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I forget who Steven Keen is quoting in this manner but he points out an early opponent of the gold standard said "In the real world, banks loan money, create de

I forget who Steven Keen is quoting in this manner but he points out an early opponent of the gold standard said "In the real world, banks loan money, create deposits in the process, and look for the reserves later." As for your solution, suppose my kid has to go to the ER. I go to the bank to withdraw funds early because of unforeseen circumstances. Does the bank have to give them to me?

pdonis 14y ago
> suppose my kid has to go to the ER. I go to the bank to withdraw funds early because of unforeseen circumstances. Does the bank have to give them to me? This sort of situation is what insurance is for.
- einhverfr 14y ago
  So insurance pays for 100% of the cost? Where do I find such insurance? Or suppose I need chemo and insurance will only cover 80% of the $100k cost? Do I have to keep $20k under my pillow?
  - pdonis 14y ago
    > So insurance pays for 100% of the cost? Where do I find such insurance? Remember we're talking about a very different world from the one we actually live in, a world where banks aren't allowed to lend at longer terms than they borrow. In such a world health insurance would presumably also be very different from what we're used to, since it would only be expected to insure against things that should be insurable, i.e., unforeseen circumstances. What we now call "health insurance" is something like auto insurance that would also be expected to pay for oil changes, replacing tires, checking your air cleaner and wiper blades, etc., etc. If we had health insurance that worked more like the way our actual auto insurance works, we would cleanly separate predictable health expenses from unpredictable ones, and only expect insurance for the latter. That would change things a lot. > Or suppose I need chemo and insurance will only cover 80% of the $100k cost? The big question here is, why do you need chemo? We're probably getting off topic, but I can see at least three distinct possibilities: (1) You need chemo because of something accidental and unforeseen that gave you cancer--say you were in an airplane that got irradiated with a burst of cosmic rays. This would be insurable, and these sorts of conditions are rare enough that I would expect an insurance company to pay the claim, with a reasonable deductible (you would trade off the deductible against the premiums, just as you do now with auto insurance--again, this is all in the light of the general comments I made above). (2) You need chemo because someone else's deliberate act or negligence caused your cancer--say your city water was contaminated by a factory's effluent. In this case the party responsible should be paying for your chemo, just as if someone else hits your car they are responsible for paying to get it fixed. (3) You need chemo because you didn't take care of yourself very well, didn't get regular checkups, and got a form of cancer that could have been diagnosed and prevented but wasn't. In this case your insurance company would still be obligated to pay, but your premiums would probably have been quite a bit higher, just as people with bad driving records have to pay more for auto insurance. Of course I understand that this kind of analysis is a lot more unpalatable when applied to health insurance vs. auto insurance. Our bodies are much more important to us than our cars. But that doesn't change the economics involved.
    - einhverfr 14y ago
      I suppose building a different world is one way to solve the problems of the present. Maybe by version 7 or 8 we will get something liveable.....
    - philwelch 14y ago
      > Remember we're talking about a very different world from the one we actually live in, a world where banks aren't allowed to lend at longer terms than they borrow. In such a world health insurance would presumably also be very different.... So that's your solution, throw away the world and start over again? This kind of thinking gets very unappealing when you realize that for all its flaws, the world seems to work fairly well as it is--and that empirically-based, stepwise improvement on the status quo is a safer and more reliable way to go than hoping some ideology is going to work better.
      - pdonis 14y ago
        It's not my "solution", it's my description of what a hypothetical world might be like in which we didn't expect the difficulties of things like finance and health care to be hidden from us by schemes like banks borrowing short and lending long, and governments hiding from us the real costs of the health care we receive. I agree completely that the actual world we live in is nowhere near that hypothetical world, and that we aren't going to get to that hypothetical world in one giant transition. However, I would also observe that what we are doing now is not a "stepwise improvement" towards that hypothetical world or anything like it. Instead we move in the other direction--more of the real costs of financial tricks and health care are hidden from us.
        philwelch 14y ago
        I said empirically based stepwise improvement, not stepwise transition towards some ideologically driven fantasy world.
        pdonis 14y ago
        Then how do you define "improvement"?
- philwelch 14y ago
  It would make more sense to have insurance against the less likely risk, like a bank run.
  - pdonis 14y ago
    What you're calling "insurance" against a bank run is a central bank printing money. For examples of how well that works out in practice, see the Great Depression and the economy right now.
    - philwelch 14y ago
      A fair appraisal of fiat money would be the entire history of economic development since the 20th century, and on that standard it looks quite different. The world is far richer today than it was when the gold standard was abandoned.
      - pdonis 14y ago
        > The world is far richer today Agreed, but the relevant comparison is the way the world is now, compared to the way it would have been if the gold standard had not been abandoned. Unfortunately there is no way to re-run the experiment to see. However, there is at least one interesting indication: the worst depression in history, the Great Depression, happened after we went off the gold standard and after we established the Fed to supposedly control the money supply so boom and bust cycles would be controlled.
        philwelch 14y ago
        The Fed's major mistake in the Depression was not printing enough money--the money supply contracted and started a deflationary spiral. Solution: go ahead and print more money when a big recession hits. Which is exactly the solution you people criticize.
        pdonis 14y ago
        The money supply has gone up considerably since 2008, hasn't it? Shouldn't that have led to an actual recovery, instead of the stagnant economy we've actually observed?

pdonis 14y ago

> suppose my kid has to go to the ER. I go to the bank to withdraw funds early because of unforeseen circumstances. Does the bank have to give them to me? This sort of situation is what insurance is for.

einhverfr 14y ago
So insurance pays for 100% of the cost? Where do I find such insurance? Or suppose I need chemo and insurance will only cover 80% of the $100k cost? Do I have to keep $20k under my pillow?
- pdonis 14y ago
  > So insurance pays for 100% of the cost? Where do I find such insurance? Remember we're talking about a very different world from the one we actually live in, a world where banks aren't allowed to lend at longer terms than they borrow. In such a world health insurance would presumably also be very different from what we're used to, since it would only be expected to insure against things that should be insurable, i.e., unforeseen circumstances. What we now call "health insurance" is something like auto insurance that would also be expected to pay for oil changes, replacing tires, checking your air cleaner and wiper blades, etc., etc. If we had health insurance that worked more like the way our actual auto insurance works, we would cleanly separate predictable health expenses from unpredictable ones, and only expect insurance for the latter. That would change things a lot. > Or suppose I need chemo and insurance will only cover 80% of the $100k cost? The big question here is, why do you need chemo? We're probably getting off topic, but I can see at least three distinct possibilities: (1) You need chemo because of something accidental and unforeseen that gave you cancer--say you were in an airplane that got irradiated with a burst of cosmic rays. This would be insurable, and these sorts of conditions are rare enough that I would expect an insurance company to pay the claim, with a reasonable deductible (you would trade off the deductible against the premiums, just as you do now with auto insurance--again, this is all in the light of the general comments I made above). (2) You need chemo because someone else's deliberate act or negligence caused your cancer--say your city water was contaminated by a factory's effluent. In this case the party responsible should be paying for your chemo, just as if someone else hits your car they are responsible for paying to get it fixed. (3) You need chemo because you didn't take care of yourself very well, didn't get regular checkups, and got a form of cancer that could have been diagnosed and prevented but wasn't. In this case your insurance company would still be obligated to pay, but your premiums would probably have been quite a bit higher, just as people with bad driving records have to pay more for auto insurance. Of course I understand that this kind of analysis is a lot more unpalatable when applied to health insurance vs. auto insurance. Our bodies are much more important to us than our cars. But that doesn't change the economics involved.
  - einhverfr 14y ago
    I suppose building a different world is one way to solve the problems of the present. Maybe by version 7 or 8 we will get something liveable.....
  - philwelch 14y ago
    > Remember we're talking about a very different world from the one we actually live in, a world where banks aren't allowed to lend at longer terms than they borrow. In such a world health insurance would presumably also be very different.... So that's your solution, throw away the world and start over again? This kind of thinking gets very unappealing when you realize that for all its flaws, the world seems to work fairly well as it is--and that empirically-based, stepwise improvement on the status quo is a safer and more reliable way to go than hoping some ideology is going to work better.
    - pdonis 14y ago
      It's not my "solution", it's my description of what a hypothetical world might be like in which we didn't expect the difficulties of things like finance and health care to be hidden from us by schemes like banks borrowing short and lending long, and governments hiding from us the real costs of the health care we receive. I agree completely that the actual world we live in is nowhere near that hypothetical world, and that we aren't going to get to that hypothetical world in one giant transition. However, I would also observe that what we are doing now is not a "stepwise improvement" towards that hypothetical world or anything like it. Instead we move in the other direction--more of the real costs of financial tricks and health care are hidden from us.
      - philwelch 14y ago
        I said empirically based stepwise improvement, not stepwise transition towards some ideologically driven fantasy world.
        pdonis 14y ago
        Then how do you define "improvement"?
philwelch 14y ago
It would make more sense to have insurance against the less likely risk, like a bank run.
- pdonis 14y ago
  What you're calling "insurance" against a bank run is a central bank printing money. For examples of how well that works out in practice, see the Great Depression and the economy right now.
  - philwelch 14y ago
    A fair appraisal of fiat money would be the entire history of economic development since the 20th century, and on that standard it looks quite different. The world is far richer today than it was when the gold standard was abandoned.
    - pdonis 14y ago
      > The world is far richer today Agreed, but the relevant comparison is the way the world is now, compared to the way it would have been if the gold standard had not been abandoned. Unfortunately there is no way to re-run the experiment to see. However, there is at least one interesting indication: the worst depression in history, the Great Depression, happened after we went off the gold standard and after we established the Fed to supposedly control the money supply so boom and bust cycles would be controlled.
      - philwelch 14y ago
        The Fed's major mistake in the Depression was not printing enough money--the money supply contracted and started a deflationary spiral. Solution: go ahead and print more money when a big recession hits. Which is exactly the solution you people criticize.
        pdonis 14y ago
        The money supply has gone up considerably since 2008, hasn't it? Shouldn't that have led to an actual recovery, instead of the stagnant economy we've actually observed?