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> 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

> 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". You have Alice, Bob and Charlie. They all earn the same amount of money. Alice decides to take a loan and buy a 200k house. Bob stays at home and invests in stocks. Charlie stays at home, and puts the money in a savings account. 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 in the savings account (let's forget about the interest for this example). They are technically all worth the same, just that their money is in a different form. And then one day, they all lose their jobs. Alice gets social benefits, one time extra monetary help, loan refinancing and/or even a loan freeze in some cases, Bob gets nothing and is told to sell the stock (even if it's a bad moment to sell), and Charlie gets laughed at the social benefits office, because he has 100k in his account. This might be our (slovenian) speciality, but the system is made to fuck with people who live responsibly and to always 'save' the people who spend all their money. Also houses are almost literally untouchable, even if you're a single person in a ~1mio city center apartment, and could move to a smaller one a bit further from the center for 150k.

kingsuper20 5y ago
> 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.
- saithound 5y ago
  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-nationalises-pension-funds/38105.article https://www.ipe.com/nightmare-in-hungary-as-government-natio...
- dantheman 5y ago
  The US tax system isn't regressive; I'm against legislating behavior through tax breaks, but calling them subsidies isn't really fair either.
  - dan-robertson 5y ago
    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.
    - missedthecue 5y ago
      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.
- ixacto 5y ago
  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.
bumby 5y ago
>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.
- Nursie 5y ago
  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.
  - bumby 5y ago
    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.
    - Nursie 5y ago
      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.
      - deleted 5y ago
        [deleted]
reedjosh 5y ago
> 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.
- Clubber 5y ago
  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.
  - reedjosh 5y ago
    And a typical 30yr mortgage rate is ~3% right now. https://www.zillow.com/refinance/ https://www.zillow.com/refinance/ > gotten into the weeds a bit Fair > downvotes be damned. Good advice.
- ska 5y ago
  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.
ryandrake 5y ago
> > 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."
Nursie 5y ago
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.
- greedo 5y ago
  Yup, both Bob and Charlie "stay at home." Who's home? How is it paid for?
  - nybble41 5y ago
    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.
    - Nursie 5y ago
      Again, not seeing why it shouldn’t.
      - nybble41 5y ago
        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.
- ajsnigrutin 5y ago
pc86 5y ago
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.

kingsuper20 5y ago

> 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.

saithound 5y ago
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-nationalises-pension-funds/38105.article https://www.ipe.com/nightmare-in-hungary-as-government-natio...
dantheman 5y ago
The US tax system isn't regressive; I'm against legislating behavior through tax breaks, but calling them subsidies isn't really fair either.
- dan-robertson 5y ago
  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.
  - missedthecue 5y ago
    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.
ixacto 5y ago
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.

bumby 5y ago

>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.

Nursie 5y ago
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.
- bumby 5y ago
  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.
  - Nursie 5y ago
    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.
    - deleted 5y ago
      [deleted]

reedjosh 5y ago

> 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.

Clubber 5y ago
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.
- reedjosh 5y ago
  And a typical 30yr mortgage rate is ~3% right now. https://www.zillow.com/refinance/ https://www.zillow.com/refinance/ > gotten into the weeds a bit Fair > downvotes be damned. Good advice.
ska 5y ago
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.

ryandrake 5y ago

> > 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."

Nursie 5y ago

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.

greedo 5y ago
Yup, both Bob and Charlie "stay at home." Who's home? How is it paid for?
- nybble41 5y ago
  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.
  - Nursie 5y ago
    Again, not seeing why it shouldn’t.
    - nybble41 5y ago
      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.
ajsnigrutin 5y ago

pc86 5y ago

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.