No, no, no. The government should not insure the wealth of people.
The New York Times published an article about a Greek man who lost a lot of money because his investments in SNS, a Dutch bank that was recently nationalised, were wiped out as Jeroen Dijsselbloem, the Dutch minister of finance, did not recognize the claims of junior bondholders of this bank. According to the article. But that’s not what really happened. SNS had invested a lot of money in all kinds of prestigious real estate projects which did not yield the expected returns and which therefore could not pay back SNS anymore, which meant that SNS could not pay its bondholders anymore. That is what really wiped out the value of these investments. And Jeroen Dijsselbloem only stated:
‘hey, I’m not the one who’s going to pick up that bill! You’re the one who has been stupid as you did not read the SNS accounts before investing and as you did not read the fine print stating ‘junior bond’. And yes, the Irish have been *daft* to bail out the creditors of reckless banksters, but well, you should always learn from the mistakes of others. Anyway – the government needs the money to invest in the future and to guarantee minimum incomes for people in real need. The government should protect people from the worst consequences of loss of income. But the government is should not insure loss of wealth“.
And indeed, the Dutch government should never, never ex post have given a 100% guarantee to Dutch people who invested their money in Icesave savings accounts, an Icelandic bank which went broke. And the Icelanders where completely right to reject the bill which the Dutch government presented to them because of this ridiculous ex-post guarantee: ‘hey, you’re the one who has been stupid!’. We learned from their wisdom. The government should guarantee basic income security. It should not insure perceived wealth.