Debased debate.

There are all sorts of candidates for the root cause of the systemic global financial crisis, but if we separate the wheat from the chaff we're left with risk and moral hazard. Pointing to human greed and cupidity as the cause doesn't identify anything useful about this era's crisis, as human greed, self-interest and opportunism are default settings.

That institutions have failed is self-evident, as is their inability to structurally reform themselves. If we ask why this is so, we eventually come back to the source: risk and moral hazard.

The key to understanding risk is to ask where it is being offloaded. Risk cannot be disappeared, it can only be transferred or cloaked. The question is: who is it being transferred/offloaded to? What are the consequences of risk pooling up in these reservoirs?

Moral hazard is a fancy way of saying those who have no risk act quite differently from those burdened with risk. Here's an easy way to grasp the concept: imagine two gamblers in a casino. One is backstopped up to $1 million by a wealthy patron; every loss he incurs will be made good until the $1 million is consumed.

The other gambler has only his own cash to put at risk.

Moral hazard means risk has been separated from consequence.^[1]

I love the simplicity of Mr. Hughes's "human greed, self-interest and opportunism are default settings."

The left mendaciously believes these are loathsome characteristics of the "right." In their view "right-wing" means "Nazi," of course, exemplified by William F. Buckley, Sarah Palin, Russell Kirk, Justices Scalia and Thomas, Rush Limbaugh, Ann Coulter, Pat Buchanan, Gen. Pinochet, and any graduate of Hillsdale College and Grove City College. Anyone, in short, who has the unmitigated gall to want a society with real popular sovereignty and constitutional government. Who wants a country free of municipal water treatment departmental SWAT teams, 24/7 video surveillance, U.N. kleptocrats, environmental nut jobs, communist Congressmen, judges who wrap their garbage in the Constitution, and mystery-guest presidents with school girl fetishes about the Muslim Brotherhood and electric power grids energized by Harry Potter.

"Corporations" are greedy by leftist definition. And they exist only to distort the electoral process by donating billions to radical, racist, and anti-democratic causes and candidates. However, unions are never greedy, participate in the electoral process only to vindicate the interests of "good government," and are all out for the working man.

QED.

Individual leftists themselves are never greedy either. They only want "social justice," a tricky though still praiseworthy concept. A cynical friend observed that when leftists speak of "social justice" they really mean "what I want," but let's not go there.

The left's perpetual focus on right-wing greed, self-interest, and opportunism is yet one more illustration of the debased political debate in this country. Mr. Hughes raises well thought out points about the danger of offloading risk on the (wildly unconstitutional) central government and the moral hazard danger in doing so, but the left will want to keep the debate focused on greed, self-interest, and opportunism as though these human defects never ever were encountered until the spawning of the Eisenhower administration. So the centralization of risk and flirtation with moral hazard continue because we can't begin to have a rational debate about these problems with the left.

And note that it's no counter to this point to say that Republicans enthusiastically pursue centralization of risk and moral hazard. This they do do but this assumes that "Republicans" are somehow right-wing. A laughable, pathetic misunderstanding of the way it is.

Smith mentions institutional failure and institutional inability to structurally reform. These are hugely important points. Spending continues to reach stratospheric heights yet the citizen will search far and wide to find a currently existing institution that exerts even feeble efforts to control spending. The RHINOceristic Cong. Paul Ryan and the Simpson-Bowles Commission took a stab at chopping a narrow footpath through the jungle of rent seeking, redistributionist feeding frenzy, and financial sector criminality but their efforts disappeared into the background noise of the universe faster than Vince Foster's autopsy x-rays.

Notes
^[1] "The Source of Systemic Crisis: Risk and Moral Hazard." By Charles Hugh Smith, Of Two Minds, 8/21/13 (emphasis in original).