Whose moral hazard?

As our increasingly feeble minded GOM contemplates the imminent arrival of a wholly inadequate private pension he ponders the term “moral hazard”.

This insurance industry expression has been popularised by Mervyn King and is now bandied about freely in the context of the derivative creators, investment bankers and fund managers who took the fruits of the economic boom but left the customers (mostly pension fund investors) with the costs of weak performance and (in conjunction with other tax players) sole ownership of the wreckage of the economic recession.

As he looks at what he paid pension managers over the past decades and the loss of value he has received at their hands the GOM certainly has no time for these scoundrels.

But are they the only villains of the piece? What about another group of people who took the credit for the boom but who were wholly protected from the growing level of risk?

Might it not be the case that the continued payment of MP’s and civil servants’ pensions out of current revenue, not the proceeds of past investment, has exposed them to an entirely comparable risk of moral hazard?

Could this be why successive Governments have done so little to head off the inevitable pension train crash? They were simply immune to the consequences of their irresponsible inactivity.

Let’s hear it from Mervyn (whose pension, we suspect, will not rely on “past performance”, either).