Don’t make the mistake of confusing what the bond market calls a moral obligation with the more widely-held definition of the term.
One may suspect that a moral obligation as it applies to repaying the 38 Studios loan implies that our shared concept of right and wrong compels us to make good on our word to repay the debt we owe those who bought the bonds.
No, not at all actually.
In the world of high finance and big bond buying, a moral obligation simply means it may or may not cost money to change ones mind. It’s actually a misuse of both words in that repayment has nothing to do morality, nor is it an obligation. It’s not even apples to oranges. It’s more like apples to poisonous mushrooms. It’s almost as if the fat cats of finance have purposefully perverted the phrase to further institutionalize our self-interest in serving the rich, but I’m sure an industry that is too big to fail would never stoop to such a tactic.
Not at all to discount what’s in our fiduciary best interest, but I think it’s a slippery slope when we start confusing fiscal decisions with moral obligations. There’s even an insurance product for this. You know your society is in trouble when there is an industry that makes money off of the assumption that the government won’t make good on a moral obligation.
That said, I’m really hoping it ends up being financially advantageous not to pay the bondholders – that way we can save money AND we’ll see who in Rhode Island is a real small government conservative and who is acting like a friend to the taxpayer when they are secretly just advocating for Wall Street and corporate America’s interest in our state government.