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Keynes was wrong | 57 comments (57 topical, editorial, 0 hidden)
Re: Keynes was wrong (none / 1)
What about insurance?

I'm not being flippant. New Zealand's current economic growth rate (4%) apparently owes a substantial amount to the reconstruction of the city of Christchurch, destroyed by earthquakes a couple of years ago, and which is largely funded by insurance money which is flooding in from overseas.

Surely the reconstruction efforts you mention should be covered by some sort of disaster insurance fund? And whether public or private, this would amount to the creation of money, wouldn't it?

It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II

by eurogreen on Sun Jun 1st, 2014 at 12:05:14 PM EST
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Re: Keynes was wrong (none / 1)
I presume Christchurch took out insurance before_ the earthquake?

My point is that the existence of a fiscal authority is the ultimate insurance policy.

So, what kinds of implicit guarantees are Eurozone governments providing that they shouldn't be in the business of providing? I can think of half a dozen off the top of my head:
  • deposit insurance for banks
  • granting limited liability to businesses
  • disaster relief
  • access to health care
  • access to education
  • access to legal redress
  • public safety
All of these are implicit guarantees that every citizen in Europe expects to enjoy relatively free of charge. These are large contingent liabilities of the state. Any and all of them could not be undertaken by a private entity that didn't charge hefty fees up front and wasn't adequately capitalised in case a particularly large claim presented itself. Would you pay a savings deposit insurance premium to an inadequately capitalised insurance company? (not that "sophisticated investors" didn't do exactly that when they bought CDS "protection" over the past 10 years) Would you incur risks with a full-liability entity having less capital than your potential loss? Would you trust you can be rescued from a disaster by an entity without the capital and operating income to actually fund a rescue operation? How about health insurance from an entity without the resources to pay for the treatment? How about your right to file a complaint to an entity without the necessary money to operate a grievance handling system? How about contracting physical security or firefighting services from an entity without the operating income to actually deploy security or firefighters?


A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Carrie (migeru at eurotrib dot com) on Sun Jun 1st, 2014 at 12:38:08 PM EST
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Keynes was wrong | 57 comments (57 topical, 0 editorial, 0 hidden)
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