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  • Writer's pictureStephen H Akin

Moral Hazzard

Updated: Apr 19, 2023

"History Doesn't Repeat It's Self But It Often Rhymes" Mark Twain

Moral hazard is a situation where an economic actor has an incentive to increase its exposure to risk because it does not bear the full costs of that risk.

Or, put another way, it is when a party takes an excessive risk in bad faith, knowing another party is economically responsible for the outcome

Looking back over time from the days of Mark Twain, The Reconstruction Era to the time of F. Scott Fitzgerald, Gatsby and the Roaring Twenties we have seen all of this before.

The Economic Report of The President

Chapter 8

Digital Assets: Relearning Economic Principals

Multiple financial crises have struck the United States during the last two centuries. Many of these crises have been caused by institutions that function like banks but are not registered or regulated as banks, so-called shadow banks.

For example, the 1907 crisis—then called a “panic”—was mainly caused by trust companies, which were State-chartered entities that competed with banks for deposits. Because these trusts were not part of the central payments system, and thus processed only a small amount of payments, they did not hold a large amount of cash relative to deposits. To earn profits, they made as many loans as possible. After a series of events in October 1907 set off a rush for withdrawals, several trusts faced a run and were forced to suspend credit and liquidate assets, acting as a catalyst for a larger fire sale in financial markets.

To save the financial system, J. P. Morgan, owner of the eponymous bank, and a small number of other finan- cial leaders individually chose which banks to bail out (Moen and Tallman 2015). This helped government policymakers realize that when faced with a crisis, the financial system, as then constituted, would rely on a privileged group of individuals seeking to maximize their own profits rather than on institutions that had an obligation to protect the public’s interest. This real- ization helped lead to the creation of the Federal Reserve—the centralized entity that first aimed to serve as the lender of last resort and, over time, also obtained the exclusive power to issue U.S. dollar notes and manage the Nation’s monetary policy.

Fast forward 100 years, and digital asset proponents are now aspiring to create a

decentralized financial system without relying on governments and their regulatory frameworks, which were shaped by important lessons learned from multiple previous crises, including the 1907 panic. Digital assets are electronic representations of value and operate as part of a complex and interconnected digital ecosystem. Crypto assets are a subset of digital assets that use cryptographic techniques and distributed ledger technology (DLT) but exclude central bank digital currencies (U.S. Department of the Treasury 2022a). DLTs rely on networks to store and process transactions.

This chapter primarily examines crypto assets, whose proponents have been relearning the lessons from previous financial crises the hard way. In addi- tion to the decentralized custody and control of money, it has been argued that crypto assets may provide other benefits, such as improving payment systems, increasing financial inclusion, and creating mechanisms for the dis- tribution of intellectual property and financial value that bypass intermediar- ies that extract value from both the provider and recipient. Looking under the hood at these arguments, however, shows a more complicated picture.

So far, crypto assets have brought none of these benefits. Meanwhile, the costs generated by several of their aspects—such as those for consumers, the physical environment, and the financial system—are not only substantial but are also being accrued in the present. Indeed, crypto assets to date do not appear to offer investments with any fundamental value, nor do they act as an effective alternative to fiat money, improve financial inclusion, or make payments more efficient; instead, their innovation has been mostly about creating artificial scarcity in order to support crypto assets’ prices—and many of them have no fundamental value. This raises the question of the role of regulation in protecting consumers, investors, and the rest of the financial system from panics, crashes, and fraud related to crypto assets. Even so, as companies and governments experiment with DLT, it is conceivable that some of their potential benefits may be realized in the future.

This week the White House Released the March 20, 2023 Download Full Report PDF

Download PDF • 12.91MB


Industry upset over the 35 pages dedicated to debunking the “Perceived Appeal of Crypto Assets,” along with a short section on the and central bank digital currencies.

"Crypto FUD"


Fear, uncertainty and doubt (often shortened to FUD) is a propaganda tactic used in sales, marketing, public relations, politics, pollingand cults. FUD is generally a strategy to influence perception by disseminating negative and dubious or false information and a manifestation of the appeal to fear.


Since our last blog post Akin Investments was featured in this article by US News and World Report:

8 Best Green Stocks to Buy for 2023

US News and World Report

Matt Whittaker Mar 15, 2023

Green stocks at the forefront of the energy transition could be excellent long-term opportunities Ford Motor Co. (F)

"I like Ford and their electric vehicle strategy and believe it will help to preserve one of America's icons," says Stephen Akin, registered investment advisor with Akin Investments. Through 2026, the automaker is investing more than $50 billion globally in electric vehicles and plans to be able to build more than 2 million of them per year by the end of 2026. The annual run rate by the end of this year will be 600,000. "I like Ford and their electric vehicle strategy and believe it will help to preserve one of America's icons," says Stephen Akin, registered investment advisor with Akin Investments Ford has already started electrifying some of its most well-known models, offering an all-electric Mustang and F-150. It also offers all-electric vans, a charging network with more than 75,000 chargers, and more than 2,700 EV-certified dealers in all 50 states. "This electrification strategy is a core component of Ford's goal to (achieve) carbon neutrality globally by 2050," the company says. "Ford is investing significantly to accelerate research and development of battery and battery cell technology."

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