Why insurance should be a state monopoly

Written By: - Date published: 4:25 pm, November 11th, 2013 - 100 comments
Categories: Economy - Tags:

The seeming purpose of having competition is to prevent monopoly pricing and excessive profits but, as Steve Keen shows, all businesses use the same pricing model with about the same level of profits. If they did use the pricing model that economists say that they should use they’d actually go broke.

What the market possibly does do is prevent excessive profiteering by private monopolies (a private, unregulated monopoly, actually gets to charge whatever they like – just look at Telecom) although the record profits that the banks are pulling in would tend to indicate that this doesn’t happen. As a state monopoly can, and should, be open to public scrutiny the added complexity and costs of competition aren’t needed to prevent excessive profits. A state monopoly can be run at close to cost.

An insurance monopoly gets the most people in it making the premiums the lowest possible due to economies of scale. On top of that it also precludes the massive duplication of bureaucracy that occurs in a competitive market thus saving costs there. Thirdly it doesn’t have the dead-weight loss of profit in it which further decreases premiums. Fourth, the government, and thus the insurance company, isn’t going to fold like AMI and thus legitimate claims will always be paid out in a timely fashion*. Fifthly it’s going to be completely transparent, the public will be able to see the money’s coming from and exactly where and why it’s being spent – something that just cannot be done with private institutions.

But the most important reason is how it works and it works, not as a large deposit of cash as private insurance does, but as a pay-as-you-go system.

  • Premiums are collected/Claims are paid out
  • Any difference between the amount on hand from premiums is covered by the governments ability to create money at 0% interest
  • Premiums are recalculated to cover expected costs plus any deficit from the previous year

The first advantage in this is that it’s actually very cheap to set up but the main advantage is that it doesn’t have to withdraw a huge amount of money from the economy to cover claims as the private insurers do. This means that that money will stay in circulation and thus help keep the economy going rather than contributing to its collapse.

One other thing, due to the governments ability to create currency there is no need for re-insurers and so that level of complexity and added expense is removed further decreasing premiums.

It is impossible for the private sector, with it’s dead-weight loss of profit, the need for a large stack of cash, and the duplication of competition to compete with this model.

* Extreme events such as the Christchurch earthquakes will still cause problems. You could get paid out but still not have anywhere to live due to there being a lack of builders available. Such extreme events will always need government intervention to get the logistics working.

Draco T Bastard

100 comments on “Why insurance should be a state monopoly ”

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  1. Rogue Trooper 1
    11 November 2013 at 4:31 pm

    Opportunity Knocks.

  2. TightyRighty 2
    11 November 2013 at 4:47 pm

    Thank god you are just a blowhard on a website Draco. Country would be fucked if they let anyone as deluded as you near the wheel. So you’d destroy people savings just so the state can pay claims by printing money? I don’t see any scams there. No Sirreee

    • Rogue Trooper 2.1
      11 November 2013 at 5:03 pm

      DTB =/= WOBH

    • Draco T Bastard 2.2
      11 November 2013 at 7:31 pm

      Not destroying peoples saving at all. They’ll still have them and, due to the fact that premiums would increase in the case of money being created, there won’t be any inflationary pressure.

    • ghostwhowalksnz 2.3
      12 November 2013 at 10:01 am

      And paying Rio Tinto $30 mill – at thats just the first installment- for them to break the contract they signed is going to benefit the country ?

    • Tat Loo (CV) 2.4
      12 November 2013 at 10:07 am

      So you’d destroy people savings just so the state can pay claims by printing money? I don’t see any scams there. No Sirreee

      You got a $20 or $50 note in your wallet, tighty? Who printed that money, tighty? Could it be the state i.e. the only agency who can.

    • thatguynz 2.5
      12 November 2013 at 10:27 am

      Thank allah you are just a blowhard on a website TightyRighty. Country would be fucked if they let someone with such a lack of economic intellect as you near the wheel. Oh wait….

  3. Lara 3
    11 November 2013 at 4:51 pm

    One fact I do know is my 24 year old niece whilst working as a “underwriter” here in NZ earned $120,000 pa or more – this was back in 2004. She is obviously very good at what she does but without any tertiary qualifications what so ever then moved to the UK – her pay was the equivalent of NZ$250,000 pa – she apparently finished work around 3pm. 6 week holidays and very long weekends the norm for many years. We are indeed being rorted by the insurance industry. Bring on KiwiAssure, bring down overpriced premiums. Or work in insurance!!

  4. Ad 4
    11 November 2013 at 5:21 pm

    Leviathan must not triumph.

    The record of current state monopolies such as ACC and EQC is overall not great – not for price, not for exercise of power, not for privacy, and not for service.

    We need strong regulators (and specialist courts) to protect citizens from public and private cartels, protect the state from ripoff monopsonists, and protect competitors from really stupid and unjustified interventions.

    Enchain with fiersome regulations all public and private entities with too much power over us.

    • Draco T Bastard 4.1
      11 November 2013 at 7:41 pm

      The record of current state monopolies such as ACC and EQC is overall not great

      Actually, it’s not that bad under normal conditions. ACC is awesome in its cost effectiveness. EQC has fucked up badly in Christchurch but, then, so have the private insurance companies. Neither of them were prepared for the earthquakes. With insurance being fully a state service when the earthquakes hit it would have been easier for the government to step in and rectify things. Instead we had them running around for months negotiating with the private insurers.

      They’re not perfect but we can make things better if they’re a state service. We don’t have any power to do so with private entities.

      We need strong regulators (and specialist courts) to protect citizens from public and private cartels, protect the state from ripoff monopsonists, and protect competitors from really stupid and unjustified interventions.

      All of which is really quite expensive. State service monopoly with total transparency which anybody can look into is going to be better and cheaper. There’s no way that they could get away with overcharging (or even undercharging) or any questionable practices.

      Enchain with fiersome regulations all public and private entities with too much power over us.

      If they have any power over us then they need to be a government service and answerable to the public.

  5. Tat Loo (CV) 5
    11 November 2013 at 5:37 pm

    The record of current state monopolies such as ACC and EQC is overall not great – not for price, not for exercise of power, not for privacy, and not for service.

    Mostly operational matters which could be got right with the correct leadership and improved organisational cultures.

    • Ad 5.1
      11 November 2013 at 5:48 pm

      None of those are reasons for them to be a state monopoly.
      In fact it’s more direct to hold poor systems accountable through being able to take your business elsewhere, than through the ballot box.

      • Tat Loo (CV) 5.1.1
        11 November 2013 at 5:56 pm

        if you can give me an example of any country in the world which has come up with a competitive private sector model which is superior to our ACC scheme in terms of costs and healthcare results, that’s what we can move towards.

        In fact it’s more direct to hold poor systems accountable through being able to take your business elsewhere

        Actual track record is well against you here.

        And you think that’s working well in our electricity retail “market”? How about our broadband retail “market”? How about our private insurance “market”? Or our private banking “market”.

        The reality is that corporates typically laugh at consumer level threats to take their business elsewhere because the level of cohesion in such consumer advocacy is typically very low, and major corporates have usually worked hard to capture entire markets.

        EDIT I am all for your idea of strong indepedent regulation and oversight of all private and public corporates. A statist I am not.

        • Ad 5.1.1.1
          11 November 2013 at 6:23 pm

          Love the idea of ACC, like I love the idea of Christianity.

          Markets that make stable profits and states are interdependent (some would say codependent).

          Personally I would rather have an ACCC and aggregate my regulators. Hard to trust politicians to run anything with these pricks in charge.

        • Ad 5.1.1.2
          11 November 2013 at 6:25 pm

          …and you way so are a statist

          Oh yes you are. Great big huge stompy one. Huge.
          😉

          • Tat Loo (CV) 5.1.1.2.1
            11 November 2013 at 6:49 pm

            lol – if so it would be in a far more distributed and local/community governance way. A very bad outcome for the country would be for massively centralised power with decisions and budgets all run out of Wellington. Although the Thorndon Bubble crowd might love it, few others would.

            • Ad 5.1.1.2.1.1
              11 November 2013 at 8:42 pm

              Perhaps instead of a state insurance company there should be one for each Regional Authority, and one for each major Council such as Dunedin, Christchurch, Auckland, Wellington, Tauranga, and Hamilton.

              It would in a sense be a bigger version of RiskPool – which already operates between and for most New Zealand Councils for their own assets.

              Cities that felt inclined would slip it into one of their holding companies. In the case of Tauranga, it could complement the TSB.

              Would New Zealand be better if it were predominantly regionally governed?

              • Tat Loo (CV) …
                11 November 2013 at 8:59 pm

                And central government could act to provide re-insurance.

                Would New Zealand be better if it were predominantly regionally governed?

                Otago and Southland people would say…definitely 🙂

                Joking aside, budgets, standards and standardisation, foreign and nationwide policy, audit and assurance could be provided from Wellington. With local democratic entities taking it from there.

              • Rogue Trooper …
                11 November 2013 at 11:12 pm

                sounds familiar Ad

    • Tim 5.2
      11 November 2013 at 7:27 pm

      “Mostly operational matters which could be got right with the correct leadership and improved organisational cultures.”
      A bloody BIG change in organisational culture!
      The public service generally does NOT have to run on corporate lines as a business reinforced by nasty little penny pinching attitudes, cost centre accounting, frikken purchase agreements ffs, and KPI’s (which, if not met – don’t really matter).

      You know – if you look back over the past couple of decades, the ONLY time something happens to improve the inadequacies of these corporatised departments and Muntries is when some Senior manager might potentially be embarassed. And when they are (embarassed), bonuses still get paid and any blame is transferrred to the nearest underling.

      Many Senior managers/”CEO’s” (even that term is inappropriate) need reminding of pretty basic things like codes of conduct, reinforcing the idea that THEY serve the public – NOT the other way round. Bad attitudes are now so entrenched amongst them after a quarter century plus, their sense of entitlement is the norm. Those underlings earning substantially less pay are actually the ones keeping the wheels turning, often working in fear as they execute the whims of their CEO/mgr.

  6. Descendant Of Sssmith 6
    11 November 2013 at 6:31 pm

    Private sector gives out others information, looks up peoples personal records, shares info with other people and businesses – you just don’t hear bout it as much and you can’t OIA it.

  7. roger 7
    11 November 2013 at 6:43 pm

    Having worked in insurance, these arguments either don’t apply or don’t make sense.

    1) Publicly listed companies are exposed to considerable scrutiny regarding the state of their finances.

    2) Economies of scale don’t apply to insurance. The risk of having a natural disaster or a car stolen in a particular area is the same regardless of how many people are insured and premiums are calculated accordingly on that basis of risk. Likewise, as customers increase, the needed bureaucracy to support the organisation must also increase in size, further eroding any potential for “economies of scale”.

    3) Duplication of bureaucracy argument doesn’t make sense, the other insurers aren’t charging more in premiums because their competition also have bureaucracy.

    4) I don’t understand what you mean by “dead-weight loss of profit”. If you mean that insurance companies increase premiums when profits drop, the same will apply to an SOE which would need to increase premiums to cover increasing costs or fewer customers in order to stay solvent. Either that or be bailed out by the taxpayer by printing money as you suggest.

    5) Almost all insurance companies didn’t fold after the earthquakes, they simply went to their re-insurers which is usual when a massive event like this happens. The only option for an SOE insurer if they didn’t use re-insurers would be a massive taxpayer bailout.

    6) You’re advocating that instead of keeping a large cash reserve that can be accessed whenever needed in case of disaster, that we wing it and simply print more money whenever we want so we drive up inflation and erode the value of savings. This without considering what state the government finances or the economy might be in the next time a disaster hits.

    Also correct me if I’m wrong but doesn’t the reserve bank make the decision about printing money? Or are you also suggesting to end the reserve bank’s independence from the government by forcing them to print money at the government’s request?

    • infused 7.1
      11 November 2013 at 6:48 pm

      All of the above, silly.

    • Tat Loo (CV) 7.2
      11 November 2013 at 7:10 pm

      I think most of your comments are slighly off the mark. The overall the case for a public insurance company is simple – we can do it for ourselves, and keep our money in the country. We don’t need private profits flowing offshore.

      I will respond to one comment you make more specifically however:

      6) You’re advocating that instead of keeping a large cash reserve that can be accessed whenever needed in case of disaster, that we wing it and simply print more money whenever we want so we drive up inflation and erode the value of savings. This without considering what state the government finances or the economy might be in the next time a disaster hits.

      Also correct me if I’m wrong but doesn’t the reserve bank make the decision about printing money? Or are you also suggesting to end the reserve bank’s independence from the government by forcing them to print money at the government’s request?

      1) Don’t get fussed about printing money. Governments do it all the time. Just have a look at the growth of M1 and M2 in the NZ economy over the last 10 years, for instance.

      2) Printing money rarely impacts in terms of monetary inflation. And why should it? NZ has a highly competitve market economy with plenty of spare resources/capacity, and plenty of workers willing to work for a minimum wage. If you were to make a case that our economy was running very tight on spare capacity and free labour, perhaps you could make the case.

      3) I’m not sure 100% reserve bank independence is a good thing. After all, the era of “reserve bank independence” has coincided with a massive increase in widespread financial instability, and monetary policies that have been very helpful in transferring wealth away from workers and towards financial speculators and capitalists.

    • Draco T Bastard 7.3
      11 November 2013 at 7:24 pm

      1.) AMI. Saying that there is enough scrutiny already when we’ve just had a major failure due to lack of oversight is rather blatant BS.
      2.) The more people in an insurance scheme the less the premiums will be as the risk is covered by more people. It may not be by much, maybe less than 1%, but across an entire nation that is going to add up to millions of dollars. As the saying goes: A little bit here, a little bit there and pretty soon you’re talking serious money.
      3.) More bureaucracy = more cost. Costs that has to be covered by the society.
      4.) Nope, that’s not what I mean. A state insurance company would be running at cost. It brings in enough to cover wages/salaries and claims. What it doesn’t have is the payout of dividends and it’s the dividends that are the dead-weight loss. This is proven conclusively by Telecom not rolling out fibre years ago despite having the wherewithal to do so. NZ is out of pocket by ~$17b.
      5.) Nope. What would happen is that the claims would be paid for by creating money at the time that payout was made (Possibly months or years later – see my note). The premiums would then be adjusted to compensate but they wouldn’t be high. I also note that, according to reports or here, that premiums have gone up around 70% despite, or because of, the international reinsurers. The reinsurers and their profits are another level of complexity that we have to pay for as well which pushes up premiums.
      6.) Nope. I’m advocating that the state insurance service create money to cover normal claims and adjust premiums as necessary. In the case of an actual disaster the government itself would have to step in – see my note.

      Also correct me if I’m wrong but doesn’t the reserve bank make the decision about printing money?

      No, the private banks do. The reserve bank acts as the lender of last resort if the banks can’t find enough to cover the lending that they’ve already made.

      Or are you also suggesting to end the reserve bank’s independence from the government by forcing them to print money at the government’s request?

      Yes but I’m not suggesting that there are no controls over how much the government can create. I’ve also suggested that private banks should no longer be able to create money at all so as to help with the stability of the currency and decrease inflation. See, there’s a major problem with allowing the private banks to create money with limitations as they do – it results in there being too much money available which pushes up share and house prices without a corresponding increase in products, services or productivity.

      • TheContrarian 7.3.1
        11 November 2013 at 7:45 pm

        “This is proven conclusively”

        No it isn’t. Making a statement about what could have happened is not prove it would have happened.

        • Draco T Bastard 7.3.1.1
          11 November 2013 at 8:01 pm

          Yeah, it actually is. We project out what was happening before the change and compare the estimated results with what actually happened.

          Are you really so stupid as to think that our network wouldn’t be better with another $17b invested in it?

          • TheContrarian 7.3.1.1.1
            11 November 2013 at 9:16 pm

            Are you really that stupid as to think everything follows a set path?

            Nothing is proven conclusive, you only have your prediction. And it isn’t conclusive by any means.

            • Lanthanide 7.3.1.1.1.1
              11 November 2013 at 9:52 pm

              I think this largely sums up why I generally disagree with most things Draco says.

              • Draco T Bastard …
                11 November 2013 at 11:05 pm

                A non argument is why you disagree?

                • Lanthanide …
                  12 November 2013 at 7:18 am

                  Because you see everything as black and white and you have all the answers. Anyone that disagrees with you, on subjects which aren’t actually black and white, is simply wrong.

                  • Draco T Bastard …
                    12 November 2013 at 11:02 am

                    I don’t have all the answers that’s why I put them up here for discussion. I’m more than happy to be shown to be wrong.

                    EDIT: This comment also got a commenting too fast error on first attempt.

                    • TheContrarian …
                      12 November 2013 at 12:45 pm

                      You have been shown wrong already. You can’t make a conclusive statement on actions that never happened. You can make an educated guess but you can’t go around stating something as conclusive fact when you can’t possibly know the outcome.

                    • Colonial Viper …
                      12 November 2013 at 12:54 pm

                      Well, that is true…it’s a complex and highly uncertain world out there.

            • Draco T Bastard 7.3.1.1.1.2
              11 November 2013 at 10:58 pm

              The prediction is based upon the fact that it would.

              There are two possible options available:
              1.) Continue as is so that $17b gets spent on the network
              2.) Continue as is but also decrease prices. This decreases the amount spent on the network but also decreases the monthly rental. Result being that the amount of money in people pockets increases by the same amount while the network still improves.

              Either way, the country would be $17b better off.

              • TheContrarian …
                11 November 2013 at 11:09 pm

                There are far more than merely two possible options Draco. Which makes your comment about others being unable to follow logic pretty ironic, you having just committed a false dilemma. Black and white thinking to the layman – something you do frequently.

                (The above ^ was in response to Draco’s unedited comment which accused Lanth of being unable to follow logic. Ironic again considering it was a non-argument of his own).

                Fact is you can’t conclusively prove any future event which are based purely on events which haven’t happened nor can no longer happen. You make a educated guess extrapolating from a particular historical point but to follow it up with “This is proven conclusively” is laughable at best, flat out self-deception at worst.

                • Rogue Trooper …
                  11 November 2013 at 11:14 pm

                  ooooh

                • Draco T Bastard …
                  12 November 2013 at 10:57 am

                  There are far more than merely two possible options Draco.

                  Well, I can’t think of what else would have happened if telecommunications wasn’t deregulated and Telecom left to continue as is using the surplus that it was getting to upgrade the network. Perhaps you’d like to enlighten us, show us something that, under those conditions would contradict my own conclusions?

                  Fact is you can’t conclusively prove any future event which are based purely on events which haven’t happened nor can no longer happen.

                  Ok, that’s reasonable but I’d say that from what we see out of Telecom over the last 20+ years and the need now for the government to legislate and fund the implementation of the network upgrade is indicative of the dead-weight loss of profit.

                  • photonz …
                    12 November 2013 at 11:44 am

                    Draco says “Well, I can’t think of what else would have happened if telecommunications wasn’t deregulated ”

                    I can tell you. If the govt had kept telecom…..

                    A “toll call” in NZ would have continued to cost a days wages.
                    A “toll call” overseas would have continued to cost a weeks wages.
                    You would continue to have to go on a waiting list to buy a telephone.
                    Faults would have continued unfixed for days and weeks.
                    You would continue to have to apply to get a special permit if you wanted a second line.
                    Service levels would have continued to be abysmal.

                    When telecom was privatised,

                    – toll calls plummeted to under half price within months.
                    – there was a massive $5 BILLION in new capital expenditure in just the first few years. That’s MORE that the total value of the company at the time, and massively more than the govt had been spending.
                    – old systems that had been outdated for years were replaced,.
                    – service levels improved dramatically.
                    – fault fixing times dropped from days and weeks to same day.
                    – new internet and mobile systems were built.

                    From a customer point of view, the government run telecom was a dinosaur, pig, dog – whatever you want to call it.

                    But under the government, it was appallingly run.

                    • joe90 …
                      12 November 2013 at 12:02 pm

                      A “toll call” in NZ would have continued to cost a days wages.
                      A “toll call” overseas would have continued to cost a weeks wages.
                      You would continue to have to go on a waiting list to buy a telephone.
                      Faults would have continued unfixed for days and weeks.
                      You would continue to have to apply to get a special permit if you wanted a second line.

                      You’re lying.

                    • Colonial Viper …
                      12 November 2013 at 12:04 pm

                      All nonsense mate. That modernisation was well on the way already.

                      And the Govt sold Telecom for a song, before the internet boom. It was a stupid and short sighted move.

                      The only certainty is that NZ shouldn’t be exporting an Xtra billion dollars a year to foreign shareholders, further damaging our current account.

                    • McFlock …
                      12 November 2013 at 12:06 pm

                      Now Joe, we’d get nowhere if we didn’t have photoshopnz to make shit up for us.

                    • photonz …
                      12 November 2013 at 12:24 pm

                      Colonial Viper says “All nonsense mate. That modernisation was well on the way already.”

                      Wrong. For years the rest of the world had voice mail, 0800 numbers, 0900 numbers, telebanking etc.

                      NZ waited years didn’t still get them. As soon as telecom was privatised, they were introduced.

                      By 1992, our extortionate toll prices had dropped 60%.

                      Under the govt, Telecom customer service was so bad, that it’s poor service even gets a mention in the Encyclopedia of NZ about how customers were regularly frustrated about how long it took, just to buy a phone.

                      Here’s another Encyclopedia of NZ entry –
                      “Delays in the installation of new telephones affected more than residential customers. In 1984 Treasury, at the forefront of the push for re-organisation of the Post Office, waited two months for existing telephone jacks to be shifted. Senior officials exchanged angry letters. Treasury argued that it was inefficiency, and the Post Office insisted it was pressure of work.”

                    • greywarbler …
                      12 November 2013 at 12:29 pm

                      photonz
                      What right wing pamphlet did you obtain your education from? Dribbling this sort of information from your feeding tray onto our nice clean working blog is not of any use. Clean up your act, your facts, your thinking, which you ought to try doing for yourself – not just repeating stuff that some big boys you admire have fed you.

                    • Colonial Viper …
                      12 November 2013 at 12:47 pm

                      Hey photonz.

                      Apart from all your lies. Please stop advocating for exporting billions of dollars overseas.

                    • Lanthanide …
                      12 November 2013 at 2:23 pm

                      Have a look at how NZPost is run today, with KiwiBank, and ask yourself what might have happened had they continued to own Telecom.

                      Would a government-owned Telecom have looked as you suggested, or would a government-owned Telecom look more like the current Telecom we have?

                    • Draco T Bastard …
                      12 November 2013 at 2:52 pm

                      I can tell you.

                      No you can’t. Selling Telecom achieved nothing that wasn’t already happening. Digital exchanges were being installed prior to 1990 and was scheduled to be finished by 1996 (actual finish was 1999). So was the fibre backbone that allowed toll prices to drop. We were even installing fibre to the cabinet in the 1980s. Continuation of that to FttH was envisioned even at that stage although the thinking then was more about cable TV than the internet.

                      Service levels would have continued to be abysmal.

                      Service levels were excellent within the physical limitations. Those limitations continue to this day. Really, try and ADSL out in a rural area.

                      I’ve worked for Telecom both in the 1980s and in the 2000s so I actually have first hand knowledge of this.

                      fault fixing times dropped from days and weeks to same day.

                      No, actually, they didn’t. Faults are fixed as soon as possible within the physical limitations of having someone to fix them. Some faults would never be fixed. Had one customer who had a faulty line and had been complaining about it for months. The problem was two fold though: The cable that fed the cabinet was faulty and it was full. This cable was not, at the time, scheduled for replacement.

                      But under the government, it was appallingly run.

                      No, it was actually quite well run. It could have done with some improvements but that’s true of pretty much all organisations.

                    • Tracey …
                      12 November 2013 at 2:55 pm

                      Photonz

                      Am beginning to see why you might be the lowest paid in your company

                    • Draco T Bastard …
                      12 November 2013 at 3:06 pm

                      NZ waited years didn’t still get them. As soon as telecom was privatised, they were introduced.

                      And the only way it could have been instantly introduced was because Telecom, before the sale, planned on it and installed the necessary digital exchanges.

                      Treasury argued that it was inefficiency, and the Post Office insisted it was pressure of work.

                      And Treasury was wrong. In the 1980s and even into the 1990s the network was still immature and required massive amounts of physical labour. New technologies such as the digital exchanges changed that. Sale to the private sector didn’t.

                      PS, getting “posting too fast” on every post now.

                  • TheContrarian …
                    12 November 2013 at 12:51 pm

                    “Well, I can’t think of what else would have happened if telecommunications wasn’t deregulated and Telecom left to continue as is using the surplus that it was getting to upgrade the network”

                    They might have made a bad investment, they might have put the money towards other endeavours, a new CEO might have upped the pay the board makes in light of the surplus, an incoming government might have taken the surplus and put it into health or education, Telecom might have been broken up in an anti-trust/monopoly case etc etc etc.

                    • Draco T Bastard …
                      12 November 2013 at 2:56 pm

                      They might have made a bad investment,

                      Telecoms CDMA investment anyone?

                      a new CEO might have upped the pay the board makes in light of the surplus,

                      Like the $5m to $10m CEO pay packets they have ATM?

                      an incoming government might have taken the surplus and put it into health or education, Telecom might have been broken up in an anti-trust/monopoly case etc etc etc.

                      That goes against the given conditions that it remain the same.

                      So, no arguments at all against my logic.

                    • TheContrarian …
                      12 November 2013 at 3:52 pm

                      What are you talking about? We have already shown your logic is a fallacy.

                      Namely:
                      “You can’t make a conclusive statement on actions that never happened. You can make an educated guess but you can’t go around stating something as conclusive fact when you can’t possibly know the outcome.”

                      And I have given you a range of things that could go differently from the two you claim are the only outcomes.

                      Your logic is demonstrably wrong.

                    • Draco T Bastard …
                      12 November 2013 at 5:52 pm

                      And I have given you a range of things that could go differently from the two you claim are the only outcomes.

                      No you haven’t. you gave a range of options some of which had happened under privatisation (bad decisions and upped CEO/management pay) and thus doesn’t count as the surplus would still be able to match the $17b in dividends and some of which were excluded from the supposition that Telecom would continue as is utilising it’s entire surplus to upgrade the network.

                      Your logic is demonstrably wrong.

                      Then demonstrate it to be wrong because so far you’ve absolutely failed to do so.

                    • TheContrarian …
                      12 November 2013 at 6:28 pm

                      “Then demonstrate it to be wrong because so far you’ve absolutely failed to do so”

                      Third (or maybe fourth?) time’s a charm.
                      “You can’t make a conclusive statement on actions that never happened. You can make an educated guess but you can’t go around stating something as conclusive fact when you can’t possibly know the outcome.”

                      That is the failing in your logic. You have committed a logical fallacy. Namely stating a conclusive proof on actions that haven’t and can no longer occur and stating there are only two possible outcomes. But there are several outcomes.

                      Those potential outcomes include:
                      “They might have made a bad investment, they might have put the money towards other endeavours, a new CEO might have upped the pay the board makes in light of the surplus, an incoming government might have taken the surplus and put it into health or education, Telecom might have been broken up in an anti-trust/monopoly case etc etc etc.”

                      It doesn’t matter if some of those options happened under privatisation – they still could have happened regardless of public or private ownership. Your whole argument rest on two outcomes. That is a logical fallacy considering there are more than two outcomes.

                      For fucks sake, Draco. Your logical failing has been shown to you several times over.

                    • TheContrarian …
                      12 November 2013 at 7:05 pm

                      “the supposition that Telecom would continue as is utilising it’s entire surplus to upgrade the network.”

                      Supposition –
                      a belief held without proof or certain knowledge; an assumption or hypothesis.

                      Therefore you cannot claim it to be conclusive proof.

                      You are demonstrably wrong on so many levels.

                    • Draco T Bastard …
                      12 November 2013 at 7:14 pm

                      You have committed a logical fallacy. Namely stating a conclusive proof on actions that haven’t and can no longer occur

                      I accepted that a few comments ago and said that my logic was indicative of the dead-weight loss of profit. The two outcomes were part of the assumption that Telecom continue as it was and they are still the only possible outcomes.

                      It doesn’t matter if some of those options happened under privatisation – they still could have happened regardless of public or private ownership.

                      In fact they did happen under privatisation while the dividends were and are still being pulled out which means that they can be ignored.

                      Your whole argument rest on two outcomes.

                      No it doesn’t. It rests on the supposition that Telecom would continue as it was prior to privatisation with deregulation also removed. That specifically means that the government doesn’t pull out the surplus as dividends because they weren’t doing so and the anti-trust couldn’t possibly apply because telecommunications would still be regulated, i.e, no competition.

                      That is a logical fallacy considering there are more than two outcomes.

                      No there isn’t if Telecom continues as it was before.

                      You have not proven my logic false. You’ve come up with some scenarios (bad decisions and mega management pay (really, how much would the board have to be paid to soak up $17b in 20 years?)) that don’t change the outcome and that is all.

                    • TheContrarian …
                      12 November 2013 at 7:45 pm

                      “It rests on the supposition that Telecom would continue as it was prior to privatisation with deregulation also removed”
                      “No there isn’t if Telecom continues as it was before.”

                      Supposition –
                      a belief held without proof or certain knowledge; an assumption or hypothesis

                      So, not ‘conclusive proof’ rather a supposition based upon a certain scenario which ignores all other variables.

                      Finally.

                    • Draco T Bastard …
                      13 November 2013 at 11:45 am

                      So, not ‘conclusive proof’ rather a supposition based upon a certain scenario which ignores all other variables.

                      A scenario based upon what was actually happening before deregulation and sale. It is quite logical and reasonable to extend that out to make a projection upon what might have been which is what I have done. I keep telling you this and you keep ignoring it for your own delusion.

                      You have still failed to contradict that logic.

                      I won’t bother answering any more from you as it will be your usual spin and distortion.

                    • TheContrarian …
                      13 November 2013 at 1:28 pm

                      That isn’t conclusive proof Draco. It is impossible to claim conclusive proof on something that hasn’t happened. No matter how much you claim otherwise – your logic is faulty. A projection is not proof.

                      There are no two was about it – that is a fact. No matter how to try and reword a supposition, by definition, is not a proof. Jesus man, what is the matter with you? My delusion? My delusion that you can’t claim proofs on that which you suppose?

  8. jerry Ross 8
    11 November 2013 at 6:56 pm

    ACC is the most cost effective system in the world. where is there a better system in use ? Today there is a govt running it that wants to kill it and it is still the best system in the world. I do not have any source to back this up but have lived in north America for many years and they certainly do not have any thing close to our level of service for all the people. Being a regular visitor to the Mayo Clinic in Phoenix, with their plush carpets and fine artworks, did not sell me on their system where half the population are not even allowed in the door. Is that the type of system we need? ACC is a far superior system even without the art and carpets in our hospitals.

    • greywarbler 8.1
      12 November 2013 at 1:30 pm

      Talking about why our telephone system might not have been what Treasury wanted, many of whom had trained in the USA, here’s part of an excellent summary.
      http://www.wordworx.co.nz/KiwitelcoTimeline.htm
      Taming the lightning – Keith Newman

      The 1980s: A lack of investment by the Post Office meant the network was not in a position to handle the growth needed for the next generation of services. By the mid-1980s the network was overloaded, there was massive congestion. In Auckland the exchange was verging on collapse and across the country there are frequent network crashes. The Post Office, a government department limited in what it could invest, became increasingly inefficient. The government began to look at the problem and ways to create a more efficient department and as part of its economic reforms began looking at ways of putting it on a commercial footing. Under the State-owned Enterprises Act of 1986 it created several state trading companies including Telecom.

      1980: The Broadcasting Corporation of New Zealand (BCNZ) formed to merge TV1 & TV2 channels under a single corporation. The Post Office supports about 800 leased lines and 1800 modems. When DARPA needed a team to implement its brand-new TCP/IP protocol stack on the VAX under Unix, it chose Berkeley Unix as the platform largely because its source code was available and unencumbered. This was a major turning point in the evolution of Unix and the various tools that improved connectivity, thereby assuring the success of the nationwide and global goals of APRAnet, and TCP/IP as a communications protocol for the future.

      1981: New Zealand’s first and only indigenous home computer systems were created. The Poly. Development of the Poly named after Wellington Polytech where it was developed was targeted at school use with a colour screen and ‘obscure proprietary networking system. The Aamber Pegasus, supported multiple computer languages and had a network version which connected to a server. Both attempted to meet the requirements of the government’s computers in schools initiative which never produced orders large enough for the machines to become a commercial reality….

      A couple of quotes that reflect how much better NZ phone system was coping after private interests took it over. Like any system could have coped smoothly under the impetus of the internet growth, government or private!
      ‘I’m sorry but your call cannot be connected right now because of overloading’ please try again later,’.
      Telecom’s phone message that reappeared frequently in the late 90s as the public network was groaning under the weight of exponential internet growth.
      and
      Scott Mathias, rich media pioneer on moving his business to Australia in 1999.
      ‘NZ is an impoverished and undernourished internet community because of what hasn’t come out of Wellington. We’re dealing with people in the US who have larger pipes than the whole of NZ. We have a coantrolled situation here where the key players are extracting as much as they can from the Internet community.’
      and
      In the lunatic years of the 1980s no-one listened because so many clever young men in glass towers, moving pieces of paper around, had everyone’s attention. It is important however, not to lose sight of the fact that no true wealth is ever created until somebody makes something physical. That’s what creates careers and jobs.”
      Electronic pioneer Sir Angus Tait, June 1999.

      Me – It’s a pity isn’t it that government finds it so difficult to encourage NZ businesses to develop stuff instead of wanting to snuggle up to big companies and spend our hard-earned taxes to go overseas. Britain would never have survived the world wars if it hadn’t developed its own machinery of all sorts. Even big countries try to foster their own innovation. It’s even more important for small ones that want to amount to something other than a pile of cowpats.

      • photonz 8.1.1
        12 November 2013 at 1:48 pm

        The left wants to decimate the savings of anyone who invests in renewable energy with their power plan (or anyone who invests in the fibre optic network),.

        Then they complain that it’s hard to get people to invest in NZ.

        Go figure.

        • Colonial Viper 8.1.1.1
          12 November 2013 at 1:56 pm

          These foreigners aren’t investing in building new assets in NZ. They are doing an asset grab on the cheap, for infrastructure we have already paid for as a nation.

          And you are backing that, as a disloyal shit head.

          • photonz 8.1.1.1.1
            12 November 2013 at 2:55 pm

            If you beliee that, then the left should be encouraging Kiwis to invest as much as possible NZ assets instead of doing everything possible to screw them if they do.

            • thatguynz 8.1.1.1.1.1
              12 November 2013 at 3:22 pm

              You’re entirely right – that is one option for what people should be investing in. Not ones that they already own via the common good however.

            • Tat Loo (CV) 8.1.1.1.1.2
              12 November 2013 at 7:40 pm

              If you believe that, then the left should be encouraging Kiwis to invest as much as possible NZ assets

              Yes. That’s one purpose of taxes. Having the public invest in the common good.

        • greywarbler 8.1.1.2
          12 November 2013 at 6:04 pm

          Have you got a list of silly annoying questions that someone has collated to trot out in the absence of any brain of your own to work through some real dialogue.

  9. photonz 9
    11 November 2013 at 11:26 pm

    Draco says “One other thing, due to the governments ability to create currency there is no need for re-insurers …………..”

    Hell – with the ability to print money, why bother taking tax at all – the govt could just print money for ALL it’s needs.

    Genius – just like Mugabe.

    • Tat Loo (CV) 9.1
      12 November 2013 at 7:48 pm

      Hell – with the ability to print money, why bother taking tax at all

      I’m glad you asked. Taxation is not strictly required for government revenues because, as you have already pointed out, a government can issue whatever currency it requires.

      However a strong taxation system is still extraordinarily useful to the nation:

      1) It gives the NZ dollar value and desirability in the private sector. This is because the private sector has to pay its taxes with NZ dollars, and causes the need for employment paid in NZ dollars.

      2) It gives the government an excellent mechanism with which to control the quantity of money in circulation i.e. the level of liquidity in the economy.

      3) It allows the government to incentivise desired activities and behaviours in the economy, while restraining others.

      Therefore, even if a government were to print (i.e. electronically create using key strokes) all the dollars it needed to spend, taxation would still be crucial.

  10. TightyRighty 10
    12 November 2013 at 7:09 am

    @draco, you print a little bit of money for this, a liitle bit for that…. The added velocity of the printed money to the economy will cause inflationary pressure far outweighing what little effect “raising premiums” might have.

    Your assertations are rubbish always. Every single thing you assert with “incontrovertible” proof could only eve cooked up by someone with no real world experience. Just theoretical day dreams.

    • Draco T Bastard 10.1
      12 November 2013 at 10:49 am

      The added velocity of the printed money to the economy will cause inflationary pressure far outweighing what little effect “raising premiums” might have.

      Doesn’t seem to have that much effect when the private banks do it – except in housing of course. I also made certain that the money would be drawn from the economy by the increase in premiums thus the inflationary pressure should be minimal.

      • photonz 10.1.1
        12 November 2013 at 11:01 am

        That’s because with a bank it has to be paid back, so actually represents something – work done.

        When a government prints money it represents nothing, except theft. Theft of value of everything else in the country.

        When a govt doubles the money supply, the actual total value of everything in the country hasn’t changed. But inflation means the dollar value of everyone’s assets halves. Effectively the govt steals half the previous dollar value of everyone’s assets.

        So when you print money so say a govt insurance provider can pay out, you have created nothing, nada, zilch, zip. All you are doing is, via inflation, stealing off everyone else.

        It’s a corrupt and crooked idea.

        • Draco T Bastard 10.1.1.1
          12 November 2013 at 11:24 am

          When a government prints money it represents nothing, except theft.

          I’ve clearly explained how it would be paid back.

          When a govt doubles the money supply, the actual total value of everything in the country hasn’t changed. But inflation means the dollar value of everyone’s assets halves. Effectively the govt steals half the previous dollar value of everyone’s assets.

          Perhaps you can explain the exponential increase in m3 then? That really isn’t the government printing it but the private banks. And, yes, that printing of money pushes up asset prices without changing the underlying value. Interestingly enough, mostly in house prices.

          So when you print money so say a govt insurance provider can pay out, you have created nothing, nada, zilch, zip.

          Incorrect, it has created work and the distribution and use of the nations resources.

          It’s a corrupt and crooked idea.

          No, the present system of the private banks creating money and charging interest on it is. the government creating money transparently and destroying it through taxes and direct payment for services is the non corrupt idea.

          • Colonial Viper 10.1.1.1.1
            12 November 2013 at 12:12 pm

            +1

            photonz has actually missed a key point: we are losing wealth every day in this country by not engaging approx 250,000 people who want full time jobs, in full time jobs.

            These are people with creativity, intelligence, energy who could be working building things, making things, maintaining things, caring for others, etc.

            By not spending sufficient money into the economy none of these things get done. That opportunity cost (‘output gap’) in not adding that potential wealth to the nation is hugely costly.

            Photonz, being a RWNJ, doesn’t understand basic real economics however.

  11. photonz 11
    12 November 2013 at 12:02 pm

    Draco says “Incorrect, it has created work and the distribution and use of the nations resources”

    You are confused. Work is done for the money, in the same way you can use a bank loan to employ someone to build a house.

    The difference is the bank loan has real value because represents money that has to be paid back in the future.

    The govt printed money represents no real value, except assets stolen off everyone else though inflation.

    If you were correct, the government would never ever need to collect tax again – they could just print money for everything.

    Just like Zimbabwe did. I was there at the start of the year and a $5 trillion note wouldn’t buy a loaf of bread that cost $1 just a few years earlier.

    • greywarbler 11.1
      12 November 2013 at 12:23 pm

      photonz
      I know there is an answer to what you have said that countermands it, actually demolishes it which can be expressed better by DTB. And I am sure he has a number of times already.
      You are failing to look at the government-issuing- its-own-money situation when it is done appropriately and spent appropriately.

      If you understand analogies, then it is applying the cream to the part of the body with the septic bite. It is useless and pointless to spread it all over. Zimbabwe is a worst case. It is not helpful to use the most dramatic worst case and then suggest that would apply anywhere.

      • photonz 11.1.1
        12 November 2013 at 1:25 pm

        So can you explain why governments don’t print money all the time, instead of only when they are totally desperate?

        Can you explain why even the Greens have given up the idea?

        Was it because it was so ridiculed by people from both sides of the political spectrum?

        Do you remember when mortgage rates were 20%. Try paying an Auckland mortgage at that rate.

        See what happens to house inflation then, of if wages can keep up when every three months you’re effectively getting paid 5% less..

        • greywarbler 11.1.1.1
          12 November 2013 at 1:41 pm

          photonz
          You read stuff, repeat it but don’t understand the whys and wherefores.

          Your thinking reminds me of A Fish Called Wanda.
          Wanda: But you think you’re an intellectual, don’t you, ape?
          Otto: [superior smile] Apes don’t read philosophy.
          Wanda: Yes they do, Otto, they just don’t understand it!

        • Colonial Viper 11.1.1.2
          12 November 2013 at 1:58 pm

          So can you explain why governments don’t print money all the time, instead of only when they are totally desperate?

          Governments do print money all the time, but they usually rely on the private banks for new money supply into the economy.

          Do you remember when mortgage rates were 20%. Try paying an Auckland mortgage at that rate.

          Interest rates can be set at any level the Reserve Bank wishes, using modern monetary management methods. You really are 30 years out of date.

          • photonz 11.1.1.2.1
            12 November 2013 at 2:08 pm

            Go ahead – make printing money a left wing policy.

            We’ll sit back as you get laughed at as much as Russel Norman did.

            In the end he couldn’t handle the ridicule and dropped the policy.

            If you think the Reserve Bank would or even could set a low interest rate when we have high inflation from printing money, you’re even more delusional.

            • Tracey 11.1.1.2.1.1
              12 November 2013 at 2:10 pm

              you man like the tories in the UK and the democrats in the USA? That “left-wing”?

              • photonz …
                12 November 2013 at 2:47 pm

                Tracy – you have confusing quantitative easing, (which lowers interest rates), with printing money (which increases inflation, and hence interest rates).

                • Tracey …
                  12 November 2013 at 2:49 pm

                  Thanks photonz

                  But you seem to be the one confusing printing money with quantitative easing

                  “Russel Norman says the Green Party realised it does not have support for quantitative easing – money printing – and it was never going to be implemented.
                  The co-leader announced a back-down on the policy this morning, describing it as an example of listening.

                  “The Greens do listen so today we are not pursuing the QE element of our monetary policy.”

                  • photonz …
                    12 November 2013 at 3:38 pm

                    It would be silly to start QE when the interest rates can still come down.

                    The Greens talked of printing money then of QE as if they were the same thing and having the same effects. They’re not and they don’t.

                    It made you wonder if they even knew there was a difference.

                    Anyway, QE is a last resort when you can’t lower interest rates any more.

                    Not only can we still lower interest rates, but at next change it’s likely they will need to go in the other direction – up – not down.

                    • One Anonymous Knucklehead …
                      12 November 2013 at 4:18 pm

                      Perhaps that’s why the Green Party called for:

                      Quantitative Easing (QE) in the form of the Reserve Bank purchasing Government earthquake recovery bonds to pay for the government’s costs in the rebuild of Christchurch and, separately, refilling the Natural Disaster Fund.

                      It makes me wonder if you made up the lie that they called for printing money, or whether you’re just another Tory parrot.

                      Dupe, or duplicitous, which is it?

                    • Draco T Bastard …
                      12 November 2013 at 6:02 pm

                      The Greens talked of printing money then of QE as if they were the same thing and having the same effects. They’re not and they don’t.

                      Yes they are. The US printed trillions of dollars (Quantitative Easing) to push up inflation (it almost failed to do so) and lowered interest to near zero to increase borrowing.

                    • Rogue Trooper …
                      13 November 2013 at 4:15 pm

                      😀 , some sense at last.

                • dv …
                  12 November 2013 at 2:53 pm

                  So photons quantitative easing does not print money?
                  Glad to have have that cleared up.

            • KJT 11.1.1.2.1.2
              12 November 2013 at 3:46 pm

              Ridicule by a bunch of ignorant, or deliberately two faced, twits, who do not remember economic history and, like Photo, have a very shaky grasp of economics.

              QE/printing money, they are basically the same thing, was how the USA, that bunch of rabid socialists, got out of the 30’s depression and financed their war spending.
              The UK borrowed to finance their war instead. Note which had the healthiest economy in the 50’s.
              NZ got out of the 30’s depression earlier than most of the rest of the world by, wait for it, extensive public works schemes paid for by “printing money”.

              Neither turned into Zimbabwe. I seem to remember a period of, quote “unprecedented prosperity” for decades after. Which lasted, in fact, until the banks were de-regulated and allowed to “print money”. Not many savers seem to have lost in that time either.

              A thriving and productive economy and fairly paid workers, seems to help savings, surprise!

              • photonz …
                12 November 2013 at 4:11 pm

                That’s funny – you complain of ignorance then come out with something really really silly like QE and printing money are the same thing.

                If they are the same, can you explain why QE sends interest rates down and printing money sends them up?

                Clue – it could be something to do with the fact that QE merely swaps bonds for cash – while it puts more money into circulation, nothing new is created.

                Whereas printing money is just that – it creates money out of nothing.

                • Draco T Bastard …
                  12 November 2013 at 6:17 pm

                  If they are the same, can you explain why QE sends interest rates down and printing money sends them up?

                  Whatever gave you the idea that printing money would send interest rates up? It’s excessive borrowing that does that. Printing money will drop them as it decreases the need to borrow.

                  Whereas printing money is just that – it creates money out of nothing.

                  But that’s all fiat money ever is. The process of creating it and, yes, destroying it is important. The fact is that the private banks create lots of it (that’s where that exponential increase in m3 comes from) and it comes bearing interest which cannot be paid back.

                  The process we have at the moment rewards only the banks and is unsustainable.

    • Colonial Viper 11.2
      12 November 2013 at 12:52 pm

      The difference is the bank loan has real value because represents money that has to be paid back in the future.

      That’s a nonsensical comment. The bank loan is just electronic credits created out of thin air. No intrinsic value whatsoever.

      The govt printed money represents no real value, except assets stolen off everyone else though inflation.

      That’s a nonsensical comment. A $100 note printed by the government is far more valuable than $100 electronic credit held by a TBTF bank.

      If you were correct, the government would never ever need to collect tax again – they could just print money for everything.

      That’s a nonsensical comment as taxes and a tax system are still very useful. Japan, US, Canada, Australia, print a lot of money and they still have tax systems.

      Just like Zimbabwe did. I was there at the start of the year and a $5 trillion note wouldn’t buy a loaf of bread that cost $1 just a few years earlier.

      It takes significant war, productive economy destruction and/or a major currency collapse to get into a situation like Zimbabwe. They pretty much had all three.

      Do we have any of those happening here? No, didn’t think so.

      • dv 11.2.1
        12 November 2013 at 2:58 pm

        CV I have always thought that if you wanted say build a bunch of houses, issue the required money to do the job and then withdraw the money from the economy from the income derived from the assets.

        • Draco T Bastard 11.2.1.1
          12 November 2013 at 3:33 pm

          There’s a couple of ways that the money created by government could be withdrawn from the economy:
          1) Taxes (Build and fund schools/health service)
          2) User pays (This is the one I’ve described for this suggested state monopoly)

          Easy to balance government created money. Impossible to balance private bank created money with interest.

    • Draco T Bastard 11.3
      12 November 2013 at 3:18 pm

      You are confused. Work is done for the money, in the same way you can use a bank loan to employ someone to build a house.

      No I’m not. You are.

      The difference is the bank loan has real value because represents money that has to be paid back in the future.

      No it doesn’t. The bank loan represents money created ex nihilo that needs to be destroyed (paid back) with the added costs of interest which physically can’t be paid back. The government created money represents money created ex nihilo that needs to be destroyed (paid back) but that will be, in this case, paid back by the premiums. It doesn’t have the added and non essential costs of interest on it though so it can actually be paid back.

      Effectively, there is no difference to the money except the unsustainable interest on bank loans.

      If you were correct, the government would never ever need to collect tax again – they could just print money for everything.

      Incorrect. The government would still need to tax to destroy the money created – just like the bank loan.

      Just like Zimbabwe did.

      Nope, Zimbabwe creates money irrespective of the tax base and thus gets massive inflation. Completely the opposite of what I’ve said.

  12. Puddleglum 12
    12 November 2013 at 2:46 pm

    I found this interesting article by David Middleton, then General Manager of EQC, explaining the thinking behind the system. It was written in 2001, ten years before the Christchurch earthquakes.

    On pages 59 and 60 there’s a bit about how they ‘out-source’ the ‘scaling up’ problem of responding to disasters to private companies. That’s pretty much what happened in 2011.

    For anyone in Christchurch it’s worth a read. It’s also worth reading for its analysis of the insurance industry and its (in)ability – through reinsurance – to meet the needs of people in major disasters.

    • Rogue Trooper 12.1
      13 November 2013 at 4:19 pm

      and Roger Sutton is calling for private Insurance companies to up their completion game by 50%.- Midday Report.