Moral hazard is the way of life. We don’t like the government, but just look at the government spend trillions in stimulus to bail out America during the 2020 coronavirus pandemic?

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!

Please everyone, follow the 30/30/3 rule for home buying so we never get into another financial mess.

Here is also my House Expense Guideline For Financial Freedom post for those who want to retire earlier.

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.

Thankfully, the mortgage industry is now very tight in 2020+. The banks have learned their lesson from the 2008-2009 crisis!

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.

Related: The 1/10th Rule For Car Buying Everyone Should Follow

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.

Related: How To Get HealthCare Subsidies As A Millionaire

TEACHERS 

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.

Now that I review this post in 2020, I think teachers need to get paid more and support more by the government. Asking them to teach in person during a coronavirus pandemic is not fair. There needs to be hazard pay!

Moral Hazard Is Everyone

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!

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Updated for 2020 and beyond. Moral hazard is everywhere.