Welcome to socialist states of America
They are getting the loan at LIBOR + 8.5%. That's downright punitive.
LIBOR + 8.5% is not a rate at which a company with AIG's business model could survive at. AIG lends to people at around LIBOR + 4% for mortgages or LIBOR + a lower % to insure BBB to AA rated borrowers.
They'll probably have to sell off their assets in a hurry at below fair value. The longer they wait, the more pain the high interest inflict on them.
Amazing.
Now for the first one, there is a clear and self-interested argument for public health measures that even the most laissez faire libertarian could get behind. Namely, that the prevalence of flu amongst the lower classes means that you and your precious sprogeny are more likely to die of it.
For the other two we have to rely on those outmoded and declassé ideals about compassion and bettering the human condition, and the tediously earnest argument that the less suffering there is in a society, the better off everyone in that society is...
But, really who cares; I mean you've got yours, or you are on the way to getting yours and the rest of the human race is of no concern to you other than as service providers or as customers right?
With such large confounding factors, how can you draw the conclusion you seem to be implying?
Do you know how many people are not insured and cannot afford insurance? ("Go to the emergency room" is not a health plan.)
Do you know how many people with serious illnesses are turned down by their own insurance companies every year?
I'm not saying socialism is an automatic answer, but it'd better than this mess.
When you say "socialism" what exactly do you mean? I think it is one of those words that has lost its meaning since there are so many different definitions of it and we're not always on the same page.
edit: :( what did i do?!
If you're upset about being downmodded, I'd suggest
1) Carefully re-read your comment, looking for ambiguities or excessive partisanship.
2) Look for patterns in the rest of the comments--I'd expect downmods on a "government actually handles [common scenario] pretty well" post in a thread full of mises.org and lew rockwell references; and just resolve to live with it.
3) Just wait. Sometimes there's two or three quick, reflexive downmods that can dent your self-esteem, but often your comment's opinion-o-meter will rise hours later, and leave you feeling rather silly if you added another comment just to complain about downmods.
Having health insurance provided by the State (i.e. you through your tax dollars after several layers of corruption and bureaucratic waste) does not guarantee quality of care. A competitive free market is more likely to develop better medicine.
The American freemarket system clearly doesn't work very well.
The graphs alone should open the eyes of any who defends the current US system.
Of course Cuba and the US are both outliers. But realistically the US should be able to get results that are much closer to other first world countries.
I think that your comment splendidly proves my point.
I'm curios though, how do you guarantee people who are sick/hurt/dying behave as rational actors?
I might be mis-remembering but i thought rational actors were a requirement, otherwise they would be to quick to give away money.
I think those who want socialized medicine have to justify aggression (initiating force through taxation, regulation, etc.) They also have to convince us that the masses (in the case of a democracy) can make better decisions than the individuals directly involved in each particular situation. They have to explain how people would be motivated to innovate in a system lacking competition and guaranteeing equality of outcome (this, is what I'm assuming is meant by "socialism", by the way).
I think these questions are of interest to us and the "hackers" of other disciplines... we want an environment where people are free to try new things. Mitigating the risk of failure should can also be managed by the market through insurance, which, getting back to the original point is privilege not a right because one has no "right" to the goods/services of another.
So, sure, it would be a great idea for everyone to contribute to a large pool for health insurance... but on a voluntary basis. Those who decline to or cannot pay will have to rely on charity if something happens. I can feel bad for them but I would not feel justified in putting my gun (or a tax collector's) to someone else's head to make them pay for it.
This is all assuming that both insurance and healthcare costs will both decrease dramatically when America rids itself of the heavy regulation of and handouts to the respective industries by going to either a completely socialist or capitalist system.
But at the same time, I think that people should HAVE to put into the pot, or you end up with a Tragedy of the Commons. No-one pays, because they don't like to think they'll get sick.
And then when they do, well, it's too late.
(I should note that I am biased towards socialized medicine, being an aforementioned sick person)
rational = utility maximising utility defined by consumer choice
Basically, they pay anything because it's worth anything.
It's an easy topology exercise to prove that if preferences are transitive, then a utility function exists (I think you may also need to assume a countable number of goods/services).
Well, yes & no. A free market does develop good medicine in much the same way as it develops good everything else. But what you are usually measuring something essentially different when evaluating medicine.
You could say that a free market system should produce more medicine. But (as free markets do) this is distributed unevenly among the population. that's OK when you are talking about shoes. Your free market will produce more shoes then a nationalised shoe industry. But a lot of those will end up in the closets with 20+ pairs or in the form of $500 shoes. Same with medicine.
The US is a good place to go if you want $10m surgery. But if you are measuring public health: life expectancy, infant mortality, death from preventable diseases, & such a $1 at the bottom goes a lot further then $1 at the top. The gains made from flattening the system, generally outweigh the lost effeciency.
Essentially, this is a highly tangled problem and a simple solution won't do.
Bingo. There's a nice discussion of just a bit of the economics involved in health care in "The Undercover Economist". It's really a very complicated subject because it is not your typical market for something like shoes, to use someone else's example. Pure capitalist systems will leave at least a few unfortunate individuals to die or suffer from easily/cheaply curable diseases. Pure state run systems throw out all the useful information that a market provides and introduce inefficiencies of their own.
You guys keep thinking about this as if the economy existed in a world where buzzwords & their associated connotations are absolute. You are not choosing between US 2008 & 1963 Soviet Russia. The most radical model likely to ever be proposed in the US is something like the UK's.
The system tries to provide internal pressure to reform (just like big companies do). There will probably be a decline in mean medical care from an economic utility standpoint (to the extent that term has any meaning - I think very little) There will be a dramatic improvement in health to the bottom 25% -30% resulting in huge gains to life expectancy & similar indicators.
As a bonus that the fear Americans have of being left without health cover will lift.
Capitalist evangelists of various sorts are always quick to point out there are no good example of command economies performing well. That's fair. But there are plenty of examples of 'socialist' health care systems that work. They perform well on any meaningful scales at a cost lower then the US's. From Cuba (an outlier but a very interesting one) to the UK to Japan. Pick one.
Table 10 on page 200 measures "attainment", which is something along the lines of (actual health improvements due to health care) / (best possible health improvements given spending level). That's a very different quantity than quality of care, which is what the original poster was talking about.
(It's actually more complicated, education levels are somehow worked in and details are described elsewhere.)
Rankings and indices are great, but it helps to know what you are actually ranking.
IMO, there's a good case to be made for a baseline of mandatory basic healthcare (i.e. no dying in the streets, no choosing food this week over a visit to the doctor), which should be tax-funded for families below a certain income threshold.
The other end of the stick is the hospitals and doctors themselves, and there is absolutely nothing that suggests that they become more efficient or cheaper, if they are made public employees. Quite the contrary, I'd argue.
If not, then the answer to your question is "yes".
I would rather die form cancer at home with my family than in a hospital with people who are only pretending to treat me.
No, since nobody would be middle-class or above, it would only be poor people dying from treatable diseases.
Eating grass doesn't make you a sheep.
God, that was too easy.
http://en.wikipedia.org/wiki/Duck_test
...used the phrase when he accused the Jacobo Arbenz Guzmán government of being Communist. Patterson explained his reasoning as follows:
Suppose you see a bird walking around in a farm yard. This bird has no label that says 'duck'. But the bird certainly looks like a duck. Also, he goes to the pond and you notice that he swims like a duck. Then he opens his beak and quacks like a duck. Well, by this time you have probably reached the conclusion that the bird is a duck, whether he's wearing a label or not."
There are entire industries that are heavily subsidized and regulated, Telecom, Healthcare, Energy, Transportation, etc... Our countries national roadway system came about more or less as an assistance to the automotive industry. The 401k laws have been a huge boon to the stock market.
And, now, the government is making a big move into finance and investment banking.
For what it's worth, my day job and my main part-time job are both entirely dependent on the market, so I sure hope the market doesn't need to crash. I agree with David Einhorn (who, by the way, has been short Lehman for a while): the stock market is okay, but the credit market is way overpriced.
To make the pro-bailout argument more clear, here is one reputable economist predicting that if we had let the FMs default, the dollar would drop about 30% and unemployment would double, in about a week.
http://www.marginalrevolution.com/marginalrevolution/2008/09...
Obviously, these bail outs have their costs, such as the value of money lent as well as increased moral hazard, but it's worth considering whether this is worth the potential cost of a market collapse to the whole economy.
it won't. this loan doesn't unwind the terrible decisions aig (and others) made, nor the hedges they tied to those decisions, and the hedges they tied to those hedges, and the hedges they tied to those hedges.
the derivatives unwind cannot be stopped short of a repudiation of all global currencies. the amount of leveraged capital in hedge deals is still north of $100 trillion. no one has the money to pay that out. it would be easier just to erase the USD dollar than to circulate $100 trillion in new fiat wealth...the effect would be the same anyway...worthless dollar
Hasn't the USA at the same time demanded open markets of all other economies in which it invested or participated in some way?
Hasn't the USA's tax dollars funded most private research, yet the economic benefits have been ripped by private industry?
The double standard is just showing a bit more than usual at the moment, but nothing has changed.
Rent seeking is in the DNA of democracy.