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The Role of Excess

Spanish proverb

Can a good idea become a bad idea?

Legitimate ideas frequently cause problems when carried too far. Consider the most recent financial crisis. Mortgage Backed Securities, by themselves, were not a bad idea. However, this idea went too far. The MBS eco-system  was constructed in such a way that it rewarded risky behavior and punished good behaviour. (Gresham’s Law). A good idea was simply carried too far.

A lot of media outlets say that MBS were a horrible idea—I disagree. Learning to recognize that ‘good ideas’ can be carried too far will help you understand why something was created in the first place.