How does Government spending stimulate the economy, and what's the risk to the tax-payer? Thank you.

To use your example of Sam and AIG, It seems to me that an increase in risk of the insured asset (say the bonds in your example) would result in not just higher collaterals for AIG, but an increased cost to SAM to insure the assets (bonds) since they are now a riskier investment from AIG's point of view. Is this true in fact?

Hi Shel Sam would pay as much as the insurer demanded. He'd pay very little for a AAA company in a boom. But for General Motors in a recession? Well, maybe not as much as 20% per year, but you can bet the insurer would want a fairly fat fee for that coverage. paddy