In response to:

Flooded by Keynesianism

Ahenobarbus Wrote: Nov 03, 2012 1:34 PM
This is not even to address the insurance question. When Krugman and other Keynesians talk about the insurance money to rebuild all that's been lost, they treat the insurance funds as "found money". But it is not free; the insurance companies will lose tremendous amounts of funds, and the reinsurance companies that insure them will also be out tremenous amouns of money. This value will have to be replaced with future productivity. That means higher insurance prices to make up the value of the payouts. However those costs are distributed they will have to be met.
Richard31 Wrote: Nov 03, 2012 4:45 PM
Whups - didn't mean to flag you, Ahenobarbus.

You are quite right - except the money comes out of insurance reserves. So it's a double hit when a major payout happens. One, the companies are forced to sell investments (they obviously don't just keep cash under their mattress), which depresses the price of those investments (whatever they are - stocks, bonds, T-Bills). Two, you are right - they then have to raise rates to rebuild those reserves as quickly as possible - because the next disaster just might be around the corner. If, for example, we had a Cat 3 or above hit Florida this season, they would be in big trouble.

Hurricane Sandy was an invader, one that splashed ashore with as much destructive power as any foreign (or perhaps interstellar) invader could hope to bring to bear against our coasts. Thus, in the opinion of economist Paul Krugman, the storm should help boost the American economy.

“If we discovered that, you know, space aliens were planning to attack and we needed a massive buildup to counter the space alien threat and really inflation and budget deficits took secondary place to that, this slump would be over in 18 months,” the Nobel Prize winning economist declared on CNN in 2011....