bookmarked posts. Interesting choice of topic.
I always like to start my posts with a story, so here I go. Once upon a time there was a prince and a princess…
Nah, not that kind of story, hehe, let me try again :)
You've almost lost me already :P Next time start with a story for an adults :)
Back to main topic: Moral hazzard - I must admit, that I've never heard such an expression before.
Based on what you wrote, it's a bit similar to trading (not that I like trading or I'm good at it). We try to estimate risks and rewards/potential loses, before we place an order.
ps. based on your story, I would say that Becky is ... doomed. I could never understand people having solid paychecks and having huge debt. Maintaining cost of those debts alone must be frustrating ....
Have a great day buddy,
Yours, Piotr
LOL (in regards to the story)
Yeah, hedging risks in trading has some moral hazard.
For example, asset backed and debt securities, which are necessary for liquidity, can be used to offset risk/exposure to issue larger amounts of unsustainable debt at scale; like a house or a car loan that’s too much financial burden to the individual. The 2008 financial crisis exposed a lot of that, but it is still used today.
Yeah, I think Becky is in trouble. We have all introduced the financial conversation with her, but it never goes anywhere. But she is an adult, so why should she listen to us? 😒
But personal finance ‘face to face’ conversation is somewhat taboo in the US. I equate it with people running naked down the street, there may be a couple people crazy enough to do it, but most don’t...lol.
Thank you for the comment @crypto.piotr