Someone Always Farts In A Crowd

Everybody was quietly watching the puppet show at the Asian Art Museum when I hear a “boooooooP!” What was that, I think to myself as a stench waffles in the air.  Someone must have farted!  I look around to see if I can identify the culprit.  Then I notice others looking around, with some staring right at me!

“Not me!” I silently voice with my lips as I point towards a kid rolling around on the floor in front of the stage.  “Probably the kid!” I mime again with each crease of my lips extending more exaggerated with every word.

Once the show was over I tap the kid on the shoulder and say, “Hey buddy, you got me in a lot of trouble with the adults.  The bathroom is over there!”

“Sorry sir, I was just farting.  Everybody likes to fart right?” replies the kid with a big, teethy smile.

“You’re right buddy, listen to this one!” KABOOM!  I let one rip right next to him.  We laugh and go on our separate ways.

THE MORAL HAZARD OF AMERICA

Someone always farts in a crowd, both men and women.  It’s sometimes hard to hold it in, and frankly even if you unleash the beast, nobody will know it’s you if you keep an oblivious face.  “Whoever smelt it delt it” was a favorite elementary school phrase because we’re able to lay blame on some poor classmate.  Furthermore, any weak retort never seemed to work!

HOUSING

When you know  the government will bail you out of your home, why not try and borrow as much money as possible and live the life you couldn’t otherwise?  If rough times occur, just hand back over the keys and let the bank deal with the fallen asset.  Meanwhile, you’ve enjoyed a lovely 5 years living large on someone else’s dime!

BANKS

The financial bailout of late has recently been punctuated by an even more ominous sign of moral hazard.  The government quietly allowed Citigroup to save billions of dollars in future taxes by changing the rules! The Washington Post’s article is somewhat confusing, but all you need to know is that Citigroup received another multi-billion bailout because the government is a shareholder and wants to claim investment success from its initial $45 billion investment.

CARS

A friend of mine is a genius at driving cars he can’t afford.  He leases them.  The other day, he picked up a new Audi A5 with no money down, and a payment of $968/month.  The duration of the lease is 60 months, and he figures after the second year, he’ll just tell the dealer he’s got no more money and hands over the keys.  What is the dealer going to do, repo his car?  Fine!  He has no equity in the car in the first place.  What about his credit?  Who cares, as the dealer gave him the lease with his mediocre credit rating in the first place.

GROUP PROJECTS

Facilitator, collaborator, slacker.  There’s always a slacker in a group project.  I remember being so tired after a long week that I fell asleep during a Friday night conference call.  We were strategizing about our final presentation!  Each member had their role.  I volunteered to hold the clip board and dozed off.

Do I feel bad for not carrying my weight?  A little bit, but not enough to stay awake.  In my heart, I knew that my team of go-getters would carry me towards a good grade because they felt it important to get straight A’s.  Getting a “B” was good enough for me, as there is a non grade disclosure policy.

HEALTH CARE

The National Health Statistics say that 34% of Americans are obese and 66% of all Americans are at least overweight. We Americans know there is universal health care reform coming, and “the rich” will be paying a disproportionate amount for this catch-all system.  If there are magical pills to pop and cheap doctors visits to extend the life of our hearts, why not keep eating to our heart’s content?

Can you imagine if America had NO health care system?  We’d probably be the fittest people on earth because everybody would work out like crazy knowing that there’s nothing to save them.

TEACHERS (New as of 8/11/10)

Congratulations to the 300,000 teachers out there who are going to receive a $26 billion bailout by the Obama administration!  It is wonderful that Congressional Democrats came up with an emergency bill this Wed, August 11th to help teachers keep their jobs.  Although some may argue that our system doesn’t reward performance, and needs some serious overhauling.  Teachers are the lifeblood of society!  We need more teachers, even if they aren’t very good, than less.

Furthermore, many of the teachers, firemen, and policemen were the loudest opponents of the financial services and automotive industry bailouts.  With them receiving bailout money themselves, maybe they’ll be more accepting of others who received and who will receive bailout money.

CONCLUSION

Confucius once said, “Wise man never play leap frog with unicorn.” In other words, he who knows the pitfalls makes informed decisions.  Americans are much smarter than the world gives us credit for.  We adeptly exploit inefficiencies to our own benefits, sometimes to the extreme.

Smart people somewhere in a boardroom are rubbing their hands together figuring out how far they can push and still get away with all the spoils.  The government will bail us out as they’ve demonstrated time and time again.  Just remember that when it’s crowded and you need to let one rip, go for it!  You can always blame someone else and walk away.  USA!

Readers, any additional types of moral hazard examples you can provide?

Have you ever participated in moral hazard?  If so, what was your thought process behind it?

Are we all in cahoots with each other and are we really just one corrupt nation?

Keigu,

Sam @ Financial Samurai – “Slicing Through Money’s Mysteries”

Folllow on Twitter @FinancialSamurai and subscribe to our RSS feed.

Sam started Financial Samurai in 2009 during the depths of the financial crisis as a way to make sense of chaos. After 13 years working on Wall Street, Sam decided to retire in 2012 to utilize everything he learned in business school to focus on online entrepreneurship.

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Comments

  1. Neal @ WealthPilgrim.com says

    FS,

    Let me be the first to “make a contribution” on this worthy subject.

    For years I walked around very angry about the decisions our elected officials made and make.

    Then I realized that WE elect them. Big Government robs us of our freedom only because we are oh so willing to hand over personal responsibility.

    Put up a candidate who tells the American people that we have to give up, tighten our belts, suffer, do without – in order to fix our problems. That guy or gal will get laughed at and forgotten.

    We get the Government we deserve. Until we take personal responsibility for ourselves, this sad state of affairs will keep stinking up the place.
    .-= Neal @ WealthPilgrim.com´s last blog ..Roth IRA Conversions Can Wreck Your Tax Credit for Homebuyers =-.

    • says

      Neal-san, we elected the politicians so you are right, it’s nobody else’s fault but our own!

      That said, so long as the politicians can raise taxes on others to help us, that’s all that matters! Go USA!

  2. 20smoney says

    Moral hazard is everywhere now. The root of it is the Federal Reserve. I recommend “End the Fed” by Ron Paul.
    .-= 20smoney´s last blog ..Selective Hearing… =-.

    • says

      I agree, but the root of it is really the people. The Fed enables the people’s behavior, but it does not determine what it is that they want. The Fed is more like the parent giving his kids endless candies, even though he knows it will eventually give them a very sick stomach.

      I still agree with ending the fed. Humans don’t change, but human behavior changes very strongly in response to incentives. Sam’s point above about everyone working out in the face of no health system was a good one!

  3. says

    I was just talking to my husband about this yesterday, how the government bailed out all of these financial institutions and, psychologically, what this says to the public. The government is basically sending the message that you can screw up, then be rewarded for it with lots of money! Now, obviously the bailout money has gone to companies to kick-start the economy, and is supposed to trickle down to the public in the form of jobs. However, I don’t see that happening any time soon. Which leads me to question how effective this bail out will be and who really benefits? The banks! I liked your analogy of shifting blame :), it’s to the point.
    .-= Little House´s last blog ..My Credit eBook is Available! =-.

  4. Geek says

    re: fat – Being fat doesn’t make you more likely to die for the most part… there’s a correlation between fat and lots of things, but correlation != causation.

  5. says

    Awesome post. Silent but deadly!
    Here’s my example.
    I had a friend who was a strident anti-war activist. Hated the military. When someone broke into the house, he dang near killed the hapless drunk. He said he and his family were threatened.
    I couldn’t help but see that when we’re threatened in the collective sense we can afford to sit on the sidelines and bemoan the horrors of war. But, individually, we behave totally different.

  6. says

    Basically, anytime responsibility is shifted from the individual to the collective, the results tend towards the lowest common denominator.

    In your backyard, you would put in a pool with exotic palm trees, a great surround sound system, flat panel TV, and a built-in BBQ grill. Instead, you get a barely maintained pool by the HOA, that’s only open 4 months a year, some teens are making out in the ‘adult’ pool, the foosball table is broken, and the main pool is closed down for 2 days because someone’s ‘lil tyke wasn’t wearing a waterproof diaper after snack time.

    What’s that – you’d rather buy a home entertainment system and have the “rich” pay for all our health care? Okay, just enjoy being wait-listed for medical procedures, and being treated by more & more nurse assistants and less & less doctors, because there aren’t enough of them to go around.

    At some point collectivism is a help to our society, and at some point it begins to foster stagnant thought and complacent lifestyles. The Samurai is right though; we’re no dummies – we gladly seem to take the bait!

    • says

      Collectivism is only good so far as it’s not forced and it doesn’t mean socializing the costs, privatizing the benefits ;)

      Those HOAs are pretty lame, by the way — don’t pay a debt and they give your house to a board member?

  7. says

    @Neal @ WealthPilgrim.com
    Hey Neal, welcome back from Maui you lucky dog! Thanks for your contribution. You’re right. We voted the politicians in, and that means no complaining!

    @Little House
    All smoke and mirrors. Take advantage, and blame someone else. That’s what so many homeowners who bought property they couldn’t afford are doing. They blame lenders, the gov’t, Wall St…. but they don’t blame themselves for making a poor purchase. Awesome!

  8. says

    I see a moral hazard daily at my place of employment. About 90% of the people here do 10% of the work while the other 10% of the people do 90% of the work. I’m surrounded by slackers who only care about the next overtime hour and almost never about the produce we produce. I’m in the 10% who give a crap, but there is nothing in it anymore for me. No more raises, no more promotions, no more perks. I guess the herd has it right-Do what is required to get by and nothing more. I just can’t do it though, are there classes that teach you how to be a slacker?? I thinking I should sign up :-)
    .-= Jeff´s last blog ..How to Calculate Net Worth =-.

  9. says

    Nice list and great lead in, Sam. You sure caught my attention!

    Housing: I listened to a story on “This American Life” about a guy who was given $500,000 for a mortgage and had no possible way of ever paying it back. He had been living in the house for something like three years without making a payment. Apparently there were so many foreclosures the banks couldn’t keep up. So let’s bail this guy out and all the other people who bought houses they couldn’t afford.

    Banks: Instead of saying “the Government is a shareholder” we need to get into the habit of saying “the taxpayers are shareholders”. I’m still a little freaked out we have politicians brokering multi-billion dollar deals, how about you? But let’s bail them out because they didn’t mean to lose all that money, right?

    Cars: Isn’t your friend’s luck due to run out? What does he drive after this car is gone? Maybe you can bail him out and loan him Moose.

    Group Projects: I hate group projects. I was always the guy who got stuck picking up the slack for the group and bailing everyone else out. I almost think it would be easier to do the whole project by yourself in some cases. Too bad the real world is full of group projects.

    Health Care: I agree with you, and I understand you were just using overweight people as an example indicative of an unhealthy nation. I have always worked jobs so I could have health care, took good care of myself, am at my ideal weight/BMI, exercise, take supplements, etc. I am most upset about the proposed health plan because I will end up helping to subsidize health care for people who have NOT lived a healthy lifestyle.

    I wish they would make the health care plan more focused on preventative measures and helping people with genetic defects who can’t buy coverage (people with MS, Parkinsons, genetic heart problems, etc.). They’re the ones who really need bailed out.

    As far as moral hazards, I’ve been known to blame the baby (since I don’t have a dog) ;-)
    .-= David @ MBA briefs´s last blog ..The definition of FAILURE =-.

  10. says

    Until you can win office on your actual stance on issues over the size of your war chest and the lies you are willing to tell about your opponent and how many major corporations you have in your pocket, this is the silly stuff we will deal with in government. Oh did I mention redistricting? Another winner.
    .-= Tracy´s last blog ..New Car or Used Car: Eco-Friendly Or Not? =-.

  11. says

    @Jeff
    Jeff, you need to go to Slacker School 101 man! Why let people benefit from your hard work? We live in slackerville times, at least for the next 7 years.

    @David @ MBA briefs
    Sorry for being the slacker during group project times if we ever get put together. You’re the type of guy I can count on to get things done, b/c you are Mr. Gung Ho! :) Just look at your comments. More often than not they are well written, structure, with HTML, and to the point! You must have been a military man at some point.

    Yeah, subsidizing people who don’t live a healthy lifestyle is tough, BUT so much of disease and health is heiditary. We often have no idea what will happen to us, so I’m actually happy more people who can’t afford coverage are getting covered. Ya never know!

    @Geek
    Donno why, but I keep reading that obesity is the #1 killer and the cause of hundreds of billions of dollars in unnecessary health car expenses. Maybe the scientists are wrong. All smoke and mirrors.

    @Tracy
    Redistricting is amazing!! Have you seen some of the lines on the map? Hilarious!

  12. says

    example of a moral hazard:

    A guy I knew in college was graduating and at the end of his last semester went on a huge shopping spree buying all kinds of lavish gifts for his family on credit. He was an international student who was going back home – so he had no intention of paying his credit card balance, and joked about how he was going to “screw the system”. As far as I know, he never had any repurcussions.
    .-= thriftygal´s last blog ..Fickle Alliances =-.

  13. says

    @admin This was a great idea for an article, and funny lead in. I’ve been silently fuming about a lot of the stuff you touched on, bank bail outs, mortgage bail outs, Cash for Clunkers, and now health care bail outs. This is the bailing-est administration we could ever wish for.

    Thanks for the compliment, and I hope I’m pulling my weight with the fund (even though ABM isn’t).
    .-= David @ MBA briefs´s last blog ..The definition of FAILURE =-.

  14. Geek says

    @admin, @genius

    The scientists aren’t wrong, the media’s reporting is wrong. If fat people just died really young, then health care for them would be pretty cheap, all things considered, and we would encourage people to get fat so there would be more resources for the rest of us when they died off. Exercise and nutrition I’m on your side, but fat has very little do with it. Most dieters gain back the weight. quick post on a blog i read on this: http://junkfoodscience.blogspot.com/2009/04/does-it-really-matter-how-your-numbers.html
    I suppose fat people could be more expensive when they’re old, since fat will help you live through chemo/radiation therapy as you lose massive amounts of weight. In which case, yes, fat people are more expensive for the system.

    It’s offensive to use fat people as health-care-system scapegoats – most people can’t help it if they’re fat (a vast majority of diets and diet+exercise programs don’t work). Use smokers instead, or people who don’t get yearly checkups and thus let problems go until they’re much more expensive to fix.

  15. says

    @Geek It’s actually offensive that you use the word “fat.” I didn’t read anything in the article that uses the word “fat”, only you.

    Are you overweight Geek, hence your super defensiveness? If so, don’t worry. Nobody knows who you are anyway. Don’t think the articles uses obese people as scategoats at all.

    You’re right, “fat people can’t help they are fat” and it’s all someone elses fault. lol.

  16. Geek says

    Snark aside, why is it so hard to choose a group of people who are _provably_ likely to be a burden on the system? The main point of the post seems tragedy-of-the-commons-esque. What about smokers and heavy drinkers, or people who don’t exercise?

    I’m not “overweight” by government measurement but have had some serious eating problems in the past due to self-image issues. Thank you for asking.

  17. says

    @Geek
    If you read the bottom of the post, FS asks “Readers, any additional types of moral hazard examples you can provide?” You bring up smokers, drinkers, fair enough.

    You really do seem overly defensive. The word “fat” is offensive and not the correct term if we are going that route. Obese people is just an example.

    You’re absoultey wrong that “fat people can’t help they are fat.” Fat people are fat because they want to be fat. And if they don’t want to be fat, they won’t be. Just look at the show The Biggest Loser.

  18. Geek says

    My apologies for using the word fat as an adjective to describe people who have BMIs above 25. People who have had problems with self image and eating may seem a little defensive about sizeism to those who haven’t. So I derailed the thread. FS was the one to validly attack my main point, addressed below.

    My relevant point was – the original post is incorrect in one of the moral hazards because overweight/obese people don’t get sick and die earlier or more than people with a bmi between 20-25. I know this is very hard to believe (@FS) -

    Studies that disagree with our “common knowledge” don’t get any publicity. It’s a better story for the media if thinner people (society currently thinks they’re better-looking) are healthy and people who weigh more (society thinks are ugly) are unhealthy and going to die.

    I would love if everyone did some weight-study research but realize this isn’t going to happen. Instead, my plea is to please use things other than being overweight/obese as negative health examples in posts.

  19. says

    FS – you never fail to amaze!

    When you think about life, were is there not someone passing the buck(bill) to someone else for payment? When people bail on their credit cards the rest of us make up the slack. When someone steals candy from the gas station we have to make up the slack. When one person get a discount someone else has to pay extra to meet profit targets. When Obama stimulates via infrastructure spending who’s paying for the 4 guys that are watching one dig?

    Crap, FS, this is depressing. Is anyone not passing the buck?

    Oh yeah, the 40 or 50 PF bloggers that follow FS! Because we don’t believe there will be S.S., we don’t believe our companies will follow through with a pension, we don’t believe there will be a sustainable health care system when we get to our golden years. So we are not sleeping on our conference call of retirement planning. We are working our personally responsible arses off to make sure we can take care of ourselves.
    .-= LeanLifeCoach´s last blog ..If You Lived 130 Years? =-.

  20. Charlie says

    I totally agree with your comment in healthcare. I’ve heard too many stories of people gorging themselves just so they would qualify for that stomach stapling surgery. Gross. More Americans need to start taking their health more seriously. It’s good that a lot of fast food joints are offering healthier options like salads, fresh fruit, and juice, but there are too many weak willed souls who still order the hamburger and extra large coke instead. Why can’t more people realize soda is diabetes in a bottle?

  21. says

    A social study class once convinces their professor that socialism is the way to go. He is a good teacher, so he proposes an experiment to prove/disprove it. The concept is everybody will get the same grade for the future tests. The grade is the class’ average grade.

    On the first test, everybody gets “B”. The students who don’t study before the test are excited. On the other hand, the students who work hard for the test resent it. So they decided not to study as hard next time since they will not get the best grade anyway.
    The result for the second test is “C”. And as you can imagine it grows worse; until the end of the semester, the professor has to FAIL everybody in the class.

    Anyway, the reality may not be this harsh (although I think it’s a true story I read in a psychology book). Just a thought.
    .-= Bytta @151 Days Off´s last blog ..Day 11: Designing Your Life with Savings Snowball =-.

  22. says

    @David @ MBA briefs
    Don’t feel too stressed man. Don’t uncover the truth like the state of Nebraska being exempt from paying their part in the health care bill b/c Obama needed their vote. It’s all mute now.

    @Bytta @151 Days Off
    That sounds like a fantastic study! So true! It’s just a downward spiral in the end that breads laziness and malaise. But, maybe in the US, we need to be socialists for the next 3 years at least? I was sure Obama would get a second term, but if the employment figures don’t improve in 2 years, Obama could be done for as he’s ostracized the wealthy already.

    @Charlie
    Wuh? I have never heard of people gorging themselves to get the stomach surgery. Is that true? If so, that’s NUTS! Diabetes in a bottle, never heard of that saying. I stay away of soda b/c of the sugar.

    @Geek
    Sorry you are offended. Not meant to offend. Maybe you’re right, that everybody is lying (doctors, media, scientists, statisticians etc) and obese people really are just the way they are. But, my own expirment in my post “Losing Your Way To More Money” defies that logic for me personally.

    http://www.financialsamurai.com/2009/07/25/losing-your-way-to-more-money/

    @LeanLifeCoach
    Hey mate, don’t be depressed! Social Security will be here in 30-40 years! Maybe only 70% payout, but not bad! Hope there are more than 50 PF bloggers who stop by who do the right thing (looking at my log)!

    I’m tempted everyday to just chill, and work the system under our new gov’t. Why fight it? We should join em.

  23. Geek says

    @FS – Not lying, just being selective about which information to display more prominently based on common belief. I don’t think there’s a conspiracy, I think that people are ignoring a lot of information because its easy.

  24. says

    Very true. For years I sat out the housing market because it was so obviously over-valued, and everyone else piled in. By the time it blew up it had become so pivotal to the economic health of the nation that 0% interest rates were implemented to stop the price crashing.

    So everyone farted eventually, to use your metaphor, but only a few of us suffered the blow back!

    Love the Unicorn quote! ;)
    .-= Monevator´s last blog ..How to make money developing iPad apps =-.

  25. says

    The financial bail out, that happened globally is in my opinion a good thing up to some level. Without the bail the credit crisis would have hit us much harder!
    .-= Wannabe´s last blog ..2nd day =-.

  26. Kosmo @ The Casual Observer says

    The ultimate moral hazard is being the beneficiary of someone’s life insurance. At a certain price point, it’s awfully tempting to whack them to expedite the release of funds.

    I’m, um, kidding. Yeah, that’s it.
    .-= Kosmo @ The Casual Observer´s last blog ..Kosmo’s Favorite Sports Moments =-.

  27. Mike Hunt says

    I’ve got one more for you:

    Slight cheating on paying taxes. For the average W2′er this is not easy but for small business owners you can decide not to declare cash income and exaggerate your deductions slightly. Do it a bit and you won’t get caught- go overboard and you may risk an audit you cannot defend.

    Anytime you have a system of voluntary declarations there is bound to be some leakage- just like there is one in every crowd!

    -Mike

    • says

      Must happen all the time! Ahhhh, to be a small business owner. That could be a dream come true, except for all the new taxes you’ll have to pay in 2011!

  28. says

    Good post, Sam… and I agree with most everything you said. :-)

    However, please explain the logic behind this comment:

    “We need more teachers, even if they aren’t very good, than less.”

    Why the lack of standards? Why settle for mediocrity, or worse?

    If you owned a business, I bet you wouldn’t accept hiring substandard employees simply because you needed more employees. I know I wouldn’t.

    I know certainly don’t want a lousy teacher educating my children. (Actually, I have had a couple lousy teachers teach my kids, and I would have rather had the school district tell me to keep my kids at home because they had a lack of qualified candidates.) :-)

    I cringe every time I hear a Congressman, or American citizen say, “The bill that was passed today has some flaws, but it was the best that could be done.”

    No. If the bill had obvious flaws, it shouldn’t have been passed!

    My $0.02 (after taxes)

    Len
    Len Penzo dot Com

    • says

      Because an adult figure guiding a child is better than no attention, and no adult figure at all!

      Furthermore, we are using government money to pay for teachers, so you can’t exactly expect to have the best when it comes to government funds due to all the waste. That said, $80,000 for each of the 300,000 teachers seems pretty good, but only for 1 or 2 years.

      If you could only pass perfect bills, then NO BILL will ever be passed.

  29. says

    Sam, your post is frightening, I have to be honest. That we are all in cahoots and looking to find the next corner to get the most out we can. But it rings true with me. You can borrow oodles of money and just declare bankruptcy with a stiff credit hit, and someone else takes care of the bill. This part trouble’s me. That you can simply hand over your debts to someone else (a bank) and just get a slap on the wrist.

    I think if society is to really progress, there needs to be a shift in global thinking from how can I milk the system to how can I improve everything as a whole. But that’s easy to say when you are doing ok financially as I am. I’m sure there are many perspectives I have not taken into account…

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