Matthew's Journal

Isn't the insurance-buying just borrowing someone else's capital? Say I had a billion pounds (wish that were true). I could do lots of things with it. I could lend it out, I could buy factories, I could buy cocoa futures, well, you get the idea.

One of the things I could do is I could use it to sell insurance to banks. If they give me shedloads of money, I will promise to give them the billion, should they need it.

In the meantime, I could keep the billion more-or-less liquid by lending it to someone trustworthy (tm) like the government. Or, to make it nicely circular, to the bank.