Uninsured Disaster Losses - When Government Ceases to Pay
Manage episode 432838396 series 2987301
The fiscal cliff or abyss is not that far off, measured in years to a decade depending on your source, or political lens. Most economists, save those who support modern money theory (MMT), understand that perpetual deficit financing does have a life cycle, an end point where the interest on the debt will exceed the ability of the government to raise additional funds to cover it. We're approaching that in many OECD nations, where debt to revenue models, provide an uncomfortable picture. Debt to GDT ratio measures the output of a nation in total, that remains steady at an average of 121%. What is more concerning is the ratio of debt expenses to revenue.
Historically, whether enshrined in legislation or by moral code, governments have stepped in when there have been uninsured losses due to situations beyond the control of residents. Flooding, earthquakes, etc, where insurance was unavailable or prohibitively expensive, some relief is offered from governments to cover portions of the loss. Those figures are growing as well, within the context of the fiscal cliff, these are unsustainable. Timelines are up for debate, but a general consensus is within a decade, if governments continue deficit financing at the current rate, there will be a situation where a fiscal calamity is a certainly. The exponential growth in disaster losses will not slow and as available funds for governments to leverage are reduced, there is a point where support cheques to disaster victims becomes impossible.
A disaster, where no insurance was available, and irrespective of the legislative framework or the wishes of constituents, the government simply will not cover losses. Families and corporations will declare bankruptcy, walk away from everything and begin again.
In the United States, the uninsured losses in EM will reflect the uninsured losses in the medical system.
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