We are reading this week how many forces are in play that influence the character and the nature of financial institutions in the United States. For this posting you are requested to do 3 things in your IP posting. First, you are to provide a definition in your own words of either adverse selection or moral hazard in banking and money. Second, you are to describe a transaction you are involved with that is impacted by either adverse selection or moral hazard. The transaction could be economic or not economic – it ma be a continuing transaction or a relationship with another person or an institution. Third, you are to explain how informational asymmetries have exactly impacted the transaction you are involved in highlighting how some mechanisms may be in place to protect each party, or to protect at least one party in the transaction. If you have some ideas about what to post but are not sure please feel free to fully sketch out your ideas and send them to me before posting.

While we wrestle with the topics inside of money and banking and our projects, I thought it might be useful to have a discussion where we can be a bit creative and maybe even have a little bit of fun.