04-19-2016, 07:01 PM
Again, not exactly. Imagine if a casino did not have enough money to pay out their winners, what would happen? The winners would sue and take the assets of the casino. If the casino did not have enough assets to cover the balance then the winners would take the assets of the owners of the casino (limited-liability is fictional). The same thing would happen if an insurance company, without sufficient funding, was able to convince people into making monthly payments. In the end, the insurance company would get sued and forfeit their assets. Now, if the company put a clause into their contract that said that they would be unable to pay if fill-in-the-blank happened, fully-disclosed to the customer, then the insurance company would be in the right.
Regardless, neither example is the same as fractional-reserve banking which would be the equivalent of a casino issuing more chips than cash it has on hand or insurance companies which promise more benefits by using the money of new beneficiaries to pay old beneficiaries (Ponzi Scheme). It must be understood that fractional-reserve anything makes that institution more profitable in the short-term but more unstable in the long-term and this has devastating effects on the economy especially when money, one-half of every transaction, is the product being manipulated. If you want a stable, sustainable, free and moral civilization you must not allow businesses to claim to have more assets than they actually have. Again, Rothbard has the answer you are looking for. I appreciate the discussion though, I have not had this much fun on RPF's in a while. ;)