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That's not really true. Companies regulated under Solvency II will require sufficient capital to survive a 1 in 200 years worst case event. Sort of (but not rea

That's not really true. Companies regulated under Solvency II will require sufficient capital to survive a 1 in 200 years worst case event. Sort of (but not really), 1 in 200 companies will face death-knell liquidity crisis every year. The question is, what do we do then? Do we let a company that took 50 years to build up fail? It is so easy to destroy something, and such a pain in the ass to build it. Maybe the idea instead is to make it such that we only have to bail out a portion of the 1 in 200 companies that fail each year? The portion that should be considered a going concern. What about General Motors? That is an incredible wealth-generating asset. A blip in the cash-flow statement could have made that into 1-2% of its productive capability, but the US didn't let that go down.

icelancer 13y ago
>What about General Motors? That is an incredible wealth-generating asset. A blip in the cash-flow statement could have made that into 1-2% of its productive capability, but the US didn't let that go down. You make it sound like GM had no control over it. And that additionally, when a company goes bankrupt, all the wealth just disappears into thin air. Neither is true.
- hessenwolf 13y ago
  It does not disappear into thin air, in the same way the rubber from a burst balloon can still be used to tie your hair back (but not as severe, and the recovery rate might be as high as 60%, but I would suspect very, very much lower in the case of a fire-sale of GM's assets)
marcosdumay 13y ago
> The question is, what do we do then? Do we let a company that took 50 years to build up fail? It is so easy to destroy something, and such a pain in the ass to build it. What's the alternative? Tax people and give their money to the aristocracy (because you just created one)?
- hessenwolf 13y ago
  I have no idea what you are talking about. I am certainly not aristocracy. The US government stepped in with temporary funding to stop GM going under. I stepped in later to replace that funding by buying some high risk equity (about enough to buy a used car-tyre). So did lots of other people. Luckily, I made a return for this investment (others, not so much).

icelancer 13y ago

>What about General Motors? That is an incredible wealth-generating asset. A blip in the cash-flow statement could have made that into 1-2% of its productive capability, but the US didn't let that go down. You make it sound like GM had no control over it. And that additionally, when a company goes bankrupt, all the wealth just disappears into thin air. Neither is true.

hessenwolf 13y ago
It does not disappear into thin air, in the same way the rubber from a burst balloon can still be used to tie your hair back (but not as severe, and the recovery rate might be as high as 60%, but I would suspect very, very much lower in the case of a fire-sale of GM's assets)

marcosdumay 13y ago

> The question is, what do we do then? Do we let a company that took 50 years to build up fail? It is so easy to destroy something, and such a pain in the ass to build it. What's the alternative? Tax people and give their money to the aristocracy (because you just created one)?

hessenwolf 13y ago
I have no idea what you are talking about. I am certainly not aristocracy. The US government stepped in with temporary funding to stop GM going under. I stepped in later to replace that funding by buying some high risk equity (about enough to buy a used car-tyre). So did lots of other people. Luckily, I made a return for this investment (others, not so much).