Thread by @gbponz

THREAD: CORNUCOPIA. how far away are government and people from economic reality? @amlivemon @Halsrethink @BaldingsWorld @nglinsman @bondstrategist @DavidBCollum @jeuasommenulle @macrodesiac_

https://twitter.com/gbponz/status/1302358209429147651?s=20

(1/12)

Like everybody else, I am bombarded by messages by governments and others that they would receive money in various guises and that it should be spent wisely, or that some expense will be defrayed by someone else, "insurance" being a case in point. (2/12)

I had the luck many years back of meeting Alfonso #Desiata, one of the fathers of Italian insurance, and a phrase he told me stuck to my mind: "There is no insurance without mutuality". It's not the insurance company that covers your car: it's the other car owners.(3/12)

So, when you look at an insurance company and think it acts as principal, think again: it's a secretary to the the insured. Aside from that, for a profit he provides bridge financing. So, when rioters say that "insurance will cover shops", they are incurring two errors.(4/12)

on top of the agent/principal, they think that "someone outside" will be continuously pour resources into the system they are draining, a thing I call "the Cornucopia fallacy" which is common to many facets of life now.en.wikipedia.org/wiki/Cornucopia (5/12)

Like "money from Europe" for the Europeans, the #nudge sale (see #recoveryfund ) is that some external agent conjures resources out of thin air that are subsequently assigned to public entities, to be distributed for the "common good". bit.ly/2Z9jt6Y (6/12)

But those resources as in insurance come from the SAME income generating capacity that supposedly should be helped by spending them. To make an extremely crude version, you could cut the middleman by simply saying "if you see an investment opportunity, take it". #YogiBerra (7/12)

That has an intriguing consequence: the unspoken assumption is that Governments can see profitable investment where Private agents cannot, irrespective of tax/incentive distortions, which for states are irrelevant since net effect is zero.(8/12)

All this on the back of the easiest monetary policy a @RudyHavenstein would devise plus over a decade of state actors' unsuccessful attempts at jogging a meaningful economic recovery. #Mazzuccato
Yet if you ask them the recipe is "much more of the same".(9/12)

More importantly, all previous spending decisions have been blessed as "sacred cows" (bad) and there is a consistent tendency to mislabel "spending increases" as "investments"(worse). (10/12)

The #GreenNewDeal, for instance, is a climate enhancer (no opinion on that either way) bought with ADDITIONAL CURRENT RECURRING COSTS AND INEFFICIENCIES.
You WILL have either less output per level or input, or same output bough more dearly.(11/12)

Yet, that is sold as an "investment". that does not bode well for the economy, but not as bad as the widespread conviction that yes, Virginia, Cornucopia exists.(end)