question about japan disaster's ability to stimulate the local economy.

[twister5400]

quick question. when all these insurance companies start paying out this money to insured victims, how will it stimulate the japanese economy?

[twister5400]

any help would be appreciated. was talking about the situation there with someone, and need some help. i understand broken window fallacy, but this was a good point about insurance, and one that i would like to know more about. anyone have any knowledge? pros, cons, will the money be paid out, etc...

[emazur]

Paying money to recoup from destruction, whether intentional or accidental, does not stimulate the economy as a whole b/c one person's gain is another's loss. That being said, if the insurance company was run honestly, they pay money back to insured victims who then can invest their money into for example building (or rebuilding) a business. That would be a recovery but I wouldn't call it "stimulus".

[Seraphim]

Go read about the broken window fallacy. If you still have questions then, come back and ask.

[Zippyjuan]

You have to be careful where you take your measurement of their economy from (as is true in the global economic crisis as well). It is tempting to comapre where they were before the quake (or in our case, where we were before the economic crisis hit) to see if it helps or not. Instead you must start at the bottom- after the crisis hit. That is your new starting point. We still don't know the extent of the damages or physical human or economic losses. The effected areas will probably take decades to recover. Insurance payments will make things better than they are now- but will not bring things up to where they were before the quake and tsunami hit.

[ctiger2]

I'd bet the insurance companies go bust and payout ZERO.

[Zippyjuan]

Some probably will go bust. The government (taxpayers) will be shelling out a lot of money too.

[osan]

quick question. when all these insurance companies start paying out this money to insured victims, how will it stimulate the japanese economy?

It won't. Rebuilding destroyed nations is not the same as advancing their economies. It is called "recovery" for a reason - you are attempting to regain that which was lost. The net result, at the very best, is called "treading water".

I suspect one or more Jap. insurance carriers may be circling the drain before all is said and done. But who knows... maybe Obammy will offer to bail them out. I mean, why stop at domestic boundaries, right?