{"id":38286,"date":"2018-09-25T17:36:41","date_gmt":"2018-09-25T22:36:41","guid":{"rendered":"http:\/\/olduvai.ca\/?p=38286"},"modified":"2018-09-25T17:36:41","modified_gmt":"2018-09-25T22:36:41","slug":"free-riding-investors-set-up-markets-for-a-major-collapse","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=38286","title":{"rendered":"Free-Riding Investors Set up Markets for a Major Collapse"},"content":{"rendered":"<div class=\"row\">\n<div class=\"small-12 medium-10 medium-centered columns featured-image\"><img decoding=\"async\" src=\"https:\/\/dweaay7e22a7h.cloudfront.net\/wp-content_3\/uploads\/2014\/12\/MarketDip2.jpg\" alt=\"Free-Riding Investors Set up Markets for a Major Collapse\" \/><\/div>\n<\/div>\n<div class=\"row content-body\">\n<div class=\"small-12 medium-10 medium-centered columns\">\n<div class=\"row\">\n<h3 id=\"share-highlight\"><a href=\"https:\/\/dailyreckoning.com\/free-riding-investors-set-up-markets-for-a-major-collapse\/\"><span style=\"color: #222222;\">Free-Riding Investors Set up Markets for a Major Collapse<\/span><\/a><\/h3>\n<div id=\"single-article-body\" class=\"small-12 medium-10 columns single-article\">\n<p>Free riding is one of the oldest problems in economics and in society in general. Simply put, free riding describes a situation where one party takes the benefits of an economic condition without contributing anything to sustain that condition.<\/p>\n<p>The best example is a parasite on an elephant. The parasite sucks the elephant\u2019s blood to survive but contributes nothing to the elephant\u2019s well-being.<\/p>\n<p>A few parasites on an elephant are a harmless annoyance. But sooner or later the word spreads and more parasites arrive. After a while, the parasites begin to weaken the host elephant\u2019s stamina, but the elephant carries on.<\/p>\n<p>Eventually a tipping point arrives when there are so many parasites that the elephant dies. At that point, the parasites die too. It\u2019s a question of short-run benefit versus long-run sustainability. Parasites only think about the short run.<\/p>\n<p>A driver who uses a highway without paying tolls or taxes is a free rider. An investor who snaps up brokerage research without opening an account or paying advisory fees is another example.<\/p>\n<p>Actually, free-riding problems appear in almost every form of human endeavor. The trick is to keep the free riders to a minimum so they do not overwhelm the service being provided and ruin that service for those paying their fair share.<\/p>\n<p>The biggest free riders in the financial system are bank executives such as Jamie Dimon, the CEO of J.P. Morgan. Bank liabilities are guaranteed by the FDIC up to $250,000 per account.<\/p>\n<p>Liabilities in excess of that are implicitly guaranteed by the \u201ctoo big to fail\u201d policy of the Federal Reserve. The big banks can engage in swap and other derivative contracts \u201coff the books\u201d without providing adequate capital for the market risk involved.<\/p>\n<p>\u2026click on the above link to read the rest of the article\u2026<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Free-Riding Investors Set up Markets for a Major Collapse Free riding is one of the oldest problems in economics and in society in general. Simply put, free riding describes a situation where one party takes the benefits of an economic condition without contributing anything to sustain that condition. The best example is a parasite on [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[5270,11023,1668,3453,303,317,13599,802,3650],"class_list":["post-38286","post","type-post","status-publish","format-standard","hentry","category-economics","tag-big-banks","tag-daily-reckoning","tag-derivatives","tag-fdic","tag-fed","tag-financial-system","tag-james-rickards","tag-too-big-to-fail","tag-us-federal-reserve"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/38286","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=38286"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/38286\/revisions"}],"predecessor-version":[{"id":38287,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/38286\/revisions\/38287"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=38286"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=38286"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=38286"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}