charles hugh smith-When Risk Is Disconnected From Consequence, the System Itself Is at Risk         When Risk Is Disconnected

Of Two Minds - The Panama Papers: This Is the Consequence of Centralized Money and

game behave quite differently from those who face consequences. This disconnection of risk from consequence is called moral hazard

pressure on two adjacent plates of the Earth's crust rises without apparent consequence until the plates

medicine” that has been offered as a cure; it is systemic, the consequence of profound

to institutionalize moral hazard: those managing the institution’s departments rarely suffer any personal consequence when the institution

and scammers, from those pursuing bogus disability claims to lobbyist leeches, will suffer any consequence. Moral hazard is the

Spoiled Teenager Syndrome         Spoiled Teenager Syndrome   (January 3, 2013) Is masking risk, cost and consequence a strategy

policies of unlimited liquidity and zero-interest rates have generated an unintended consequence: the super

The Smith Uncertainty Principle (yes, it's my work): Every sustained action has more than one consequence. Some consequences will appear

of failure and risk, and the system loses touches with reality/consequence and runs

failure is not only always an option, it is inevitable as a systems-level consequence of tightly

Explanation" for why the current account deficit is of little consequence. We should start, of

Voltaire observed, “No snowflake in an avalanche ever feels responsible.” A second consequence is psychological. Even if

Law of Conservation of Risk : Every sustained action has more than one consequence. Some consequences will appear

of the pandemic. Recall that first order effects: every action has a consequence. Second order effects: every

smith-The Global Endgame         The Global Endgame   (March 12, 2013) Is pushing consequence forward the same

The Crushing Vice of Price July 29, 2015 Devaluation has a negative consequence few mention: the

the possible second-order effects receive little attention: first order, every action has a consequence. Second order, every consequence

money has institutionalized moral hazard , the disconnect of risk and consequence. The ultimate

risk" Wonderlands protected from the market forces of risk and consequence. These islands of

burned in the previous bubble bust shun risk assets. The second negative consequence is the structural

and bonds after another for 25 years. OK Fed : as a direct consequence of your

quality goods were simply not manufactured and sold. There is another even more pernicious consequence of the

own cash to put at risk. Moral hazard means risk has been separated from consequence. The backstopped

all the gains from the Fed's expedient grab-bag of consequence-free winnings accrued to

had just been "saved" by extreme policies. ( First order effects: every action has a consequence. Second order effects: every

commoditization / homogenization has consequences other than low prices and convenience is not advertised. One consequence is every town and

As you may recall from recent posts here: first order, every action has a consequence. Second order, every consequence

elites and institutions don't dare admit is that to protect themselves from consequence, we've had to

and Federal Reserve. Spoiled Teenager Syndrome (January 3, 2013) Masking risk, cost and consequence creates an illusory world

the sublimely confident Bulls consider: second-order effects : first order, every action has a consequence. Second order, every consequence

power, and it flows from the disconnect between authority, responsibility and consequence. A leader

and complexity that serves no purpose beyond guaranteeing insiders' paper-shuffling jobs. As a consequence, complexity that adds no

The Fed's grace is godlike in its infinite expansion. This escape from karma, consequence and divine

the Nation September 24, 2018 The nation is failing as a direct consequence of these

is the assurance that the Fed will save every market from every consequence. All this hubris is

24, 2021 If you think this scale of stimulus is sustainable and consequence-free, you must be

wedge between us. In other words, maybe the divisions are an intentional consequence of the

have persuaded themselves that their relentless pursuit of self-interest has no cost or consequence. Conveniently ignoring Adam Smith

be displayed. Our Crazy-Making Economy's Endgame: Festering Frustration Seeking an Outlet The consequence of policies

Is Artifice and PR, Collapse Beckons November 22, 2021 The notion that consequence can be as easily

I've been writing about moral hazard --the separation of risk from consequence--since 2011. Punters who

Class, Poor Middle Class April 9, 2015 This great generational injustice is the direct consequence of central

the way to do that is to embrace fact, responsibility, choice, consequence and thrift

and consequence. Every time the Central State guarantees something, it disconnects risk from consequence and institutionalizes

incentivize what is known as moral hazard: the separation of risk from consequence.  This can be summarized

devaluation and financial repression) into stocks. What nobody knows is the eventual consequence of all

to pay for the state's largesse. Once we examine this necessary consequence of liberal

in the U.S. over the past two decades, it's had an ugly consequence: gone are high wages

form of derangement or collapse of productivity is the inevitable consequence of being

system of making debt pass for capital, is itself failing, in consequence of its

of a financial system that has become neofeudal, parasitic and predatory. One such consequence has been the

marijuana is surrounded by violence--well duh-- the violence is the direct consequence of Prohibition

problem of moral hazard , the separation of financial risk from consequence? No, they made it

create a dreamy illusion of prosperity. Here's the third consequence of bubbles

volatile monsoon season--flash flooding, killing heat, etc. The least noticeable but most devastating consequence of the

attributed to Aristotle), i.e. we are what we do every day, resolutions have little consequence until they become daily

in 2008-09, stock market gains had cratered and as a consequence taxpayers had to

sweetheart contracts where the private cartel/monopoly can overbill the government without consequence; toothless anti-trust agencies

context, the entire defense budget is around $700 billion.) Chart 3: the inevitable consequence is soaring entitlement deficits

attributed to Aristotle), i.e. we are what we do every day , resolutions have little consequence until they become daily

of dollars can be borrowed annually for decades to come, with no consequence. The system

low net profitability would be revealed. And what would be the immediate consequence of strict

money and run. This becomes a theme—big short-term returns, no personal consequence, and “externalized

the prospect of deflation should note that deflation is the natural consequence of rising

cronies by instituting moral hazard , the disconnect of risk and consequence: the central

propping up their currency to stem the flood tide faces another unintended consequence--a faltering

borrower just borrows more money. Creating money out of thin air is also not consequence-free. Fancy financial footwork

Now the central banks are facing runaway asset bubbles that are the direct consequence of their

economies of the export-dependent nations also implode. This is the inconvenient consequence of having

equality of wealth and income? What if rising inequality is a consequence of bottom

the erosion of the domestic economy. Trade wars are the inevitable consequence of monetary

ZIRP/NIRP, this requires taking on higher risk, as higher yields are a direct consequence of higher

and find some other way to live. Yet this is the inevitable consequence of a

the soaring dollar, which has made the yuan stronger simply as a consequence of the

the nation is slip-sliding into the Greater Depression , and one consequence is that all these

is to borrow as much money as possible now before interest rates rise--an inevitable consequence of inflationary

in the U.S. over the past two decades, it's had an ugly consequence: gone are high wages

phenomenon in which a neighborhood decays when windows are broken without enforcement or consequence (i.e. no enforcement of

the financially connected, and all the elites that are protected from consequence and therefore

in charge except to make sure nothing gets done of any consequence. In this

borrowing and spending don't actually solve the problem -- nor is there any consequence for continually

borrowing and spending don't actually solve the problem -- nor is there any consequence for continually

chasing a limited pool of assets, labor and resources has another consequence: inflation , the steady

whose benefit? Since moral hazard--the disconnect of risk and consequence--is the fundamental

tools of financialization. In other words, financialization isn't a consequence of having

bets. This is the essence of moral hazard --risk is disconnected from consequence by central bank intervention

from the system without creating any value whatsoever. Financialization isn't a consequence of having

order and second-order effects: First order effects: every action has a consequence. Second order effects: every

unprecedented deficits as far as the eye can see? Will there never be any consequence of that

important weapon is moral hazard , the disconnection of risk and consequence. You disconnect risk from

the competence or intelligence of their managers--it is the intrinsic consequence of their

Crazy-Making Economy's Endgame: Festering Frustration Seeking an Outlet   (May 22, 2015) The consequence of policies

Class, Poor Middle Class   (April 9, 2015) This great generational injustice is the direct consequence of central

capital's dominance having second-order effects. ( First order effects: every action has a consequence. Second order effects: every

Unaffordable for the Bottom 90% September 11, 2023 This is the direct consequence of the

April 9, 2014) But turning everyone into a speculator via financialization had an unintended consequence: widening wealth inequality. It

bonds so the government can spend a gazillion dollars. There is no consequence of this

and as yet unpaid, price in suppressed systemic risk, cost, and consequence. Trend #1: Central Planning