Money, Bank Credit, and Economic Cycles - The Ludwig von Mises ...

586 Money, Bank Credit, and Economic Cyclesare those entrepreneurs who specialize in convincing economicagents of the importance and necessity of short-,medium- and long-term saving, as well as in efficiently connectinglenders and borrowers, spreading risk and takingadvantage of the corresponding economies of scale.LIFE INSURANCE COMPANIESAS TRUE FINANCIAL INTERMEDIARIESThe social significance of life insurance companies setsthem apart from other true financial intermediaries. In fact thecontracts offered by these institutions make it possible forbroad layers of society to undertake a genuine, disciplinedeffort to save for the long term. Indeed life insurance providesthe perfect way to save, since it is the only method whichguarantees, precisely at those moments when householdsexperience the greatest need (in other words, in the case ofdeath, disability, or retirement), the immediate availability ofa large sum of money which, by other saving methods, couldonly be accumulated following a very prolonged period oftime. With the payment of the first premium, the policyholder’sbeneficiaries acquire the right to receive, in the eventof this person’s death, for instance, a substantial amount ofmoney which would have taken the policyholder many yearsto save via other methods.Moreover life insurers develop and operate large commercialnetworks which specialize in emphasizing to families thefundamental importance of committing to long-term, disciplinedsaving, not only to prepare for the possible misfortunesassociated with death, disability, or illness, but also to guaranteea decent income in case of survival beyond a certain age.Thus we could conclude that life insurance companies are thequintessential “true financial intermediaries,” because theiractivity consists precisely of encouraging long-term saving infamilies and channeling saved funds into very secure longterminvestments (mainly blue-chip bonds and real estate). 104104 Austrian economists have always recognized the major role lifeinsurance plays in facilitating voluntary saving among broad sections of