It could also be a question of cultural competence. Higher income people tend to have more education so they know how the educational system works. Thus they can position their kids to do well on the tests, as was suggested by the article.
A good example of this is jigsaw puzzles. Jigsaw puzzles were one of the first tests used to measure IQ. In response, middle class parents bought more jigsaw puzzles. Their kid’s IQ increased. So, does exposing children raise their IQ or does it just help in passing a test? If it is just the latter than there are issues that need to be addressed.
On a side note, the article made me chuckle a little. I went to a magnet school in Houston many years ago. Back then its criteria was explicitly racist. Houston was under a court order to integrate. All of the white rich kids went to private school leaving behind poor black kids, so there was nobody left to integrate. The magnet schools were created to lure white children into the system so some balance could be achieved.
I will disagree, and I would argue that computers should not be intruded into this classroom.
I tutor inner-city kids. Common issues are highly mobile families, poverty, English as a second language, and refuge status. They are academically behind their peers. Their parents are unsophisticated or put little emphasis on education. Throwing even modest obstacles can derail them.
I get why computers are important to education. However, this has to be a school wide initiative, not a classroom one.
Those are the partners – that is the management of Sycamore. However, that is not who owns them.
Think of Sycamore as an investment advisor of a investment company, which is kind of like a mutual fund – it is the just the scale is very different. A few outsider investors (pension funds, the ultra-rich, etc.) buy shares in the investment company. The investment company than buys companies.
Sycamore is paid on the performance of the fund. They may or may not have a direct ownership in the investment company and thus may not have any direct ownership of Hot Topic.
I think you are missing the point. They are not going to merge the two organizations. Hot Topic will remain Hot Topic, ThinkGeek will remain ThinkGeek. Both will carry their own lines – I expect some cross over but not much.
However, in one sense they are very much alike. They both market pop culture goods to a niche market. Their goods are partially based on fads so they have a short shelf life. Lots of custom stuff that you can't find in a more traditional retail shop like Amazon or Wal-Mart.
What they are going to combing is the back off stuff. Accounting and procurement are at the top of my list.
To extend, some of the best scrambled eggs I have had was from an espresso machine. The steam made the eggs very fluffy and allowed the proprietor to server breakfast under a "coffee shop" license instead of a "restaurant" license.
All of the alternatives involve seignorage or equivalent. Mobile payments and Amazon gift cards imply giving the telecom or Amazon an interest-free loan between the date the credit is paid for and the date it is redeemed - which is pretty much exactly the same as seignorage, which gives the government an interest free "float" to fill the gap between cumulative tax collections and cumulative government spending.
You have the concept of seigniorage slightly wrong. It has nothing to do with government tax collection and spending. Just as every Amazon gift card is a interest free loan to Amazon, every physical dollar is a interest free loan to the federal government. This is seigniorage.
That being said, I don't think we should spend much time with seigniorage. While it might be worth billions to the federal government, compared to the trillions that the government spends and borrows each year it is small change and has a low impact.
There is not proof, nor can there be, that there is a soul. I think that is common ground between us. What then? Does this invalidate religion and faith? Can another human or government invalidate my faith? Nor more than they could impose religion or faith on anyone. Religion and faith is a personal thing.
If faith (or lack of faith) cannot be imposed on me how can I deny that right to a AI mind that equivalent to my own. I will further point out that many moral decisions we make have a religious dimension. I am using religion in a the broad sense of the word. There are secular and atheist "religions" out there. I used to attend a Human Secularist Sunday service.
Who is to say that a AI does not have a soul? Do you have some type of test to prove it does not? Will not future AIs be our children will rights as a corneous human? Or will they be some lesser beasts, shackled like slaves by imposed restrictions? And where do we draw the line? If we can perfectly simulate a brain, would that have some type of different rights?
I personally think that this AI / religion thing is somewhat silly. At this point it is so farfetched at this stage of development.
Why pay minimum wage? I bet we could outsource that work to a 3rd world country and only pay a 1/10 of minimum wage. It is not like the pilots would have to be physically here in the US to run them remotely.
Uber is a stock - It is just privately traded. So it is not exposed to the vigor that a second by second tick that stock market has - it is just ever so often - once or twice a year. But it has exposure to the market place.
To extend, we are not just comparing "apples to oranges", we are dealing with a pretty "revenue" is a pretty worthless statistic when trying to determine leadership abilities.
Example: GM is one of the largest car manufactures by revenue. It is run by a woman. Unfortunately while GM has huge revenue that does not mean it is very well run. Which is not exactly Mary Barra's fault – she inherited a mess.
A big problem in trying to determine if "female" leadership is any good is that there are so few data points spread across such a diverse universe of CEO positions. You are not going to generate any good hard statistical data this way.
Boeing's wings (another very expensive part) are made in Japan. Fasteners are made in Europe. IIRC from it's Air Force bid for tankers, it's only 50% US.
The Airbus's engines (one of the most expensive parts) and flight controls are made in the US. Once Airbus's US factor is up and running it's plans will be 55% US.
Next question - is a Toyota car that is designed and built (including the power plant) in the US a US car or a Japanese car? In this age of international companies answering questions like these are hard and kind of pointless.
Airbus, oddly enough, would be another "American" option - maybe even more American than Boeing.
When the US was looking at replacing it current generation of aerial refueling aircraft, Airbus' bid was more American based on "value". Both companies subcontract much of the work and not all of the subcontractor are in America or Europe. (I don't think the Mobile Alabama can produce the 380, but you never know what type of modifications they would make to win the contract.)
If we Americans want to be the "best" and on the cutting edge we can rest on our laurels and hid behind "Buy American". Let the Europeans come and I will be happy – as long as we can bid on their president's plan. (or prime misters, or whatever)
The game plan for the Greexit would be to convert everything, both assets and liabilities, into Drachma. Euro bonds issued by the Greek government are controlled by Greek law. Or any debt issued under Greek law. There will be some messy cases.
As you say, after a Greek exit from the Euro their currency would be worthless which is kind of the point. They get to pay their debts with worthless currency. The local currency becomes worthless making their exports (such as tourism in a oddly back end way) more competitive.
And yes, they would lose the benefits of being part of the EU. Personally I think the long hard road of austerity is the better choice but I do acknowledge that there is a second road out there.
The last time Greek flirted with an exit everybody who could kept their money out of Greece. I heard about some interesting cash sweep transactions to minimize any money that had to stay overnight in Greece. i.e. keeping money in safer German banks, figuring out on a daily bases what was being paid to and from local suppliers, and then moving only just that amount of money over.
The people aren't willing to sacrifice to pay back the debt.
What if the question was not about "wanting to pay back their debt" but about their ability to pay back their debt. IIRC their debt stands at 170% of GDP plus they are paying 10% on their bonds. IIRC, Germany actually has a slight negative interest rate. We can debate how bad things have to be before they can't pay back their debt. However if they are not there they are getting pretty close.
If Greece were a person or a company they would file bankruptcy. Assets would be sold, reforms would be made, and liabilities would be cut. Life goes on.
Should countries borrow more than they can afford? No. Should bankers lend to countries that can't back. There is enough blame to be spread around to both parties and so both parties should suffer. Expect that Greece can't declare bankruptcy so they have back themselves into a corner.
That consideration is a factor, but governments tend to be long lasting entities, so they could certainly eventually pay off the debt, if they shrunk or even deferred payments for awhile. Something is usually better than nothing for a vendor, as long as the cost of administering the debt is less than what they bring in.
I think you missed my point here.
Greece could default, and replace the old bonds with new bonds at 80% of par. I lose 20% of my value.
Greece could cut the interest payments from 10% to 5%. I lose 20% of my value.
Greece could push out the repayment schedule from 10 years to 15. I lose 20% of my value.
Any way I cut it, I as an investor lose 20%. Psychologically it may be less damaging to my repayment is pushed back by 10 years but the immediate economic damage is the same.
So why is shrinking better than deferment? I think that there are differences but I would like to hear your viewpoint.
Unfortunately, financial solvency doesn't provide for retirement for people directly, although for any realistic social insurance program, you need to have long term financial stability and capacity. That means that even though austerity may actually work, there is clearly not the will to see it through.
We might have the same opinion here, but I will point out that any unfunded pension is a liability. What moral argument can you make that private pension plans that invested in Geek bonds should take a hit while the public plans don't? And I think you can make that argument – but it does make the point that public pensions need to be in the mix of future obligations that need to be cut.
It may be a good idea for Greece to default and deal with it, but that will end their ability to get anything like good loans in the near future. And I don't think the extra money from no longer paying on the debt will fix the quality of life problems that the people in Greece have right now.
I will slightly disagree with you here. I personally think Greece's big problems are structural. Too much bureaucracy, inefficient collecting of taxes, etc. Reforming these items would not cost the government anything, but there would be a painful period of adjustment for the common man. However, the end result would be a stronger, more efficient, rational economy.
However, I would tend to agree with you that a clean bankruptcy is better than a messy partial default. Expect that there is no real mechanism to Greece to default. If I understand correctly, it would be easier for Greece to exit the EU, convert to the Drachma, and devalue the currency.
I have a question for you – what do you see as the difference between extending payments and defaulting / writing down on the debt?
IIRC, the last round of "extending payments" effectively reduced the net present value of the debt by 20%. At a certain point, the difference between restructuring and defaulting comes down to semantics.
I can think of a couple of ways that this could be done but none seems practical.
Have both on the same orbital track, but then you are always pointing sideways. You could tether the two objects together, but I think that there have been issues with all of the experiments so far. A long time ago I read a theoretical paper that one could achieve a "geostationary orbit" with an active solar sail, but it has never been tried.
You can read the above threat for the ongoing argument between myself and others.
In short, by value or by risk weighted value, most life insurance products are annuities. a.k.a. private pensions. These pay cash for as long as you live. If life expectancy were to increase, the amount of cash needed would increase. This would tap the reserves of the insurance company.
On the flip side, increasing life expectancy would help the insurance companies with term or whole life insurance – the type of insurance that pays out when you die.
Which takes us to risk, because the risk of people dyeing too soon and dying too late is not the same. What is the chance that a large number of people will all of sudden die 5 years early? Maybe people in their 70s will take up smoking and skydiving. What is the chance of people dying 5 years longer? Maybe some medical breakthrough? Most of the surprises have been in people living longer, not shorter lives.
For term life you absolutely care about the financial stability of the company. Term life isn't "short-term" like 6 months, it's "short term" like 10-20 years. Property insurance is typically a 1 year term and the difference between a company that looks like it will be able to pay it's bills for 1 year versus one that can pay for the next 20 is huge. Just ask pets.com.
As you point you, who know what the future will bring? Volatility is an insurance company's enemy. Take a look at the volatility of the actuary tables over the past 20 years for middle aged adults. And we see almost no change. But we also need to protect the premiums for the market risk of Pet.com from blowing up. However, rates are calculated using 20 year government bonds with no inflation protection, so low risk there. Capital requirements tend to be low because of the low risk. So yes, 10 to 20 years in short term in insurance lingo for such a dull boring product. Well, maybe medium term.
Your understanding of whole life is totally incorrect. Whole life is a life insurance policy that does not terminate after a set number of years; rather, as long as you can cover the cost of premiums, it continues to be in force. An annuity is an entirely different product (although it can also be sold by insurance companies).
Technically you are correct, but I alluded to that. Ask people on what they have got and most will answer whole life. Peak underneath the hood and 9 times out of the 10 you will see that the majority of the payments going towards an annuity.
As for dying in year 29 of the 30 year term policy, he is referring to the fact that since you are still in the term, you should get the death benefit (whether you paid as a single premium or annual premiums is not so important). The problem is if the company goes bankrupt in year, say, 24, then you don't get a death benefit. True, you aren't on the hook for premiums after the company goes belly up, but if you get 30 year term insurance as a healthy 35 year old, then the company goes bankrupt after 24 years (when you are 59), you are in big trouble. You were paying relatively cheap premiums that took into account that you have been paying since you were 35, but now you have to go find another company and get a new policy, now as a 59 year old. And if you have developed health issues since then it's even worse.
Technically you are correct here but reality is different. Rates are calculated using actuarial tables and long dated government bonds – both are low risk. State regulators require reserves and segregated risks. I can't think of the last time an insurance company got into trouble for writing term or whole life insurance. When AIG blew up it did not affect their whole life policy holders because of the safe guards in effect. Once again, a low risk, low capital line of bossiness.
Now, take a look at the average life insurance company. For "Life" products, annuities and the like dominate the balance sheet. Often by a factor of 10. While I can't think of an insurance company that has gotten into trouble over their term or whole life, there have been many companies that have had issues with their annuities and long term care. Actuarial tables have not moved much for middle age individuals – not many die. Figuring out when old people is harder and most of the risk here is that people will live longer, not shorter. This helps the whole life side but that tends to be the smaller side.
Life insurance can be broken down into 2 major types.
The first is "Term Life". You agree for a term of X years – let us say 10. You pay a premium. In return, if you die, your heirs get a big payout. This is what you are talking about, and you are ½ right. In this case the insurance company wants you to live a longer life. However, it operates more like property insurance because it is short term so the need for financial stability is less.
The second class is immediate annuities, which most people know as whole life. Immediate annuities provide a cash stream for as long as you live so you can think of it as a private social security plan. You are right that these plans share the same risk characteristics as long term care. However, the annuities business is about 100x as large as the long term care bossiness. If you need payments for 30 years then financial stability is more important.
Now, I am rereading the OP and the need for 30 years of "term" insurance and dying in year 29 and I am getting a little confused. It sounds like he is referring to a 30 year term insurance policy with a single premium but those are very rare in America. That would straddle the line. But I would guess that he is confused on how term insurance with a cash balance works – which is an arcane subject so I will let that slide.
I will point out that there is a huge difference between life and property insurance. Both are highly regulated.
Property insurance, which includes auto insurance, is about short term risks. They buy reinsurance to protect them against big, one off extraordinary risks. Earthquakes, hurricanes, etc. If they muck up on ordinary risks, such as basic underwriting, they can still go bankrupt and leave you one the hook.
Life insurance is a whole different ball of wax. Their biggest risk is superannuation risk – people living longer than expected. There are a few reinsurance schemas which have just been launched but they are untested. Very much the expectation. Here you do want financial stability.
Expect they can't sell them. As long as they give them away for free as fan based art, Paramount will tolerate the infringement. Start charging, probably not.
I would argue that you can't separate the two points. But this may be splitting hairs too finely. I have found many backers of BitCoin want to insist that there is such a thing as inherent value and that all we need is a better system.
"Money" is on my booklist but I not gotten around to it yet. I would counter with "Lords of Finance" by Liaquat Ahamed. It covers the interwar period in Europe and the issues that Central Bankers had because they lacked money because America had sucked all of the gold out of Europe during WWI. I found the tale sobering. Money may not have any inherent value but it is still an important thing to get right.
Or maybe "A Monetary History of the United States, 1867-1960" by Milton Friedman, but that thing can be used as a door stop.
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It could also be a question of cultural competence. Higher income people tend to have more education so they know how the educational system works. Thus they can position their kids to do well on the tests, as was suggested by the article.
A good example of this is jigsaw puzzles. Jigsaw puzzles were one of the first tests used to measure IQ. In response, middle class parents bought more jigsaw puzzles. Their kid’s IQ increased. So, does exposing children raise their IQ or does it just help in passing a test? If it is just the latter than there are issues that need to be addressed.
On a side note, the article made me chuckle a little. I went to a magnet school in Houston many years ago. Back then its criteria was explicitly racist. Houston was under a court order to integrate. All of the white rich kids went to private school leaving behind poor black kids, so there was nobody left to integrate. The magnet schools were created to lure white children into the system so some balance could be achieved.
I will disagree, and I would argue that computers should not be intruded into this classroom.
I tutor inner-city kids. Common issues are highly mobile families, poverty, English as a second language, and refuge status. They are academically behind their peers. Their parents are unsophisticated or put little emphasis on education. Throwing even modest obstacles can derail them.
I get why computers are important to education. However, this has to be a school wide initiative, not a classroom one.
Those are the partners – that is the management of Sycamore. However, that is not who owns them.
Think of Sycamore as an investment advisor of a investment company, which is kind of like a mutual fund – it is the just the scale is very different. A few outsider investors (pension funds, the ultra-rich, etc.) buy shares in the investment company. The investment company than buys companies.
Sycamore is paid on the performance of the fund. They may or may not have a direct ownership in the investment company and thus may not have any direct ownership of Hot Topic.
I think you are missing the point. They are not going to merge the two organizations. Hot Topic will remain Hot Topic, ThinkGeek will remain ThinkGeek. Both will carry their own lines – I expect some cross over but not much.
However, in one sense they are very much alike. They both market pop culture goods to a niche market. Their goods are partially based on fads so they have a short shelf life. Lots of custom stuff that you can't find in a more traditional retail shop like Amazon or Wal-Mart.
What they are going to combing is the back off stuff. Accounting and procurement are at the top of my list.
To extend, some of the best scrambled eggs I have had was from an espresso machine. The steam made the eggs very fluffy and allowed the proprietor to server breakfast under a "coffee shop" license instead of a "restaurant" license.
All of the alternatives involve seignorage or equivalent. Mobile payments and Amazon gift cards imply giving the telecom or Amazon an interest-free loan between the date the credit is paid for and the date it is redeemed - which is pretty much exactly the same as seignorage, which gives the government an interest free "float" to fill the gap between cumulative tax collections and cumulative government spending.
You have the concept of seigniorage slightly wrong. It has nothing to do with government tax collection and spending. Just as every Amazon gift card is a interest free loan to Amazon, every physical dollar is a interest free loan to the federal government. This is seigniorage.
That being said, I don't think we should spend much time with seigniorage. While it might be worth billions to the federal government, compared to the trillions that the government spends and borrows each year it is small change and has a low impact.
I think you are missing my point.
There is not proof, nor can there be, that there is a soul. I think that is common ground between us. What then? Does this invalidate religion and faith? Can another human or government invalidate my faith? Nor more than they could impose religion or faith on anyone. Religion and faith is a personal thing.
If faith (or lack of faith) cannot be imposed on me how can I deny that right to a AI mind that equivalent to my own. I will further point out that many moral decisions we make have a religious dimension. I am using religion in a the broad sense of the word. There are secular and atheist "religions" out there. I used to attend a Human Secularist Sunday service.
Who is to say that a AI does not have a soul? Do you have some type of test to prove it does not? Will not future AIs be our children will rights as a corneous human? Or will they be some lesser beasts, shackled like slaves by imposed restrictions? And where do we draw the line? If we can perfectly simulate a brain, would that have some type of different rights?
I personally think that this AI / religion thing is somewhat silly. At this point it is so farfetched at this stage of development.
Why pay minimum wage? I bet we could outsource that work to a 3rd world country and only pay a 1/10 of minimum wage. It is not like the pilots would have to be physically here in the US to run them remotely.
Is there a fixed amount of labor to go around? No.
http://en.wikipedia.org/wiki/L...
Do they make our economy more dynamic and flexible? Yes. Is this more than every? Yes.
Which is more of an argument for a overhaul of our immigration policy rather than immigration policing, but still, we should welcome immigrants.
Uber is a stock - It is just privately traded. So it is not exposed to the vigor that a second by second tick that stock market has - it is just ever so often - once or twice a year. But it has exposure to the market place.
To extend, we are not just comparing "apples to oranges", we are dealing with a pretty "revenue" is a pretty worthless statistic when trying to determine leadership abilities.
Example: GM is one of the largest car manufactures by revenue. It is run by a woman. Unfortunately while GM has huge revenue that does not mean it is very well run. Which is not exactly Mary Barra's fault – she inherited a mess.
A big problem in trying to determine if "female" leadership is any good is that there are so few data points spread across such a diverse universe of CEO positions. You are not going to generate any good hard statistical data this way.
Let's see,
Boeing's wings (another very expensive part) are made in Japan. Fasteners are made in Europe. IIRC from it's Air Force bid for tankers, it's only 50% US.
The Airbus's engines (one of the most expensive parts) and flight controls are made in the US. Once Airbus's US factor is up and running it's plans will be 55% US.
Next question - is a Toyota car that is designed and built (including the power plant) in the US a US car or a Japanese car? In this age of international companies answering questions like these are hard and kind of pointless.
747 is the only american made option, so be it
Airbus, oddly enough, would be another "American" option - maybe even more American than Boeing.
When the US was looking at replacing it current generation of aerial refueling aircraft, Airbus' bid was more American based on "value". Both companies subcontract much of the work and not all of the subcontractor are in America or Europe. (I don't think the Mobile Alabama can produce the 380, but you never know what type of modifications they would make to win the contract.)
If we Americans want to be the "best" and on the cutting edge we can rest on our laurels and hid behind "Buy American". Let the Europeans come and I will be happy – as long as we can bid on their president's plan. (or prime misters, or whatever)
You are half right but that is not the plan.
The game plan for the Greexit would be to convert everything, both assets and liabilities, into Drachma. Euro bonds issued by the Greek government are controlled by Greek law. Or any debt issued under Greek law. There will be some messy cases.
As you say, after a Greek exit from the Euro their currency would be worthless which is kind of the point. They get to pay their debts with worthless currency. The local currency becomes worthless making their exports (such as tourism in a oddly back end way) more competitive.
And yes, they would lose the benefits of being part of the EU. Personally I think the long hard road of austerity is the better choice but I do acknowledge that there is a second road out there.
The last time Greek flirted with an exit everybody who could kept their money out of Greece. I heard about some interesting cash sweep transactions to minimize any money that had to stay overnight in Greece. i.e. keeping money in safer German banks, figuring out on a daily bases what was being paid to and from local suppliers, and then moving only just that amount of money over.
The people aren't willing to sacrifice to pay back the debt.
What if the question was not about "wanting to pay back their debt" but about their ability to pay back their debt. IIRC their debt stands at 170% of GDP plus they are paying 10% on their bonds. IIRC, Germany actually has a slight negative interest rate. We can debate how bad things have to be before they can't pay back their debt. However if they are not there they are getting pretty close.
If Greece were a person or a company they would file bankruptcy. Assets would be sold, reforms would be made, and liabilities would be cut. Life goes on.
Should countries borrow more than they can afford? No. Should bankers lend to countries that can't back. There is enough blame to be spread around to both parties and so both parties should suffer. Expect that Greece can't declare bankruptcy so they have back themselves into a corner.
That consideration is a factor, but governments tend to be long lasting entities, so they could certainly eventually pay off the debt, if they shrunk or even deferred payments for awhile. Something is usually better than nothing for a vendor, as long as the cost of administering the debt is less than what they bring in.
I think you missed my point here.
Greece could default, and replace the old bonds with new bonds at 80% of par. I lose 20% of my value.
Greece could cut the interest payments from 10% to 5%. I lose 20% of my value.
Greece could push out the repayment schedule from 10 years to 15. I lose 20% of my value.
Any way I cut it, I as an investor lose 20%. Psychologically it may be less damaging to my repayment is pushed back by 10 years but the immediate economic damage is the same.
So why is shrinking better than deferment? I think that there are differences but I would like to hear your viewpoint.
Unfortunately, financial solvency doesn't provide for retirement for people directly, although for any realistic social insurance program, you need to have long term financial stability and capacity. That means that even though austerity may actually work, there is clearly not the will to see it through.
We might have the same opinion here, but I will point out that any unfunded pension is a liability. What moral argument can you make that private pension plans that invested in Geek bonds should take a hit while the public plans don't? And I think you can make that argument – but it does make the point that public pensions need to be in the mix of future obligations that need to be cut.
It may be a good idea for Greece to default and deal with it, but that will end their ability to get anything like good loans in the near future. And I don't think the extra money from no longer paying on the debt will fix the quality of life problems that the people in Greece have right now.
I will slightly disagree with you here. I personally think Greece's big problems are structural. Too much bureaucracy, inefficient collecting of taxes, etc. Reforming these items would not cost the government anything, but there would be a painful period of adjustment for the common man. However, the end result would be a stronger, more efficient, rational economy.
However, I would tend to agree with you that a clean bankruptcy is better than a messy partial default. Expect that there is no real mechanism to Greece to default. If I understand correctly, it would be easier for Greece to exit the EU, convert to the Drachma, and devalue the currency.
I have a question for you – what do you see as the difference between extending payments and defaulting / writing down on the debt?
IIRC, the last round of "extending payments" effectively reduced the net present value of the debt by 20%. At a certain point, the difference between restructuring and defaulting comes down to semantics.
I too would like to know how to do this.
I can think of a couple of ways that this could be done but none seems practical.
Have both on the same orbital track, but then you are always pointing sideways.
You could tether the two objects together, but I think that there have been issues with all of the experiments so far.
A long time ago I read a theoretical paper that one could achieve a "geostationary orbit" with an active solar sail, but it has never been tried.
You can read the above threat for the ongoing argument between myself and others.
In short, by value or by risk weighted value, most life insurance products are annuities. a.k.a. private pensions. These pay cash for as long as you live. If life expectancy were to increase, the amount of cash needed would increase. This would tap the reserves of the insurance company.
On the flip side, increasing life expectancy would help the insurance companies with term or whole life insurance – the type of insurance that pays out when you die.
Which takes us to risk, because the risk of people dyeing too soon and dying too late is not the same. What is the chance that a large number of people will all of sudden die 5 years early? Maybe people in their 70s will take up smoking and skydiving. What is the chance of people dying 5 years longer? Maybe some medical breakthrough? Most of the surprises have been in people living longer, not shorter lives.
For term life you absolutely care about the financial stability of the company. Term life isn't "short-term" like 6 months, it's "short term" like 10-20 years. Property insurance is typically a 1 year term and the difference between a company that looks like it will be able to pay it's bills for 1 year versus one that can pay for the next 20 is huge. Just ask pets.com.
As you point you, who know what the future will bring? Volatility is an insurance company's enemy. Take a look at the volatility of the actuary tables over the past 20 years for middle aged adults. And we see almost no change. But we also need to protect the premiums for the market risk of Pet.com from blowing up. However, rates are calculated using 20 year government bonds with no inflation protection, so low risk there. Capital requirements tend to be low because of the low risk. So yes, 10 to 20 years in short term in insurance lingo for such a dull boring product. Well, maybe medium term.
Your understanding of whole life is totally incorrect. Whole life is a life insurance policy that does not terminate after a set number of years; rather, as long as you can cover the cost of premiums, it continues to be in force. An annuity is an entirely different product (although it can also be sold by insurance companies).
Technically you are correct, but I alluded to that. Ask people on what they have got and most will answer whole life. Peak underneath the hood and 9 times out of the 10 you will see that the majority of the payments going towards an annuity.
As for dying in year 29 of the 30 year term policy, he is referring to the fact that since you are still in the term, you should get the death benefit (whether you paid as a single premium or annual premiums is not so important). The problem is if the company goes bankrupt in year, say, 24, then you don't get a death benefit. True, you aren't on the hook for premiums after the company goes belly up, but if you get 30 year term insurance as a healthy 35 year old, then the company goes bankrupt after 24 years (when you are 59), you are in big trouble. You were paying relatively cheap premiums that took into account that you have been paying since you were 35, but now you have to go find another company and get a new policy, now as a 59 year old. And if you have developed health issues since then it's even worse.
Technically you are correct here but reality is different. Rates are calculated using actuarial tables and long dated government bonds – both are low risk. State regulators require reserves and segregated risks. I can't think of the last time an insurance company got into trouble for writing term or whole life insurance. When AIG blew up it did not affect their whole life policy holders because of the safe guards in effect. Once again, a low risk, low capital line of bossiness.
Now, take a look at the average life insurance company. For "Life" products, annuities and the like dominate the balance sheet. Often by a factor of 10. While I can't think of an insurance company that has gotten into trouble over their term or whole life, there have been many companies that have had issues with their annuities and long term care. Actuarial tables have not moved much for middle age individuals – not many die. Figuring out when old people is harder and most of the risk here is that people will live longer, not shorter. This helps the whole life side but that tends to be the smaller side.
Life insurance can be broken down into 2 major types.
The first is "Term Life". You agree for a term of X years – let us say 10. You pay a premium. In return, if you die, your heirs get a big payout. This is what you are talking about, and you are ½ right. In this case the insurance company wants you to live a longer life. However, it operates more like property insurance because it is short term so the need for financial stability is less.
The second class is immediate annuities, which most people know as whole life. Immediate annuities provide a cash stream for as long as you live so you can think of it as a private social security plan. You are right that these plans share the same risk characteristics as long term care. However, the annuities business is about 100x as large as the long term care bossiness. If you need payments for 30 years then financial stability is more important.
Now, I am rereading the OP and the need for 30 years of "term" insurance and dying in year 29 and I am getting a little confused. It sounds like he is referring to a 30 year term insurance policy with a single premium but those are very rare in America. That would straddle the line. But I would guess that he is confused on how term insurance with a cash balance works – which is an arcane subject so I will let that slide.
I will point out that there is a huge difference between life and property insurance. Both are highly regulated.
Property insurance, which includes auto insurance, is about short term risks. They buy reinsurance to protect them against big, one off extraordinary risks. Earthquakes, hurricanes, etc. If they muck up on ordinary risks, such as basic underwriting, they can still go bankrupt and leave you one the hook.
Life insurance is a whole different ball of wax. Their biggest risk is superannuation risk – people living longer than expected. There are a few reinsurance schemas which have just been launched but they are untested. Very much the expectation. Here you do want financial stability.
Expect they can't sell them. As long as they give them away for free as fan based art, Paramount will tolerate the infringement. Start charging, probably not.
I would argue that you can't separate the two points. But this may be splitting hairs too finely. I have found many backers of BitCoin want to insist that there is such a thing as inherent value and that all we need is a better system.
"Money" is on my booklist but I not gotten around to it yet. I would counter with "Lords of Finance" by Liaquat Ahamed. It covers the interwar period in Europe and the issues that Central Bankers had because they lacked money because America had sucked all of the gold out of Europe during WWI. I found the tale sobering. Money may not have any inherent value but it is still an important thing to get right.
Or maybe "A Monetary History of the United States, 1867-1960" by Milton Friedman, but that thing can be used as a door stop.