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Fault Lines by Raghuram G. Rajan

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CHAPTER SIX

When Money Is the Measure of All Worth

WHEN THE FRENCH MONARCHY was strapped for money in the eighteenth century, it found more and more creative ways to raise funds.1 One of these was to sell annuities—government bonds that paid out a fixed amount until the death of the person on whom the annuity was written. Annuities were very popular with the public, for they offered beneficiaries a guaranteed income for life in a time before there were old-age pensions. The monarchy liked them because it received payment up front.

The monarchy targeted these annuities at wealthy men—typically in their early fifties—who had the means to buy an annuity and who, given low life expectancies at that time, typically did not have very long to live. ...

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