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Buzzword: Moral hazard

Marketplace Staff Aug 17, 2007
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Buzzword: Moral hazard

Marketplace Staff Aug 17, 2007
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A license to ill brings us this week’s Marketplace Money buzzword: Moral hazard.

A moral hazard is a concept insurers first dreamed up. It’s a situation in which you’re so protected financially that you feel free to act . . . well, badly. Like if you have lot of car liability insurance. Why not drive 100 miles per hour? If you crash, hey, you’re covered!

Some economists feel a big moral hazard could soon loom over the stock market. They fear the Fed will give in to nervous speculators and cut interest rates. That could make it even easier to speculate, leading to another kind of hazard: a market bubble.

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