There’s a reason why I believe in economic freedom; free markets and free people. Read here and then I’ll tell you why.
New Orleans is still far from being able to withstand a 100-year storm — in other words, a storm that has a 1% chance of happening next year, a 10% chance in any given decade, and a 30% chance during the duration of a standard mortgage. An individual might accept these odds, but not a rational insurance company for any price most property owners would be willing to pay. Thus the city couldn’t have found a better time to rehearse its vulnerability — in the heat of a presidential campaign. For if the present New Orleans is to remain viable, it will be because federal money makes it so.
Just add it to the list. Final liability for more and more of life’s risks is being assumed by the federal government, i.e., taxpayers. Investment banks and hedge funds now aspire to be “too big to fail.” Washington has completed its monopolization of the mortgage business and the student loan business. Car companies in a financial bind? Congress is ready to become their lender of last resort too.
New Orleans is just one city. Miami, Houston and Long Island are all a typhoon away from losses greater than Katrina’s $140 billion. One-third of Katrina’s damages were covered by private insurance. In the event of a Hayward Fault earthquake of 7 or higher, San Francisco and vicinity would be thwacked with losses upwards of $165 billion — of which only 10% are insured. Guess who will pick up the tab? And why not. Perversely, all such commitments seem a drop in the bucket compared to $85 trillion in unfunded Medicare liability.
No matter what, there are costs. Sometimes it doesn’t make sense to build a city in a certain area. Sometimes it doesn’t make sense to create a new financial instrument. But how are we suppose to know?
By failure. Capitalism’s sledgehammer destroys bad decisions quickly and mercilessly. And we need that because continuing to waste good resources on bad decisions is a recipe for economic disaster. The quicker we find out that we made a bad move (building a home in a notorious hurricane path or handing out loans without any background check and then repackaging said loans to make them look like top rated debt) the quicker we can fix things.
But that wouldn’t be “fair” or “compassionate.” Actually, in my opinion, bailing people out is the meanest thing you can do to them. All you are doing is setting them up for continued failure. That’s what our activist and progressive federal government has done with the big banks and that is what it does with cities struck by a natural disaster. Eventually this golden goose of compassionate idiocy will end because our benighted federal government won’t have the money to let people continue to make bad decisions.
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