>they are the "smart ones"

In the U.S. this is often referred to as the "moral hazard". True they may be the 'smart' ones, but I can't help but think there's got to be a system that prioritizes the area of the Venn diagram where "smart" and "moral" overlap.

I find the concept of "moral hazard" foul when applied to things like retirement provision, social healthcare and social security. It is used a justification to let others rot and starve.

I know that's a common feeling, but I tend to view it as an acknowledgement that we need to understand the behavior being incentivized rather than an actual statement about morals which can be endlessly debated.

There's some irony in the phrasing used to decry the term "moral hazard" though in that it seems to hint of morals itself.

I think perhaps that's part of my issue with it - "moral hazard" appears to be backwards, it is often used to justify what appear to be very immoral policies and outcomes.

Alice was about to be made homeless, the others have liquid assets, and clearly have made other arrangements for housing.

I think your example is not really a full picture, and I don't necessarily agree that the state encouraging home-ownership, and helping out home-owners who might be about to lose their home, is wrong.

To my eyes, Alice was living responsibly.

Yup, both Bob and Charlie "stay at home." Who's home? How is it paid for?

Bob and Charlie are living rent-free in their parents' basements. Alice could have done the same—and will, if she has to sell the house to avoid bankruptcy—but she wanted to appear more independent. Alternatively, she could sell the house, pay off the remaining mortgage, and use the other $100k for rent until conditions improve.

No one in this scenario likely to end up homeless in the near term, as they all have roughly equivalent net worths over $100k. The system just favors those with their assets tied up in housing rather than more diversified investments or liquid savings.

Again, not seeing why it shouldn’t.

By subsidizing home ownership the government is encouraging people to go into debt and funnel whatever savings they manage to scrape together after paying interest into a single depreciating asset rather than a safer, more diversified portfolio. The policy is beneficial to moneylenders and people selling houses, but these things hardly need to be subsidized.

Bob and Charlie are the responsible ones.

Alice can sell her house for 200k and have 100k to pay for rent and live off.

The fact that you need to make up such a farcical example to prove your point should tell you something. The fact that you need to hand-wave a decade of wildly different asset classes' appreciation (or depreciation) in order to prove your point should tell you something.

1. Houses aren't particularly liquid, and in a debate about what is "smart" vs. "moral," and the fact that they don't always overlap, you're going to have a hard time arguing for forced eviction from one's primary (only) residence.

2. The 200k house ten years ago is going to be worth a lot more than 200k today. On average you're looking at 290k in a decade.

3. Bob's 100k in stocks would be 217k if he bought it one lump sum and got average returns, so let's say he purchased over time and is sitting around 175k.

4. Charlie's lost money because his 100k is somewhere between 105k and 110k now but he's lost 2-3 times that in purchasing power.

So they are emphatically not worth the same.

Alice owns an illiquid 290k asset for which she's only liable another 100k, so she's +190. She can refinance and lower her payment. She can get loan forbearance because we as a society have decided that it's immoral to immediately kick people out of their homes because they can't pay.

Bob is +75k and there are plenty of ways to make money off of a stock portfolio without liquidating it. You can even get a traditional loan using the portfolio as collateral but you're unlikely to get more than 40-50% of the value given the potential for volatility.

Charlie's lost money and yes, he's going to get laughed out of any assistance office because he's using a savings account - a vehicle designed mainly for emergency funds and short-term savings - for his life savings.

To your last point about the city center apartment, there is a huge difference between a reasonably intelligent person who just lost their job selling their apartment and moving somewhere cheaper, and a bank or government forcing them to do so.

> Also houses are almost literally untouchable,

Often, (in the US) retirement accounts are also sacrosanct, depending on the claim.

The issue of houses reminds me of how much of the US tax system is regressive. Electric car subsidies, special treatment for capital gains, mortgage deductions.

The US tax system is designed by people who in theory represent the will of the people, but in reality that are advocating for special interests.

You have things like SALT tax deduction and mortgage interest tax deduction which are directly designed to benefit rich liberals in blue states by subsidizing their oversized government. Take these away and people get mad or move to TX/FL/NV because they actually have to pay their full taxes.

Also having a high state sales tax is much more logical if you don’t want to pay tax just don’t spend money.

It would make much more sense to just do a federal sales tax, totally eliminate the corporate tax as people are paying taxes anyway and it is just a disadvantage to us-domiciled corporations competitiveness, and also totally eliminate fed and state income taxes. Like purge them with fire, there’s way too much complexity and corruption built up over the last hundred years.

Then if you still care about people at the end just institute UBI and Medicare for all to eliminate the billing complexity and potential for discrimination. This policy would also be compatible with open borders and free movement of labor if we as a society decided we want that.

Private retirement accounts are far from untouchable in the EU, though: e.g. Hungary straight-up nationalized private pension funds in 2010 [1].

[1] https://www.ipe.com/nightmare-in-hungary-as-government-natio...

The US tax system isn't regressive; I'm against legislating behavior through tax breaks, but calling them subsidies isn't really fair either.

The comment was only about parts of the us tax system. Regressive is a technical term and means that the effective rate decreases as one’s means increase. A simple example is a flat poll tax: richer people feel a much lower burden than poorer people. Mortgage contribution deductions are regressive because poorer people don’t have mortgages on average.

It's also worth noting that the mortgage contribution benefit is capped at a few thousand bucks. It primarily benefits the middle class but is an after thought to millionaires and above. It really doesn't move the needle for them.

> > And don't think these pernicious incentives don't exist and that peoples reliance on social security doesn't happen. That quote of "The state will save me" is almost word for word out of the mouth of friends and colleagues, with children and families, who despite being very well paid refuse to save and invest for their retirement, choosing instead to spend what they have today and only rely on social security for their retirement.

> Tbh, in the current system (which is bad!), they are the "smart ones".

I've had people tell me I'm a fool for saving for retirement, because when the time comes, the people who haven't saved will massively outnumber the people who have, and they will simply vote to fix it. Spend it now on BMWs and fancy vacations because "Our future government will not let 90% of their population starve on the street because they didn't save."

> 10 years go by, alice paid off 100k of the 200k loan, house is still worth 200k, bob has 100k of stocks and Charlie has 100k

If we're talking dollars, then it would be incredibly unwise to save them. The very fact that the fed targets some level of inflation at all makes this incredibly unwise.

Housing would never be worth just 200k 10 years later as long as population is increasing and the dollar inflating.

Stonks are stonks. They're fine, but they don't provide the (at least) two fold benefit of buying a house in American society.

1). You pay a high cost for housing either way--might as well have _some_ of it go toward principal.

2). A mortgage allows you to highly leverage an appreciating asset against a depreciating dollar.

The reliance on the state's pension scheme is also terrifying as the schemes tend to increase (if at all) under the inflation of true cost of living.

All that said, I have a mortgage and stonks and crypto (metals soon), but I'll never hold more dollars than I need for a month (I have credit cards if it really came to it.)

Edit: Why downvote? If you disagree, please say why.

The general point about cash losing money to inflation is spot on, but:

> Why downvote? If you disagree, please say why.

Sure, so

> Stonks are stonks. They're fine, but they don't provide the (at least) two fold benefit of buying a house in American society.

If you look at averages (across multiple areas, over many decades), you get:

* stonks yield somewhere around 6% above inflation (so 9-10% before inflation).

* houses yield somewhere around 1% above inflation, after including all the other random incentives plus taxes and upkeep costs, (not including multi family rental properties, which is a different matter)

There are localities in which houses do much better (say the bay area), and there are localities in which houses do much worse (Detroit).

But on average, it's a massive opportunity cost vs investing in equities. Which is fine, because there's other benefits to owning a house, like not having to move if someone jacks up your rent.

While we're at it, other reasons for downvotes may include:

> metals soon

These yield also ~1% above inflation

> I'll never hold more dollars than I need for a month (I have credit cards if it really came to it.)

In 2008, the banks slashed my credit to <10% of what it was in 2007. Don't rely on credit cards for emergencies.

Please hold more than 1 month in savings.

> * houses yield somewhere around 1% above inflation

But buying a house is the only way I can leverage such a massive amount and I have to have housing anyway. It also fixes my housing costs in contrast to renting.

Further, I can sell my house and take gains without paying taxes on the gains. I can't do that with stocks.

> Don't rely on credit cards for emergencies.

I'll also be able to sell metals/stonks/cryptos if need be, but overall I'm just not risk adverse. If I end up selling to get by and lose some, I see that as just making up for what I would have already lost by holding too much cash.

I should note that the 90% credit drop also coincided at a time when my investments crashed by 50%+, which would have been an extremely suboptimal time to pull out money. That would have wiped out like 10 years of growth.

I strongly, strongly encourage you to put aside at least 3 to 6 months' worth of expenses outside of risky investments.

To add on to your point, the core issue is that you need to take into account correlated risk when deciding on your investment strategy/risk tolerance.

If you're at the point where you need to dip into an emergency fund, it's possible (maybe even likely) that the entire financial market is burning. You will need access to capital when nobody has access to capital, which will make borrowing very expensive or impossible.

The US has unusually high incentives & subsidies for home ownership, so it is a pretty strong contender. More generally though, home ownership vs. renting is not always a clear win. Agree savings accounts are useless these days.

Because an example was given to illustrate a point and you are picking on it in a direction that has nothing to do with the discussion and the example. You took the spirit out of the example and made an analysis of the letters, colors and font - borderline trolling.

Sure, I was just saying to work the system as best you can and describing what I do in the US.

This is correct. Ever since the US allowed consumer banks and commercial banks to merge, savings rate is usually less than a point, if that.

Putting money in a savings account is actually losing value at the rate of inflation - interest. Inflation is usually around 2-3%, interest is a point or less. (last time I checked).

I think the downvote was the comment wasn't entirely relevant to what the OP was trying to demonstrate and might have gotten into the weeds a bit, but I don't know why people downvote. Who knows, it could have been a mis-click. Just say what you want to say, downvotes be damned.

And a typical 30yr mortgage rate is ~3% right now.

https://www.zillow.com/refinance/

> gotten into the weeds a bit

Fair

> downvotes be damned.

Good advice.