Monday, December 10, 2012

The “Fiscal Cliff” and the coming collapse of the insurance industry

Current discussions about the “fiscal cliff” are misleading as usual and they distract many people from other problems that are just as important if not more important and they also put certain things off the table, as they say that have an enormous amount of political support from powerful special interests even when they provide little or no benefit for the vast majority. One of the most blatant is, As Bruce Gagnon indicated the military. The need for the military, and many other expenses that our society pays for, routinely overlooks the fact that our economy is supposed to do things that provide an improved quality of life or some other benefit. The military, as it has been run for decades, hasn’t done that at all; or at least a closer look at many of the details would indicate that it hasn’t if many people took this look.

(Edit since this was posted years ago the environmental destruction has been continuing; and the insurance industry is trying to use this as an excuse to sell more policies as they did before this article. However if you Google many of the disasters that happened at least one or two years ago, you'll find that there are an enormous amount of consumer complaints which the traditional media isn't reporting widely. This practice has been going on for decades, however it is approaching the point will it will eventually collapse one way or another..) 

Hermine Hits Florida, Heads Towards Mid-Atlantic Sept. 2 2016

Anyone that has read the Pentagon Papers would presumably know that the Vietnam war wasn’t fought to defend democracy at all since it didn’t take the support of the people in Vietnam into consideration, nor did it involve giving the American public the information they needed to make decisions about supporting the war. The support of the Shah led to the Iranian revolution; the Nicaraguan Contras were based on lies and of course there were no weapons of mass destruction in Iraq. Now the same pattern of behavior is reemerging in relation to Syria and Iran again. The versions of these conflicts currently being presented to the public aren’t the same as the version that has been given in the past and they omit many of the most important historical facts.

This is just one of the many problems that they ignore when discussing the fiscal cliff. They also fail to mention the fact that the distribution of income and the tax burden is incredibly unfair so that the people who do the most work don’t receive the most benefit at all; instead we have a system that has turned into a few oligarchies where the corporations no longer have to compete against each other but workers still have to compete with other workers that live around the world and have to put up with much worse working conditions than we do here in the USA. A simple example of this is the fact that workers in the sweat shops that produce our clothes don’t earn more than a few dollars a day and are forced to work long ours producing merchandise that is often low quality, or if it is high quality the price the consumer pays tends to be outrageous. This work improves the quality of life for consumers. The people that do advertising and other works that help increase profits for the corporations make much more money but the consumers don’t received improved products based on their work since advertising is designed to hype the product without adding value and convince the consumer to base their purchasing decisions based on lies; so it actually makes life worse for the consumer yet the costs of their pay is still passed on to the consumer and the details of the business is usually protected trade secrets; although they can’t keep them completely secret.

It also ignore the fact that an enormous amount of our economic activities that are factored into the Gross Domestic product including war as President Eisenhower indicated when he said, “Every gun that is made, every warship launched, every rocket fired signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed. This world in arms is not spending money alone. It is spending the sweat of its laborers, the genius of its scientists, the hopes of its children. The cost of one modern heavy bomber is this: a modern brick school in more than 30 cities. It is two electric power plants, each serving a town of 60,000 population. It is two fine, fully equipped hospitals. It is some fifty miles of concrete pavement. We pay for a single fighter plane with a half million bushels of wheat. We pay for a single destroyer with new homes that could have housed more than 8,000 people.” Chance for Peace speech

The implication of this quote is that Eisenhower recognized that, as a society, we have to pay for every thing one way or another whether it is in the public or private sector or not; whether it is for profit organizations or non-profit. As I just indicated in my recent “Truth in Advertising Store” post an enormous amount of the products that are currently being promoted on TV are scams and yet our economy pays for them although the brunt of the burden is bared for many of these products by people with limited thinking skills to recognize these obvious scams they inevitably lead to many more social problems one way or another either because people wind up on welfare or they fall for other scams that also result in expenses to society.

Over the past thirty years the costs of many expenses that do little or nothing to improve the quality of life have been increasing while the costs of many activities that do are being cut due to an irrational economic system and it is inevitably having an impact on the fiscal stability of this country one way or another. The costs of advertising; lobbying; campaign contributions; shipping merchandise around the world including an enormous amount of defective merchandise; psychological research to manipulate the public for political purposes; psychological marketing to children; and many other things have been rising due to the fact that they all help increase profits for the people that have overwhelming control over the economic system. This wouldn’t be possible in a system where corporations truly had to compete with each other based on the quality of their merchandise and an accurate perception of how much these products are worth because over the past thirty years the corporations have merged into a much smaller number of oligarchies so they no longer compete.

The result is that we have an economic system that isn’t providing many of the most important goods that are designed to improve the quality of life for a large percentage of the public and it doesn’t allow them to participate productively in the economy in a manner that provides any incentives.

For many people the “fiscal cliff that they have to deal with has nothing to do with the deficit instead it has something to do with whether they can eat and obtain clothes, shelter, health care and education due to the epidemic volumes of consumer fraud that has become standard practice.

The most the Congress and the White House is willing to discuss is whether they should raise the taxes on those that are benefiting from the corporate fraud from 35 percent to 39 percent. Even if they did this it would only provide a minor amount of money to repair the enormous amount of damage that they’ve done and it wouldn’t do anything to address the root problems of the economic system.

The corporations also get to take advantage of lax environmental laws in many other countries although the cost of this isn’t being considered yet, at least not by the most powerful institutions. An enormous amount of damage as a result of this is already being done to many other people in other parts of the world and now it is even happening more here in the United States and yet the most powerful institutions continue to ignore the damage being done by pollution and Climate Change.

This is actually a much bigger “cliff” or “slope” and the potential damage is much worse yet they refuse to even consider it. This was discussed previously in my recent Blog Environmental Apocalypse. The recent Hurricane, Sandy seems to have indicated that it almost certainly escalating and it is hitting areas that are much less likely to be hit by hurricanes, assuming that Climate Change is a contributing factor to this hurricane. Even if it isn’t there is still a major problem with pollutions and escalating storms, the escalation clearly isn’t indicated by any one storm but this one has almost certainly done much more damage than the vast majority of most storms due to the fact that it hit a much more populated area that also has much more expensive houses than many of the areas in the south.

This could lead to a potential collapse of the insurance industry.

It may not happen right away and even if it does begin it may not be reported right away any more than the Enron scandal was widely reported before the complete collapse or many other high profile scandals on Wall Street. The reason for this is because the corporate media has consolidated into a small number of corporations and they have an enormous conflict of interest due to their ties with the industries that have been involved in these scandals. Some of these scandals involve interlocking board member and the fact that the economic system is now controlled by a small percentage of the public that has a common economic ideology and they don’t appear to be willing to acknowledge many inconvenient facts in their decision making.

The sole concern of the most powerful people in this country overwhelmingly seems to be short term profit regardless of what happens in the long run either due to economic disaster, war or environmental disasters.

My prediction of a possible collapse of the insurance industry isn’t based on any inside evidence or a large number of complaints; although I’m sure I could find them; it is based on the basic principles of insurance and the assumption that the number of environmental catastrophes are escalating. Additional contributing factors include a pattern of behavior of deception and fraud on the behalf of the business community.

Insurance is a system of risk sharing that is essentially gambling in reverse. With gambling you put in a small amount and hope you win the jackpot which will be smaller than the total pool of money collected due to the fact that expenses and profit are taken out. With Insurance people do the same thing but they don’t want the jackpot; instead they want assurance that they will be protected in case of disaster. The insurance companies still have to take out money for expenses and since they’re mostly for profit institutions they want to keep as much money for themselves as they can get away with. These expenses include an enormous amount of advertising which is expensive and an enormous amount of campaign contributions and lobbying expenses which is designed to influence the political system. The cost of both these expenses has to be passed on to consumers yet they receive no influence or honesty with these expenses. In fact the result is quite the opposite.

Both the government run by politicians who collect these contributions and the corporate media that collect money for insurance ads now have a major conflict of interests and they have both already proven that they’re much more likely to look out for the interests of the insurance companies than they are the policy holders.

The corporate media has been selling an enormous amount of ads for insurance and it is conceivable that they might do even more of this when many people become more concerned about Climate Change but they don’t provide more than a token amount of coverage about the complaints from policy holders including those from Hurricane Katrina as an article in the Business section of the New York Times, “Insurance woes for Hurricane Katrina victims,” indicates. This may be a popular paper but a large percentage of the public probably doesn’t read it and many of them might not focus too much on the business section. Furthermore how often these stories are repeated tends to have a major impact on how likely people are to learn from it or hear about it; and this shouldn’t be considered more than a token story since it is hardly mentioned much elsewhere.

The government isn’t doing any better to hold the insurance companies accountable either; in fact a close look at their activities almost certainly indicates that they make it much easier for the insurance companies to get away with fraud. Like many other industries they have been determined to “deregulate” as much as possible this is accompanied the fact that there is an enormous amount of propaganda telling the public that regulations are making life much worse for them.

This is far from the truth and they are very selective about which regulations they are eliminating. For example regulations about disclosure of information to protect the public are much more likely to be eliminated while regulations about trade secrecy laws are much more likely to be preserved. This essentially means that they are much more likely to eliminate the regulations that benefit the campaign contributors and ensure that the public will not know what is going on. They do of course have an enormous amount of disclosure laws but they are very confusing and they result in an enormous amount of “fine print” that people rarely find out about until it is too late.

Neither the media or the government do much if anything to explain the most fundamental principles of how the insurance companies work to the majority of the public; instead they allow an enormous amount of propaganda that ignore these principles and convinces those that don’t figure them out for themselves that they’re getting their money’s worth. If they did explain these principles it would include informing people of the obvious conflicts of interest that both these institutions have.

The potential problems in the current economic environment could get even worse if the people who run the insurance companies aren’t held accountable and the Climate Change continues to escalate. With little coverage of the problem the majority of the public may continue to expect the insurance companies to provide some protection even though there are already major doubts about that and it will almost certainly get much worse.

These insurance companies aren’t supposed to work like pyramid scams; they’re supposed to ensure that they have enough money on hand to pay for the claims as they occur; however when the claims start escalating then it might be much more likely that they do even though it is supposed to be regulated in a manner to prevent this. If they can’t dispute many of these claims in court they may often be forced to cover them and they could conceivably do this by increasing the sales of new policies based on the fear of Climate Change. If this happens it could conceivably result in a situation where they’re selling new policies to cover old ones at a time when the disasters are escalating and the new policies will only result in more claims which would lead to a potential pyramid scheme and result in the break down in the system.

Even if this isn’t the way it turns out it is virtually guaranteed that one way or another that they will no longer be able to pay the claims if the disaster continue to escalate.

The basic principles are relatively simple and ultimately if the damage escalates they just can’t cover it one way or another.

If they acknowledge the basic principles of the insurance industry then it becomes the most effective insurance that the public could ever buy is always prevention based on the topic at hand. If you have a leak in the roof and you want to prevent further damage you simply repair the leak before it gets much worse and results in an enormous amount of water damage.

No insurance required.

If we do decide some insurance is necessary then it should be a form of Single-Payer system and efforts to minimize bureaucracy should be made. A public system wouldn't have to take money out of the pool collected to pay claims for advertising profits or other expenses dramatically improving efficiency if it was open to scrutiny to prevent fraud.

Some of the payments could come from taxes that increase risk so that disasters are less likely. If Climate Change is real, which reasonable scientists agree on; they could tax oil gas coal etc., use some of it to finance wind and solar and the rest to pay for the insurance pool saving money for everyone except the industries that have been previously gouging us.

If the problem is environmental damage resulting in environmental pollution you stop polluting as soon as possible and find alternative ways to run the economy.

Not complicated!

Or at least it wouldn’t be complicated if the most powerful institutions weren’t ideologically committed to an economic system, political system and media system that are downright stupid and ignore an enormous amount of inconvenient facts.

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