At gold parties, consumers exchange old jewelry for cash, but sellers beware
Friday, October 31, 2008
Wednesday, October 29, 2008
The Next World War? It Could Be Financial
The global financial outlook grows more dire by the day: The United States has been forced to shore up Wall Street, and European governments are bailing out numerous commercial banks. Even more alarmingly, the government of Iceland is presiding over a massive default by all the country's major banks. This troubling development points not only to an even more painful recession than anticipated, but also to the urgent need for international coordination to avoid something worse: all-out financial warfare.
The ramifications of Iceland's misery are probably more serious than people realize. The country's bank assets are more than 10 times greater than its gross domestic product, so the government clearly cannot afford a bailout. This is going to be a large default, affecting many parties. In the United Kingdom alone, 300,000 account holders face sudden loss of access to their funds, and the process for claiming deposit insurance is not entirely clear.
There is now a risk that continued corporate and bank defaults within nations ... will lead to a chaotic series of national and local defaults. If governments don't respond with sensible, coordinated policies, there's a risk of financial war.
But there's a broader concern. With European governments turning down his appeals for assistance, Iceland's prime minister, Geir Haarde, warned last week that it was now "every country for itself." This smacks of the financial autarchy that characterized defaulters in the financial crisis in Asia in the late 1990s. Similarly, when Argentina defaulted on its debt in 2001–02, politicians there faced enormous pressure to change the rule of law to benefit domestic property holders over foreigners, and they changed the bankruptcy law to give local debtors the upper hand. In Indonesia and Russia after the crises of 1998, local enterprises and banks took the opportunity of the confusion to grab property, then found ways to ensure that courts sided with them.
(..)
Here are six steps toward avoiding a situation of "each nation for itself":
The ramifications of Iceland's misery are probably more serious than people realize. The country's bank assets are more than 10 times greater than its gross domestic product, so the government clearly cannot afford a bailout. This is going to be a large default, affecting many parties. In the United Kingdom alone, 300,000 account holders face sudden loss of access to their funds, and the process for claiming deposit insurance is not entirely clear.
There is now a risk that continued corporate and bank defaults within nations ... will lead to a chaotic series of national and local defaults. If governments don't respond with sensible, coordinated policies, there's a risk of financial war.
But there's a broader concern. With European governments turning down his appeals for assistance, Iceland's prime minister, Geir Haarde, warned last week that it was now "every country for itself." This smacks of the financial autarchy that characterized defaulters in the financial crisis in Asia in the late 1990s. Similarly, when Argentina defaulted on its debt in 2001–02, politicians there faced enormous pressure to change the rule of law to benefit domestic property holders over foreigners, and they changed the bankruptcy law to give local debtors the upper hand. In Indonesia and Russia after the crises of 1998, local enterprises and banks took the opportunity of the confusion to grab property, then found ways to ensure that courts sided with them.
(..)
Here are six steps toward avoiding a situation of "each nation for itself":
FBI Probe of JPMorgan Fees Focuses on Swaps Roiling Muni Debt
While JPMorgan has been relatively unscathed by the subprime crisis that hit Bear Stearns Cos., Merrill Lynch & Co., Lehman and other Wall Street firms, a little-known part of the largest bank in the U.S. made a tidy profit peddling a different kind of corrosive debt to hundreds of counties and school districts earlier this decade.
As the credit crunch froze lending globally, causing stock markets to plunge, local officials who say they trusted JPMorgan faced a crisis of their own. Wall Street's drive for profits over the past decade has backfired on towns, cities and counties that borrow in the $2.7 trillion municipal bond market.
Financings arranged by JPMorgan and other banks are forcing hundreds of public agencies to spend billions of dollars they don't have to pay for increased interest payments and penalties.
No Bailouts
As the credit crunch froze lending globally, causing stock markets to plunge, local officials who say they trusted JPMorgan faced a crisis of their own. Wall Street's drive for profits over the past decade has backfired on towns, cities and counties that borrow in the $2.7 trillion municipal bond market.
Financings arranged by JPMorgan and other banks are forcing hundreds of public agencies to spend billions of dollars they don't have to pay for increased interest payments and penalties.
No Bailouts
Short Sellers Aren't Jackals, They're Bears, Fleckenstein Says
An article from Bloomberg on the incredibly prescient Bill Fleckenstein...
Oct. 29 (Bloomberg) -- A six-foot stuffed grizzly bear guards the entrance to the offices of Fleckenstein Capital Inc., located on a quiet, leafy street in the Capitol Hill neighborhood of Seattle. The bear sends a clear message: The man inside, Bill Fleckenstein, founder and president of the firm, is a short seller and proud of it.
Fleckenstein, 55, has emerged as one of the most-outspoken defenders of what has been depicted by everyone from the chief executive officer of Morgan Stanley to the Archbishop of Canterbury as a renegade class of investors. Since world markets began their most serious plunge in decades in July, 17 countries have banned or restricted short selling, including the U.S., Canada, the U.K., Germany, France, Switzerland, Australia, Japan and Taiwan. Commentators around the world have labeled short sellers as hyenas, jackals, vermin and vultures.
Fleckenstein says that investors who bet that stocks will decline, as short sellers do, are simply bears. And he says they are not to blame for the market meltdown. ``Short sellers didn't lower the fed funds rate or tell people to take out mortgages when they shouldn't have,'' he says. ``Now we are the bad guys, the ones wearing black hats.''
Oct. 29 (Bloomberg) -- A six-foot stuffed grizzly bear guards the entrance to the offices of Fleckenstein Capital Inc., located on a quiet, leafy street in the Capitol Hill neighborhood of Seattle. The bear sends a clear message: The man inside, Bill Fleckenstein, founder and president of the firm, is a short seller and proud of it.
Fleckenstein, 55, has emerged as one of the most-outspoken defenders of what has been depicted by everyone from the chief executive officer of Morgan Stanley to the Archbishop of Canterbury as a renegade class of investors. Since world markets began their most serious plunge in decades in July, 17 countries have banned or restricted short selling, including the U.S., Canada, the U.K., Germany, France, Switzerland, Australia, Japan and Taiwan. Commentators around the world have labeled short sellers as hyenas, jackals, vermin and vultures.
Fleckenstein says that investors who bet that stocks will decline, as short sellers do, are simply bears. And he says they are not to blame for the market meltdown. ``Short sellers didn't lower the fed funds rate or tell people to take out mortgages when they shouldn't have,'' he says. ``Now we are the bad guys, the ones wearing black hats.''
A New Stimulus Plan: Keep the Campaign Going
Let’s face it, in our slumping economy, there is only one growth industry left: Political campaigns. Well, maybe two, if you count bankruptcy lawyers, but we’ll worry about them another time.
Think of it, while consumption on everything from autos to sofas has slowed to a trickle, campaign spending is booming. Candidates this year have raised—and are likely to spend—in excess of $5 billion. Barack Obama alone may spend something approaching $1 billion.
Even better, it is all domestic consumption. With a normal fiscal stimulus, a lot of money leaks overseas as consumers buy stuff like Korean HDTVs or Malaysian shirts. The banks seem to be mostly hoarding the $250 billion Treasury just gave them. But politicians never leave a nickel on the table, and they spend almost every cent at home. Consultants. Phone banks. Hotel rooms. Beer. Media buys for all those ads with the ominous music. Even the bumper stickers and yard signs are made in the USA.
Think of it, while consumption on everything from autos to sofas has slowed to a trickle, campaign spending is booming. Candidates this year have raised—and are likely to spend—in excess of $5 billion. Barack Obama alone may spend something approaching $1 billion.
Even better, it is all domestic consumption. With a normal fiscal stimulus, a lot of money leaks overseas as consumers buy stuff like Korean HDTVs or Malaysian shirts. The banks seem to be mostly hoarding the $250 billion Treasury just gave them. But politicians never leave a nickel on the table, and they spend almost every cent at home. Consultants. Phone banks. Hotel rooms. Beer. Media buys for all those ads with the ominous music. Even the bumper stickers and yard signs are made in the USA.
Why the Dollar Surge Won't Last
That same broken dollar is now king. It won’t last. Think of it as a temporary scarcity of life jackets.
(..)
Sadly, at least for dollar bulls, it is not that the dollar is newly back to being the de facto world currency, the position it held for most of the last sixty years. Matter of fact, the U.S. dollar's so-called reserve status is more endangered than ever. The U.S. is still spending more than it brings in every year; it borrows money abroad to finance an unsustainable trade deficit; and it has lost its way with respect to building an economy around selling things for more than they cost. You know, the capitalism thing, as opposed to the financial engineering thing.
Because far from being a de facto standard, the dollar is really beginning to piss people off.
(..)
Sadly, at least for dollar bulls, it is not that the dollar is newly back to being the de facto world currency, the position it held for most of the last sixty years. Matter of fact, the U.S. dollar's so-called reserve status is more endangered than ever. The U.S. is still spending more than it brings in every year; it borrows money abroad to finance an unsustainable trade deficit; and it has lost its way with respect to building an economy around selling things for more than they cost. You know, the capitalism thing, as opposed to the financial engineering thing.
Because far from being a de facto standard, the dollar is really beginning to piss people off.
Are Stocks the Bargain You Think?
Some of the country’s most famous investors, including Warren Buffett and John Bogle, have started to make the case that it’s time to dive back into the stock market.
They are usually careful to add that they don’t know what stocks will do in the short term. Yet their basic message is clear enough: stocks are now cheap, irrational fears have been driving the market down lately, and people who buy today will be glad that they did.
After a day like Tuesday, when the market rose 11 percent, it’s easy to see the merits of the argument.
But there is another argument that deserves more attention than it has gotten so far. It’s the bearish argument that is based neither on fears that the country may be sliding into another depression nor on gut-level worries about the unknown. It is based on numbers and history, and it has at least as much claim on reason as the bullish argument does.
It goes something like this: Stocks are truly cheap only relative to their values over the last 20 years, a period that will go down as one of the great bubbles in history. If you take a longer view, you see that the ratio of stock prices to corporate earnings is only slightly below its long-term average. And in past economic crises — during the 1930s and 1970s — stocks fell well below their long-run average before they turned around.
They are usually careful to add that they don’t know what stocks will do in the short term. Yet their basic message is clear enough: stocks are now cheap, irrational fears have been driving the market down lately, and people who buy today will be glad that they did.
After a day like Tuesday, when the market rose 11 percent, it’s easy to see the merits of the argument.
But there is another argument that deserves more attention than it has gotten so far. It’s the bearish argument that is based neither on fears that the country may be sliding into another depression nor on gut-level worries about the unknown. It is based on numbers and history, and it has at least as much claim on reason as the bullish argument does.
It goes something like this: Stocks are truly cheap only relative to their values over the last 20 years, a period that will go down as one of the great bubbles in history. If you take a longer view, you see that the ratio of stock prices to corporate earnings is only slightly below its long-term average. And in past economic crises — during the 1930s and 1970s — stocks fell well below their long-run average before they turned around.
Tuesday, October 28, 2008
GOP Sticks With Karl (Marx)
To get a Democrat to admit to practicing socialism is a lot like frisking a wet seal.
To get Republicans to confess to their role in socializing America is an equally slippery affair.
The latter have been grandstanding about the plan of the wily pitch-man Obama to plunder taxpayers (the minority) so as to pay tax consumers (the majority). For the edification of GOP grandstanders, America has a tax system that energetically distributes income.
The progressive income tax is a good example of Karl Marx's maxim, "From each according to his ability, to each according to his need." It is socialism by any other name.
Obama is an adherent of this socialism; as is McCain. And so is George Bush, who, as a campaign ploy, had promised to reform America's steep tax system, but decided to stick with Karl.
Indeed, America, the cradle of capitalism, clings to Karl. Russia, the cradle of communism, has abandoned him in favor of a flat—and very low—tax on income.
(..)
"Your earnings are not exclusively your own; we have a claim on them, and our claim precedes yours; we will allow you to keep some of it, because we recognize your need, not your right; but whatever we grant you for yourself is for us to decide."
This is both socialism and serfdom—the blight of which GOPers could have lessened during their interminable tenure, but didn't. If anything, America has slouched toward socialism under Republicans. Perhaps not as far as direct taxation goes, but certainly in as much as borrowing and printing money is concerned. For this is how wastrel "W" has funded his orgiastic spending.
Borrowing and counterfeiting cash is taxation by stealth and subterfuge. These, arguably, are more destructive than direct taxation because more clandestine. Americans don't seem to comprehend that there is no free lunch—that unlimited spending comes at a price. Be it creditors that must be paid or a money supply that is inflated—the net effect is every bit as bad as increasing taxes on income, if not worse.
Taxation hits the pocketbook directly; government's borrowing and counterfeiting does so indirectly—it devalues Joe the Plumber's labor, assets, purchasing power, and savings. Unaware of how he's being ground down, Generic Joe keeps on consuming until he crashes.
To get Republicans to confess to their role in socializing America is an equally slippery affair.
The latter have been grandstanding about the plan of the wily pitch-man Obama to plunder taxpayers (the minority) so as to pay tax consumers (the majority). For the edification of GOP grandstanders, America has a tax system that energetically distributes income.
The progressive income tax is a good example of Karl Marx's maxim, "From each according to his ability, to each according to his need." It is socialism by any other name.
Obama is an adherent of this socialism; as is McCain. And so is George Bush, who, as a campaign ploy, had promised to reform America's steep tax system, but decided to stick with Karl.
Indeed, America, the cradle of capitalism, clings to Karl. Russia, the cradle of communism, has abandoned him in favor of a flat—and very low—tax on income.
(..)
"Your earnings are not exclusively your own; we have a claim on them, and our claim precedes yours; we will allow you to keep some of it, because we recognize your need, not your right; but whatever we grant you for yourself is for us to decide."
This is both socialism and serfdom—the blight of which GOPers could have lessened during their interminable tenure, but didn't. If anything, America has slouched toward socialism under Republicans. Perhaps not as far as direct taxation goes, but certainly in as much as borrowing and printing money is concerned. For this is how wastrel "W" has funded his orgiastic spending.
Borrowing and counterfeiting cash is taxation by stealth and subterfuge. These, arguably, are more destructive than direct taxation because more clandestine. Americans don't seem to comprehend that there is no free lunch—that unlimited spending comes at a price. Be it creditors that must be paid or a money supply that is inflated—the net effect is every bit as bad as increasing taxes on income, if not worse.
Taxation hits the pocketbook directly; government's borrowing and counterfeiting does so indirectly—it devalues Joe the Plumber's labor, assets, purchasing power, and savings. Unaware of how he's being ground down, Generic Joe keeps on consuming until he crashes.
Is Volatility Embedded in the System for a Generation?
A rather grim scenario is laid out here...
On the macroeconomic front, I continue to be very, very disturbed by several factors. The fact that anyone cares about third-quarter earnings is beyond me. They are, to my mind, approaching irrelevance. The real story, yet only the beginning of the story, will be what fourth-quarter earnings look like. And while I'm not a betting man, I am pretty confident that they will suck. Hard. It's not that earnings for durable goods manufacturers will fall by 5%, 10%. They could drop by 50% or more. We are in the early stages of a consumer slow-down that does not seem to be factored into current stock prices. My fear is that people will find this as a shock, and that the market will get absolutely massacred when the realization sets in that corporate earnings aren't merely down, but are falling off a cliff.
And this, my friends, will precipitate staff cuts that will make the recent downsizings look like child's play. Falling corporate earnings. Falling stock prices. Firms with limited access to capital and high fixed costs will cut the only thing they can: people. More out of work people means a drop in consumer spending, which means falling corporate earnings, and so on.
At the end of the blogpost,"aarondelcohen" makes an interesting comment:
Are you kidding me? That is the single bleakest outlook I've seen. It's probably worth discussing. I don't feel completely equipped on macroeconomics, but I talked to a quant vulture fund person today who told me she had modeled the $15bn a month we are spending in Iraq coming back into the US in investments 24 months from now and you can really see where that kind of investment helps restore activity and even positive GDP growth. To use her words, "You'd be amazed what happens when you take that money away from there and put it here."
On the macroeconomic front, I continue to be very, very disturbed by several factors. The fact that anyone cares about third-quarter earnings is beyond me. They are, to my mind, approaching irrelevance. The real story, yet only the beginning of the story, will be what fourth-quarter earnings look like. And while I'm not a betting man, I am pretty confident that they will suck. Hard. It's not that earnings for durable goods manufacturers will fall by 5%, 10%. They could drop by 50% or more. We are in the early stages of a consumer slow-down that does not seem to be factored into current stock prices. My fear is that people will find this as a shock, and that the market will get absolutely massacred when the realization sets in that corporate earnings aren't merely down, but are falling off a cliff.
And this, my friends, will precipitate staff cuts that will make the recent downsizings look like child's play. Falling corporate earnings. Falling stock prices. Firms with limited access to capital and high fixed costs will cut the only thing they can: people. More out of work people means a drop in consumer spending, which means falling corporate earnings, and so on.
At the end of the blogpost,"aarondelcohen" makes an interesting comment:
Are you kidding me? That is the single bleakest outlook I've seen. It's probably worth discussing. I don't feel completely equipped on macroeconomics, but I talked to a quant vulture fund person today who told me she had modeled the $15bn a month we are spending in Iraq coming back into the US in investments 24 months from now and you can really see where that kind of investment helps restore activity and even positive GDP growth. To use her words, "You'd be amazed what happens when you take that money away from there and put it here."
The Brain Why Darwin Would Have Loved Botox
In June 2008 in the Journal of the American Academy of Dermatology, a team of cosmetic surgeons suggested this experiment is making all of us happier. People with Botox may be less vulnerable to the angry emotions of other people because they themselves can’t make angry or unhappy faces as easily. And because people with Botox can’t spread bad feelings to others via their expressions, people without Botox may be happier too. The surgeons grant that this is just speculation for now. Nevertheless, they declare that “we are left with the tantalizing possibility that cosmetic procedures may have beneficial effects that are more than skin deep.”
Maybe. But for all the Botox youthfulness plastic surgeons may want to think about, neuroscience raises a darker possibility. Making faces helps us understand how other people are feeling. By altering our faces we’re tampering with the ancient lines of communication between face and brain that may change our minds in ways we don’t yet understand.
Maybe. But for all the Botox youthfulness plastic surgeons may want to think about, neuroscience raises a darker possibility. Making faces helps us understand how other people are feeling. By altering our faces we’re tampering with the ancient lines of communication between face and brain that may change our minds in ways we don’t yet understand.
Monday, October 27, 2008
The Age of Prosperity Is Over
From the famed economist Arthur D. Laffer...woth reading the entire article
Financial panics, if left alone, rarely cause much damage to the real economy, output, employment or production. Asset values fall sharply and wipe out those who borrowed and lent too much, thereby redistributing wealth from the foolish to the prudent. This process is the topic of Nassim Nicholas Taleb's book "Fooled by Randomness."
When markets are free, asset values are supposed to go up and down, and competition opens up opportunities for profits and losses. Profits and stock appreciation are not rights, but rewards for insight mixed with a willingness to take risk. People who buy homes and the banks who give them mortgages are no different, in principle, than investors in the stock market, commodity speculators or shop owners. Good decisions should be rewarded and bad decisions should be punished. The market does just that with its profits and losses.
(..)
But here's the rub. Now enter the government and the prospects of a kinder and gentler economy. To alleviate the obvious hardships to both homeowners and banks, the government commits to buy mortgages and inject capital into banks, which on the face of it seems like a very nice thing to do. But unfortunately in this world there is no tooth fairy. And the government doesn't create anything; it just redistributes. Whenever the government bails someone out of trouble, they always put someone into trouble, plus of course a toll for the troll. Every $100 billion in bailout requires at least $130 billion in taxes, where the $30 billion extra is the cost of getting government involved.
If you don't believe me, just watch how Congress and Barney Frank run the banks. If you thought they did a bad job running the post office, Amtrak, Fannie Mae, Freddie Mac and the military, just wait till you see what they'll do with Wall Street.
(..)
The stock market is forward looking, reflecting the current value of future expected after-tax profits. An improving economy carries with it the prospects of enhanced profitability as well as higher employment, higher wages, more productivity and more output. Just look at the era beginning with President Reagan's tax cuts, Paul Volcker's sound money, and all the other pro-growth, supply-side policies.
Bill Clinton and Alan Greenspan added their efforts to strengthen what had begun under President Reagan. President Clinton signed into law welfare reform, so people actually have to look for a job before being eligible for welfare. He ended the "retirement test" for Social Security benefits (a huge tax cut for elderly workers), pushed the North American Free Trade Agreement through Congress against his union supporters and many of his own party members, signed the largest capital gains tax cut ever (which exempted owner-occupied homes from capital gains taxes), and finally reduced government spending as a share of GDP by an amazing three percentage points (more than the next four best presidents combined). The stock market loved Mr. Clinton as it had loved Reagan, and for good reasons.
The stock market is obviously no fan of second-term George W. Bush, Nancy Pelosi, Harry Reid, Ben Bernanke, Barack Obama or John McCain, and again for good reasons.
These issues aren't Republican or Democrat, left or right, liberal or conservative. They are simply economics, and wish as you might, bad economics will sink any economy no matter how much they believe this time things are different. They aren't.
Financial panics, if left alone, rarely cause much damage to the real economy, output, employment or production. Asset values fall sharply and wipe out those who borrowed and lent too much, thereby redistributing wealth from the foolish to the prudent. This process is the topic of Nassim Nicholas Taleb's book "Fooled by Randomness."
When markets are free, asset values are supposed to go up and down, and competition opens up opportunities for profits and losses. Profits and stock appreciation are not rights, but rewards for insight mixed with a willingness to take risk. People who buy homes and the banks who give them mortgages are no different, in principle, than investors in the stock market, commodity speculators or shop owners. Good decisions should be rewarded and bad decisions should be punished. The market does just that with its profits and losses.
(..)
But here's the rub. Now enter the government and the prospects of a kinder and gentler economy. To alleviate the obvious hardships to both homeowners and banks, the government commits to buy mortgages and inject capital into banks, which on the face of it seems like a very nice thing to do. But unfortunately in this world there is no tooth fairy. And the government doesn't create anything; it just redistributes. Whenever the government bails someone out of trouble, they always put someone into trouble, plus of course a toll for the troll. Every $100 billion in bailout requires at least $130 billion in taxes, where the $30 billion extra is the cost of getting government involved.
If you don't believe me, just watch how Congress and Barney Frank run the banks. If you thought they did a bad job running the post office, Amtrak, Fannie Mae, Freddie Mac and the military, just wait till you see what they'll do with Wall Street.
(..)
The stock market is forward looking, reflecting the current value of future expected after-tax profits. An improving economy carries with it the prospects of enhanced profitability as well as higher employment, higher wages, more productivity and more output. Just look at the era beginning with President Reagan's tax cuts, Paul Volcker's sound money, and all the other pro-growth, supply-side policies.
Bill Clinton and Alan Greenspan added their efforts to strengthen what had begun under President Reagan. President Clinton signed into law welfare reform, so people actually have to look for a job before being eligible for welfare. He ended the "retirement test" for Social Security benefits (a huge tax cut for elderly workers), pushed the North American Free Trade Agreement through Congress against his union supporters and many of his own party members, signed the largest capital gains tax cut ever (which exempted owner-occupied homes from capital gains taxes), and finally reduced government spending as a share of GDP by an amazing three percentage points (more than the next four best presidents combined). The stock market loved Mr. Clinton as it had loved Reagan, and for good reasons.
The stock market is obviously no fan of second-term George W. Bush, Nancy Pelosi, Harry Reid, Ben Bernanke, Barack Obama or John McCain, and again for good reasons.
These issues aren't Republican or Democrat, left or right, liberal or conservative. They are simply economics, and wish as you might, bad economics will sink any economy no matter how much they believe this time things are different. They aren't.
Myths and Misconceptions about U.S. Healthcare
Several myths about health insurance interfere with the diagnosis of problems in the current system and impede the development of productive reforms. Although many are built on a kernel of truth, complicated issues are often simplified to the point of being false or misleading. Several stem from the conflation of health, health care, and health insurance, while others attempt to use economic arguments to justify normative preferences. We apply a combination of economic principles and lessons from empirical research to examine the policy problems that underlie the myths and focus attention on addressing these fundamental challenges. [Health Affairs 27, no. 6 (2008): w533-w543 (published online 21 October 2008; 10.1377/hlthaff.27.6.w533)]
The Hard Sell: Why the Surge in Home Sales is Bad News
When I wrote about housing for Slate six months ago, I pointed out some of the houses on the market at asking prices 30 percent or 40 percent off what they'd sold at just a year or so earlier. The response was disbelief. Did I select my examples at random, one reader asked me snidely in an e-mail, or did I cherry pick to get the most dramatic numbers? Well, I didn't cherry pick, and now you won't find anyone doubting that drops of this scale are par for the course.
Unfortunately, we have a lot further to go. The Case/Shiller price index, a measure of home prices going back to 1987, shows California home prices still at about twice where they were at the peak of the last big housing cycle back in 1990. So just to get back to the top of the last peak, prices would have to drop another 50 percent. Interest rates at that time were substantially higher, in the range of 10 percent a year. If you take that into account and look not at sales prices but at the cost of paying mortgages, we're still in for another drop of 30 percent. That's if prices don't fall below the last peak and interest rates stay at 6.5 percent or less. In other words, it's a best-case scenario.
These numbers are so dire that they might sound like scare mongering, except that if you look through the recent sales listings at any number of online sites, you won't have to search very hard to find price drops right along the lines of these numbers. This house in Riverside, Calif., for instance: bought for $586,000 in 2006, foreclosed on in November 2007, and now sold again this summer for $147,000-just 25 percent of what it sold for two years ago. And here's another heart-stopping fact: Even that vastly diminished sales price was financed, according to real estate records, with a 100 percent mortgage. Good luck getting one of those now.
What this means for homeowners is that if you happened to buy at the peak of the boom, your house is unlikely, in inflation-adjusted terms, to get back to the price you paid for it for another decade at best, if ever.
Unfortunately, we have a lot further to go. The Case/Shiller price index, a measure of home prices going back to 1987, shows California home prices still at about twice where they were at the peak of the last big housing cycle back in 1990. So just to get back to the top of the last peak, prices would have to drop another 50 percent. Interest rates at that time were substantially higher, in the range of 10 percent a year. If you take that into account and look not at sales prices but at the cost of paying mortgages, we're still in for another drop of 30 percent. That's if prices don't fall below the last peak and interest rates stay at 6.5 percent or less. In other words, it's a best-case scenario.
These numbers are so dire that they might sound like scare mongering, except that if you look through the recent sales listings at any number of online sites, you won't have to search very hard to find price drops right along the lines of these numbers. This house in Riverside, Calif., for instance: bought for $586,000 in 2006, foreclosed on in November 2007, and now sold again this summer for $147,000-just 25 percent of what it sold for two years ago. And here's another heart-stopping fact: Even that vastly diminished sales price was financed, according to real estate records, with a 100 percent mortgage. Good luck getting one of those now.
What this means for homeowners is that if you happened to buy at the peak of the boom, your house is unlikely, in inflation-adjusted terms, to get back to the price you paid for it for another decade at best, if ever.
Taiwan Dumps Fannie, Freddie, and Uncle Sam?
Not only China, but even our ally Taiwan, is rethinking their faith in U.S. securities...
After Mao drove the Nationalists off the Mainland in 1949, the cry went up among U.S. conservatives, "Who lost China?"
Now Washington might well worry about who lost Taiwan as a major investor in U.S. agency securities as the Republic of China has openly questioned their credit quality -- even after the federal government has committed hundreds of billions of dollars to bail out mortgage giants Fannie Mae and Freddie Mac.
Beyond that, Washington might well worry that other nations also no longer view its agencies -- and now, by extension, the very credit of the United States of America -- beyond question.
Taiwan's financial regulators reportedly have ordered that nation's insurance companies to pare their holdings of the debt and mortgage-backed securities of Fannie Mae (ticker: FNM), Freddie Mac (FRE) and Ginnie Mae securities, according to a report on the Internet site of Asian Investor magazine.
Such an order would be a stunning rebuke to Washington, coming a little more than a month after the federal government effectively nationalized the mortgage giants. Fannie and Freddie last month were placed into conservatorships with the Treasury standing ready to inject up to $100 billion through purchases of preferred shares in the government sponsored enterprises.
As a result, Fannie and Freddie debt has the "effective guarantee" of the U.S. government, a spokeswoman for the Federal Housing Finance agency, the regulator for the GSEs, said Thursday. (That was a "clarification" of FHFA director James Lockhart's earlier declaration to the Senate Finance Committee that Fannie and Freddie debt had the "explicit" guarantee of the U.S. Treasury, Dow Jones Newswires reports.)
Moreover, Ginnie Mae securities have always been backed with the same full faith and credit guarantee as the U.S. Treasury.
After Mao drove the Nationalists off the Mainland in 1949, the cry went up among U.S. conservatives, "Who lost China?"
Now Washington might well worry about who lost Taiwan as a major investor in U.S. agency securities as the Republic of China has openly questioned their credit quality -- even after the federal government has committed hundreds of billions of dollars to bail out mortgage giants Fannie Mae and Freddie Mac.
Beyond that, Washington might well worry that other nations also no longer view its agencies -- and now, by extension, the very credit of the United States of America -- beyond question.
Taiwan's financial regulators reportedly have ordered that nation's insurance companies to pare their holdings of the debt and mortgage-backed securities of Fannie Mae (ticker: FNM), Freddie Mac (FRE) and Ginnie Mae securities, according to a report on the Internet site of Asian Investor magazine.
Such an order would be a stunning rebuke to Washington, coming a little more than a month after the federal government effectively nationalized the mortgage giants. Fannie and Freddie last month were placed into conservatorships with the Treasury standing ready to inject up to $100 billion through purchases of preferred shares in the government sponsored enterprises.
As a result, Fannie and Freddie debt has the "effective guarantee" of the U.S. government, a spokeswoman for the Federal Housing Finance agency, the regulator for the GSEs, said Thursday. (That was a "clarification" of FHFA director James Lockhart's earlier declaration to the Senate Finance Committee that Fannie and Freddie debt had the "explicit" guarantee of the U.S. Treasury, Dow Jones Newswires reports.)
Moreover, Ginnie Mae securities have always been backed with the same full faith and credit guarantee as the U.S. Treasury.
US has Plundered World Wealth with Dollar: China Paper
While the nationalist rhetoric here needs to be taken with a grain of salt, esp. as many believe that China has for many years artificially devalued its currency relative to the dollar to make its exports more attractive to us, the fact is that the dollar is in great danger imo, and we have ceded too much control to other countries in the trillions of dollar of debt that have been bought up by China, among others...This is also a huge problem I have with the bailout that will be financed by the issuance of further debt. As more and more of our treasuries are bought up by other countries, we cede more and more of our sovereignty. On the other hand, if our debt is not bought by the same countries, we are in even more dire straits imho...
BEIJING (Reuters) - The United States has plundered global wealth by exploiting the dollar's dominance, and the world urgently needs other currencies to take its place, a leading Chinese state newspaper said on Friday.
The front-page commentary in the overseas edition of the People's Daily said that Asian and European countries should banish the U.S. dollar from their direct trade relations for a start, relying only on their own currencie
(..)
The People's Daily is the official newspaper of China's ruling Communist Party. The Chinese-language overseas edition is a small circulation offshoot of the main paper.
Its pronouncements do not necessarily directly voice leadership views. But the commentary, as well as recent comments, amount to a growing chorus of Chinese disdain for Washington's economic policies and global financial dominance in the wake of the credit crisis.
"The grim reality has led people, amidst the panic, to realize that the United States has used the U.S. dollar's hegemony to plunder the world's wealth," said the commentator, Shi Jianxun, a professor at Shanghai's Tongji University.
BEIJING (Reuters) - The United States has plundered global wealth by exploiting the dollar's dominance, and the world urgently needs other currencies to take its place, a leading Chinese state newspaper said on Friday.
The front-page commentary in the overseas edition of the People's Daily said that Asian and European countries should banish the U.S. dollar from their direct trade relations for a start, relying only on their own currencie
(..)
The People's Daily is the official newspaper of China's ruling Communist Party. The Chinese-language overseas edition is a small circulation offshoot of the main paper.
Its pronouncements do not necessarily directly voice leadership views. But the commentary, as well as recent comments, amount to a growing chorus of Chinese disdain for Washington's economic policies and global financial dominance in the wake of the credit crisis.
"The grim reality has led people, amidst the panic, to realize that the United States has used the U.S. dollar's hegemony to plunder the world's wealth," said the commentator, Shi Jianxun, a professor at Shanghai's Tongji University.
Natural Settings Help Brain Fatigue
After a recent post about using natural settings to help children with attention deficit disorder, several readers wrote in wondering whether many of us may be suffering from a “nature deficit.”
As it turns out, everyone appears to benefit from the restorative powers of nature. I recently spoke about “attention restoration theory” with Andrea Faber Taylor, a child environment and behavior researcher at the Landscape and Human Health Laboratory at the University of Illinois at Urbana-Champaign. As she explained, the human brain has two forms of attention: “directed” attention, which is what we use most of the time to concentrate on work, studies and tests, and “involuntary” attention, which is what occurs when we automatically respond to things like running water, crying babies or wild animals.
The problem is that directed attention is a finite resource — everyone has experienced the fatigue of taking a test or a big project at work. Attention restoration theory suggests that walks in nature and views of green space capture our involuntary attention, giving our directed attention a needed rest.
How Washington's Bailout Will Boost Wall Street Bonuses
Uncle Sam has a new name on Wall Street — Sugar Daddy. Bonuses for investment bankers and traders are projected to fall by 40% this year. But analysts, compensation consultants and recruiters say the drop would be much more severe, perhaps as much as 70%, had it not been for the government's efforts to prop up the financial firms. "Year-end pay on Wall Street will be higher than it would have been had it not been for the government and mergers," says Alan Johnson, a leading compensation consultant. "You would expect it to be down much more."
Johnson predicts the average managing director at an investment bank, a title typically earned around eight years on the job, will receive a bonus of $625,000. That's down from nearly $1.1 million last year, but it is still 15 times the income of the average American household. Top bankers could receive as much as $1 million. Even a bond trader just out of business school could see his or her bank account enriched by as much as $170,000 this Christmas. "The firms have had an extremely difficult year," says Joan Zimmerman, a Wall Street career coach. "But they can't afford to lose talent either."
Johnson predicts the average managing director at an investment bank, a title typically earned around eight years on the job, will receive a bonus of $625,000. That's down from nearly $1.1 million last year, but it is still 15 times the income of the average American household. Top bankers could receive as much as $1 million. Even a bond trader just out of business school could see his or her bank account enriched by as much as $170,000 this Christmas. "The firms have had an extremely difficult year," says Joan Zimmerman, a Wall Street career coach. "But they can't afford to lose talent either."
Sunday, October 26, 2008
Obama, McCain Face Most Pressure Since FDR to Speed Transition
Oct. 27 (Bloomberg) -- On the night of Nov. 4, either Barack Obama or John McCain will be celebrating his election as president. It may be a short party.
Whoever wins will come under intense, immediate pressure -- unmatched since Franklin D. Roosevelt's election in 1932 -- to begin participating in policy making over which he'll have no formal control for 2 1/2 months. Within days, the winner's economic advisers may be heading to the U.S. Treasury to help tackle the nation's worst financial crisis in more than seven decades.
``The situation is so serious that he has to be involved,'' says James Thurber, director of the center for congressional and presidential studies at American University in Washington. ``But he has to be very careful because he's not the president and won't be the president until he's sworn in.'' President George W. Bush's Treasury officials are encouraging the candidates to waste no time getting a grasp of the $700 billion financial-rescue effort, even saying their aides can work out of the department, according to people who have spoken with the department.
Whoever wins will come under intense, immediate pressure -- unmatched since Franklin D. Roosevelt's election in 1932 -- to begin participating in policy making over which he'll have no formal control for 2 1/2 months. Within days, the winner's economic advisers may be heading to the U.S. Treasury to help tackle the nation's worst financial crisis in more than seven decades.
``The situation is so serious that he has to be involved,'' says James Thurber, director of the center for congressional and presidential studies at American University in Washington. ``But he has to be very careful because he's not the president and won't be the president until he's sworn in.'' President George W. Bush's Treasury officials are encouraging the candidates to waste no time getting a grasp of the $700 billion financial-rescue effort, even saying their aides can work out of the department, according to people who have spoken with the department.
Europe on the brink of currency crisis meltdownn crisis meltdown
The financial crisis spreading like wildfire across the former Soviet bloc threatens to set off a second and more dangerous banking crisis in Western Europe, tipping the whole Continent into a fully-fledged economic slump.
Currency pegs are being tested to destruction on the fringes of Europe’s monetary union in a traumatic upheaval that recalls the collapse of the Exchange Rate Mechanism in 1992.
“This is the biggest currency crisis the world has ever seen,” said Neil Mellor, a strategist at Bank of New York Mellon. Experts fear the mayhem may soon trigger a chain reaction within the eurozone itself. The risk is a surge in capital flight from Austria – the country, as it happens, that set off the global banking collapse of May 1931 when Credit-Anstalt went down – and from a string of Club Med countries that rely on foreign funding to cover huge current account deficits.
Currency pegs are being tested to destruction on the fringes of Europe’s monetary union in a traumatic upheaval that recalls the collapse of the Exchange Rate Mechanism in 1992.
“This is the biggest currency crisis the world has ever seen,” said Neil Mellor, a strategist at Bank of New York Mellon. Experts fear the mayhem may soon trigger a chain reaction within the eurozone itself. The risk is a surge in capital flight from Austria – the country, as it happens, that set off the global banking collapse of May 1931 when Credit-Anstalt went down – and from a string of Club Med countries that rely on foreign funding to cover huge current account deficits.
Financial Meltdown Worsens Food Crisis
SHANGHAI -- As shock waves from the credit crisis began to spread around the world last month, China scrambled to protect itself. Among the most extreme measures it took was to impose new export taxes to keep critical supplies such as grains and fertilizer from leaving the country.
About 5,700 miles away, in Nairobi, farmer Stephen Muchiri is suffering the consequences.
It's planting season now, but he can afford to sow amaranthus and haricot beans on only half of the 10 acres he owns because the cost of the fertilizer he needs has shot up nearly $50 a bag in a matter of weeks. Muchiri said nearly everyone he knows is cutting back on planting, which means even less food for a continent where the supply has already been weakened by drought, political unrest and rising prices.
While the world's attention has been focused on rescuing investment banks and stock markets from collapse, the global food crisis has worsened, a casualty of the growing financial tumult.
About 5,700 miles away, in Nairobi, farmer Stephen Muchiri is suffering the consequences.
It's planting season now, but he can afford to sow amaranthus and haricot beans on only half of the 10 acres he owns because the cost of the fertilizer he needs has shot up nearly $50 a bag in a matter of weeks. Muchiri said nearly everyone he knows is cutting back on planting, which means even less food for a continent where the supply has already been weakened by drought, political unrest and rising prices.
While the world's attention has been focused on rescuing investment banks and stock markets from collapse, the global food crisis has worsened, a casualty of the growing financial tumult.
So When Will Banks Give Loans?
“Twenty-five billion dollars is obviously going to help the folks who are struggling more than Chase,” he began. “What we do think it will help us do is perhaps be a little bit more active on the acquisition side or opportunistic side for some banks who are still struggling. And I would not assume that we are done on the acquisition side just because of the Washington Mutual and Bear Stearns mergers. I think there are going to be some great opportunities for us to grow in this environment, and I think we have an opportunity to use that $25 billion in that way and obviously depending on whether recession turns into depression or what happens in the future, you know, we have that as a backstop.”
Read that answer as many times as you want — you are not going to find a single word in there about making loans to help the American economy. On the contrary: at another point in the conference call, the same executive (who I’m not naming because he didn’t know I would be listening in) explained that “loan dollars are down significantly.” He added, “We would think that loan volume will continue to go down as we continue to tighten credit to fully reflect the high cost of pricing on the loan side.” In other words JPMorgan has no intention of turning on the lending spigot.
It is starting to appear as if one of Treasury’s key rationales for the recapitalization program — namely, that it will cause banks to start lending again — is a fig leaf, Treasury’s version of the weapons of mass destruction.
(..)
There are lots of reasons the markets remain unstable — fears of a global recession, companies offering poor profit projections for the rest of the year, and the continuing uncertainties brought on by the credit crisis. But another reason, I now believe, is that investors no longer trust Treasury. First it says it has to have $700 billion to buy back toxic mortgage-backed securities. Then, as Mr. Paulson divulged to The Times this week, it turns out that even before the bill passed the House, he told his staff to start drawing up a plan for capital injections. Fearing Congress’s reaction, he didn’t tell the Hill about his change of heart.
Now, he’s shifted gears again, and is directing Treasury to use the money to force bank acquisitions. Sneaking in the tax break isn’t exactly confidence-inspiring, either. (And let’s not even get into the less-than-credible, after-the-fact rationalizations for letting Lehman default, which stands as the single worst mistake the government has made in the crisis.)
(..)
Late Thursday afternoon, I caught up with Senator Dodd, and asked him what he was going to do if the loan situation didn’t improve. “All I can tell you is that we are going to have the bankers up here, probably in another couple of weeks and we are going to have a very blunt conversation,” he replied.
He continued: “If it turns out that they are hoarding, you’ll have a revolution on your hands. People will be so livid and furious that their tax money is going to line their pockets instead of doing the right thing. There will be hell to pay.”
Let’s hope so.
Read that answer as many times as you want — you are not going to find a single word in there about making loans to help the American economy. On the contrary: at another point in the conference call, the same executive (who I’m not naming because he didn’t know I would be listening in) explained that “loan dollars are down significantly.” He added, “We would think that loan volume will continue to go down as we continue to tighten credit to fully reflect the high cost of pricing on the loan side.” In other words JPMorgan has no intention of turning on the lending spigot.
It is starting to appear as if one of Treasury’s key rationales for the recapitalization program — namely, that it will cause banks to start lending again — is a fig leaf, Treasury’s version of the weapons of mass destruction.
(..)
There are lots of reasons the markets remain unstable — fears of a global recession, companies offering poor profit projections for the rest of the year, and the continuing uncertainties brought on by the credit crisis. But another reason, I now believe, is that investors no longer trust Treasury. First it says it has to have $700 billion to buy back toxic mortgage-backed securities. Then, as Mr. Paulson divulged to The Times this week, it turns out that even before the bill passed the House, he told his staff to start drawing up a plan for capital injections. Fearing Congress’s reaction, he didn’t tell the Hill about his change of heart.
Now, he’s shifted gears again, and is directing Treasury to use the money to force bank acquisitions. Sneaking in the tax break isn’t exactly confidence-inspiring, either. (And let’s not even get into the less-than-credible, after-the-fact rationalizations for letting Lehman default, which stands as the single worst mistake the government has made in the crisis.)
(..)
Late Thursday afternoon, I caught up with Senator Dodd, and asked him what he was going to do if the loan situation didn’t improve. “All I can tell you is that we are going to have the bankers up here, probably in another couple of weeks and we are going to have a very blunt conversation,” he replied.
He continued: “If it turns out that they are hoarding, you’ll have a revolution on your hands. People will be so livid and furious that their tax money is going to line their pockets instead of doing the right thing. There will be hell to pay.”
Let’s hope so.
Thursday, October 23, 2008
Pros Feel the Pain
Financial executives say the crisis of 2008 is the worst they've seen, and that Obama and McCain offer little hope
Half of U.S. financial executives say the current economic climate is the worst they've seen in their careers, according to a new poll from Condé Nast Portfolio.
The poll, conducted in early October of top finance executives from across the country, shows 77 percent of executives in the sector are convinced their industry is in a state of crisis. More than half—56 percent—say the economy is in a significant recession, and 50 percent say the economy is the worst they've encountered. ( See an interactive feature of the data.)
In terms of the presidential election, neither Barack Obama nor John McCain gets a clear vote of confidence from finance executives: 18 percent have a lot of confidence in Obama's approach to dealing with the country's economic problems, while only 8 percent have a lot of confidence in McCain's approach to the same issues; 42 percent have hardly any confidence in Obama, while 24 percent have hardly any in McCain.
Half of U.S. financial executives say the current economic climate is the worst they've seen in their careers, according to a new poll from Condé Nast Portfolio.
The poll, conducted in early October of top finance executives from across the country, shows 77 percent of executives in the sector are convinced their industry is in a state of crisis. More than half—56 percent—say the economy is in a significant recession, and 50 percent say the economy is the worst they've encountered. ( See an interactive feature of the data.)
In terms of the presidential election, neither Barack Obama nor John McCain gets a clear vote of confidence from finance executives: 18 percent have a lot of confidence in Obama's approach to dealing with the country's economic problems, while only 8 percent have a lot of confidence in McCain's approach to the same issues; 42 percent have hardly any confidence in Obama, while 24 percent have hardly any in McCain.
Wednesday, October 22, 2008
Greenspan Urges Tighter Regulation After Market `Breakdown'
One of the most famous acolytes of Libertarianism, who arguably has more to do with the global financial meltdown than anyone in recent history, is now calling for increased regulation...funny that....
Oct. 23 (Bloomberg) -- Former Federal Reserve Chairman Alan Greenspan called for tighter regulation of financial companies, distancing himself from the free-market culture that he helped to create.
Firms that bundle loans into securities for sale should be required to keep part of those securities, Greenspan said in prepared testimony to the House Committee on Oversight and Government Reform. Other rules should address fraud and settlement of trades, he said. Greenspan's office released the text ahead of the hearing scheduled for 10 a.m. in Washington.
The comments contrast with Greenspan's aversion to increasing financial supervision as Fed chairman from August 1987 to January 2006. Earlier this decade, he warned lawmakers against tightening oversight of energy derivatives.
Oct. 23 (Bloomberg) -- Former Federal Reserve Chairman Alan Greenspan called for tighter regulation of financial companies, distancing himself from the free-market culture that he helped to create.
Firms that bundle loans into securities for sale should be required to keep part of those securities, Greenspan said in prepared testimony to the House Committee on Oversight and Government Reform. Other rules should address fraud and settlement of trades, he said. Greenspan's office released the text ahead of the hearing scheduled for 10 a.m. in Washington.
The comments contrast with Greenspan's aversion to increasing financial supervision as Fed chairman from August 1987 to January 2006. Earlier this decade, he warned lawmakers against tightening oversight of energy derivatives.
Making Sense of Health Care through Analogies
Another insightful post from Maggie Mahar of the HealthBeat.It is definitely reading in its entirety, especially the details re: point #3 below..
In discussing what’s wrong with health care in America, we often cite statistics—such as the fact that the U.S. spends 16 percent of its GDP on health care, yet has a life expectancy of 77.8 years, below the average of 78.6 years for OECD countries.
But health care is complex, and numbers can sometimes be too abstract to make a lasting impression on people who aren’t health care wonks. Sometimes what really connects isn’t data, but analogies that put health care in terms that everyone can understand. Of course, there are good analogies that illuminate and bad analogies that mislead, so you always have to be careful. Here are a few of the best and worst analogies that I’ve come across:
(1) The Titanic and Inequality. As The Health Care Blog (THCB) noted recently, it’s hard to come up with a more clichéd analogy than the Titanic. It’s really the poster child for much ballyhooed behemoths that collapse because they’re not nearly as state-of-the-art or invulnerable as people assume. But really, that’s a perfect encapsulation of our health care system. We spend $2.4 trillion on health care annually—the equivalent of bailing out Wall Street twice every year.
(..)
(2) Automakers and Prescription Drugs. One of the reasons why the upper crust has it so much better in health care is that the U.S. spends about 14 percent of its health care dollars on prescription drugs. These drugs are largely attainable only to folks with health insurance and generally don’t do much for the behavioral or environmental conditions that threaten the health of lower-earning Americans.
Actually, most prescription drugs don’t do much for anybody, let alone the poor. Last year, Marcia Angell, a Senior Lecturer at Harvard Medical School and the former editor-in-chief of the New England Journal of Medicine, observed that, “according to FDA classifications, fully 80 percent of drugs that entered the market during this decade are unlikely to be better than existing ones for the same condition.”
(..)
(3) Consumer Goods and Medical Treatments. Thinking about how automakers would operate under the prescription drug model highlights the startling regulatory structures (or lack thereof) surrounding the pharmaceutical industry. But the car-as-medicine analogy only goes so far: it’s very helpful for understanding system-wide issues, but from the perspective of the patient, health care is unlike any other commodity.
This is a hard thing for some people to grasp, most of all the hardcore advocates of consumer-driven medicine—i.e. a health care framework in which people have high-deductible coverage and health savings accounts, and shop around for the cheapest care, the same way they would for a new car.
(..)
(4) Handymen and Primary Care Physicians. Consumerism often directs us toward high-end, specialized goods—but in health care, this sort of innovation fetish can prove dangerous. In fact, one of the least sexy areas of health care is primary care, yet it’s also one of the most important.
In discussing what’s wrong with health care in America, we often cite statistics—such as the fact that the U.S. spends 16 percent of its GDP on health care, yet has a life expectancy of 77.8 years, below the average of 78.6 years for OECD countries.
But health care is complex, and numbers can sometimes be too abstract to make a lasting impression on people who aren’t health care wonks. Sometimes what really connects isn’t data, but analogies that put health care in terms that everyone can understand. Of course, there are good analogies that illuminate and bad analogies that mislead, so you always have to be careful. Here are a few of the best and worst analogies that I’ve come across:
(1) The Titanic and Inequality. As The Health Care Blog (THCB) noted recently, it’s hard to come up with a more clichéd analogy than the Titanic. It’s really the poster child for much ballyhooed behemoths that collapse because they’re not nearly as state-of-the-art or invulnerable as people assume. But really, that’s a perfect encapsulation of our health care system. We spend $2.4 trillion on health care annually—the equivalent of bailing out Wall Street twice every year.
(..)
(2) Automakers and Prescription Drugs. One of the reasons why the upper crust has it so much better in health care is that the U.S. spends about 14 percent of its health care dollars on prescription drugs. These drugs are largely attainable only to folks with health insurance and generally don’t do much for the behavioral or environmental conditions that threaten the health of lower-earning Americans.
Actually, most prescription drugs don’t do much for anybody, let alone the poor. Last year, Marcia Angell, a Senior Lecturer at Harvard Medical School and the former editor-in-chief of the New England Journal of Medicine, observed that, “according to FDA classifications, fully 80 percent of drugs that entered the market during this decade are unlikely to be better than existing ones for the same condition.”
(..)
(3) Consumer Goods and Medical Treatments. Thinking about how automakers would operate under the prescription drug model highlights the startling regulatory structures (or lack thereof) surrounding the pharmaceutical industry. But the car-as-medicine analogy only goes so far: it’s very helpful for understanding system-wide issues, but from the perspective of the patient, health care is unlike any other commodity.
This is a hard thing for some people to grasp, most of all the hardcore advocates of consumer-driven medicine—i.e. a health care framework in which people have high-deductible coverage and health savings accounts, and shop around for the cheapest care, the same way they would for a new car.
(..)
(4) Handymen and Primary Care Physicians. Consumerism often directs us toward high-end, specialized goods—but in health care, this sort of innovation fetish can prove dangerous. In fact, one of the least sexy areas of health care is primary care, yet it’s also one of the most important.
The Folly Of A Depression Thesis
Excellent analysis, as usual from Karl Denninger..read the entire piece...
As I spend more and more time pondering the actions of our Treasury and Fed, along with the last Depression and the actual steps taken by various administrations (most specifically Hoover and FDR), I come to the conclusion that those who claim to know so much about it, and how to prevent it, are in fact either talking out their ass - or worse.
Yes, this means you Ben.
See, the common rhetoric is that we had a Depression because credit tightened and liquidity dried up - the government took a "you made a mess, you burn in it" attitude.
This, however, is simply not true, and worse, it ignores the fact that The Fed created the bubble in the 1920s that led to the Depression, just as The Fed created this bubble that is now bursting!
In fact, one wonders - if Ben was chosen for his expertise on The Depression, was (and is) his intent to cause the second one?
You could hardly pick a better matching set of conditions.
(..)
In short we are setting up for what looks like an even Greater Depression, perhaps something similar to the 1873 panic. While the causes would be very different in practice, in principle they seem to be the same - malinvestment caused by "easy money" that, when business conditions turn, becomes "protected" by government - leading to Depression instead of an ordinary business recession and bankruptcy of those who overextended themselves. Now, as then, we have companies that have spent incredible amounts of money to buy influence - it was recently disclosed that AIG, for example, continues to pay lobbyists in an attempt to loosen regulation even though they are now surviving on money borrowed from The Fed!
Be prepared, get out of debt and position yourself so you can survive without the use of consumer or business credit of any sort.
If you have liquid cash, you will be in a great position to pick off property and other goods that people are forced to abandon as the situation worsens. There are many people who became fabulously wealthy as a consequence of The Depression, and all of them had one thing in common - they had cash when things got really bad, and were able to pick off assets cheaply in forced sales.
The TARP has now been proven a failure; even Secretary Paulson has abandoned his original plan, but what he hasn't done is come back to Congress (or the American People) and apologized for the idiocy of his original proposal, nor has he taken responsibility for the equity market crash that this bout of insanity precipitated. Not that this is surprising in the least - expecting anyone in government to have the smallest bit of integrity and admit that they screwed the pooch and hosed Americans is asking too much, isn't it?
After all its not his retirement that got shredded - its yours.
As I spend more and more time pondering the actions of our Treasury and Fed, along with the last Depression and the actual steps taken by various administrations (most specifically Hoover and FDR), I come to the conclusion that those who claim to know so much about it, and how to prevent it, are in fact either talking out their ass - or worse.
Yes, this means you Ben.
See, the common rhetoric is that we had a Depression because credit tightened and liquidity dried up - the government took a "you made a mess, you burn in it" attitude.
This, however, is simply not true, and worse, it ignores the fact that The Fed created the bubble in the 1920s that led to the Depression, just as The Fed created this bubble that is now bursting!
In fact, one wonders - if Ben was chosen for his expertise on The Depression, was (and is) his intent to cause the second one?
You could hardly pick a better matching set of conditions.
(..)
In short we are setting up for what looks like an even Greater Depression, perhaps something similar to the 1873 panic. While the causes would be very different in practice, in principle they seem to be the same - malinvestment caused by "easy money" that, when business conditions turn, becomes "protected" by government - leading to Depression instead of an ordinary business recession and bankruptcy of those who overextended themselves. Now, as then, we have companies that have spent incredible amounts of money to buy influence - it was recently disclosed that AIG, for example, continues to pay lobbyists in an attempt to loosen regulation even though they are now surviving on money borrowed from The Fed!
Be prepared, get out of debt and position yourself so you can survive without the use of consumer or business credit of any sort.
If you have liquid cash, you will be in a great position to pick off property and other goods that people are forced to abandon as the situation worsens. There are many people who became fabulously wealthy as a consequence of The Depression, and all of them had one thing in common - they had cash when things got really bad, and were able to pick off assets cheaply in forced sales.
The TARP has now been proven a failure; even Secretary Paulson has abandoned his original plan, but what he hasn't done is come back to Congress (or the American People) and apologized for the idiocy of his original proposal, nor has he taken responsibility for the equity market crash that this bout of insanity precipitated. Not that this is surprising in the least - expecting anyone in government to have the smallest bit of integrity and admit that they screwed the pooch and hosed Americans is asking too much, isn't it?
After all its not his retirement that got shredded - its yours.
Indian Brides Replace Traditional Gold Jewelry as Prices Rise
Oct. 22 (Bloomberg) -- Ashima Lahiri will say her wedding vows in December wearing fake earrings, necklaces and bangles that cost a tenth of the price of gold, breaking a millennia-old Indian tradition that brides wear the precious metal.
``Gold is too hot now,'' says the 25-year-old fashion designer from Kolkata, eastern India, who'll spend 15,000 rupees ($305) on her bridal set instead of 160,000 rupees for a real one. ``You can't touch it.''
Lahiri's not alone. Indian families, the world's biggest buyers of gold, are canceling purchases before the peak wedding season because prices have touched a record high in India, putting traditional bridal sets out of reach. That's spurred sales of gold-plated, silver and brass gem-encrusted jewelry, designed to match the bride's wedding saris.
(..)
Bullion, considered an investment haven, has weathered a global rout in commodities that has sent the Reuters/Jefferies CRB Index down 18 percent this month, the biggest fall in at least 52 years. In India, gold has gained 14 percent this year, reversing a 6 percent decline in the global spot rate, because a 20 percent slump in the Indian rupee against the dollar to a record low has driven up the cost of importing the metal.
(..)
Households in India have 15,000 tons locked away in family vaults, almost double the reserves held by the U.S. Federal Reserve, according to consultant McKinsey & Co. That's worth about $376 billion at current prices after gold has gained for seven straight years.
(..)
``Every home in India has enough gold so if there is a wedding all they have to do is melt old jewelry and make new sets,'' said Daman Prakash Rathod, director at MNC Bullion Ltd., the biggest bullion dealer in southern India.
``Gold is too hot now,'' says the 25-year-old fashion designer from Kolkata, eastern India, who'll spend 15,000 rupees ($305) on her bridal set instead of 160,000 rupees for a real one. ``You can't touch it.''
Lahiri's not alone. Indian families, the world's biggest buyers of gold, are canceling purchases before the peak wedding season because prices have touched a record high in India, putting traditional bridal sets out of reach. That's spurred sales of gold-plated, silver and brass gem-encrusted jewelry, designed to match the bride's wedding saris.
(..)
Bullion, considered an investment haven, has weathered a global rout in commodities that has sent the Reuters/Jefferies CRB Index down 18 percent this month, the biggest fall in at least 52 years. In India, gold has gained 14 percent this year, reversing a 6 percent decline in the global spot rate, because a 20 percent slump in the Indian rupee against the dollar to a record low has driven up the cost of importing the metal.
(..)
Households in India have 15,000 tons locked away in family vaults, almost double the reserves held by the U.S. Federal Reserve, according to consultant McKinsey & Co. That's worth about $376 billion at current prices after gold has gained for seven straight years.
(..)
``Every home in India has enough gold so if there is a wedding all they have to do is melt old jewelry and make new sets,'' said Daman Prakash Rathod, director at MNC Bullion Ltd., the biggest bullion dealer in southern India.
Tuesday, October 21, 2008
Health Care and Cronyism
Dr. Wes draws parallels between the current mortgage based financial crisis and the future of U.S. healthcare..
Because the parallels to our proposed health care system of the future are, I'm afraid to say, remarkably similar:
Homeownership has deep roots in the American soul. But until recently getting a mortgage was a challenge for low-income families.
Homeownership's roots in our soul pales in comparison to our own health care needs. Additionally. many families can no longer afford health care, or even the insurance policies that are supposed to be our saviour. "What do you mean we can't have health care for all? Of course we must! It is our moral imperative!" This is emotional manipulation - appealing to our most primal fears -a roof over our heads is primal, mortality more so.
So we stand on this slippery slope.
Enter the money.
We've gotten to the point where even our own presidential candidates have espoused health care as a "right" for every American. As we consider this entitlement, we must now ask ourselves how, exactly, the government will implement this initiative to make healthcare a "right." Can the government really supply the facilities, the doctors, the finances to make this happen?
Because the parallels to our proposed health care system of the future are, I'm afraid to say, remarkably similar:
Homeownership has deep roots in the American soul. But until recently getting a mortgage was a challenge for low-income families.
Homeownership's roots in our soul pales in comparison to our own health care needs. Additionally. many families can no longer afford health care, or even the insurance policies that are supposed to be our saviour. "What do you mean we can't have health care for all? Of course we must! It is our moral imperative!" This is emotional manipulation - appealing to our most primal fears -a roof over our heads is primal, mortality more so.
So we stand on this slippery slope.
Enter the money.
We've gotten to the point where even our own presidential candidates have espoused health care as a "right" for every American. As we consider this entitlement, we must now ask ourselves how, exactly, the government will implement this initiative to make healthcare a "right." Can the government really supply the facilities, the doctors, the finances to make this happen?
Monday, October 20, 2008
Beijing Plans Health Care For Everyone
BEIJING -- China has unveiled an ambitious plan to achieve universal health care. The plan, released for public debate last week, lays out in broad strokes plans to introduce greater health-care funding and control prices. The current system leaves out much of the population and forces the rest to pay heavy out-of-pocket expenses.
Overhauling China's health-care system has global significance, given the country's demographic heft, its frequent role as epicenter of infectious diseases and its growing importance in health innovations ranging from organ donation to the use of traditional Chinese medicine.
"What happens in China is a major driver in the dynamics of global health," said medical journal Lancet.
The overall goal of the plan is to cover 90% of the population within two years and achieve universal health care by 2020.
One major point in the draft is to return to the nonprofit motive for national health care. This was dismantled in the 1980s as China cut public services, especially in the countryside. Today, public hospitals receive little government funding and are pressed to operate like businesses. The peddling of experimental, costly drugs and treatments has become rampant.
Overhauling China's health-care system has global significance, given the country's demographic heft, its frequent role as epicenter of infectious diseases and its growing importance in health innovations ranging from organ donation to the use of traditional Chinese medicine.
"What happens in China is a major driver in the dynamics of global health," said medical journal Lancet.
The overall goal of the plan is to cover 90% of the population within two years and achieve universal health care by 2020.
One major point in the draft is to return to the nonprofit motive for national health care. This was dismantled in the 1980s as China cut public services, especially in the countryside. Today, public hospitals receive little government funding and are pressed to operate like businesses. The peddling of experimental, costly drugs and treatments has become rampant.
Sunday, October 19, 2008
Bernanke Is Fighting the Last War
The credit markets remain frozen, the stock market continues to get hammered, and deep recession now seems a certainty -- if not a reality already.
Most people now living have never seen a credit crunch like the one we are currently enduring. Ms. Schwartz, 92 years old, is one of the exceptions. She's not only old enough to remember the period from 1929 to 1933, she may know more about monetary history and banking than anyone alive. She co-authored, with Milton Friedman, "A Monetary History of the United States" (1963). It's the definitive account of how misguided monetary policy turned the stock-market crash of 1929 into the Great Depression.
Since 1941, Ms. Schwartz has reported for work at the National Bureau of Economic Research in New York, where we met Thursday morning for an interview. She is currently using a wheelchair after a recent fall and laments her "many infirmities," but those are all physical; her mind is as sharp as ever. She speaks with passion and just a hint of resignation about the current financial situation. And looking at how the authorities have handled it so far, she doesn't like what she sees.
Federal Reserve Chairman Ben Bernanke has called the 888-page "Monetary History" "the leading and most persuasive explanation of the worst economic disaster in American history." Ms. Schwartz thinks that our central bankers and our Treasury Department are getting it wrong again.
Most people now living have never seen a credit crunch like the one we are currently enduring. Ms. Schwartz, 92 years old, is one of the exceptions. She's not only old enough to remember the period from 1929 to 1933, she may know more about monetary history and banking than anyone alive. She co-authored, with Milton Friedman, "A Monetary History of the United States" (1963). It's the definitive account of how misguided monetary policy turned the stock-market crash of 1929 into the Great Depression.
Since 1941, Ms. Schwartz has reported for work at the National Bureau of Economic Research in New York, where we met Thursday morning for an interview. She is currently using a wheelchair after a recent fall and laments her "many infirmities," but those are all physical; her mind is as sharp as ever. She speaks with passion and just a hint of resignation about the current financial situation. And looking at how the authorities have handled it so far, she doesn't like what she sees.
Federal Reserve Chairman Ben Bernanke has called the 888-page "Monetary History" "the leading and most persuasive explanation of the worst economic disaster in American history." Ms. Schwartz thinks that our central bankers and our Treasury Department are getting it wrong again.
AIG Spa Trip Fuels Fury on Hill
Pressing Executives to Concede Mistakes, Lawmakers Blast Them About Bonuses
For some people at AIG, the insurance giant rescued last month with an $85 billion federal bailout, the good times keep rolling.
Joseph Cassano, the financial products manager whose complex investments led to American International Group's near collapse, is receiving $1 million a month in consulting fees.
Former chief executive Martin J. Sullivan, whose three-year tenure coincided with much of the company's ill-fated risk-taking, is receiving a $5 million performance bonus.
And just last week, about 70 of the company's top performers were rewarded with a week-long stay at the luxury St. Regis Resort in Monarch Beach, Calif., where they ran up a tab of $440,000.
For some people at AIG, the insurance giant rescued last month with an $85 billion federal bailout, the good times keep rolling.
Joseph Cassano, the financial products manager whose complex investments led to American International Group's near collapse, is receiving $1 million a month in consulting fees.
Former chief executive Martin J. Sullivan, whose three-year tenure coincided with much of the company's ill-fated risk-taking, is receiving a $5 million performance bonus.
And just last week, about 70 of the company's top performers were rewarded with a week-long stay at the luxury St. Regis Resort in Monarch Beach, Calif., where they ran up a tab of $440,000.
A doctor's prescription for healing American health care
More suggestions for health care reform by another physician...
Change must come from doctors, patients, and insurance companies working together instead of against each other. It cannot come from Washington.
Change must come from doctors, patients, and insurance companies working together instead of against each other. It cannot come from Washington.
Fixing Our Broken Health Care System
A well thought out solution to our health care crisis..worth reading the whole article...
...There you have it, those are my suggestions for overhauling our health care system. Make it accessible, esp. to those who can’t afford it, by eliminating the inefficient and wasteful Medicaid and SCHIP programs to establish a national health care system through the expansion of the existing health department system. Make it more affordable by injecting capitalism into health care to allow hospitals, clinics and insurance companies to compete among each other. Ensure quality and patient safety. And lastly for health care providers, establish a medical court and level the playing field for EMTALA care.
...There you have it, those are my suggestions for overhauling our health care system. Make it accessible, esp. to those who can’t afford it, by eliminating the inefficient and wasteful Medicaid and SCHIP programs to establish a national health care system through the expansion of the existing health department system. Make it more affordable by injecting capitalism into health care to allow hospitals, clinics and insurance companies to compete among each other. Ensure quality and patient safety. And lastly for health care providers, establish a medical court and level the playing field for EMTALA care.
Saturday, October 18, 2008
Understanding the financial crisis: the basics
A reasonable, simplified analysis of what precipitated the financial meltdown...
But to start, we need a basic understanding of what actually has happened. So here's the chain of events (to the best of my understanding):
But to start, we need a basic understanding of what actually has happened. So here's the chain of events (to the best of my understanding):
$85,000,000,000,000 and Counting . . .
While this is probably not new news to many readers of this blog, I thought that it was a good reminder from "Insureblog"
If you think $700,000,000,000 is a lot of money to start to bail us out of the mortgage mess.
Or $85,000,000,000 plus another $37,000,000,000 for AIG is disgusting.
Try this on for size.
$85 TRILLION.
That is the estimated unfunded liability for Medicare.
(..)
Medicare went into deficit this year -- 2008. That means that this year Medicare began paying out more than the program takes in. Oops! Someone forgot to tell the politicians. They are giving away money like a drunken sailor and promising even more. If we can't cover our costs for Medicare, how are we going to pay for health care for everyone? The numbers don't lie.
If you think $700,000,000,000 is a lot of money to start to bail us out of the mortgage mess.
Or $85,000,000,000 plus another $37,000,000,000 for AIG is disgusting.
Try this on for size.
$85 TRILLION.
That is the estimated unfunded liability for Medicare.
(..)
Medicare went into deficit this year -- 2008. That means that this year Medicare began paying out more than the program takes in. Oops! Someone forgot to tell the politicians. They are giving away money like a drunken sailor and promising even more. If we can't cover our costs for Medicare, how are we going to pay for health care for everyone? The numbers don't lie.
Friday, October 17, 2008
The Financial Crisis and Healthcare
The financial markets are gyrating. The world economy is teetering. The U.S. government is making a $700 billion or more bailout to avert a worldwide disaster. No surprise, health care has become a side show. Or has it? Not only does this upheaval actually make health-care reform more pressing, it makes comprehensive reform—change in the way health care is paid for and how care is organized and delivered— more realistic and feasible.
"Socialism" has come to Wall Street. For more than 60 years, Republicans have criticized as "socialized medicine" any reform proposal that gave government a central role in funding health services or in regulating providers.
The charge has always been false. True socialism requires governmental ownership of the means of production. No health-care reform proposal, even the most ardent single-payer plans, ever suggested the government should employ doctors, or own hospitals, pharmacies, home health-care agencies or drug companies. Moreover, in the current system, the government already pays for more than 40 percent of the health-care bill. With a Republican administration leading the takeover of Freddie Mac, Fannie Mae, American International Group Inc., and the purchase of housing securities, it hardly seems credible to criticize health-reform plans as socialized anything.
The phenomenal failure of Wall Street dramatically changes the appetite of the country for regulation and for shoring up the safety net. With trillions of dollars evaporating in this crisis, millions of middle-class Americans face the prospect of losing their homes and jobs, and witnessing a dramatic contraction of their retirement savings. In response, the public will desperately want financial security, and health care is a critical element of that.
This financial crisis also means Americans may be more willing to forgo gold-plated comprehensive insurance that covers everything with few restrictions. Under the threat of losing everything, Americans may feel content with the guarantee of a decent plan that covers cost-effective treatments with some restrictions on choice and services to save money. This should enhance the chances for a bipartisan deal on health care.
"Socialism" has come to Wall Street. For more than 60 years, Republicans have criticized as "socialized medicine" any reform proposal that gave government a central role in funding health services or in regulating providers.
The charge has always been false. True socialism requires governmental ownership of the means of production. No health-care reform proposal, even the most ardent single-payer plans, ever suggested the government should employ doctors, or own hospitals, pharmacies, home health-care agencies or drug companies. Moreover, in the current system, the government already pays for more than 40 percent of the health-care bill. With a Republican administration leading the takeover of Freddie Mac, Fannie Mae, American International Group Inc., and the purchase of housing securities, it hardly seems credible to criticize health-reform plans as socialized anything.
The phenomenal failure of Wall Street dramatically changes the appetite of the country for regulation and for shoring up the safety net. With trillions of dollars evaporating in this crisis, millions of middle-class Americans face the prospect of losing their homes and jobs, and witnessing a dramatic contraction of their retirement savings. In response, the public will desperately want financial security, and health care is a critical element of that.
This financial crisis also means Americans may be more willing to forgo gold-plated comprehensive insurance that covers everything with few restrictions. Under the threat of losing everything, Americans may feel content with the guarantee of a decent plan that covers cost-effective treatments with some restrictions on choice and services to save money. This should enhance the chances for a bipartisan deal on health care.
The Rich Support McCain, the Super-Rich Support Obama
Lower Richistanis tended to vote almost exclusively based on taxes. But Upper Richistanis placed a higher priority on longer-term societal issues like health care, the environment and education, which are traditional Democrat issues. Some say Upper Richistanis can afford to minimize taxes, since they have plenty of money even after the government takes its share. Others say the ultra-rich have better tax attorneys so they don’t care as much about tax rates.
Yet a new survey shows that the Richistan split is not only alive and well, but it may even be growing.
According to a new survey by Prince & Associates, voters worth $1 million to $10 million are favoring Sen. John McCain, while voters worth $30 million or more are favoring Sen. Barack Obama. The survey of 493 families showed:
More than three quarters of those worth $1 million to $10 million plan to vote for Sen. McCain. Only 15% plan to vote for Sen. Obama (the rest are undecided). Of those worth more than $30 million, two-thirds support Sen. Obama, while one third support Sen. McCain.
Yet a new survey shows that the Richistan split is not only alive and well, but it may even be growing.
According to a new survey by Prince & Associates, voters worth $1 million to $10 million are favoring Sen. John McCain, while voters worth $30 million or more are favoring Sen. Barack Obama. The survey of 493 families showed:
More than three quarters of those worth $1 million to $10 million plan to vote for Sen. McCain. Only 15% plan to vote for Sen. Obama (the rest are undecided). Of those worth more than $30 million, two-thirds support Sen. Obama, while one third support Sen. McCain.
Thursday, October 16, 2008
From Plan A to Plan G
J Bradford DeLong: Will partially nationalising US banks stave off a depression?: From Plan A to Plan G: The US has tried to stave off depression in half a dozen ways. Will partially nationalising America's banks do the trick?
The Bush administration, having entered office as social conservatives, leaves office as conservative socialists, proprietors of the most sudden large expansion of the state's role in the US economy since mobilisation for the second world war.
Why did they decide to partially and quasi-nationalise America's banks - to invest $250bn in preferred stock plus warrants and tell the banks that it wanted them to use the capital to expand their loan base rather than contract it via deleveraging? It is certainly not what Henry Paulson signed up as Treasury secretary to do.
(via Marginal Revolution)
The Bush administration, having entered office as social conservatives, leaves office as conservative socialists, proprietors of the most sudden large expansion of the state's role in the US economy since mobilisation for the second world war.
Why did they decide to partially and quasi-nationalise America's banks - to invest $250bn in preferred stock plus warrants and tell the banks that it wanted them to use the capital to expand their loan base rather than contract it via deleveraging? It is certainly not what Henry Paulson signed up as Treasury secretary to do.
(via Marginal Revolution)
Democracy on the wane
And the villains, surprisingly enough, are the same people who supposedly make democracy possible: the middle class. Traditional theories of democratization, such as those of Harvard professor Samuel Huntington, predict a story of middle class heroics: As a country develops a true middle class, these urban, educated citizens insist on more rights in order to protect their economic and social interests. Eventually, as the size of the middle class grows, those demands become so overwhelming that democracy is inevitable. But now, it appears, the middle class in some nations has turned into an antidemocratic force. Young democracy, with weak institutions, often brings to power, at first, elected leaders who actually don't care that much about upholding democracy. As these demagogues tear down the very reforms the middle classes built, those same middle classes turn against the leaders, and then against the system itself, bringing democracy to collapse.
This is a process now being repeated in Africa, Asia, and parts of Latin America, regions that once seemed destined to become the third and fourth waves of global democratization, following the original Western democracies and the second wave in southern Europe and several other regions. The pattern has become so noticeable - repeated in Venezuela, Russia, Bangladesh, and other states - that one must even wonder about democracy's future itself.
This is a process now being repeated in Africa, Asia, and parts of Latin America, regions that once seemed destined to become the third and fourth waves of global democratization, following the original Western democracies and the second wave in southern Europe and several other regions. The pattern has become so noticeable - repeated in Venezuela, Russia, Bangladesh, and other states - that one must even wonder about democracy's future itself.
Wednesday, October 15, 2008
How it Works: Getting Paid That Is.
Excellent post from "The Independent Urologist"and comments that follow--this truly captures all that surrounds a single visit...this is absolutely unique to the American healthcare system--and hits to the heart of one of the most demoralizing aspects of practice for many of my collagues...
When you go to a restaurant, you order the food, eat, the bill comes, and you pay for the meal either with cash or credit card. If you use an accountant, they do their work, send you a bill, and you send them a check. If you purchase a sweater on-line, you supply the merchant with your credit card or paypal information, hit submit, and then the merchant processes the order. In general, the process is pretty straightforward and transparent.
In most medical practices, the process is much more complex, less transparent, and more open to error.
In medical practice, from the instant a patient calls to make an appointment, a cascade of events gets initiated that results several weeks to several months later in a payment into your bank account.
Here's the steps that follow the "I'd like to make an appointment with Dr Schoor" phone call:
(Click on the link above for the next steps in the 6 armed algorithm and all the steps that follow below each arm...you will probably be surprised)
When you go to a restaurant, you order the food, eat, the bill comes, and you pay for the meal either with cash or credit card. If you use an accountant, they do their work, send you a bill, and you send them a check. If you purchase a sweater on-line, you supply the merchant with your credit card or paypal information, hit submit, and then the merchant processes the order. In general, the process is pretty straightforward and transparent.
In most medical practices, the process is much more complex, less transparent, and more open to error.
In medical practice, from the instant a patient calls to make an appointment, a cascade of events gets initiated that results several weeks to several months later in a payment into your bank account.
Here's the steps that follow the "I'd like to make an appointment with Dr Schoor" phone call:
(Click on the link above for the next steps in the 6 armed algorithm and all the steps that follow below each arm...you will probably be surprised)
Cancer of the Devil
Tasmanian devils live on the island of (surprise!) Tasmania, off the south coast of Australia. They are marsupials: their young are born tiny (about a third of a gram — that’s a hundredth of an ounce), then fed on milk and carried in a pouch. As adults, devils are thick-set, thuggish-looking animals, with massive teeth that they use to chomp up carcasses, bones and all. Although they are far from enormous — the biggest males weigh in at around 14 kilograms (30 pounds), about the size of a French bulldog — Tasmanian devils are the largest carnivorous marsupials to have, so far, escaped extinction.
But over the last 12 years, the population has crashed — in some areas, population numbers have fallen by 90 percent. The dramatic decline has led the IUCN to move the species from “least concern” a decade ago to “endangered” now. Some think it could be extinct within 25 years. The reason? An infectious cancer.
The Long Defeat
Paul Farmer is one of my heroes...
I don’t suppose there’s a more astonishing person in the world than Farmer, and there can’t be many (any?) who have saved and improved as many lives. And he has spent much of his life among the most profoundly poor and miserable people in the world, especially in Haiti, where the organization he founded, Partners in Health, did its first work and where it still maintains its flagship project, the hospital called Zanmi Lasante.
Late in the book, when Kidder begins — and very skillfully too — to draw together the threads of his narrative and to sum up (as best he can) his understanding of Farmer, he notes Farmer’s fondness for a particular phrase: “the long defeat.” At one point Farmer says to Kidder,
“I have fought the long defeat and brought other people on to fight the long defeat, and I’m not going to stop because we keep losing. Now I actually think sometimes we may win. I don’t dislike victory. . . . You know, people from our background — like you, like most PIH-ers, like me — we’re used to being on a victory team, and actually what we’re really trying to do in PIH is to make common cause with the losers. Those are two very different things. We want to be on the winning team, but at the risk of turning our backs on the losers, no, it’s not worth it. So you fight the long defeat.”
I don’t suppose there’s a more astonishing person in the world than Farmer, and there can’t be many (any?) who have saved and improved as many lives. And he has spent much of his life among the most profoundly poor and miserable people in the world, especially in Haiti, where the organization he founded, Partners in Health, did its first work and where it still maintains its flagship project, the hospital called Zanmi Lasante.
Late in the book, when Kidder begins — and very skillfully too — to draw together the threads of his narrative and to sum up (as best he can) his understanding of Farmer, he notes Farmer’s fondness for a particular phrase: “the long defeat.” At one point Farmer says to Kidder,
“I have fought the long defeat and brought other people on to fight the long defeat, and I’m not going to stop because we keep losing. Now I actually think sometimes we may win. I don’t dislike victory. . . . You know, people from our background — like you, like most PIH-ers, like me — we’re used to being on a victory team, and actually what we’re really trying to do in PIH is to make common cause with the losers. Those are two very different things. We want to be on the winning team, but at the risk of turning our backs on the losers, no, it’s not worth it. So you fight the long defeat.”
Monday, October 13, 2008
Sickness Unto Debt
Ron Paul on the bailout...
One of the burning questions regarding the recently passed bailout, and the one that almost no one has bothered to answer, is how the government intends to pay for it. Governments have three main methods by which they can raise funds: taxation, printing new money, and debt. As our $10 trillion national debt shows, the federal government has always enjoyed raising money by issuing new debt. Money is gained upfront, while the cost of repaying that debt is pushed onto future generations.
This method is especially favored today, since imposing $700 billion worth of taxes would lead to widespread public dissatisfaction. When the cost of all the recent bailouts plus the cost of all the new lending facilities the Federal Reserve has initiated are added together, we quickly reach a figure in the trillions of dollars. Even with the debt ceiling being raised to $11.3 trillion, the issuance of debt alone cannot begin to cover the cost of all the bailouts in which the government is engaged. Every indication is that the government will use both debt and inflation in its attempt to keep the economy running at full speed.
(..)
The monetary base jumping by such a large margin is an indicator that the Federal Reserve has not learned from its mistakes and is hoping to get out of this economic downturn by creating even more credit out of thin air. With such large increases in the monetary base and with banks legally able to hold zero reserves, the vaunted money multiplier effect could theoretically reach infinity. If our policymakers fail to come to their senses, there is a real danger that we could end up in a hyperinflationary crisis such as the ones that beset Germany in the 1920s and Argentina and Zimbabwe in more recent decades
The common measure of inflation, the consumer price index, has been so manipulated over the years that it cannot be trusted to be an accurate indicator of the true effect of inflation on people's pocketbooks. This is especially true of “core inflation,” which eliminates food and energy prices, the two staples that are most important to every American. When the CPI figure is computed using the original method of calculation, it comes out to more than 10 percent per year, which is a more accurate indicator of the inflation being felt by middle-class Americans.
One of the burning questions regarding the recently passed bailout, and the one that almost no one has bothered to answer, is how the government intends to pay for it. Governments have three main methods by which they can raise funds: taxation, printing new money, and debt. As our $10 trillion national debt shows, the federal government has always enjoyed raising money by issuing new debt. Money is gained upfront, while the cost of repaying that debt is pushed onto future generations.
This method is especially favored today, since imposing $700 billion worth of taxes would lead to widespread public dissatisfaction. When the cost of all the recent bailouts plus the cost of all the new lending facilities the Federal Reserve has initiated are added together, we quickly reach a figure in the trillions of dollars. Even with the debt ceiling being raised to $11.3 trillion, the issuance of debt alone cannot begin to cover the cost of all the bailouts in which the government is engaged. Every indication is that the government will use both debt and inflation in its attempt to keep the economy running at full speed.
(..)
The monetary base jumping by such a large margin is an indicator that the Federal Reserve has not learned from its mistakes and is hoping to get out of this economic downturn by creating even more credit out of thin air. With such large increases in the monetary base and with banks legally able to hold zero reserves, the vaunted money multiplier effect could theoretically reach infinity. If our policymakers fail to come to their senses, there is a real danger that we could end up in a hyperinflationary crisis such as the ones that beset Germany in the 1920s and Argentina and Zimbabwe in more recent decades
The common measure of inflation, the consumer price index, has been so manipulated over the years that it cannot be trusted to be an accurate indicator of the true effect of inflation on people's pocketbooks. This is especially true of “core inflation,” which eliminates food and energy prices, the two staples that are most important to every American. When the CPI figure is computed using the original method of calculation, it comes out to more than 10 percent per year, which is a more accurate indicator of the inflation being felt by middle-class Americans.
Don't Be So Sure This Will Work
Last night Trichet and other policymakers in Europe basically forced Bernanke's hand, initiating 100% guarantees of interbank lending.
This forced Bernanke to follow suit early this morning, lest the US markets and US credit system implode into a smoking hole instantly.
This was not a position Bernanke was willing to take on his own, or he would have. But when the rest of the world has done it, you literally have no choice, unless you intend to be turned into an instantaneous credit island - an event that the United States would literally not survive.
So the die was cast and Paulson and Bernanke's refusal to endorse this step in the G7 meeting Friday was literally rammed down their throat.
Now, however, we have a new problem.
This forced Bernanke to follow suit early this morning, lest the US markets and US credit system implode into a smoking hole instantly.
This was not a position Bernanke was willing to take on his own, or he would have. But when the rest of the world has done it, you literally have no choice, unless you intend to be turned into an instantaneous credit island - an event that the United States would literally not survive.
So the die was cast and Paulson and Bernanke's refusal to endorse this step in the G7 meeting Friday was literally rammed down their throat.
Now, however, we have a new problem.
The Deal
From
Tyler Cowen at Marginal Revoloution...
Citigroup and JPMorgan Chase were told they would each get $25 billion; Bank of America and Wells Fargo, $20 billion; Goldman Sachs and Morgan Stanley, $10 billion each, with Bank of New York and State Street each receiving $2 to 3 billion. Wells Fargo will get an additional $5 billion, reflecting its acquisition of Wachovia, and Bank of America receives the same for amount for its purchase of Merrill Lynch.
...The government will purchase perpetual preferred shares in all the largest U.S. banking companies. The shares will not be dilutive to current shareholders, a concern to banking...executives, because perpetual preferred stock holders are paid a dividend, not a portion of earnings. The capital injections are not voluntary, with Mr. Paulson making it clear this was a one-time offer that everyone at the meeting should accept.
Here is the story. No matter what your point of view, you ought to be stunned by this development.
Tyler Cowen at Marginal Revoloution...
Citigroup and JPMorgan Chase were told they would each get $25 billion; Bank of America and Wells Fargo, $20 billion; Goldman Sachs and Morgan Stanley, $10 billion each, with Bank of New York and State Street each receiving $2 to 3 billion. Wells Fargo will get an additional $5 billion, reflecting its acquisition of Wachovia, and Bank of America receives the same for amount for its purchase of Merrill Lynch.
...The government will purchase perpetual preferred shares in all the largest U.S. banking companies. The shares will not be dilutive to current shareholders, a concern to banking...executives, because perpetual preferred stock holders are paid a dividend, not a portion of earnings. The capital injections are not voluntary, with Mr. Paulson making it clear this was a one-time offer that everyone at the meeting should accept.
Here is the story. No matter what your point of view, you ought to be stunned by this development.
What Would You Tell Your Children?
The emotions artfully articulated by this South African doctor are actually becoming increasingly commonplace here--technically not a third world country....
The other day a friend and I were trying to decide what we would tell our children of they wanted to study medicine. It wasn't all that easy. See, in addition to the truths mentioned above, there are other things about medicine, especially South African (or, I guess, any third world) medicine that you will only really understand when it's too late. For example, once you've finally completed your six years of routine humiliation at the hands of countless personality-disordered consultants and registrars, you'll be sent to some place far away from your home and very possibly not of your own choosing, to be abused and humiliated for a further two years as an intern. Just when you've settled into this new place - gotten comfy in your new house, moved in with/married your life partner - the government will once again move you to some backwater town with an unpronouncable name and no tarred roads to practice something that vaguely resembles medicine, but only in the crudest sense of the word.
In this backwater town, you will realise that, actually, you can't change the world when there are a bunch of idiots ruling it, and you'll watch in despair as mothers and babies and all sorts of other people die or become crippled from things you know are perfectly treatable, if you only had some basic drugs and resources at your disposal. You'll become more and more frustrated as half of your patients die as a result of laziness or plain stupidity, and the other half as a result of ignorance and corruption, and you'll wonder why it's called 'community service' as you have no service to offer your patients. You'll forget that you originally became a doctor so that you could cure people (mostly because a cure is as rare as a rabbit in Antarctica) - if you're lucky you'll maintain your strong sense of compassion, but if you're human it'll probably be, well, annihilated as you become completely swamped by people who just want things from you all day long and never seem to be interested in sorting their problems out themselves. After a year (or two, it now looks like) of this, you can go back to wherever you want, but you may very well end up slaving away at something thankless and unfulfilling as you wait for a post in something you really like, which you may or may not get.
(..)
But even with all this in mind, I can't imagine myself doing anything other than medicine.
The other day a friend and I were trying to decide what we would tell our children of they wanted to study medicine. It wasn't all that easy. See, in addition to the truths mentioned above, there are other things about medicine, especially South African (or, I guess, any third world) medicine that you will only really understand when it's too late. For example, once you've finally completed your six years of routine humiliation at the hands of countless personality-disordered consultants and registrars, you'll be sent to some place far away from your home and very possibly not of your own choosing, to be abused and humiliated for a further two years as an intern. Just when you've settled into this new place - gotten comfy in your new house, moved in with/married your life partner - the government will once again move you to some backwater town with an unpronouncable name and no tarred roads to practice something that vaguely resembles medicine, but only in the crudest sense of the word.
In this backwater town, you will realise that, actually, you can't change the world when there are a bunch of idiots ruling it, and you'll watch in despair as mothers and babies and all sorts of other people die or become crippled from things you know are perfectly treatable, if you only had some basic drugs and resources at your disposal. You'll become more and more frustrated as half of your patients die as a result of laziness or plain stupidity, and the other half as a result of ignorance and corruption, and you'll wonder why it's called 'community service' as you have no service to offer your patients. You'll forget that you originally became a doctor so that you could cure people (mostly because a cure is as rare as a rabbit in Antarctica) - if you're lucky you'll maintain your strong sense of compassion, but if you're human it'll probably be, well, annihilated as you become completely swamped by people who just want things from you all day long and never seem to be interested in sorting their problems out themselves. After a year (or two, it now looks like) of this, you can go back to wherever you want, but you may very well end up slaving away at something thankless and unfulfilling as you wait for a post in something you really like, which you may or may not get.
(..)
But even with all this in mind, I can't imagine myself doing anything other than medicine.
Sunday, October 12, 2008
There Is a Silver Lining
An optimistic analysis of current financial woes by Fareed Zakaria...
The crisis has forced the United States to confront bad habits developed over the past few decades. If we can kick those habits, today's pain will translate into gains.
Some of us—especially those under 60—have always wondered what it would be like to live through the kind of epochal event one reads about in books. Well, this is it. We're now living history, suffering one of the greatest financial panics of all time. It compares with the big ones—1907, 1929—and we cannot yet know its full consequences for the financial system, the economy or society as a whole.
(..)
"Leverage" is the fancy Wall Street word for debt. It's at the heart of the current crisis. Warren Buffett explained the problem in his inimitable way on "The Charlie Rose Show." "Leverage," he said, "is the only way a smart guy can go broke ... You do smart things, you eventually get very rich. If you do smart things and use leverage and you do one wrong thing along the way, it could wipe you out, because anything times zero is zero. But it's reinforcing when the people around you are doing it successfully, you're doing it successfully, and it's a lot like Cinderella at the ball. The guys look better all the time, the music sounds better, it's more and more fun, you think, 'Why the hell should I leave at a quarter to 12? I'll leave at two minutes to 12.' But the trouble is, there are no clocks on the wall. And everybody thinks they're going to leave at two minutes to 12."
(..)
Wall Street will also need to change. Paul Volcker has long argued that the recent spate of financial innovation was nothing of the kind: it simply shuffled around existing resources while contributing few real benefits to the economy. Such activity will now be reduced significantly. Boykin Curry, managing director of Eagle Capital, says, "For 20 years, the DNA of nearly every financial institution had morphed dangerously. Each time someone at the table pressed for more leverage and more risk, the next few years proved them 'right.' These people were emboldened, they were promoted and they gained control of ever more capital. Meanwhile, anyone in power who hesitated, who argued for caution, was proved 'wrong.' The cautious types were increasingly intimidated, passed over for promotion. They lost their hold on capital. This happened every day in almost every financial institution over and over, until we ended up with a very specific kind of person running things. This year, the capital that remains is finally being reallocated to more careful, thoughtful executives and investors—the Warren Buffetts … of the world."
Volcker has also argued that the highly complex financial system was not nearly as stable as people believed and that far-reaching efforts were needed to regulate and stabilize it. Now these issues will get attention at the highest level. The fear on Wall Street is that a Democratic administration would overregulate. But look at who is advising Barack Obama—Buffett, Volcker, former Treasury secretaries Robert Rubin and Larry Summers. It is more likely that what will come from their efforts will be a better-regulated financial system that, while producing less-extravagant profits, will be more stable and secure.
The crisis has forced the United States to confront bad habits developed over the past few decades. If we can kick those habits, today's pain will translate into gains.
Some of us—especially those under 60—have always wondered what it would be like to live through the kind of epochal event one reads about in books. Well, this is it. We're now living history, suffering one of the greatest financial panics of all time. It compares with the big ones—1907, 1929—and we cannot yet know its full consequences for the financial system, the economy or society as a whole.
(..)
"Leverage" is the fancy Wall Street word for debt. It's at the heart of the current crisis. Warren Buffett explained the problem in his inimitable way on "The Charlie Rose Show." "Leverage," he said, "is the only way a smart guy can go broke ... You do smart things, you eventually get very rich. If you do smart things and use leverage and you do one wrong thing along the way, it could wipe you out, because anything times zero is zero. But it's reinforcing when the people around you are doing it successfully, you're doing it successfully, and it's a lot like Cinderella at the ball. The guys look better all the time, the music sounds better, it's more and more fun, you think, 'Why the hell should I leave at a quarter to 12? I'll leave at two minutes to 12.' But the trouble is, there are no clocks on the wall. And everybody thinks they're going to leave at two minutes to 12."
(..)
Wall Street will also need to change. Paul Volcker has long argued that the recent spate of financial innovation was nothing of the kind: it simply shuffled around existing resources while contributing few real benefits to the economy. Such activity will now be reduced significantly. Boykin Curry, managing director of Eagle Capital, says, "For 20 years, the DNA of nearly every financial institution had morphed dangerously. Each time someone at the table pressed for more leverage and more risk, the next few years proved them 'right.' These people were emboldened, they were promoted and they gained control of ever more capital. Meanwhile, anyone in power who hesitated, who argued for caution, was proved 'wrong.' The cautious types were increasingly intimidated, passed over for promotion. They lost their hold on capital. This happened every day in almost every financial institution over and over, until we ended up with a very specific kind of person running things. This year, the capital that remains is finally being reallocated to more careful, thoughtful executives and investors—the Warren Buffetts … of the world."
Volcker has also argued that the highly complex financial system was not nearly as stable as people believed and that far-reaching efforts were needed to regulate and stabilize it. Now these issues will get attention at the highest level. The fear on Wall Street is that a Democratic administration would overregulate. But look at who is advising Barack Obama—Buffett, Volcker, former Treasury secretaries Robert Rubin and Larry Summers. It is more likely that what will come from their efforts will be a better-regulated financial system that, while producing less-extravagant profits, will be more stable and secure.
World Sight Day
World Sight Day was last week..My friend, Orbis Medical Director, Hunter Cherweth, speaks about vision related issues and Orbis here...
7 Spectacularly Skilled High-Speed Photographers
High-speed photography is a fascinating way to capture the images that we don’t often get to see. So many amazing things happen in the blink of an eye - moving too quickly for us to see more than a blur and the aftermath. Using clever equipment and quick shutters, these talented photographers freeze time and illuminate one single critical moment. If they time it just right, high-speed photographers can catch a moment of impact, explosion, or surprising movement - and it makes for incredible art.
Still Holding Back
The best quote of the current financial meltdown comes from famed investor, Jeremy Grantham, Chairman of GMO funds in this week's Barron's:
Do you think we will learn anything from all of this turmoil?
We will learn an enormous amount in a very short time, quite a bit in the medium term and absolutely nothing in the long term. That would be the historical precedent.
and later in the interview, more wisdom:
Do you have any closing thoughts about how we got into this financial state?
I ask myself, "Why is it that several dozen people saw this crisis coming for years?" I described it as being like watching a train wreck in very slow motion. It seemed so inevitable and so merciless, and yet the bosses of Merrill Lynch and Citi and even [U.S. Treasury Secretary] Hank Paulson and [Fed Chairman Ben] Bernanke -- none of them seemed to see it coming.
I have a theory that people who find themselves running major-league companies are real organization-management types who focus on what they are doing this quarter or this annual budget. They are somewhat impatient, and focused on the present. Seeing these things requires more people with a historical perspective who are more thoughtful and more right-brained -- but we end up with an army of left-brained immediate doers.
So it's more or less guaranteed that every time we get an outlying, obscure event that has never happened before in history, they are always going to miss it. And the three or four-dozen-odd characters screaming about it are always going to be ignored.
If you look at the people who have been screaming about impending doom, and you added all of those several dozen people together, I don't suppose that collectively they could run a single firm without dragging it into bankruptcy in two weeks. They are just a different kind of person.
So we kept putting organization people -- people who can influence and persuade and cajole -- into top jobs that once-in-a-blue-moon take great creativity and historical insight. But they don't have those skills.
Where do you see all of this going?
I want to emphasize how little I understand all of the intricate workings of the global financial system. I hope that someone else gets it, because I don't. And I have no idea, really, how this will work out. I certainly wish it hadn't happened. It is just so intricate that all I can conclude, by instinct and by reading the history books, is that it will be longer, harder and more complicated than we expect.
Do you think we will learn anything from all of this turmoil?
We will learn an enormous amount in a very short time, quite a bit in the medium term and absolutely nothing in the long term. That would be the historical precedent.
and later in the interview, more wisdom:
Do you have any closing thoughts about how we got into this financial state?
I ask myself, "Why is it that several dozen people saw this crisis coming for years?" I described it as being like watching a train wreck in very slow motion. It seemed so inevitable and so merciless, and yet the bosses of Merrill Lynch and Citi and even [U.S. Treasury Secretary] Hank Paulson and [Fed Chairman Ben] Bernanke -- none of them seemed to see it coming.
I have a theory that people who find themselves running major-league companies are real organization-management types who focus on what they are doing this quarter or this annual budget. They are somewhat impatient, and focused on the present. Seeing these things requires more people with a historical perspective who are more thoughtful and more right-brained -- but we end up with an army of left-brained immediate doers.
So it's more or less guaranteed that every time we get an outlying, obscure event that has never happened before in history, they are always going to miss it. And the three or four-dozen-odd characters screaming about it are always going to be ignored.
If you look at the people who have been screaming about impending doom, and you added all of those several dozen people together, I don't suppose that collectively they could run a single firm without dragging it into bankruptcy in two weeks. They are just a different kind of person.
So we kept putting organization people -- people who can influence and persuade and cajole -- into top jobs that once-in-a-blue-moon take great creativity and historical insight. But they don't have those skills.
Where do you see all of this going?
I want to emphasize how little I understand all of the intricate workings of the global financial system. I hope that someone else gets it, because I don't. And I have no idea, really, how this will work out. I certainly wish it hadn't happened. It is just so intricate that all I can conclude, by instinct and by reading the history books, is that it will be longer, harder and more complicated than we expect.
Our Choice
It seems that many economists are now echoing Nouriel Roubini's prescriptives...(BTW Nouriel Roubini, aka "Dr. Doom" masks can now be purchased in time for Halloween)...
Last week, I suggested the need for a coordinated monetary policy rate cut. That cut arrived yesterday, with the Fed, the European Central Bank and other central banks cutting their policy rates by 50 basis points (bps).
This action is necessary, but only cosmetic, and it is too little too late.
(..)
Policy rate cuts will have a limited effect as they don’t resolve the fundamental problem in markets--massive counter-party risk--that is keeping money-market spreads relative to safe rates so high. Yesterday’s plan to support the commercial paper market is a step in the right direction, but other, more radical policy actions are also needed now. Here are four suggestions for such additional policy action.
Why the Bailout Won’t Have to Compete With Medicare or Universal Coverage
From Uwe Rinehardt, economist from Princeton University, who specializes in healthcare
During last Friday’s presidential debate between John McCain and Barack Obama, the moderator, Jim Lehrer, asked both whether, in light of the proposed $700 billion Wall Street bailout, they would have to modify their campaign promises — including domestic spending on new health programs. Both candidates seemed flummoxed by the question and both clumsily evaded it.
The correct answer to this question is that they should not have to do so, at least in this emergent case. It all has to do with how the $700 billion is accounted for on the government’s balance sheet.
During last Friday’s presidential debate between John McCain and Barack Obama, the moderator, Jim Lehrer, asked both whether, in light of the proposed $700 billion Wall Street bailout, they would have to modify their campaign promises — including domestic spending on new health programs. Both candidates seemed flummoxed by the question and both clumsily evaded it.
The correct answer to this question is that they should not have to do so, at least in this emergent case. It all has to do with how the $700 billion is accounted for on the government’s balance sheet.
Why the greenback is on a tear
I was caught by surprise myself at the strength of the dollar, but as the article later alludes, the dollar's prospects long-term are another story...
In a twist few predicted, the rush away from risky assets has actually been good for the dollar - even though the U.S. needs to borrow $2 billion a day from its creditors overseas just to keep the lights on, and has been adding to its already substantial obligations at a rapid clip.
In a twist few predicted, the rush away from risky assets has actually been good for the dollar - even though the U.S. needs to borrow $2 billion a day from its creditors overseas just to keep the lights on, and has been adding to its already substantial obligations at a rapid clip.
Friday, October 10, 2008
The Big Necessity
Why I Wrote a Book About Human Waste
(..)
This is why the Liberian waiter laughed at me. He thought that I thought a toilet was my right, when he knew it was a privilege.
It must be, when 2.6 billion people don't have sanitation. I don't mean that they have no toilet in their house and must use a public one with queues and fees. Or that they have an outhouse or a rickety shack that empties into a filthy drain or pigsty. All that counts as sanitation, though not a safe variety. The people who have those are the fortunate ones. But four in ten people have no access to any latrine, toilet, bucket, or box. Nothing. Instead, they defecate by train tracks and in forests. They do it in plastic bags and fling them through the air in narrow slum alleyways. If they are women, they get up at 4 a.m. to be able to do their business under cover of darkness for reasons of modesty, risking rape and snakebites. Four in ten people live in situations in which they are surrounded by human excrement, because it is in the bushes outside the village or in their city yards, left by children outside the back door. It is tramped back in on their feet, carried on fingers onto clothes and into food and drinking water.
The disease toll of this is stunning. Eighty percent of the world's illness is caused by fecal matter.
(..)
This is why the Liberian waiter laughed at me. He thought that I thought a toilet was my right, when he knew it was a privilege.
It must be, when 2.6 billion people don't have sanitation. I don't mean that they have no toilet in their house and must use a public one with queues and fees. Or that they have an outhouse or a rickety shack that empties into a filthy drain or pigsty. All that counts as sanitation, though not a safe variety. The people who have those are the fortunate ones. But four in ten people have no access to any latrine, toilet, bucket, or box. Nothing. Instead, they defecate by train tracks and in forests. They do it in plastic bags and fling them through the air in narrow slum alleyways. If they are women, they get up at 4 a.m. to be able to do their business under cover of darkness for reasons of modesty, risking rape and snakebites. Four in ten people live in situations in which they are surrounded by human excrement, because it is in the bushes outside the village or in their city yards, left by children outside the back door. It is tramped back in on their feet, carried on fingers onto clothes and into food and drinking water.
The disease toll of this is stunning. Eighty percent of the world's illness is caused by fecal matter.
The Art of Persuasion Comes to Medicine
The author of a new book “INFLUENCE: Science and Practice,” Cialdini worked his persuasive magic on us. The first step, he told the Health Blog, is for people to make their health goals public. “It’s not enough to keep them in our heads, but if we tell our best friend, we’re much more likely to stay consistent,” Cialdini said. How does it work? Being inconsistent can make us seem wishy-washy or even unstable, which isn’t how we like to appear.
Doctors need to frame the health message properly to make a difference for patients. If patients are unsure or equivocal about a health choice, it’s better to tell them what they will lose rather than what they will gain. For smokers who are debating quitting, Cialdini explained, reminding them about the cost of smoking — like getting lung cancer — is more persuasive than telling them about the benefits of stopping.
Also, people are influenced by those in positions of authority, so health messages that come from experts appear more effective. Got that, doc? Cialdini points to a study from an HMO that sent out letters signed by a member of the “health team staff” vs. the chief medical officer. Compliance jumped by more than 19% when it was signed by the big shot M.D.
(..)
One of the most effective strategies in influence, whether in a health context or not, isn’t to make people like you, said Cialdini, but to persuade them that you like them. People are more swayed if they feel liked because their belief is, “I know people seek the best for those who they like,” Cialdini told us.
Doctors need to frame the health message properly to make a difference for patients. If patients are unsure or equivocal about a health choice, it’s better to tell them what they will lose rather than what they will gain. For smokers who are debating quitting, Cialdini explained, reminding them about the cost of smoking — like getting lung cancer — is more persuasive than telling them about the benefits of stopping.
Also, people are influenced by those in positions of authority, so health messages that come from experts appear more effective. Got that, doc? Cialdini points to a study from an HMO that sent out letters signed by a member of the “health team staff” vs. the chief medical officer. Compliance jumped by more than 19% when it was signed by the big shot M.D.
(..)
One of the most effective strategies in influence, whether in a health context or not, isn’t to make people like you, said Cialdini, but to persuade them that you like them. People are more swayed if they feel liked because their belief is, “I know people seek the best for those who they like,” Cialdini told us.
Thursday, October 09, 2008
Wednesday, October 08, 2008
Tuesday, October 07, 2008
Campaign Myth: Prevention as Cure-All
In a presidential campaign that promises straight talk and no gimmicks, why do both candidates champion one of medical care’s most pervasive myths.
The myth is that like magic, preventive medicine will simultaneously reduce costs and improve health.
(..)
The term “preventive medicine” no longer means what it used to: keeping people well by promoting healthy habits, like exercising, eating a balanced diet and not smoking. To their credit, both candidates ardently support that approach.
But the medical model for prevention has become less about health promotion and more about early diagnosis. Both candidates appear to have bought into it: Mr. Obama encourages annual checkups and screening, Mr. McCain early testing and screening.
It boils down to encouraging the well to have themselves tested to make sure they are not sick. And that approach doesn’t save money; it costs money.
(..)
These interventions do prevent advanced illness in some patients, but relatively few. Any savings from preventing those cases is dwarfed by the cost of intervening early in millions of additional patients. No wonder pharmaceutical companies and medical centers see preventive medicine as a great way to turn people into patients — and paying customers.
If preventive medicine were effective in improving the nation’s health, it might warrant these added expenditures. But you can’t assume it is. Early diagnosis may help some, but it undoubtedly leads others to be treated for “diseases” that would never have bothered them. That’s called overdiagnosis.
The myth is that like magic, preventive medicine will simultaneously reduce costs and improve health.
(..)
The term “preventive medicine” no longer means what it used to: keeping people well by promoting healthy habits, like exercising, eating a balanced diet and not smoking. To their credit, both candidates ardently support that approach.
But the medical model for prevention has become less about health promotion and more about early diagnosis. Both candidates appear to have bought into it: Mr. Obama encourages annual checkups and screening, Mr. McCain early testing and screening.
It boils down to encouraging the well to have themselves tested to make sure they are not sick. And that approach doesn’t save money; it costs money.
(..)
These interventions do prevent advanced illness in some patients, but relatively few. Any savings from preventing those cases is dwarfed by the cost of intervening early in millions of additional patients. No wonder pharmaceutical companies and medical centers see preventive medicine as a great way to turn people into patients — and paying customers.
If preventive medicine were effective in improving the nation’s health, it might warrant these added expenditures. But you can’t assume it is. Early diagnosis may help some, but it undoubtedly leads others to be treated for “diseases” that would never have bothered them. That’s called overdiagnosis.
Monday, October 06, 2008
Bad Medicine
James Grant, one of the best financial analysts of our time imo, on the bailout....
Low interest rates, easy money and malleable accounting rules are what plunged Wall Street into crisis. Yet it is low interest rates, easy money and malleable accounting rules that top the list of federal fixes. The unifying theme of the new bailout bill, all 451 pages of it, is the hair of the dog that bit you.
The unblinkable fact is that Americans own too much house. We overpaid and overborrowed, and many of us are "upside down," as the car dealers say. What to do? Recognize the losses and write them off. What not to do? Inflate the currency and debase accounting standards.
But inflation and debasement are the very policies being put in place. The Federal Reserve, not waiting for Congress, embarked last month on a radical program of money-printing. Reserve Bank credit -- the raw material of bank lending -- is growing at the year-over-year rate of 61 percent.
Low interest rates, easy money and malleable accounting rules are what plunged Wall Street into crisis. Yet it is low interest rates, easy money and malleable accounting rules that top the list of federal fixes. The unifying theme of the new bailout bill, all 451 pages of it, is the hair of the dog that bit you.
The unblinkable fact is that Americans own too much house. We overpaid and overborrowed, and many of us are "upside down," as the car dealers say. What to do? Recognize the losses and write them off. What not to do? Inflate the currency and debase accounting standards.
But inflation and debasement are the very policies being put in place. The Federal Reserve, not waiting for Congress, embarked last month on a radical program of money-printing. Reserve Bank credit -- the raw material of bank lending -- is growing at the year-over-year rate of 61 percent.
Friday, October 03, 2008
Healthcare is Not a Right
A reasoned analysis in favor of universal healthcare...
Our nation has long defined health care as an entitlement for the eldery, the disabled, and the very young. We are now involved in a national debate whether this entitlement will be made universal. As you all know, I am an advocate for universal health care. Though there may be an argument for the societal benefit of universal healthcare, or for the relative cost-efficiency of universal healthcare, I support it almost entirely for humanitarian reasons.
Universal health care, or, more precisely, universal health insurance, might improve upon the current state of affairs by ensuring that doctors are always paid for the services we provide, rather than being obligated to give them away to 15-30% of their patients as we now are.
The typical emergency physician provides about $180,000 of free services annually, just for reference.
As for those who claim that the slavery of universal healthcare is rather in the loss of physician autonomy, or in the corruption of the free market, I have one thing to say to them: that ship has sailed. Medical practice is irrevocably governed by a Byzantine maze of laws, regulations and standards set by a veritable alphabet soup of commissions and independent organizations. That is not going to change for the large proportion of physicians who have the need to care for patients in or incident to the hospital setting. Furthermore, there is no free market for physician services as it mow exists. Prices are set by the federal government for about half of Americans, and by a cabal of large insurers for the rest. Doctors can negotiate their prices within a narrow range with individual insurers, but the success of this is determined by the regional strength of each payer, not by the quality of care provided by the doctor, and while you can set the conversion factor for your fee schedule, you cannot set the price for each individual service you provide.
While there is a growing trend towards boutique medical practices and freestanding ERs, these are and will remain small niche players for those patients able to afford them. For the vast majority of physicians, we are stuck with the current system. Universal health care is unlikely to fundamentally change the status quo for physicians in this regard.
Bottom line: No, Health Care is not a right. When advocates of universal health care misuse the language of universal rights to push for health care for all, we fall into the trap of over-reaching and provoke a justified pushback, even from some who might be inclined to agree with us. Universal health care is, however, a moral obligation for an industrialized society, and will not result in the apocalyptic consequences promised by the jeremiads.
(via kevinmd.com)
Our nation has long defined health care as an entitlement for the eldery, the disabled, and the very young. We are now involved in a national debate whether this entitlement will be made universal. As you all know, I am an advocate for universal health care. Though there may be an argument for the societal benefit of universal healthcare, or for the relative cost-efficiency of universal healthcare, I support it almost entirely for humanitarian reasons.
Universal health care, or, more precisely, universal health insurance, might improve upon the current state of affairs by ensuring that doctors are always paid for the services we provide, rather than being obligated to give them away to 15-30% of their patients as we now are.
The typical emergency physician provides about $180,000 of free services annually, just for reference.
As for those who claim that the slavery of universal healthcare is rather in the loss of physician autonomy, or in the corruption of the free market, I have one thing to say to them: that ship has sailed. Medical practice is irrevocably governed by a Byzantine maze of laws, regulations and standards set by a veritable alphabet soup of commissions and independent organizations. That is not going to change for the large proportion of physicians who have the need to care for patients in or incident to the hospital setting. Furthermore, there is no free market for physician services as it mow exists. Prices are set by the federal government for about half of Americans, and by a cabal of large insurers for the rest. Doctors can negotiate their prices within a narrow range with individual insurers, but the success of this is determined by the regional strength of each payer, not by the quality of care provided by the doctor, and while you can set the conversion factor for your fee schedule, you cannot set the price for each individual service you provide.
While there is a growing trend towards boutique medical practices and freestanding ERs, these are and will remain small niche players for those patients able to afford them. For the vast majority of physicians, we are stuck with the current system. Universal health care is unlikely to fundamentally change the status quo for physicians in this regard.
Bottom line: No, Health Care is not a right. When advocates of universal health care misuse the language of universal rights to push for health care for all, we fall into the trap of over-reaching and provoke a justified pushback, even from some who might be inclined to agree with us. Universal health care is, however, a moral obligation for an industrialized society, and will not result in the apocalyptic consequences promised by the jeremiads.
(via kevinmd.com)
Wednesday, October 01, 2008
Life in Zimbabwe: Wait for Useless Money
So sad...
HARARE, Zimbabwe — Long before the rooster in their dirt yard crowed, Rose Moyo and her husband rolled out of bed. “It is time to get up,” intoned the robotic voice of her cellphone. Its glowing face displayed the time: 2:20 a.m.
They crept past their children sleeping on the floor of the one-room house — Cinderella, 9, and Chrissie, 10 — and took their daily moonlit stroll to the bank. The guard on the graveyard shift gave them a number. They were the 29th to arrive, all hoping for a chance to withdraw the maximum amount of Zimbabwean currency the government allowed last month — the equivalent of just a dollar or two.
Zimbabwe is in the grip of one of the great hyperinflations in world history. The people of this once proud capital have been plunged into a Darwinian struggle to get by. Many have been reduced to peddlers and paupers, hawkers and black-market hustlers, eating just a meal or two a day, their hollowed cheeks a testament to their hunger.
Like countless Zimbabweans, Mrs. Moyo has calculated the price of goods by the number of days she had to spend in line at the bank to withdraw cash to buy them: a day for a bar of soap; another for a bag of salt; and four for a sack of cornmeal.
The withdrawal limit rose on Monday, but with inflation surpassing what independent economists say is an almost unimaginable 40 million percent, she said the value of the new amount would quickly be a pittance, too.
HARARE, Zimbabwe — Long before the rooster in their dirt yard crowed, Rose Moyo and her husband rolled out of bed. “It is time to get up,” intoned the robotic voice of her cellphone. Its glowing face displayed the time: 2:20 a.m.
They crept past their children sleeping on the floor of the one-room house — Cinderella, 9, and Chrissie, 10 — and took their daily moonlit stroll to the bank. The guard on the graveyard shift gave them a number. They were the 29th to arrive, all hoping for a chance to withdraw the maximum amount of Zimbabwean currency the government allowed last month — the equivalent of just a dollar or two.
Zimbabwe is in the grip of one of the great hyperinflations in world history. The people of this once proud capital have been plunged into a Darwinian struggle to get by. Many have been reduced to peddlers and paupers, hawkers and black-market hustlers, eating just a meal or two a day, their hollowed cheeks a testament to their hunger.
Like countless Zimbabweans, Mrs. Moyo has calculated the price of goods by the number of days she had to spend in line at the bank to withdraw cash to buy them: a day for a bar of soap; another for a bag of salt; and four for a sack of cornmeal.
The withdrawal limit rose on Monday, but with inflation surpassing what independent economists say is an almost unimaginable 40 million percent, she said the value of the new amount would quickly be a pittance, too.
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