At the time that Paul Volcker broke the back of inflation in early 1980s, the recognition that risk and leverage had consequences was baked into the pie: if you were to take excessive risk you had better win the bet. If you missed the target, the expected result would be more or less total failure, and that seemed then and for decades earlier a reasonable law of nature. Now in contrast we get ready to celebrate the 20th anniversary of the era of the Great Moral Hazard. Slowly at first, but with steadily growing traction, the idea was planted that asset bubbles would be tolerated, but consequences of their bursting would be moderated or avoided entirely by increasingly vigorous actions sometimes, like now, bordering on the hysterical. This is to say that if all went well, enormous profits could be made by speculators – largely the great financial firms, including some formerly conservative blue chip banks – by riding and leveraging the bubbles. If all went badly, then the costs would be passed on to others.
~ Jeremy Grantham, "Immoral Hazard," GMO Quarterly Letter, April 2008