Privatizing Profit, Socializing Risk

By   July 19, 2008

These guys are obviously not ok with picking up the tab for the banks’ crappy investments.

The problem is quite simple. If you make an investment, there is risk and there are potential gains. The two are related in an effective market. More risk usually translates to more potential for gains. The expectation value for an investment is usually not that high, because of this. If you effectively elliminate the risk, by bailing out failed investments, you encourage more risky investments. This is because the expectation value of risky investments with huge potential gains gets much much higher when the downside is elliminated.

If you’re living in the USA and pay taxes, you have to ask yourself this question: Are you ok with picking up the tab when risky investments fail, but getting none of the profits when they work out, making private bankers billionaires? If you’re not, go to FedUpUSA and learn what you can do to stop it.

PS. If you’re unsure about the size of the bill, it’s freakin’ huge. Iraq war: $500 billion. Mortgage bailout: $2500 billion. Yeah, I’m glad it’s not my taxes…