"But even with the backing of the Fed, fractional reserve banking proved shaky, and so the New Deal, in 1933, added the lie of “bank deposit insurance,” using the benign word “insurance” to mask an arrant hoax. When the savings and loan system went down the tubes in the late 1980s, the “deposit insurance” of the federal FSLIC [Federal Savings and Loan Insurance Corporation] was unmasked as sheer fraud. The “insurance” was simply the smoke-and-mirrors term for the unbacked name of the federal government. The poor taxpayers finally bailed out the S&Ls, but now we are left with the formerly sainted FDIC [Federal Deposit Insurance Corporation], for commercial banks, which is now increasingly seen to be shaky, since the FDIC itself has less than one percent of the huge number of deposits it “insures.”
The very idea of “deposit insurance” is a swindle; how does one insure an institution (fractional reserve banking) that is inherently insolvent, and which will fall apart whenever the public finally understands the swindle? Suppose that, tomorrow, the American public suddenly became aware of the banking swindle, and went to the banks tomorrow morning, and, in unison, demanded cash. What would happen? The banks would be instantly insolvent, since they could only muster 10 percent of the cash they owe their befuddled customers. Neither would the enormous tax increase needed to bail everyone out be at all palatable. No: the only thing the Fed could do, and this would be in their power, would be to print enough money to pay off all the bank depositors. Unfortunately, in the present state of the banking system, the result would be an immediate plunge into the horrors of hyperinflation."
In that case I fail to see why you mentioned that you needed cash and that you obtained it by selling some investments - we were not talking about you personally - and the fact that your finances are well managed doesn’t mean that banks or insurance companies can’t go broke, especially when mismanaged…
So, my counterexample is valid.
Aren’t we discussing insurance companies and banks that can’t pay because they made ‘promises’ that they can’t keep ? There’s nothing bizarre about that. What is bizarre is taking for granted that they always have enough ‘assets’ to pay all the claims…when what we are discussing is the very real possibility that they don’t.
Actuarial science is similar to calculating “odds.” Via Princeton, “money that is risked for possible monetary gain” it gambling." insurance is definitely a form of gambling. Yes, there are differences in method, I never denied that, I asked how the differences actually answer the question I proposed which I still haven’t got. I’m not going to turn this into a debate about what is and isn’t gambling.
Why the difference matters in a question about all possible outcomes is…?
So, every business venture is a form of fraud! (And I never said you implied it.) The last two sentences are unrelated to the question.
Anyone can go broke. An entrepreneur can borrow money to open a restaurant, on the unguaranteed guess that people will pay more for his food than he paid for the ingredients, and can be wrong, hence incurring a liability. This is not a unique feature of banks and insurance companies, but certainly you are not going to call all entrepreneurship fraud on the basis that an entrepreneur can end up owing more than he has? My point in saying that I sell investments when I need money is that the capital to pay off the obligations need not be held in cash. There is no reason to require that the insurance company hold, in cash, enough to pay off an unlikely scenario. If the unlikely scenario occurs, they will have to sell off assets to pay what they owe. Why do you think this is a problem?
No, we’re discussing your claim that this is a position that insurance and banks will be guaranteed to be in. It is not guaranteed, and if you want to make language accomodate the claim that it is, then you’ll have to say that all business is fraud.
No, not every business. FRB is not every business. These sort of argument put forward by you extremely hurt your case. You sound like some radical socialist denying anything in your way of realizing your goal.
Why don’t you find out what the difference is: Case probability vs. Class probability.
The fact remains: it is possible to insure against fire, unexpected sickness or death, etc.. but not against a bad outcome of a business venture.
Mises’ Human Action has an entire chapter on this.
See my comment to Angurse. Look up Class probability vs. Case probability. You are making baseless assertions in things that you don’t understand well and it is extremely hurting your case for free banking.
As was repeatedly pointed out, insurance and FRB are different operations. And at any rate, it’s possible for insurance companies to make promises they know they couldn’t keep, which is fraud. However a well managed insurance company is not making any deceptive claims. All they are doing is pooling ‘insurable’ risk.
I still don’t understand why comparing insurance and FRB is a way to make the case for FRB. If anything it highlights the flaws in the FRB model.
But insurance is a product of the free market. It’s just that government has destroyed much of it by turning it into welfare. Obviously, in a true free market, many things “insured” today would not be.
Saving is no substitute for it cannot provide any risk reduction in the near term.
Of course FRB isn’t every business, thats the point of the comparison!
If business X can reach outcome Z - It is fraud.
If business A can reach outcome Z - Why isn’t it also considered fraud?
The possible outcome is what matter, business X using procedure Y, whereas business A using procedure B, doesn’t change the fact that Z=Z.
I know what the differences are and they are completely irrelevant to a discussion about all possibilities. The fact that its possible doesn’t refute the claims of fraud as presented. Please stick to the question.
I think that the need for it would reduce i.e cover for smaller items, i.e ipods, bikes etc. But with houses and other considerable investments, i.e property I think it would remain.
Having worked in the Insurance Industry… highly unlikely. 100+ year events are factored into consideration. The level / amount of payouts due to the Insurance companies customers, should the ‘unthinkable’ disaster happen are monitored and evaluated, for the precise reason - that most businesses don’t want to go bankrupt, but remain in business and profitable.
There is however, Re-Insurers within the Industry. For eg: Swiss Re, Munich Re etc.
The purpose of reinsurance is to reduce or transfer some of the risk carried by the Insurers, for the precise scenarios you stipulate - cyclones, earthquakes, major bushfires.
Many re-insurers can buy in %'s of the deal, as to how much they will insure should there be a successful claim.
If the above question is your real concern, the market has already given an answer.
Operations are irrelevant to the objection proposed. Its fraud because of a possible outcome. You have at least been consistent in labeling insurance fraud as well.
The “FRB-Insurance model” that is. [;)]
I’m not trying to make a case for FRB at all, I’m just trying to understand this particular objection that has been raised and the logical implications that follow.