Econ_June_09_2018

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16 The Economist June 9th 2018
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The role of central banks
The Free exchange column in
your issue ofMay 26th recom-
mended that central banks
grant the general public access
to their digital currencies by
offering accounts to everyone.
Thus, in times of recession, the
interest paid on these digital-
currency accountswould
become a potent tool formon-
etary policy. However, offering
this service directly to the
public raises fundamental
questions. Acentral bank
might become a superpower
in retail banking, disrupting
traditional commercial bank-
ing by refinancing the credit
supply via deposits. Commer-
cial bankswould have to
increase interest rates accom-
panied by a fall in theirmar-
gins in deposit and lending,
endangering financial stability.
In periods of stress, there is a
high riskof digital bank runs.
The column also argues
that accounts for everyone
could distributemore
“helicoptermoney”, or newly
mintedmoney, to the public.
However, the distribution of a
central bank’smoney as a
giveaway to the public is not
merely an accounting
problem. It would involve
distributional decisions that
are usually the domain of
elected governments, not of
independent central banks.
PROFESSOR JOACHIM WUERMELING
Member of the executive board
Deutsche Bundesbank
Frankfurt
Data points
Another reasonwhy the life-
insurance industry is strug-
gling (“Declining years”, May
19th) is that it is unable to quan-
tify longevity risk fully in
relation to the solvency of life-
insurance portfolios. Life
insurance is too dependent on
actuarial statistics that extrapo-
late from the past and are
rather poor in assessing this
risk. The adage that past results
do not guarantee future perfor-
mance applies in this case.
A study by the IMF on life
expectancy argued that mor-
tality tables used by life-insur-
ance actuaries exacerbated
longevity riskwithin the
industry by underestimating
how long peoplewill live. So
rather than looking at the past,
models on longevity riskneed
to take account of factors such
as the pace and duration of
improvements in life expectan-
cy that can potentially occur in
the future.
WEIMENG YEO
Newark, California
One emerging trend in the
industry is “shared value
insurance”. Because life insur-
ersmakemoremoneywhen
people live longer, their profits
are alignedwith their custom-
ers’ good health. Life insurance
can encourage healthier life-
style choiceswith financial
incentives. The idea is to help
customers overcome cravings
for instant gratification and
stop being over optimistic
about their health, which
behavioural economists say
lead to unhealthy lifestyles.
The shift from infectious to
lifestyle diseases has been
significant. Just three choices—
physical inactivity, an
unhealthy diet and smoking—
nowcausemore than 50% of
deaths and 80% of the disease
burden, according to the
OxfordHealth Alliance. This
opens up a newrole for life
insurers, but one that is com-
plementary and supportive of
their core product of protecting
people against the unplanned
contingencies of life.
Thismodel has been
successfully implemented in
South Africa, where demon-
strable increases in life expec-
tancy have been observed,
and is nowbeing adopted by a
networkof some of the largest
global insurers in theirmarket,
including PingAn, AIA,
Generali, JohnHancock,
Manulife and Sumitomo.
ADRIAN GORE
Group chief executive
Discovery Vitality
Johannesburg
Our newcolumn onwork
I look forward to readingmore
of Bartleby’s reflections (May
26th). Manyworkers ponder
day in and day out that if
economic survival was pos-
siblewithout thewholesale
occupation of employment,
what would life involve and
would there bemeaning to it
of the sort that HermanMel-
ville’s Bartlebywanted? As the
growth of services, artificial
intelligence and better redistri-
butionmake these a tangible
reality, we have an unparal-
leled opportunity to spread the
benefits of economicwell-
being thatWesterners have
enjoyed for over100 years.
DEEP SAGAR
Berkhamsted, Hertfordshire
Politics in Singapore
Your Banyan columnist (May
26th) notes that “voting is
clean” in Singapore. Further-
more, that the ruling People’s
Action Party (PAP) haswon14
general elections since 1959
because it runs “the country
competently”. I thankBanyan
for the compliment. After all,
howmany former British
colonies are therewhere
voting has always been clean
and their governments consis-
tently competent?
But Banyan insists there is
more to the PAP’s longevity: a
“favourable electoral system”
and a cowed electorate, among
other things. The PAP won 70%
of the popular vote in the last
general election. Could a
“favourable electoral system”
have delivered that? Your
correspondents have been
stationed in Singapore for
decades. Did Singaporeans
strike themas a people easily
brainwashed into believing
that the PAP and Singapore are
“synonymous”?
Singaporeans arewell-
travelled, well informed and
some even read The Economist .
They continue to vote for the
PAP because it continues to
deliver themgood govern-
ment, stability and progress.
The PAP has never taken this
support for granted. As Lee
Hsien Loong, the prime
minister, noted recently, the
political system is contestable.
We have kept it so. The PAP
couldwell lose power, and
would deserve to do so if it
ever became incompetent and
corrupt.
FOO CHI HSIA
High commissioner for
Singapore
London
Some good advice
Bagehot thinks that a good
constitutional monarch is one
who keeps his thoughts to
himself (May19th). Monarchs
are not elected, so in a democ-
racy they should not have the
power to turn their opinions
into laws. Fair enough. But
denying royals the possibility
of expressingwell-informed,
competent views takes this
point too far, and deprives a
country of a valuable source of
independent thought, argu-
ably like NGOs, which are also
unelected and politically
unbeholden. Consider Prince
Albert’s soft-power contribu-
tion to industrial-age Britain.
Bagehot dismisses Prince
Charles’s views as unconven-
tional, though admittedly
prescient at times. Those are
two qualities not in abundant
supply in political soundbites.
Perhaps it takes amonarchy to
take up a certain kind of advo-
cacy, where votes do not factor
in. Agreewith himor not, I fail
to seewhy a thinkingmonarch
is any less “dignified” for it.
EDWARD CECIL
Madrid
Peculiar politicians
I suggest the hyphen is redun-
dant in this line fromyour
piece on “Cabinet splits and
party twists” (May12th) over
Brexit: “the European Research
Group consists of 60-odd
backbenchers”.
ANDREW BILLINGTON
Marsden, West Yorkshire7
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