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Thread: FACT CHECK: Health insurer profits not so fat

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    Re: FACT CHECK: Health insurer profits not so fat

    Quote Originally Posted by winston53660 View Post
    No that is not my argument.
    Well, why would business be afraid to invest in capital(technologies, labour, etc.) without credit then? Hell, they lose money with credit because they often have to pay it back with interest. Not only that, you would have to explain the incidences that companies have invested without credit in capital before.
    Last edited by DarkWizard12; 10-26-09 at 05:36 PM.

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    Re: FACT CHECK: Health insurer profits not so fat

    Quote Originally Posted by DarkWizard12 View Post
    Well, why would business be afraid to invest in capital(technologies, labour, etc.) without credit then? Hell, they lose money with credit because they often have to pay it back with interest. Not only that, you would have to explain the incidences that companies have invested without credit in capital before.
    Because with out available credit a business will save cash if they can not spread the risk.

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    Re: FACT CHECK: Health insurer profits not so fat

    Quote Originally Posted by DarkWizard12 View Post
    Well, why would business be afraid to invest in capital(technologies, labour, etc.) without credit then?
    Suppose the company does not have the assets available to invest at an adequate level to promote profit maximization. Does it not borrow?

    Hell, they lose money with credit because they often have to pay it back with interest.
    Nope! They pay more for the allotted capital investment, but it is wrong to assume they lose money. Suppose the current rate of production shows increasing marginal returns on capital, are you really going to argue that using debt to finance increased production up until production is in equilibrium with returns is not optimal?

    Not only that, you would have to explain the incidences that companies have invested without credit in capital before.
    They have the assets to do so. Now we would have to then analyze if it is beneficial to sell assets to pay for investment, or to go into debt to pay for investment. If the specific assets yield > debt interest + capital depreciation, then it makes all the sense in the world for the company to issue debt for expansion. If asset yield < debt interest + capital depreciation, then of course they would go for the opposite.

    But nothing you have stated negates the fact that credit is the life blood in developed economies.
    It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.
    "Wealth of Nations," Book V, Chapter II, Part II, Article I, pg.911

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    Re: FACT CHECK: Health insurer profits not so fat

    Quote Originally Posted by DarkWizard12 View Post
    Well, you have to look at what credit is. First of all, it's not money. Credit is never money and represents no currency. What it is is a "deferred payment", a "contract". Anytime you use someone elses asset and agree to pay later is credit.
    Thank you, that really cleared things up for me

    It has nothing to do with cash flow and everything to do with increasing consumption.
    Consumption and investment are different avenues. You have to take into consideration the difference in production/consumption objectives, of which a firm invests in an attempt to maximize profit, while the consumer consumes to maximize utility. To what extent either goes is what determines their relative outlook.
    It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.
    "Wealth of Nations," Book V, Chapter II, Part II, Article I, pg.911

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    Re: FACT CHECK: Health insurer profits not so fat

    Quote Originally Posted by Goldenboy219 View Post
    Thank you, that really cleared things up for me
    So how then, is credit the blood of the economy?

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    Re: FACT CHECK: Health insurer profits not so fat

    Quote Originally Posted by DarkWizard12 View Post
    So how then, is credit the blood of the economy?
    Various reasons.

    First and foremost, is in regards to payment structures. Not everyone pays their bills on time, and therefore it is quite common for small businesses as well as large business to make their accounts payable function off of credit. If I am building bridges, and the customer is for some reason late on their payment, am i supposed to sell my assets to pay my employees, lay them off until payment arrives, or do i charge my customer a late fee and use credit to float payroll?

    Investment: Credit is the primary agent in capital investment. This is quite observable in regards to the fluctuations in interest rates. As the cost of credit increases (interest rates increase), the marginal propensity to invest necessarily decreases. Which is a primary reason the Federal Reserve is currently maintaining a zero interest rate (it is also used to induce lending from banks and financial institutions).

    Future income expectations: Milton Friedman explains it nicely in his permanent income hypothesis.

    In its simplest form, the hypothesis states that the choices made by consumers regarding their consumption patterns are determined not by current income but by their longer-term income expectations. The key conclusion of this theory is that transitory, short-term changes in income have little effect on consumer spending behavior.
    [ame=http://en.wikipedia.org/wiki/Permanent_income_hypothesis]Permanent income hypothesis - Wikipedia, the free encyclopedia[/ame]

    And since about 70% of the US economy is based on consumption, this represents consumption as a function of credit availability.
    It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.
    "Wealth of Nations," Book V, Chapter II, Part II, Article I, pg.911

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    Re: FACT CHECK: Health insurer profits not so fat

    Quote Originally Posted by donc View Post
    Keep digging apdst.

    (If the guy made a profit for the company, when thy only expect a 6% profit margin, then he most certainly earned it.) Now you follow that up with. (its not illegal to hide money,I do it all the time).

    Who you who you hiding it from, the IRS? Is it drug money your hiding? is it offshore?Do you do bushiness with the Gnomes of Zürich
    That's exactly who I'm hiding it from and it's perfectly leagal. Welcome to the real world.
    Quote Originally Posted by Top Cat View Post
    At least Bill saved his transgressions for grown women. Not suggesting what he did was OK. But he didn't chase 14 year olds.

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    Re: FACT CHECK: Health insurer profits not so fat

    Quote Originally Posted by apdst View Post
    That's exactly who I'm hiding it from and it's perfectly leagal. Welcome to the real world.
    Psst..agent Mike here he is.
    The haggardness of poverty is everywhere seen contrasted with the sleekness of wealth, the exhorted labor of some compensating for the idleness of others, wretched hovels by the side of stately colonnades, the rags of indigence blended with the ensigns of opulence; in a word, the most useless profusion in the midst of the most urgent wants.Jean-Baptiste Say

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    Re: FACT CHECK: Health insurer profits not so fat

    Quote Originally Posted by Phoenix View Post
    So am I understanding this correctly?
    You believe the current 6% profit margin is ridiculous to operate under and at the same time you think they should charge less and lower their profits?
    What I'm saying, is that by expanding competition, you're spreading the risk over many companies and not just a few. With moe insurance companies operating in the industry, each company could see a higher profit margin, with lower risk.

    As an example, I'll use round numbers.

    Say there are ten health insurance companies operating in a state. There are 1,000 insurees that will obviously cost those companies money, because their health is so bad, or they have a pre-existing condition, etc. That means that each company would have to take on 100 new clients that are guaranteed to be a loss.

    Now, if there were 100 companies operating in a state, that would mean their would be only 10 guaranteed loss claims for each company. Two things would happen: 1) the profit margins would go up, and the loss would be easier to weather and 2) The insurance companies would be more likeley to sign a client knowing that that client is going to b a guaranteed loss.

    it's simple loss vs. profit business strategy. When running a business and you take a risk, you have to ask yourself, "how is the loss going to affect the company? Will it be a minor dip in profits? Will we survive the loss? I don't care what kind of business you're in, you have to ask yourself these questions, at some point.

    I'll give a personal example. yesterday, I got a call from a customer that needed two trucks to go to Alberta, Canada. The loads paid $19,000, together. A $19,000 week is a helluva week, especially in this economy. It's snowing in that part of the country right now. None of my drivers have experience driving in the snow. I had to ask myself if it was worth the risk of losing two trucks and two trailers to gross $19,000. replacement cost for each truck is about $30,000 and each trailer is around $15,000. I'll net about $10,000 dollars after expenses. Is it worth it to put my drivers and $90,000 worth of equipment at a heightened risk to make $10,000, when I can keep them here, conduting normal operations and clear $5,000? I decided to go for the $5,000 and not put my men and equipment into undue risk, because I can't survive the loss of $90,000 worth of equipment.
    Quote Originally Posted by Top Cat View Post
    At least Bill saved his transgressions for grown women. Not suggesting what he did was OK. But he didn't chase 14 year olds.

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    Re: FACT CHECK: Health insurer profits not so fat

    Quote Originally Posted by donc View Post
    Psst..agent Mike here he is.
    Oooooh, bring it on. I'm not doing anything illegal. I don't expect you to understand, though.
    Quote Originally Posted by Top Cat View Post
    At least Bill saved his transgressions for grown women. Not suggesting what he did was OK. But he didn't chase 14 year olds.

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