B-24 bomber assembly hall, location unspecified
Ilargi: I've written before about the US health care issue(s), and I'm hesitant to spend (too) much additional time and space on it. The reason is that just about right from the start is has been clear that the "dialogue", if you can even call it that, has been rigged and bought a long time ago.
A Reuters article from this weekend, Angry Americans disrupt town-hall healthcare talks, describes a concerted campaign to disrupt Democrat town hall meetings on health care reform and operates at the following level:
[..] speakers asked about "martial law" and "forced vaccinations" and when the topic turned to illegal immigrants in the Bible Belt town, someone shouted: "Bus them home."
How obvious would you like it? The level of misinformation and disinformation is stunning, and other than perhaps Jon Stewart there doesn't seem to be any balance.
I'm not the only one who hesitates to further address the issue on account of this. Yves Smith had this on Friday in "The Health Insurers Have Already Won":
"[..] My bullshit meter went into high alert earlier this week with this New York Times story, "For Health Insurers’ Lobbyist, Good Will Is Tested," which was clearly a PR plant."
As Yves also rightly notes:
"One of the defining characteristics of Team Obama [is] its preference for spin in lieu of substance."
And that means the entire discussion, from all sides and ends, is drowning in bullshit. So yes, the industry has long since won this one.
It also means there will certainly never be any healthcare reform that is more substance than spin, either. Which is what the industry lobbyists have been aiming for ever since they got wind of any attempt at reform, long before you heard about it.
As I said last week, a reorganization along European principles might save the American people about $1 trillion per year. But it also might cost the insurance and chemical industries that same amount, and they’re simply not going to let that happen. No matter that this stalemate will blow up US health care in its entirety.
The industry K-Street spin campaign has managed to define the picture painted in the media to such an extent that Americans actually think they have the best health care system in the world, even as there are tons of reports available that say it is clearly and definitely not. It is in fact far worse and far more expensive, when viewed across the board.
It may be, in particular facets, seen as superior, but that will almost exclusively be the case for those who bring the money. The European view that even the poor(er) have a right to health, period, apparently doesn't exist in the US. Only those with money have the right to be healthy. And if that goes for health care, there is little reason to assume it’s any different when it comes to food, drinking water, shelter or even clean air.
Not that it is the way the issue is framed. That is done through for example a single case of a Canadian woman a few weeks ago, who claimed she couldn’t get care at home, as well as through similar "reports" from Europe. In yesterday's comment section here at The Automatic Earth, one reader posted this:
”Now tell me, when the government takes over the medical system, [..] how long do you think it will take before [a] shortage of American trained docs develops?”
And there was this gem:
"P.S. Can anyone explain to me the conversation I had with a friend yesterday? I asked her if she had planned on having more children. She responded that for the last four years she had been living in the Netherlands, and that she did not want to bear children under their socialist system. She said that the government would not allow epidurals, and would only allow them four hours in the hospital, as examples.
She said that now that she was moving back to Switzerland, she would reconsider, although at 39, she had to factor the age into the equation. So--socialists--how about a system that rations healthcare in a way that all receive some minimal level of care but a mother can't receive an epidural during labor? No thanks.”
The first comment is from someone who simply has no idea what happens elsewhere in the world (Western Europe has no systematic shortage of doctors), the second one comes directly from campaign headquarters. Apparently there is so much money available that economic blogs that address the American health care issue also merit covering. Which is somewhat amusing, I must admit.
The overall direction is clear: appeal to poorly defined fears that will always linger among a poorly educated population, in order to manipulate them for your own gains. The problem is that we've seen that film before. It uses Goebbels’ propaganda techniques to achieve Mussolini's ideals of a state run by faceless corporations.
While these ideas are inevitably bound for head-on failure, what the present events meanwhile tell me is that there is a very real possibility that screws and nuts like Sarah Palin and Glenn Beck will be serious contenders for the White House.
And this is what it reminds me of musically, courtesy of the only band that ever really mattered:
Spanish Bombs
Spanish songs in Andalucia
The shooting sites in the days of '39
Oh, please, leave the vendanna open
Fredrico Lorca is dead and gone
Bullet holes in the cemetery walls
The black cars of the Guardia Civil
Spanish bombs on the Costa Rica
I'm flying in a DC 10 tonight
Spanish bombs
yo te quiero infinito
yo te quiero oh mi corazon
Spanish bombs
yo te quiero infinito
yo te quiero oh mi corazon
Spanish weeks in my disco casino
The freedom fighters died upon the hill
They sang the red flag
They wore the black one
But after they died it was Mockingbird Hill
Back home the buses went up in flashes
The Irish tomb was drenched in blood
Spanish bombs shatter the hotels
My senorita's rose was nipped in the bud
The hillsides ring with "Free the people"
Or can I hear the echo from the days of '39?
With trenches full of poets
The ragged army, fixin' bayonets to fight the other line
Spanish bombs rock the province
I'm hearing music from another time
Spanish bombs on the Costa Brava
I'm flying in on a DC 10 tonight
Spanish songs in Andalucia, Mandolina, oh mi corazon
Spanish songs in Granada, oh mi corazon
IMF puts total cost of crisis at $11.9 trillion
The cost of mopping up after the world financial crisis has come to $11.9 trillion (£7.12 trillion), enough to finance a $1,779 handout for every man, woman and child on the planet. The staggering total is equivalent to around a fifth of the entire globe's annual economic output and includes capital injections pumped into banks in order to prevent them from collapse, the cost of soaking up so-called toxic assets, guarantees over debt and liquidity support from central banks. Although much of the total may never be called on, the potential outlay still dwarfs any previous repair bill for the global economy.
The IMF calculations, produced ahead of the two-year anniversary of the crisis, underline the continually mounting cost. Most of the cash has been handed over by developed countries, for whom the bill has been $10.2 trillion, while developing countries have spent only $1.7 trillion, the majority of which is in central bank liquidity support for their stuttering financial sectors.
The IMF figures also show that Britain has been the biggest of all the spenders on emergency measures to support its financial sector, with its total bill for the clean-up amounting to 81.8pc of its gross domestic product, equivalent to £1,227bn. Britain's record bill is also unique in that it has also already spent much of it already, with 20pc of GDP having already supported struggling institutions. The countries that make up the G20 grouping will face a combined budget deficit of 10.2pc of GDP in 2009, the biggest since the Second World War. Although the biggest will be faced by the US, with 13.5pc of GDP, Britain also faces an 11.6pc deficit and Japan a 10.3pc one.
What Are They So Mad About?....
Reader B.A. asks a question about the health care debate via email: "I don't understand why the wingnuts are so angry. Conservatives will be better off if reform becomes law, just like liberals and independents. Please explain the rationale for the fury."
Well, I'm not sure I can. It seems like one of those easy, basic questions that should have an obvious answer: what do conservatives want out of the health care debate? "Wingnut, smash" isn't an especially compelling answer. B.A. is right about the broad benefits for Americans. Some of Rush Limbaugh's listeners are one serious illness away from bankruptcy. Some Michele Bachmann voters can't get coverage because of a pre-existing condition.
Some Glenn Beck viewers will see their insurance companies drop them when they need their coverage most. Many of Bill O'Reilly's fans already enjoy the benefits of government-run health care. Some RNC donors may want to start their own business, but can't because they can't afford to pay the monthly premiums. Some of the same people who attended "Tea Parties" in April saw the insurance for themselves and their families disappear after they lost their job.
There's nothing partisan or ideological about this -- everyone is getting screwed by the status quo. We're all paying too much for too little. A huge chunk of the country is uninsured, underinsured, or uninsurable, and the system is blind to how you voted in the last election. Now, this is not to say that the Democratic proposals are flawless; they're not. But what's striking about the opposition to reform -- at least the loudest opposition to reform -- is that the right has chosen to completely ignore the actual flaws in the plan(s) and focus on imaginary, delusional nonsense.
So why are far-right activists so apoplectic? Why would people who stand to benefit from health care reform literally take to the streets and threaten violence in opposition to legislation that will help them and their families? President Obama supports an approach to health care reform that emphasizes competition and choice, doesn't increase the deficit, and wouldn't raise middle class taxes ... and conservatives are comparing the plan to the Nazi Holocaust?
B.A.'s confusion is understandable. I don't get it, either. It's probably a mistake to lump all opponents of reform in together; different groups are fighting with different motivations. I tend to see them in five different groups:
- The Greedy: There's a fairly small group of people who profit handsomely from the broken status quo. Regular Americans are getting screwed by the system, but The Greedy are getting rich. Reform puts their profits at risk, so they're fighting back to protect their livelihood.
- The Partisans: If President Obama does what many presidents have failed trying to do, it will likely make him more popular and make his presidency successful. The Partisans care more about Republican gains than the national well being, so they're fighting to prevent a major Democratic victory because it would be a major Democratic victory.
- The Tin-Foil Hats: If reform passes, the government will kill their grandparents, create "death panels," lavish benefits on illegal immigrants, and mandate that ACORN volunteers live in your basement. The Tin-Foil Hats have active imaginations, and believe their own ridiculous conspiracy theories. They'll benefit from reform, but the voices in their head discourage them from believing it.
- The Dupes: Probably the largest group in opposition to reform, The Dupes tend to believe what The Greedy, The Partisans, and The Tin-Foil Hats have told them. When confronted with accurate information, The Dupes suspect the media, Democrats, and their lying eyes aren't to be trusted. After all, Sean Hannity wouldn't lie to them, would he? Like The Tin-Foil hats, The Dupes stand to benefit from reform, but are skeptical because they don't know who's telling the truth and who isn't.
- The Wonks: The smallest of the groups, The Wonks are conservatives who actually care about substantive policy details, have read the proposals, and believe there are better ways to improve the system. The Greedy, The Partisans, The Tin-Foil Hats, and The Dupes tend to ignore The Wonks, which is a shame.
The Wonks notwithstanding, the first four groups combine to make a force to be reckoned with, and the various teams feed off of one another nicely. The Greedy aren't a big enough group to disrupt a town-hall meeting, but if they can feed some ideas to The Tin-Foil Hats, they can get a lot done. The Partisans can't come right out and acknowledge their concerns, but if they can rope in The Dupes, the combined force is considerable. B.A. emailed, "I don't understand why the wingnuts are so angry." My suspicion is they're angry for different reasons, many of which will fade if/when Democratic policymakers can manage to do the right thing.
US banks make $38 billion from overdraft fees
US banks stand to collect a record $38.5bn in fees for customer overdrafts this year, with the bulk of the revenue coming from the most financially stretched consumers amid the deepest recession since the 1930s, according to research. The fees are nearly double those reported in 2000. The finding is likely to increase public hostility towards the financial sector, which has been under political pressure to ease the burden on consumers by increasing credit availability and lending more fairly after being bailed out by taxpayers.
The Federal Reserve is working on rules on overdraft fees, and rules on customer charges could be a priority of the Obama administration’s proposed Consumer Protection Agency if approved by Congress. Data from Moebs Services, a research company, show that the crisis has prompted many banks to lift charges on overdrafts and credit cards in order to boost profits. The median bank overdraft fee has this year rose from $25 to $26, according to Moebs, the first time it has gone up in a recession for more than 40 years. “Banks are returning to a fee-driven model and overdraft fees are the mother lode,” said Mike Moebs, the company’s founder.
Overdraft fees accounted for more than three-quarters of service fees charged on customer deposits, he said. The most cash-strapped customers are the hardest hit by such fees, with 90 per cent of overdraft revenues coming from 10 per cent of the 130m checking accounts in the US. Regular use of overdrafts is most common among consumers with low credit scores, Moebs discovered. Banks say that the fees compensate for the risk they incur when they pay on behalf of customers who do not have enough money in their accounts. “Overdraft fees are there for a reason, we take on a lot of risk,” a senior banker said. “It’s a service to our customers, they want us to pay their overdrafts.”
The highest overdraft fees were charged by the largest banks, said Mr Moebs. At banks with assets greater than $50bn – a group including Citigroup, Bank of America, JPMorgan Chase and Wells Fargo – the median overdraft fee is set at $33. At BofA, a customer overdrawn by as little as $6 could trigger a $35 penalty. If the customer does not realise they have a negative balance and continue spending, they could incur that fee as many as 10 times in a single day, for a total of $350. Failing to repay the overdraft within a few days results in an additional $35 penalty.
BofA said that the bank was “committed to ensuring that our fees are transparent and predictable. We have a range of tools and services to give customers more control over their accounts and to prevent these fees”. Chase has tiered overdraft fees – the first overdraft within a 12-month period is charged at $25, the second to fourth at $32 and the fifth at $35.
SunTrust Bank charges the highest overdraft fee for a single overdraft at $36, according to the Consumer Federation of America while Citizens Bank levies a $39 fee after three overdraft items and follows with two separate “sustained overdraft fees” for repeat offenders. SunTrust said it offered waivers and discounts as well as overdraft protection services that made it easy for customers to avoid those fees.
The survey by the Consumer Federation of America found that five of the ten largest banks have raised their overdraft fees in some way in the last year. Nessa Feddis, general counsel at the American Bankers’ Association said the higher fees are appropriate because big banks do not know their customers as well as small community banks, and need to be compensated for the higher risk.
Consumer advocacy groups point to very low loss rates on overdrafts for all banks and argue that overdrafts are the least risky form of credit, while being the most expensive for consumers. Eric Halperin, director of the Center for Responsible Lending said: “The banks own your pay check before you do, so the only way you can default on your overdraft is if you choose to open another account and deposit your income elsewhere.”
Unemployment Rate Drop = Decline in Labor Force
The country shed another ~250k jobs in July, but the unemployment rate dropped to 9.4%. How is that? It looks like individuals have left the labor force.
Month over Month Change (S.A.)
How does this work? The numerator in the unemployment rate is unemployed... the denominator is labor force. Simplified example:
- 19 people are unemployed out of 200 in the labor force = 9.5% unemployment rate
- 1 of those unemployed individuals leaves the labor force
- 18 people are unemployed out of 199 in the labor force = 9.0% unemployment rate
This also explains why the percent of those unemployed decreased at a greater rate than the labor force (1/19 = a 5.2% drop in the # unemployed, but 1/200 = a 0.50% drop in the labor force).
So, was the data better than expected? Absolutely (good to great news on a relative basis), but lets make sure we understand the math... and the continued trend.
Employment as a Percent of Entire Population
Source: BLS
Beware the government’s job figures
In a phone conversation yesterday, John Williams at Shadow Government Statistics warned me not to read too much good news from the better-than-expected jobs figure. The government’s seasonal adjustments aren’t, well, adjusting properly. They’re still keying off “typical” fluctuations in employment. But of course today’s economic climate is anything but typical. Yesterday the official unemployment rate ticked down a tenth of a percent to 9.4%, but according to Williams it should have ticked up a tenth of a percent to 9.6%.There are big seasonal changes in employment that the Bureau of Labor Statistics corrects for in order to reduce the volatility of the unemployment rate. For instance, each year employment spikes ahead of the holidays as companies add workers, and then drops as those workers are let go.
July usually sees a regular pattern of planned automobile production line shutdowns to accommodate retooling for the new model year, but recent disruptions to the auto industry have changed pattern this year. Without the usual pattern of shutdowns, the government’s computers nonetheless responded by creating the usual offsetting boost in jobs, not only in the auto industry, but in supporting industries as well. The auto industry itself was alone among durable goods manufacturing industries in showing a reported, seasonally-adjusted monthly gain in July, up by 28,000 jobs.
Besides bad seasonal adjustments, Williams has problems with the so-called “birth-death” model, which “adds a fairly consistent upside bias to payroll levels each year, currently averaging 76,000 jobs per month.” The genesis of the birth-death model was after the early ’80s recession, when employment figures didn’t catch jobs being added by new small businesses. However, when a company like Taylor Bean & Whitaker stops reporting its stats, say because all employees were fired en masse, BLS assumes the company is still in business. (For how long, I’m not sure) The bottom line is that, in recessions, you’re losing more jobs from failing businesses than you’re gaining from emerging ones. Hence the upward bias of the model during recessions.But according to Williams the biggest problem with the official unemployment rate—”U-3″ in BLS parlance—is that it excludes both the underemployed and workers who have become “discouraged” and stopped looking for work:
During the Clinton Administration, “discouraged workers” — those who had given up looking for a job because there were no jobs to be had — were redefined so as to be counted only if they had been “discouraged” for less than a year. This time qualification defined away the long-term discouraged workers.
Add all the underemployed and the disappeared and you have Williams “alternate” measure, which pegs unemployment at 20.6%, not 9.4%.
Job losses cast spotlight on stingy safety net
The longest U.S. recession since World War Two is exposing gaping holes in the social safety net, putting hundreds of thousands of people at risk of falling through. Some 6.7 million jobs have been lost since the downturn began in December 2007, and the unemployed are at the mercy of a confusing and complicated patchwork of aid programs. Many of the programs, such as unemployment benefits, are less generous than those available in Europe or Japan, reflecting deeply rooted American beliefs about who is deserving of help and what role government ought to play.
"Our safety net was always skimpy at best and it has frayed very substantially over the last 30 to 40 years, for reasons both ideological and financial," said Alex Keyssar, a Harvard University professor who studies unemployment and poverty. Providing a solid safety net is certainly costly, although that argument looks a bit thin when the United States is committing trillions of dollars to ensure Wall Street has a soft landing. "Where's MY bailout?" has become a common complaint heard across the country.
Yet there has been little activity inside or outside of Washington aimed at shoring up the safety net, and Keyssar and other policy experts say the system urgently needs repair. President Barack Obama's effort to patch one of the biggest holes -- ensuring health care even for those who lose their jobs -- has met fierce opposition, suggesting the chances for broader aid reform are slim.
Government figures released on Friday showed that the unemployment rate actually dipped to 9.4 percent in July from 9.5 percent in June, although many analysts attributed that to people giving up looking for work. The ups and downs of the business cycle mean regular recessions, and with that, spikes in joblessness. But countries differ on how far a society's responsibility runs to those who get caught in the downdraft.
In the United States, the answer has long been limited public sector support -- in terms of both the size and duration of unemployment relief -- compared with Europe and Japan. Keyssar sees that as a reflection of centuries-old American attitudes toward hard work, self-determination and the troubling concept of the "undeserving poor," or who is deemed worthy of public assistance. "Linked to it all is a presumption or a suspicion, particularly on the part of conservatives, that people who are unemployed aren't really involuntarily jobless and shouldn't be supported," he said.
Those undercurrents are apparent in the way the U.S. benefit system was designed. Compared with other rich countries, U.S. benefits run out far more quickly and the eligibility rules are more rigorous. Much of that was done intentionally to discourage freeloaders.
The result is a hard-to-navigate and often insufficient set of programs which can be hard to qualify for and challenging to collect. According to the U.S. Labor Department, only 36 percent of unemployed people received benefits in 2008. Many people who exhaust their weekly benefits simply fall through the cracks, said Edward Berkowitz, a public policy professor at George Washington University in Washington who studies U.S. social welfare. "We don't have any absolutely guarantees. It's not an automatic entitlement," he said.
Figuring out where to get help is tricky. For a start, the rules differ from state to state. That means if you live in Massachusetts, the maximum weekly jobless benefit is $628. In neighboring Connecticut, it's $519 and in Missouri just $320, according to the states' web sites. Many people get much less, based on their earnings before losing their jobs. The formula for determining the amount of aid is so complex that some states put calculators on their web site to help people figure it out.
For workers who still haven't found a job after six months or a year -- an increasingly common problem as the jobless rate hovers near a 26-year high -- benefits may run out before the next steady paycheck is secured. The National Employment Law Project estimates that 1.5 million people will exhaust their benefits by the end of 2009. The logistics can be a deterrent, too. The office that processes paperwork for unemployment benefits may be miles away from the one that gives out food aid, and the eligibility rules may be different. Losing a job often means losing health insurance, and perhaps a third trip to the Medicaid office, the health insurance program for the poor.
By contrast, in Japan, standard jobless benefits are paid for up to one year, even if a worker voluntarily quits, and that period can be extended up to three years if the recipient is ill, pregnant or raising a child. Those who are out of work in Japan head to a "Hello Work" office where services are centralized. The U.S. model does have its economic advantages. Requiring employers to pay into generous safety net programs and putting tough restrictions on job cuts can discourage companies from hiring, so in good times the jobless rate tends to be higher in Europe than in the United States.
Where U.S. public assistance falls short, private programs fill the gaps, and are often the last option for people facing homelessness and hunger. Many churches have soup kitchens or clothing donation programs. Other organizations such as the Salvation Army help people with drug and alcohol addiction who cannot qualify for government aid. Reforming the public welfare program is probably out of the question politically, although policy experts have no shortage of ideas about what could be done.
A national job bank that shows openings in each state may be useful, particularly for those in hard-hit places such as Michigan, where moving may be the best option. Other ideas include wage insurance, where the government would offer some financial support for those who end up taking lower-paid jobs, or expanding customized retraining to help people whose skills are no longer needed.
One program which has had considerable success in Germany compensates workers for shortened hours, encouraging companies to cut the work week instead of jobs. Germany's economy has lost only about 300,000 jobs since the financial crisis intensified last September, even though its economy has contracted even more sharply than the United States'. Isabel Sawhill, a senior fellow at the Brookings Institution, who is about to publish a book on improving the social safety net, said reforms were taking a back seat to the more pressing issue of repairing the economy, and she worries this may be a missed opportunity.
Sawhill would like to see government job programs to keep people active and provide a social good, and better training programs that help workers successfully move out of dying sectors and into growth industries. "The military can take raw recruits and turn them into terrific soldiers. Why can't we take laid-off auto workers and turn them into terrific green energy retro-fitters?" she said.
Do Fannie and Freddie Need a 'Bad Bank?'
As the Administration weighs options for reorganizing Fannie Mae and Freddie Mac in the wake of their dismal financial performance, a strategy that spawned a lot of chatter but little action earlier in the financial crisis may be back on the table. Months ago, policymakers and outside experts weighed the benefits of creating a "bad bank" to hold commercial banks' toxic assets, but the idea never gained traction. Now, some suggest, the concept could help to restructure the mortgage giants—but the hurdles that caused commercial banks to adopt a different solution remain.
Fannie Mae said on Aug. 6 that it lost $14.8 billion in the second quarter and plans to draw down another $10.7 billion from the federal government to balance its books. That brings to $85 billion the amount of funds that it and Freddie Mac have received from Uncle Sam since the government took over the companies last September, driving home just how shaky the government-sponsored entities remain. Small wonder, then, that speculation has resumed over what the government will ultimately do with the companies, which long functioned as publicly traded firms with a government-defined mission to bolster the housing markets.
One option: The "bad bank," which The Washington Post suggested on Aug. 6 could be the tool the Obama Administration uses to resolve the problem. By establishing a separate entity to hold Fannie and Freddie's toxic assets, the surviving companies could go forward with clean balance sheets, unencumbered by past mistakes and capable of raising fresh capital from the private sector. The bad assets would be unwound over time.
Sheila Bair, chairman of the Federal Deposit Insurance Corp., pushed for much the same approach to tackling the bad assets of commercial banks this winter as did others outside government. The argument: It would restore investors' faith in the newly scrubbed companies, letting them raise new capital without fear that it would be rapidly wiped out as the toxic assets deteriorated.
Instead, the Treasury Dept. funneled hundreds of billions of dollars directly into the nation's banks though its Troubled Asset Relief Program, shoring up the banks and temporarily reassuring investors. When government-supervised "stress tests" suggested most of the big banks only needed manageable amounts of additional capital to survive, despite their toxic assets, the capital markets rallied and the banks were able to raise funds quickly.
Direct investment won out in part because it was simpler. Banks' toxic assets consisted of a stew of highly complex mortgage-backed securities that had been bundled, repackaged, and leveraged, and banks proved unwilling to sell them at prices investors were willing to pay. Infusing banks with cash was less complicated then separating bad assets and building a new institution, and dealt more directly with one of the banks' biggest problems—lack of capital—than a bad bank could.
"I think they just decided to go the route of bailing out everybody who was big, which was easier than setting up the structure of bad banks," says Campbell R. Harvey, a professor of international business at Duke University's Fuqua School of Business.
Indeed, for the shakiest banks, separating bad assets from good assets might have made it abundantly clear how short of capital they were. "It doesn't really solve the problem of institutions with negative capital," says Phillip Swagel, a visiting professor at Georgetown University's McDonough School of Business and a former assistant secretary of the Treasury under Henry Paulson. "You somehow have to add more capital or take existing debt and turn it into capital."
So far, the government capital infusions, followed by private investment, seem to have done the trick. Some banks—Goldman Sachs, JPMorgan Chase, and Morgan Stanley among them—have already repaid their TARP funds, and most of the other big banks have shown strong earnings in recent months. "We did the right thing by recapitalizing the banking sector. The financial system is nearly at pre-Lehman levels," says Daniel Clifton, a Washington policy analyst at Strategas Research.
But that could change if the housing market continues to tank. In announcing its second-quarter results, Fannie Mae appeared to forecast a grim future for the housing market, with high unemployment pushing more homeowners toward foreclosure, including those with prime, or high-quality, mortgages. Some fear that financial institutions could see their newly raised capital rapidly eaten away. "It really is not beyond the realm of possibility that our big banks could come to the trough again," Harvey says. "Prime [mortgages] could be the doomsday machine."
As for Fannie and Freddie, it comes down to a question of how the government wants to structure them when they come out of conservatorship. Dividing their assets into good and bad banks makes sense if the government wants to keep a "quasi-private institution," says Albert S. Kyle, a finance professor at the University of Maryland Smith School of Business. The government-sponsored entities are so "deeply insolvent" that they'll need to divide the assets to attract investors, he says. "As long as it's done as a part of comprehensive reform and designed in a way to make buyers and sellers participate, it can't do any harm."
The White House said on Aug. 6 that it continues to mull its options, and that it's too early to call any one strategy likely. But clearly, the Administration believes any restructuring of the GSEs can wait. The Treasury doesn't plan to release a specific plan for Fannie and Freddie until February 2010, when the 2011 budget is due.
Plus, Swagel notes, the Administration needs control of the GSEs to execute its housing policy. Using Fannie and Freddie, the Administration can keep more people in their homes by guaranteeing their mortgages—essentially subsidizing refinancing by the banks. And perhaps most attractive of all, they can maneuver with limited political interference, Swagel says. "They're using the GSEs to write checks to people without having to ask Congress."
Paulson’s Calls to Goldman Tested Ethics
Before he became President George W. Bush’s Treasury secretary in 2006, Henry M. Paulson Jr. agreed to hold himself to a higher ethical standard than his predecessors. He not only sold all his holdings in Goldman Sachs, the investment bank he had run, but also specifically said that he would avoid any substantive interaction with Goldman executives for his entire term unless he first obtained an ethics waiver from the government.
But today, seven months after Mr. Paulson left office, questions are still being asked about his part in decisions last fall to prop up the teetering financial system with tens of billions of taxpayer dollars, including aid that directly benefited his former firm. Testifying on Capitol Hill last month, he was grilled about his relationship with Goldman. “Is it possible that there’s so much conflict of interest here that all you folks don’t even realize that you’re helping people that you’re associated with?” Representative Cliff Stearns, Republican of Florida, asked Mr. Paulson at the July 16 hearing.
“I operated very consistently within the ethic guidelines I had as secretary of the Treasury,” Mr. Paulson responded, adding that he asked for an ethics waiver for his interactions with his old firm “when it became clear that we had some very significant issues with Goldman Sachs.” Mr. Paulson did not say when he received a waiver, but copies of two waivers he received — from the White House counsel’s office and the Treasury Department — show they were issued on the afternoon of Sept. 17, 2008.
That date was in the middle of the most perilous week of the financial crisis and a day after the government agreed to lend $85 billion to the American International Group, which used the money to pay off Goldman and other big banks that were financially threatened by A.I.G.’s potential collapse. It is common, of course, for regulators to be in contact with market participants to gather valuable industry intelligence, and financial regulators had to scramble very quickly last fall to address an unprecedented crisis. In those circumstances it would have been difficult for anyone to follow routine guidelines.
While Mr. Paulson spoke to many Wall Street executives during that period, he was in very frequent contact with Lloyd C. Blankfein, Goldman’s chief executive, according to a copy of Mr. Paulson’s calendars acquired by The New York Times through a Freedom of Information Act request. During the week of the A.I.G. bailout alone, Mr. Paulson and Mr. Blankfein spoke two dozen times, the calendars show, far more frequently than Mr. Paulson did with other Wall Street executives.
On Sept. 17, the day Mr. Paulson secured his waivers, he and Mr. Blankfein spoke five times. Two of the calls occurred before Mr. Paulson’s waivers were granted. Michele Davis, a spokeswoman for Mr. Paulson, said that the former Treasury secretary was busy writing his memoirs and that his publisher had barred him from granting interviews until his manuscript was done. She pointed out that the ethics agreement Mr. Paulson agreed to when he joined the Treasury did not prevent him from talking to Goldman executives like Mr. Blankfein in order to keep abreast of market developments.
Ms. Davis also said that Federal Reserve officials, not Mr. Paulson, played the lead role in shaping and financing the A.I.G. bailout. But Mr. Paulson was closely involved in decisions to rescue A.I.G., according to two senior government officials who requested anonymity because the negotiations were supposed to be confidential. And government ethics specialists say that the timing of Mr. Paulson’s waivers, and the circumstances surrounding it, are troubling.
“I think that when you have a person in a high government position who has been with one of the major financial institutions, things like this have to happen more publicly and they have to happen more in the normal course of business rather than privately, quietly and on the fly,” said Peter Bienstock, the former executive director of the New York State Commission on Government Integrity and a partner at the law firm of Cohen Hennessey Bienstock & Rabin. He went on: “If it can happen on a phone call and can happen without public scrutiny, it destroys the standard because then anything can happen in that fashion and any waiver can happen.”
Concerns about potential conflicts of interest were perhaps inevitable during this financial crisis, the worst since the Great Depression. In the weeks before Mr. Paulson obtained the waivers, Treasury lawyers raised questions about whether he had conflicts of interest, a senior government official said. Indeed, Mr. Paulson helped decide the fates of a variety of financial companies, including two longtime Goldman rivals, Bear Stearns and Lehman Brothers, before his ethics waivers were granted. Ad hoc actions taken by Mr. Paulson and officials at the Federal Reserve, like letting Lehman fail and compensating A.I.G.’s trading partners, continue to confound some market participants and members of Congress.
“I think it’s clear he had a conflict of interest,” Mr. Stearns, the congressman, said in an interview. “He was covering himself with this waiver because he knew he had a conflict of interest with his telephone calls and with his actions. Even though he had no money in Goldman, he had a vested interest in Goldman’s success, in terms of his own reputation and historical perspective.”
Adding to questions about Mr. Paulson’s role, critics say, is the fact that Goldman Sachs was among a group of banks that received substantial government assistance during the turmoil. Goldman not only received $13 billion in taxpayer money as a result of the A.I.G. bailout, but also was given permission at the height of the crisis to convert from an investment firm to a national bank, giving it easier access to federal financing in the event it came under greater financial pressure.
Goldman also won federal debt guarantees and received $10 billion under the Troubled Asset Relief Program. It benefited further when the Securities and Exchange Commission suddenly changed its rules governing stock trading, barring investors from being able to bet against Goldman’s shares by selling them short. Now that the company’s crisis has passed, Goldman has rebounded more markedly than its rivals. It has paid back the $10 billion in government assistance, with interest, and exited the federal debt guarantee program. It recently reported second-quarter profit of $3.44 billion, putting its employees on track to earn record bonuses this year: about $700,000 each, on average.
Ms. Davis, the spokeswoman for Mr. Paulson, said Goldman never received special treatment from the Treasury. Mr. Paulson’s calendars do not disclose any details about his conversations with Mr. Blankfein, and Ms. Davis said Mr. Paulson always maintained a proper regulatory distance from his old firm. A spokesman for Goldman, Lucas van Praag, said: “Lloyd Blankfein, like the C.E.O.’s of other major financial institutions, received calls from, and made calls to, Treasury to provide a market perspective on conditions and events as they were unfolding. Given what was happening in the world, it would have been shocking if such conversations hadn’t taken place.”
Although federal officials were concerned that Goldman Sachs might collapse that week, Mr. van Praag said the only topics of discussion between Mr. Blankfein and Mr. Paulson at the time involved Lehman Brothers’ troubled London operations and “disarray in the money markets.” Mr. van Praag said Goldman was fully insulated from financial fallout related to a possible A.I.G. collapse in mid-September of last year.
However, Mr. Paulson believed he needed to request the ethics waivers during that tumultuous week, after regulators had become concerned that the same crisis of confidence that felled Bear Stearns and Lehman might spread to the remaining investment banks, including Goldman Sachs. At a conference call scheduled for 3 p.m. on Sept. 17, 2008, Fed officials intended to discuss the financial soundness of Goldman Sachs, Merrill Lynch and Morgan Stanley, and they had asked Mr. Paulson to participate, according to Mr. Paulson’s calendars and his spokeswoman.
That was the first time during the crisis that Mr. Paulson’s involvement required a waiver, Ms. Davis said. The waiver was requested that morning and granted orally that afternoon, just before the 3 p.m. conference call. A few minutes later, in an e-mail message to Mr. Paulson, Bernard J. Knight Jr., assistant general counsel at the Treasury, outlined the agency’s rationale for granting the waiver.
“I have determined that the magnitude of the government’s interest in your participation in matters that might affect or involve Goldman Sachs clearly outweighs the concern that your participation may cause a reasonable person to question the integrity of the government’s programs and operations,” Mr. Knight wrote.
For investors in the United States and around the world, the days after the A.I.G. rescue were perilous and uncertain; the Dow Jones industrial average fell 4 percent on Sept. 17 as credit markets froze and investors absorbed the implications of the insurance giant’s collapse. That day, Mr. Paulson and his colleagues at the Federal Reserve were scrambling to contain the damage and shore up investor confidence.
But Mr. Paulson has disavowed any involvement in the decision to use taxpayer funds to make Goldman and A.I.G.’s trading partners whole. In his July testimony to the House, he said: “I want you to know that I had no role whatsoever in any of the Fed’s decision regarding payments to any of A.I.G.’s creditors or counterparties.”
Ms. Davis reiterated this, saying that Mr. Paulson’s involvement in the A.I.G. bailout was meant to forestall a collapse of the entire financial system and not to rescue any individual firms exposed to A.I.G., like Goldman. However, she said, federal officials were worried that both Goldman and Morgan Stanley were in danger themselves of failing later in the week and it was in that context that Mr. Paulson received a waiver. “The waiver was in anticipation of a need to rescue Goldman Sachs,” Ms. Davis said, “not to bail out A.I.G.”
Treasury Department lawyers said a waiver for Mr. Paulson regarding A.I.G. was not necessary, Ms. Davis said, because the A.I.G. rescue was conducted by the Federal Reserve. The Treasury had no power to rescue A.I.G., she said. Only the Fed could make such a loan. But according to two senior government officials involved in the discussions about an A.I.G. bailout and several other people who attended those meetings and requested anonymity because of confidentiality agreements, the government’s decision to rescue A.I.G was made collectively by Mr. Paulson, officials from the Federal Reserve and other financial regulators in meetings at the New York Fed over the weekend of Sept. 13-14, 2008.
These people said Mr. Paulson played a major role in the A.I.G. rescue discussions over that weekend and that it was well known among the participants that a loan to A.I.G. would be used to pay Goldman and the insurer’s other trading partners. Over that weekend, according to a former senior government official involved in the discussions, Mr. Paulson said that he had been warned by lawyers for the Treasury Department not to contact Goldman executives directly. But he said Mr. Paulson told him he had disregarded the advice because the “crisis” required action.
Ms. Davis said: “Hank doesn’t recall saying that. Staff had advised that he interact one on one with Goldman as little as possible, not because it would be a violation but for appearances, recognizing someone would likely attempt to read too much into it.”
On Sept. 16, 2008, the day that the government agreed to inject billions into A.I.G., Mr. Paulson personally called Robert B. Willumstad, A.I.G.’s chief executive, and dismissed him. Mr. Paulson’s involvement in the decision to rescue A.I.G. is also supported by an e-mail message sent by Scott G. Alvarez, general counsel at the Federal Reserve Board, to Robert Hoyt, a Treasury legal counsel, that same day.
The subject of the message, acquired under the Freedom of Information Act, is “AIG Letter,” and it contains a reference to a document called “AIG.Paulson.Letter.draft2.09.16.2008.doc.” The letter itself was not released.
Ms. Davis said this letter was intended to confirm that the Treasury and Mr. Paulson supported the loan to A.I.G. and that its officials recognized that any Fed losses would be absorbed by taxpayers. She said the existence of the letter did not confirm that Mr. Paulson was extensively involved in discussions about an A.I.G. bailout. Since last September, the government’s commitment to A.I.G. has swelled to $173 billion. A recent report from the Government Accountability Office questioned whether taxpayers would ever be repaid the money loaned to what was once the world’s largest insurance company.
In the ethics agreement that Mr. Paulson signed in 2006, he wrote: “I believe that these steps will ensure that I avoid even the appearance of a conflict of interest in the performance of my duties as Secretary of the Treasury.” While that agreement barred him from dealing on specific matters involving Goldman, he spoke with Mr. Blankfein at other pivotal moments in the crisis before receiving waivers.
Mr. Paulson’s schedules from 2007 and 2008 show that he spoke with Mr. Blankfein, who was his successor as Goldman’s chief, 26 times before receiving a waiver. On the morning of Sept. 16, 2008, the day the A.I.G. rescue was announced, Mr. Paulson’s calendars show that he took a call from Mr. Blankfein at 9:40 a.m. Mr. Paulson received the ethics waiver regarding contacts with Goldman between 2:30 and 3 the next afternoon. According to his calendar, he called Mr. Blankfein five times that day. The first call was placed at 9:10 a.m.; the second at 12:15 p.m.; and there were two more calls later that day. That evening, after taking a call from President Bush, Mr. Paulson called Mr. Blankfein again.
When the Treasury secretary reached his office the next day, on Sept. 18, his first call, at 6:55 a.m., went to Mr. Blankfein. That was followed by a call from Mr. Blankfein. All told, from Sept. 16 to Sept. 21, 2008, Mr. Paulson and Mr. Blankfein spoke 24 times. At the height of the financial crisis, Mr. Paulson spoke far more often with Mr. Blankfein than any other executive, according to entries in his calendars.
The calls between Mr. Paulson and Mr. Blankfein, especially those surrounding the A.I.G. bailout, are disturbing to Samuel L. Hayes, a professor emeritus at Harvard Business School and a consultant in the past for government agencies, including the Treasury Department. “We don’t know what they talked about,” Mr. Hayes said. “Obviously there was an enormous amount at stake for Goldman in whether or not the A.I.G. contracts would be made whole. So I think the burden is now on Mr. Paulson to demonstrate that there was no exchange of information one way or the other that influenced the ultimate decision of the government to essentially provide a blank check for A.I.G.’s contracts.”
In a letter accompanying the government’s production of Mr. Paulson’s calendar under the Freedom of Information Act request, Kevin M. Downey, a lawyer for Mr. Paulson, raised questions about how comprehensive the schedules were. He noted, for example, that the calendars did not reflect the Treasury secretary’s attendance at several public events. Mr. Downey did not return phone calls or e-mail messages seeking further comment. Moreover, because the schedules include only phone calls made through Mr. Paulson’s office at Treasury, they provide only a partial picture of his communications. They do not reflect calls he made on his cellphone or from his home telephone.
According to the schedules, Mr. Paulson’s contacts with Mr. Blankfein began even before the height of the crisis last fall. During August 2007, for example, when the market for asset-backed commercial paper was seizing up, Mr. Paulson spoke with Mr. Blankfein 13 times. Mr. Paulson placed 12 of those calls. By contrast, Mr. Paulson spoke six times that August with Richard S. Fuld Jr. of Lehman, four times with Jamie Dimon of JPMorgan Chase and only twice with John Thain of Merrill Lynch.
Why was Goldman invited to the AIG bailout party?
by Matt Taibbi
During the week of the A.I.G. bailout alone, Mr. Paulson and Mr. Blankfein spoke two dozen times, the calendars show, far more frequently than Mr. Paulson did with other Wall Street executives. On Sept. 17, the day Mr. Paulson secured his waivers, he and Mr. Blankfein spoke five times. Two of the calls occurred before Mr. Paulson’s waivers were granted.
- via During Crisis, Paulson’s Calls to Goldman Posed Ethics Test – NYTimes.com.
I spoke with someone who was in the Fed offices the whole weekend prior to the AIG bailout, a government official, and he poses an interesting question. Aside from the Fed, the Treasury, and the New York State Department of Insurance, the main players involved in the AIG bailout that weekend were AIG (obviously), JP Morgan, Morgan Stanley, and Goldman Sachs. There were swarms of bankers from the latter three banks there that weekend, poring over AIG’s books, trying to figure out if AIG could be rescued without government help.
Now, we know why AIG was there, obviously. Morgan Stanley was there representing the Treasury (it had been hired to advise the Treasury on the bailouts by Paulson during the Fannie/Freddie mess, with the rumor being that it was the only bank willing to give up market positions that would have left it too conflicted to do the work). JP Morgan we know was there because AIG had hired them weeks before to come in and try to clean up its messes. Only Goldman Sachs did not have an official role at these proceedings.
So why was Goldman there? And why was Paulson calling Goldman two dozen times that week? This is one of the other problems with Gasparino’s account (”of course” Blankfein was there that weekend, he says, not telling us why this is so obvious). I’m not sure I’ve ever seen an official explanation for why Goldman was there that weekend; the ostensible explanation that most people seem to accept is that Goldman naturally was there because it was such a large counterparty to AIG.
But I suspect we’re going to find that Paulson was not on the phone two dozen times with executives from Deutsche Bank or Societe Generale or Barclays or Calyon, all of whom were significant counterparties to AIG as well. Goldman was not even AIG’s largest counterparty in the sec-lending wing of its business (Deutsche Bank was, and would eventually receive $7 billion via the bailout as a result), and yet as far as I know there were no Deutsche reps there that weekend at all. So what made Goldman special? This is a good question, I think.
Promises to the Drug Industry: Like Renegotiating NAFTA?
by Dean Baker
Apparently the Obama administration made a commitment to the drug companies that it would block efforts to reduce drug costs in the Medicare prescription drug program. This was apparently in exchange for a promise by Pharma to cut their prices to seniors by $80 billion over the next decade. While we may not know the full content of whatever agreement was actually struck, if this exchange is at its center, the taxpayers got a bad deal.
To give some context, the country is projected to spend more than $3.5 trillion on prescription drugs over the next decade. This is more than 2 percent of projected GDP over this period and comes to about $12,000 per family. That is real money even in the context of federal budgets. The industry's promised $80 billion in savings would be equal to less than 3 percent of its projected revenue. It is also important to remember that these savings are not well-defined and there is no obvious enforcement mechanism. Given the record of the drug industry, a certain amount of skepticism would certainly be warranted.
Even if the industry carries through with its promise, they would still be getting a very good deal. The United States pays nearly twice as much for its prescription drugs as do people in other countries -- or for that matter, as do our veterans who receive their health care through the Veterans Administration (VA). If Medicare were to pay VA type prices, it could easily save taxpayers and beneficiaries $600-$800 billion over the next decade.
There is a great deal of support among Democrats in Congress for having Medicare negotiate lower prices with the drug industry. The industry scored a real coup if it was able to head off this possibility with a vague promise of $80 billion in savings.
It is important to realize that high drug prices don't just cost us money, they are also likely to lead to bad medicine. The basic story is that drugs are almost invariably cheap to produce; the reason that prices are high is that the government grants the industry a patent monopoly. This monopoly allows Pfizer, Merck, and the rest to charge hundreds or even thousands of dollars for a prescription of life-saving drugs that would sell for $4 at Wal-Mart if we had a free market.
When there are huge gaps like this between price and cost of production, then the industry has enormous incentive to promote their drugs, even when they may not be the best medicine for patients. This is why it spends billions of dollars each year on ridiculous television ads and why it spends tens of billions of dollars hiring former cheerleaders to go to doctors' offices to push their drugs. Business responds to incentives, that's basic economics. And the incentives the government is giving the drug companies is to push their drugs to anyone they can get to buy them, whether or not the best medicine for their condition. Needless to say, this goes directly against President Obama's efforts to contain costs by promoting good medicine.
If we had drug prices more in line with production costs, we would take away the industry's incentive to lie in ways that are bad for our health. In short, we would get better medicine and pay less money for it. (Yes, we would have to find alternatives to patents for financing drug research, but there are better ways.)
Of course there is an alternative spin that we can put on the deal with the pharmaceutical industry. Politicians often have to make commitments to gain support in the middle of heated campaigns. Remember how all the leading Democratic presidential candidates promised to renegotiate NAFTA during the primaries? We haven't heard a lot about that one lately. Perhaps the pledge to block lower Medicare drug prices is like the commitment to renegotiate NAFTA. We better hope so.
For Private Equity, a Very Public Disaster
For Steve Feinberg, the onetime owner of Chrysler, the past year has been a crawl toward defeat. He lost billions of dollars. He lost prestige. He lost his privacy. And he ended up a ward and supplicant of the federal government. But, even now, Mr. Feinberg, a man who can play a decent game of chess while blindfolded, is hard-pressed to pinpoint many mistakes.
Sitting in his office on Park Avenue, far away from the detritus that surrounds Detroit, he grows pensive when asked what he has learned from his audacious — and failed — effort to privatize and resurrect the legendary and deeply troubled auto giant. “I don’t know what we could have done differently,” he says, crossing his arms on his chest. “From the day we bought it, we worked hard to improve it.” He pauses, pondering, as the clock ticks away. Then he shakes his head. “We were too optimistic on timing,” he says. “Maybe what we should have done was not bought it.”
Mr. Feinberg took over Chrysler almost exactly two years ago, promising to revive the company. Chrysler filed for bankruptcy protection at the end of April. So how he and his private equity firm, Cerberus Capital Management, choose to describe their journey with Chrysler is a delicate matter.
If he says he should have shelled out more money to help Chrysler, he could face the ire of investors who have already suffered heavy losses on his gambit. If he says he should have simply dumped Chrysler’s auto arm, while clinging to its more promising finance unit, he could be accused of caring more about his wallet than he did about Chrysler’s workers and the automaker’s role in the economy.
Mr. Feinberg’s education at the hands of Chrysler, the government and economic reality is emblematic of the limits private equity players have encountered as they’ve sought to reap outsize returns while also contending that they had the smarts and managerial prowess to repair companies of any size. Not too long ago, some pundits and analysts wondered whether private equity firms — backed with a rising tide of easy bank loans — could gain enough traction to make runs at seemingly untouchable behemoths like General Electric.
When Cerberus began poking around Detroit, some at the firm said they thought that the American automobile industry was going to be the biggest turnaround story in history. In sessions with potential investors in the last few years, the Cerberus team came across as passionate, skilled and incredibly confident that they could succeed where others had failed.
“I thought, wow, this really signals a real change in the landscape here,” recalls a person who attended a Cerberus session who asked to remain anonymous because of agreements he signed. “I guess it gave me hope. The auto companies needed an enormous amount of capital, and where else was it going to come from?”
John W. Snow, a former Treasury secretary in the Bush administration and Cerberus’s chairman, also heralded Cerberus as Chrysler’s savior, likening the firm’s investment to the government rescue of Chrysler in 1979. “Over 25 years ago, when Chrysler faced bankruptcy, it turned to the United States government for assistance,” Mr. Snow said at a National Press Club meeting in 2007. “Today, Chrysler again faces new financial challenges. But it is private investment stepping in to inject much-needed support.”
Cerberus and its co-investors ultimately invested $7.4 billion in Chrysler, a sum now worth an estimated $1.4 billion. Ideally, Cerberus hoped to wed Chrysler’s finance arm to another finance company it controlled, GMAC. To that end, the risks in Chrysler’s auto business were something that the Cerberus team thought it could manage and that wouldn’t stand in the way of making billions of dollars for investors.
“This will go down as one of the investments made at the very top of the credit bubble,” Josh Lerner, a professor who studies private equity at the Harvard Business School. “They don’t look good. This will be a black eye on their record.” Indeed, GMAC and Chrysler became so weak that they needed $22.6 billion in government aid in the last year to stay afloat. For Chrysler and its workers, investors, business partners and customers, was all of that worth it?
Mr. Feinberg defends his actions, saying he did everything possible to help the company. Known for avoiding publicity, he says that he was naïve not to anticipate the public attention that would surround him once he bought Chrysler and that he would have avoided the investment had he known. “I always view the press as something for guys who were trying to do big things,” he says, perhaps overlooking that Chrysler was, indeed, a very big thing.
Don Johnson, a former Chrysler employee, says he worked on initial production of the Jeep Liberty at a plant in Toledo, Ohio, in summer 2007, when Cerberus won the right to buy Chrysler from Daimler of Germany. To the surprise of some, Mr. Feinberg managed to woo the support of the United Automobile Workers for the deal. But Mr. Johnson says he was always skeptical about the carmaker’s new owners. “Cerberus did not have a clue about the automotive industry,” he says. “I don’t think anything could have been worse.”
Still, if you peel back Mr. Johnson’s argument, you quickly find a story of an automaker that was already in peril by the time Cerberus came on the scene. For example, he says the body shop at his plant couldn’t produce Jeep frames fast enough to keep up with the paint and assembly lines. Instead of fixing the problem, he says, the factory paid the body shop workers overtime to come in Sundays to keep up.
Cerberus took the helm about a week after Mr. Johnson’s team ran into problems with the Jeep. When Mr. Feinberg addressed workers at a town hall meeting at Chrysler’s headquarters in Auburn Hills, Mich., shortly after the deal, he spoke of his long love of American manufacturing, according to workers who attended the speech. In particular, he said he was proud to repatriate Chrysler’s ownership from Germany. “Steve saw this as a huge patriotic opportunity, in addition to a great investment,” says Robert L. Nardelli, the former Home Depot chief executive whom Cerberus installed at Chrysler’s helm.
Although some investors doubt that anything other than profits drove Mr. Feinberg’s investment, many say they believe that he was authentically excited by the prospect of reviving an American corporate icon — a theme that Mr. Feinberg is happy to support.
Surrounded by rifles, a motorcycle and model cars in his office, Mr. Feinberg mentions family members who have served in Iraq and a brother-in-law who worked at G.M. He apologizes for rambling and explains his motivation for investing in Chrysler: “I love this country,” he says. “I feel it’s been great to me. I had a great chance.”
Still, Mr. Feinberg, 49, has spent years as a dealmaker. The son of a steel salesman, he graduated from Princeton in 1982, where he studied politics. He went into finance so he could pay off his student loans. He worked at Drexel Burnham, the investment bank made famous by Michael R. Milken before it collapsed, and then, after a brief stop at a smaller firm, he was a co-founder of Cerberus in 1992.
For years, Cerberus was largely a trading shop specializing in distressed debt. But by the mid- 1990s, Mr. Feinberg expanded into buying and selling distressed companies and hired dozens of seasoned corporate executives to run them. Chrysler was the biggest prize he had ever bagged, and many co-investors say they always believed Cerberus’s stake in Chrysler’s auto operation was never the main reason the firm was interested in the company.
According to five people who heard Cerberus’s Chrysler pitch, all of whom requested anonymity because of confidentiality agreements, Mr. Feinberg’s deputies valued the financing unit more than the auto operation. In fact, the deputies believed, the finance unit’s value covered the cost of buying Chrysler, making the car company something of a bonus — if that part of the investment worked out, great; if not, Cerberus could still profit on the finance unit.
Mr. Feinberg says he believed the automobile operation had great potential value, perhaps even more than the finance arm if Cerberus could put the automaker on the right track. But that meant he and Mr. Nardelli (who had never overseen a car company) had to effectively manage the auto operation — no small feat. By October, only three months into Cerberus’s tenure, Mr. Johnson says it was becoming obvious to him and other workers that trouble was ahead. “We went from three shifts to two shifts to one shift within a year,” Mr. Johnson recalls. “Then there was just down week after down week.”
To reduce expenses, Mr. Nardelli cut excess factory capacity and billions of dollars in fixed costs. He improved the interiors of several models, which bolstered some of its approval ratings. But there still wasn’t a strong demand for Chrysler’s product line, which was packed with large vehicles like minivans and S.U.V.’s at a time when skyrocketing gas prices were making consumers interested in more fuel-efficient cars.
The company was aware that its lineup was far too limited. And Cerberus sent Chrysler executives around the world to seek partnerships with foreign automakers like Nissan. The hope was that those companies would help provide a broader product line for dealers. But there was not time for any of the efforts to bear fruit. Chrysler was burning through cash. “Once the car market stalled, the cash in the auto market evaporated,” says Maryann Keller, a longtime auto analyst and consultant, of Chrysler’s predicament. “The cash was leaving their balance sheet, and they weren’t selling cars to make money they could invest.”
That situation was made worse by hefty interest payments on more than $10 billion in debt that Cerberus arranged for Chrysler as part of the takeover, which left the automaker carrying piles of debt just as auto sales were about to plummet. While many private equity deals involved saddling companies with debt to pay off investors, Chrysler needed to take on more debt because it had so little cash on hand to finance its operations, some analysts say. The company paid back some of the debt in November 2007.
Ms. Keller says that the company that Mr. Feinberg took over was already suffering from myriad problems: a bad cost structure, a limited product line and no pipeline of more diverse offerings. In short, she says, Cerberus had simply bought “a basket case.” At the beginning of 2008, Mr. Feinberg sized up his investment in a private letter to his investors. “We do not need to be heroes to earn a good return on the investment in Chrysler,” he wrote. “We do not need to transition the car industry or even to return Chrysler to a much stronger relative position in the U.S. car market in order to be successful.”
His letter sent a chill around New York, where dozens of hedge funds had joined in his Chrysler bet. Although these firms had agreed to let Cerberus control decisions involving their investments, there was fear about how his harsh words might affect the industry’s image. After all, such a steely, hard-headed look at Chrysler didn’t mesh with the patriotic tone of Cerberus’s other statements about the company. Nor did it comport with the private equity industry’s broader arguments that its investments were good not only for its firms, but also for America.
Cerberus, meanwhile, was unable to stop Chrysler’s downward spiral. Last fall, Chrysler and General Motors tried to merge their operations, a scenario Mr. Feinberg supported, but a deal could not be struck. And in November, Chrysler announced a huge employee buyout. Mr. Johnson, the worker at the Toledo plant, joined thousands of others who signed up. “There was absolutely no hope” among employees accepting the buyouts, he says.
Mr. Feinberg says that he sympathizes with Mr. Johnson, but that he also believes business restructurings are, unfortunately, often brutal affairs. “It’s demoralizing when things go down,” he says. “But that’s a turnaround, you know. Some guys make it; some guys don’t want to deal with it. This was the most difficult environment. You couldn’t think of a worse storm for an employee to have to live through.” It was also, as it turns out, a bad storm for Chrysler’s owners.
Mr. Feinberg, a longtime free-market enthusiast and a Republican who never envisioned himself needing the government for help, suddenly found himself running a company that needed federal support to stay alive. By early last December, with Chrysler bleeding cash, he had become a vocal presence in Washington, circulating around Congressional offices to get his story out. He even offered to put tens of millions of his own money into Chrysler, a move that would have been largely symbolic.
“He said his dad was a blue-collar manufacturing type,” says Senator Bob Corker, Republican of Tennessee, who often spoke with Mr. Feinberg. “You sit there and you talk to Steve, and you can tell he’s from a background that greatly understands what the American worker is all about.” But Mr. Feinberg soon found himself negotiating with government officials who understood what Wall Street was all about.
When Congress did not pass a rescue bill for the automakers, the Treasury Department stepped in, using financial authority it had already assumed from its bailout of the banking system. Cerberus’s fate moved into the hands of Steven Shafran, a Goldman Sachs alumnus who represented the government and was regarded inside Treasury as a tough negotiator.
Mr. Shafran forced Cerberus to accept a painfully low valuation of its GMAC stake. He also quashed arguments by Cerberus that Chrysler’s financial arm shouldn’t be responsible for paying back bailout funds provided to Chrysler’s auto operation. At some point in December, Mr. Feinberg began to realize that Cerberus’s investment in Chrysler’s auto operations was largely unsalvageable. In a phone call with Mr. Shafran about 2 a.m. on Dec. 19, he offered to simply give the car company to the government, according to five people briefed on the call.
Mr. Feinberg says he was offering Cerberus’s stake in the auto company to the government as a bargaining chit for negotiating with bankers, the union and others. But some Treasury officials were worried that he was simply trying to avoid leaving the finance unit on the hook for $2 billion of the $4 billion the auto operation received in federal aid.
Treasury officials declined Mr. Feinberg’s offer and also were so wary of his motives that they put in a rule requiring that federal bailout money provided to Chrysler’s financial arm could be used only to help Chrysler’s auto unit. Despite all of that back and forth, Mr. Shafran says he believes that Cerberus behaved professionally. “They were prepared to work closely with us to ensure a smooth landing for the car company,” he says.
When the Obama administration took over this year, Mr. Feinberg got a second chance to negotiate. He faced yet another Wall Street refugee trying to save the auto industry, Steven Rattner, as well as Ron Bloom, a former banker who worked more recently for the United Steelworkers union. Mr. Feinberg was particularly focused on decreasing the $2 billion guarantee the previous administration had wrung out of Chrysler’s financial arm. He eventually knocked that amount down by hundreds of millions of dollars after agreeing to give up some other things the government wanted — something Mr. Feinberg regards as a fair outcome.
“Basically,” Mr. Bloom says, “they realized they made a poor investment and wanted to end it in a decent way.” Chrysler filed for bankruptcy protection on April 30 to help clear the way for a merger with the Italian automaker Fiat. Cerberus now values its Chrysler stake at 19 cents on the dollar. It is a humbling and embarrassing figure for Mr. Feinberg. But it’s better than zero cents on the dollar, which is what his stake might have been worth had the government not bailed him out.
Mr. Feinberg and his colleagues at Cerberus maintain to this day that their time at Chrysler was, in part, a reflection of their patriotism — a view that some analysts find hard to swallow.
“It’s hard to believe that any of these firms — including Cerberus — will be viewed as patriots in 10 years,” said John Rogers, a private equity analyst at Moody’s Investors Service, “because I don’t think their impact on any of these companies will be seen as so positive for the overall economy.” Mr. Feinberg still begs to differ, saying his experience at Chrysler has left him feeling like a good citizen. “There were times we could have been tougher and pushed harder and gotten more,” he says, “but it wasn’t the right thing for the country.”
Canada Supreme Court rules on treating pension surpluses
A Supreme Court of Canada ruling on how employers deal with surpluses in a defined-benefit pension plan has company lawyers cheering and employee lawyers jeering. In a 5-2 ruling, Canada's top court held that Kerry Canada Inc. did not violate a 55-year old trust document, when it used an actuarial surplus in its defined-benefit plan (DB) to fund the contributions and expenses of a defined-contribution plan (DC) it created for new employees in 2000, after closing access to its DB plan. It's the latest in a string of rulings on how pension surpluses should be treated and comes as more companies switch to DC from DB plans.
In DB plans, employers are responsible for any funding shortfalls whereas in a DC plan employers merely provide a set contribution. Ron Walker, a lawyer at Fasken Martineau DuMoulin in Toronto, who represented the company, said the ruling "vindicates a lot of arrangements that have been put in place. There's a great deal more clarity for both pension lawyers and actuarial consultants out there who have been structuring plans." Paul Timmins, a lawyer at WatsonWyatt, called the decision "comforting" because it recognizes that "employers should be able to evolve the nature of a plan from time to time."
Not everyone is pleased, however. Ari Kaplan, the Koskie Minsky lawyer who argued the case on behalf of the 80 employees still in Kerry's DB plan, said it is a "green light for employers to reduce DB coverage and shift into DC coverage. In the long run, that is not a good thing for Canadian workers." He said DB plans "reduce labour mobility and increase retirement security and reduces [pensioners'] need later in life to seek forms of social government benefits."
Steve Barrett, of Sack Goldblatt Mitchell, who represented the Canadian Labour Congress in the case, said "it's regrettable the court is saying that there's no impediment from employers taking a surplus in a defined-benefit plan and diverting it for its own purposes to pay contributions to employees in an inferior plan." In 2000, Kerry closed its DB plan, shifting new employees to a DC plan. The DB plan had an actuarial surplus, which meant there was more money in it than necessary to fund pension obligations that had accrued, so Kerry took an allowable "pension contribution holiday." It stopped paying into the DB plan and used surplus funds to pay $850,000 in plan expenses, a cost it used to cover on its own, and tapped $1.5-million to cover DC contributions.
DB plan members sued to prevent the funds from being converted. The Ontario Financial Services Tribunal backed the company's actions, but the Ontario Divisional Court disagreed and ruled the money could not be used in that manner. The Ontario Court of Appeal overturned that ruling and the pensioners appealed to the Supreme Court. Writing for the majority, Justice Marshall Rothstein said "the payment of plan expenses is necessary to ensure the plan's continued integrity and existence," and pension monies can be used to pay "reasonable and necessary" expenses, which Mr. Timmins said was an important ruling for employers.
On the issue of the surplus, Justice Louis LeBel argued in his dissent that allowing the surplus to fund the DC plan "disrupts this careful" balance between providing incentives for employers to create pension plans and the need to protect pensioners' rights. However, Justice Rothstein shot that down. "It is not the role of the courts to find the appropriate balance between the interests of employers and employees. That is a task for the legislature."
Labour sounds alarm over Canada Supreme Court pension loss
A top labour lawyer is calling for government action to protect pensions in the wake of a Supreme Court ruling that it was OK for a company to move pension plan money. The high court ruled Friday that Kerry Canada Inc. could transfer surplus cash from its defined-benefit pension plan to meet its obligations under a newer defined-contribution plan. The high court also concluded that the food company can pay its pension fund's "reasonable" administration costs from pension money.
The verdict could have implications for other companies that shift money between pension funds. It also bolsters a call this week by Canada's premiers for a national summit on pensions, said Steven Barrett of the Toronto-based law firm Sack Goldblatt Mitchell. "If anything, I think it reinforces the call for government and legislative action to enhance the pension plans of workers who are facing retirement with either pension plans that have been seriously eroded over the last year or so or workers who simply have no, or inadequate, pension coverage," said Barrett, who intervened in the case on behalf of the Canadian Labour Congress. "(The court) in fact says it is up to legislatures and governments to develop pension plans that protect workers."
At their meeting in Regina this week, the premiers jointly called on the federal government to hold a national gathering to find ways to assist Canadians who are facing retirement without adequate income. Ontario Premier Dalton McGuinty cited a recent study that showed that, by 2030, two-thirds of Canadians will not have enough retirement income to pay for their necessary living expenses. But David Vincent, a senior partner at law firm Ogilvy Renault, sees the decision as being about controlling costs and providing corporations with predictability in earnings.
The ruling confirms "the economic reality of today," Vincent's office said in an email to The Canadian Press. "Defined benefit pension plans are just too unpredictable and expensive for businesses to maintain while staying competitive," said the email. The Kerry Canada case pitted the company against some of its current and former employees and had been closely watched by business, unions and the pension industry. It stemmed from 1985, when
Kerry began paying administrative costs for the pension plan from the pension itself, and then took a contribution holiday. Then, in 2000, the company amended its plan, closing its defined benefit plan to new employees, and creating a defined contribution plan. Kerry employees asked the Ontario Superintendent of Financial Services to investigate the firm after it changed the plan. In June, 2007, the Ontario Court of Appeal ruled that an employer could stop paying pension plan expenses if there was nothing specifically in the plan to prevent it. It also concluded that the company would not have to pay back the money it took from the fund while it took a contribution holiday.
The Supreme Court agreed, saying there was nothing in the plan preventing the company from avoiding making payments if the fund was in surplus, and nothing stopping it from transferring funds from one part of the plan to the other. "The plan documents do not preclude combining the two components in one plan and nothing in these documents or trust law prevents the use of the actuarial surplus for the (define contribution) contribution holidays," Justice Marshall Rothstein wrote.
The high court ruled that Kerry was not obligated to pay pension expenses out of pocket, because those expenses were incurred for the benefit of pension plan members. "The payment of plan expenses is necessary to ensure the plan's continued integrity and existence, and the existence of the plan is a benefit to the employees," Rothstein wrote. "It is therefore to the exclusive benefit of the employees that expenses for the continued existence of the plan are paid out of the fund."
Over 30,000 British firms in danger of failing by end of 2010
Analysts predict that over 30,000 companies could go into liquidation before the end of next year, after official figures showed that company failures have reached their highest ever level. There were 5,055 company failures in England and Wales in the second quarter of 2009 on a seasonally-adjusted basis, the Insolvency Service said, which equates to an increase of 2.9pc compared with the previous quarter, and a 39.1pc year-on-year rise. An additional 1,027 companies went into administration in the period, a rise of 9.5pc year-on-year, and the number of companies going into receivership almost doubled from 177 to 345.
In all, around one in 120 active companies went into liquidation in the twelve months to June. The consensus amongst analysts was that the outlook was likely to worsen in the short-term, even if the economy recovers. Andrew MacCallum, managing director of Alvarez & Marsal, said: "More than 5,000 companies may have gone into liquidation in the last quarter, but we can expect to see that figure exceeded in every quarter until at least the end of 2010. "Credit is still tight and many businesses are loaded with debt that they cannot service.
Liz Bingham of Ernst & Young said: "In the last recession the insolvency peak lagged the economic trough by over a year. "Even though the number of corporate insolvencies has declined slightly compared to the previous quarter, we fear that the worst is still to come." Phil McCabe of the Forum for Private Business blamed the lack of finance available to small businesses as the most important factor in the rise in insolvencies.
"At the moment, we are seeing apparently viable businesses being labelled as 'high risk' by some banks," he said. The news comes on the same day that figures showed a record number of individuals were declared insolvent in the last quarter, and two days after Lloyds Banking Group announced losses of £19bn from bad corporate loans.
Vulture fund swoops on Congo over $100m debt
The government of the war-torn Democratic Republic of Congo is racking up fines of $20,000 a week in a case brought by a New York-based vulture fund over a debt incurred from Tito's Yugoslavia in the 1980s. Vulture funds are so called because they prey on the world's poorest countries, buying up their sovereign debt cheaply on capital markets and then going to courts, often in Britain or the United States, to enforce payment of the full value of the debt.
A Washington Court handed down a penalty against the DRC in March, starting at $5,000 a week and eventually rising to $80,000, for failing to comply with a demand to provide detailed information about all its assets throughout the world. The fine is the latest twist in the long-running effort by investment fund FG Hemisphere to collect a debt first incurred 20 years ago, when the notorious dictator Mobutu Sese Seko was in power in the DRC. The debt now amounts to $100m, including interest and penalties.
Lawyers for the African country have lodged an objection to the penalty, on the grounds that the district court has no jurisdiction over a sovereign state; but Stephen Cundra, of law firm Roetzel and Andress, who is representing the DRC, said no ruling has so far been handed down on whether the fine must stand. "Eight million people have died in the Congo for lack of healthcare... and the last thing they can do is find $100m for a vulture fund," Cundra said. As well as a series of moves to take control of the DRC's assets in Washington, the fund has also taken action in Hong Kong and South Africa.
FG Hemisphere, which was unavailable for comment, describes itself as "a New York-based investment company specialising in uncovering, investigating and managing alternative investment opportunities and special situations within the emerging markets." Nick Dearden, director of the Jubilee Debt Campaign, said: "The World Bank has made clear that DRC cannot afford to repay its debts. Today as DRC struggles to emerge from a past characterised by slavery, imperialism, looting and war, they are attacked again by financial vultures."
Tamara Gaw, in-house counsel at campaign group TransAfrica Forum, said the case underlined the urgent need for legislation to prevent vulture funds pursuing developing countries' debts on American soil. The Stop Vultures Act is on its way through the House of Representatives. Britain announced last month that it would also consult on bringing in a law to cap the amounts an institution could claim against a poor country.
But the government was spurred into more concrete measures by a group of 12 cross-party MPs who had called in parliament for a Developing Country Debt (Restriction of Recovery) bill that would seek to ban hedge funds and other creditors from taking legal action against the world's poorest countries. At least 54 companies are known to have taken legal action against 12 of the world's poorest countries in recent years, for claims amounting to over $1.8bn (£1.2bn).
141 comments:
Concerning the turning of the maker stoneleigh expects the market to tank this fall. However, since the main thrust of the stimulus is for now until next year, isn't it possible we could see a flat economy and stock market until a out the middle of next year? This is particularly directed at stoneleigh and/or Ilargi. This was mentioned by Stoneleigh but I would really appreciate if either could flesh this out, since this is an important concept. Appreciated
Thank you, Ilargi.
The link for the Taibbi article points back to TAE.
Feel free to delete this comment to keep down the clutter.
Eliza
Taibbi article link:
http://preview.tinyurl.com/mwjjan
Joseph, thank you.
From the Reuters article: "Sawhill would like to see government job programs to keep people active and provide a social good, and better training programs that help workers successfully move out of dying sectors and into growth industries. "The military can take raw recruits and turn them into terrific soldiers. Why can't we take laid-off auto workers and turn them into terrific green energy retro-fitters?" she said."
Indeed. Why is this so hard?
The clunkers cash should have gone to something like weatherization programs.
Eliza
Thanks I&S!
All of the links demonstrate that there is a definite consensus among a growing number of bloggers/analysts that the USA is not going to achieve any "socialist" reforms that could benefit the ordinary people.
The sh*t will hit the fan.
The middle class will get decimated.
The pretend middle class are going to wake up in a different matrix.
The poor will continue to do their "thing".
Too bad ... so sad...
I'll cross my fingers for a good "black swan event" but I won't hold my breath.
jal
At least "Gasman," the anesthesiologist, seems earnest, although not worldly. What is pertinent to the health care debate, that he probably does know, is the the USA already has a shortage of doctors. It is a shortage of primary care providers.
Part of the reason for that is the same thing that has been squeezing the middle class: high overhead. The rents are high, equipment is expensive, billing is a nightmare, and of course the liability insurance is breathtaking. It is becoming increasingly difficult to run a solo practice. Moreover, hospitals are closing at an alarming rate (http://preview.tinyurl.com/nohc6b).
The article I linked to, The Next Wave of Corporate Medicine — How We All Might Benefit, in NEJM (but open access), argues that part of the solution will be increasing centralization and corporatization of medicine. This will work OK for the cities, but will be impossible in rural areas.
I find this worrisome. One thing that can accelerate the collapse, is a simultaneous collapse of the healthcare system.
Oddly, the author of the article somehow manages to make it sound like a good thing. This seemed odd to me until the end, when I saw that he "reports receiving grant support from the Pharmaceutical Research and Manufacturers of America." He may have a different view of the corporatization of medicine, compared to the rest of us.
Socialist healthcare is excellent, however what we really need is socialist banks
A shame you reproduced that idiotic Telegraph article:
IMF puts total cost of crisis at $11.9 trillion
Can none of you do maths - or is it propaganda to mislead about the world population? Hint: it isn't 4 billion
Forgive me for going OT; I think it would be of interest to several here (esp Snuffy, Greenpa & OGardener:
You Say Tomato, I Say Agricultural Disaster
http://www.nytimes.com/2009/08/09/opinion/09barber.html?pagewanted=1
Very interesting information about NE USA tomato blight wrt large-scale farms and the increasing number of backyard/community plots.
This year, for the first time, I grew my tomato plants from seed. I thought it would be hard, but we have what appears to be a bumper crop in the making. Since Seattle has had virtually no rain for months, I wonder if we will dodge tomato blight?
Eliza
From Yesterday
I was looking up the URL given (NiFe Batteries), when on one of the websites (below) I came across this free book which to my mind is a real find on what is available for RE - the solutions maybe a bit pricey but worth looking at, as it gives a fairly comprehensive overview.
http://www.beutilityfree.com/1SourceBook/SourceBookV3.9.pdf
Happysurfer,
The "beutilityfree" site is the one that imports them from ChanHong battery works in China. Near as I can tell that is the only place still making them.
Though perhaps a craft industry will emerge in the de-industrial scrap recycling future. This battery technology is well over 100 years old and is dead simple.
Ooh shanghai stocks have been following for quite a few days now. This is a leading indicator IMO, a trend to definitely watch,if it carries on it won't be long before the US markets begin their slides as well.At most 2-3 months. Lets's see!
Ciao Ilargi,
I had a heart attack when I was 38 and lucky for me I was living in Italy and not in the USA! I was in intensive care for two days and in a specialized cardiology clinic for a week after that, where they did a coronagraphy of my heart (among other things) and I paid nothing for all the excellent service that I received from extremely competent (and Italian trained) doctors and nurses. As a legal resident of the country everything was covered by the state health insurance.
I've heard of many people who have had heart attacks in the USA and who end up going bankrupt or having to sell their homes just to pay their bills and honestly I find it hard to believe that such a perverse financial arrangement continues to exist in a country as rich as the USA is (Well, at least it USED to be rich).
If America needs tips on how to organize its health care system then it should go to either France or Italy, the two best systems in the world (according to the WHO).
Snuffy,
Could you repeat recommended links for wood gas generator info. I have the FEMA report republished by KnowledgePublications.com, and they offer many others, but I'd appreciate recommended sources based on your direct experience.
Thanks
Re: healthcare
I've long said that real reform is not possible here. Along with the deeply stupid rhetoric, there are simply too many big entities and individuals who make too much money out of the current system. They will not permit real reform to happen. This is not new, here, in Predatory America.
Illargi, my expectation is that this great Health[s]Care phase will be mooted soon enough. A return to Stoneleigh's expected pay-as-you-go for health services is ironically the better choice. (see her post in last thread)
A recent study (which I can't yet locate and hope is not urban legend) compared health and markets. Expecting a positive correlation, it found an inverse correlation, good times = sicker people, hard times = healthier people.
Overall, I expect we will discover, after a disorderly (in all things) transition, a much healthier population.
From a spiritual/metaphysical perspective I believe health insurance as we have come to know it/use it perversely supports sickness and carelessness. My wife and I have never purchased health insurance. We both now are required to pay a tax penalty (in Massachusetts) for that choice. Perhaps because we have no insurance, we seem to take much better care of our health than others who don't have that concern. Also, most of what is covered we would not have done, and most of what we use is not covered. We might buy a catastrophic policy (which in my opinion is actual insurance) with a $50K deductible, but such things aren't easily found.
As it is, we get all the care we've ever needed. We get traditional appointments, physicals, emergency room visits and pay-as-we-go. We almost always get an automatic discount when we say we're self insured - often as much as half to two-thirds less than is billed to insurance.
Preparing for a shift in our healthcare landscape is as sensible as preparing for changes in financial, energy and political landscapes.
Thanks Ilargi for posting the Clash.
Listening to it was like a trip down
memory lane.Although the words of
another song from that album have always stuck in my head:
when they kick in your front door
how you're gonna come
with the hands on your head
or on the trigger of your gun
(guns of brixton)
What bothers me most about this crisis is that people are so incredebly passive that the biggest
heist in history is taking place in
front of their eyes and they don't
seem to even notice or care.But once it's over,they will likely attack the usual suspects (scapegoats).It's all so predictable and sad.
So far there has been next to no
resistance to the psychopaths pulling the strings and as long as it stays that way they will continue to ruin everything.
Back to the Clash
Since you like them so much,you may
find philosophyfootball.com interesting.They have a few clash
shirts in their dissenter section.
(i have the english civil war shirt)
Grisu
Ilargi:
"Apparently there is so much money available that economic blogs that address the American health care issue also merit covering. Which is somewhat amusing, I must admit."
So now you have become a conspiracy theorist. (Comment for entertainment purposes only.)
-------------
Deep Throat summed up Amerika in three words when he said to Woodward, "Follow the money."
If plumbers purportedly make more than doctors and it only requires a high school education, why doesn't the wonderful libertarian market correct itself, increase the number of plumbers which would increase competition and drive prices down to reasonable levels? (Hint: it has to do with restrictive licensing practices. The vast majority of plumbers in the USA are journeymen who work for companies at wages in the area of 2-4X Walmart greeter level).
When I was a chemistry major at Brown University, all chem majors and all pre-med had to take a year of physical chemistry. The first half was traditional thermodynamics and the second half was chemical quantum mechanics. It was a very tough course. Since the profs tended to grade on a curve, the higher the percentage of pre-meds in the class, the better it was for chem majors. Though they studied harder, on the average they were considerably less able. So much for the theory that only just a slim proportion of the population has the mental machinery to become physicians.
Back to Deep Throat. Who benefits most from the high cost of medical education and its sadistic practices? I would argue that it is the medical establishment in their final trimester of life and the insurance companies. It becomes a valve for keeping the supply of physicians low. Additionally the instructors themselves make high salaries. And finally, the insurance companies benefit. In the end, they get a percentage cut of the total - the bigger the total, the bigger the cut.
Ph. D. students in chemistry at Brown use to trade off their tuition and got minimal living expenses in return for being T.A.'s. This practice didn't appear to impoverish society or explode the national debt. I would argue that the high cost of medical education is a propaganda ploy to rationalize a life time of over priced services.
Living on the paradisiacal island of St. John, I see that many of the (previously) multi-million dollars villas are owned by physicians. Similar to RC, I almost never go to physicians and prefer to die suddenly than a death of a thousand cuts. Since I go to Latin America every year, I have had my check-ups and non-acute care there by specialists at rates in the area of 10% of Amerika.
I do have a fairly reasonably priced ex-pat catastrophic policy. By eliminating coverage of care in the 50 states, I am charged one-half of the regular.
Most American physicians, in my experience, go into the field for the economic rewards, but there is also the prestige factor. For the moment, physicians are held in higher esteem, than say investment bankers (if not on this site).
I was struck by Dr. J's comment and practices being dictated by profit. Down here plumbers use primarily plastic pipe. The ball valves are also primarily plastic as well and are just as quick to add as any other fitting, such as an elbow. The problem is that in the heat, salt, and intense UV, they don't function very long. I had chosen to use primarily brass valves which require screwing in threaded male adaptors on both sides and are more expensive. Putting in a brass valve is easily 4X as time consuming as a plastic valve. Most of my customers didn't know that difference. I received less profit. So why did I do it? Because I took pride in my work and felt that I was providing a service. So I drove a beater rather than a spiffy SUV. I didn't care.
Healthcare for All, the controversy de jour, is certainly less worn than gay marriage or flag burning as a public distraction. It helps to remember "All News is Lies." I didn't originate that, however it sums up the state of the American political "conversation" perfectly.
Nor am I the first to observe that the Office of the President and White House have become props, mere stage settings for images and soundbites. Their function is theatrical, as long ago the office was converted to facilitating corporate goals. There are still real benefits to winning the President's job though, such as opportunities for enrichment of their inner circle of friends at public expense.
The state reflects the leadership of the wealthy top 1/2 of 1%, that own it. Is that a surprise? That a government exists now of, by and for the people, for the common good, must only be believed by people who did not get enough protein as infants and when they were growing children.
99.9% of our genetic material is universally the same one person to the next; that is just not enough reason for human needs to weigh more than the concerns of corporate lobbyists and their owners apparently.
@Bigelow
99.9% of our genetic material is universally the same one person to the next; that is just not enough reason for human needs to weigh more than the concerns of corporate lobbyists and their owners apparently.
98.5% of chimp genetic material is common to so-called humans, but they are a special interest group.
"That a government exists now of, by and for the people, for the common good, must only be believed by people who did not get enough protein as infants and when they were growing children. "
I suspect it is related to a severe iodine deficiency resulting in a pandemic of cretinism among Usacos.
Ilargi said - "The first comment is from someone who simply has no idea what happens elsewhere in the world (Western Europe has no systematic shortage of doctors)..."
That ignorance of other people and nations is huge, and is a big part of not only this health care discussion but makes reasonable discourse on economic and political issues difficult as well.
The average neighbor of mine is so indoctrinated with the simplistic notions of jingoism that they are incapable of sincere rationale.
I have watched it progress for decades and it has been very discouraging and depressing. The illusional "free market" that is supposed to make all the proper decisions for us if we "just let it work!" How asinine! What the hell do we have gray matter for?
The Stock Market and Monetary Disorder
I’ll restate my thesis as concisely as I can (not my strong suit): The deeply maladjusted U.S. “Bubble” economy requires $2.5 Trillion or so of net new Credit creation to stem systemic (Credit and economic Bubbles) implosion. Only “government” (Treasury, agency debt, and GSE MBS) debt can, today, fill the gigantic void created with the bursting of the Wall Street/mortgage finance Bubble. The private sector Credit system is severely impaired, and there is as well the reality that the market largely lost trust (loss of “moneyness”) in Wall Street obligations (private-label MBS, CDOs, ABS, auction-rate securities, etc.). The $2.0 Trillion of U.S. “government” Credit creation coupled with the Trillion-plus expansion of Federal Reserve Credit over the past year has stabilized U.S. financial and economic systems.
The synchronized global expansion of government deficits, state obligations, and central bank Credit amounts to an historic government finance Bubble. Markets have thus far embraced the surge of debt issuance. This U.S. and global reflation will have decidedly different characteristics when contrasted to previous Fed and Wall Street-induced reflations.
...
My secular bearish thesis rests upon a major assumption: The U.S. economy is sustained by $2.5 Trillion (or so) of new Credit. Only this amount will stem a downward spiral of asset prices, Credit, incomes, corporate cash flows and government finances. On the other hand, if forthcoming, the $2.5 Trillion of additional – chiefly government-directed and non-productive - Credit will foment problematic Monetary Disorder. In simplest terms, another bout of Credit inflation leads further down the path of unhinged market prices, destabilizing speculation, and unwieldy flows of finance.
The stock market has become illustrative of what we might experience in the way of Monetary Disorder. Speculation has returned with a vengeance, galloping blindly ahead of fledgling little greenish shoots. Those of the bullish persuasion contend that the marketplace is, as it should, simply discounting a rosy future. I would counter that problematic market dynamics have taken over, with prices increasingly disconnected from reality. In short, the market is in the midst of one major short squeeze.
To repost a valuable comment from the end of yesterdays comment section:
Martin, the Netherlands said...
@ anon 3.42: I'm Dutch, and I doubt whether our fried was correctly informed. Expecting mothers are given the option whether to have their baby at home or in a hospital. About half of the Dutch babies are born at home. I know of several babies whose mothers did have epidurals. How long a stay in hospital takes depends entirely on how things go. Both of our children were born at home, although in one case we had planned to go to hospital. (But things went so rapidly that the midwife decided on the spot to finish the job at home.) Stating that epdurals are not allowed, and that mothers who have delivered babies just hours ago are tossed out of a hospital, regardless of their condition, which you are suggesting, is factually incorrect. Whether the Dutch system should be called socialism or not is something that is quite irrelevant here. What matters is that we have a fairly efficient and cost-efficient system, that generally does the job well. I pay (for two adults aged 50 and 48, and two kids at university aged 20 and 18) somewhere between EUR 350 and EUR 400 per month, and in case we use any healthare, a maximum of EUR 155 per person per year extra.
August 10, 2009 5:18 AM
Taizui
The guys who started it all were "das" and Dr tom reed/[the Biomass foundation]all the stuff you see on the web comes from the book/information they have google "woodgas"and you can get tons of info,but their website is where everyone got their start
http://www.woodgas.com/bookstore.htm#GasifiersGeneral
The booklet on downdraft gasifier engine systems is really really good...that fema tractor document explains in laymans terms all the principals used...good starting point.
off to work..
snuffy
On the point of childbirth in Europe, my experiences in the UK were quite civilized. All of my children were delivered in hospital by midwives and I could have stayed in hospital for three days had I wanted to. Epidurals were routinely available. (I never had one because luckily my babies were all born in less time than an epidural would have needed to take effect anyway.)
After newborns went home, a health visitor would visit the home every day for ten days to make sure everything was going well with the baby. After that time there were community clinics available where parents could take their babies at any time to be weighed and checked over by a health visitor. For more serious concerns there were also medical clinics available on a drop-in basis, and if a baby was taken ill rapidly, doctors would make house calls in the middle of the night. All of this was completely free, even any necessary medication (not even a dispensing fee for children under 16). Dentistry for the mother was also free for a year after the baby's birth.
Eliza- yep, I saw that article; I'm kind of tuned to any headline with Ag in it.
And it's really just the tip of the iceberg- he's a well educated chef- and probably knows more than he's saying, for the sake of clear communication-
The real situation is a great deal WORSE than this article states.
Wow! That was scary. I just googled "gray corn blight"- and in 3 pages couldn't find the story. Hm.
Back in the 70's, I think, we almost (really really really) lost the ENTIRE US corn crop; because all the hybrids were using one male sterile line to make the cross- and it turned out to be highly susceptible to gray corn blight. It was really close.
Other similar disasters are waiting.
Beautiful post. I couldn't agree more about the Clash.
Thanks, Wyote
I thought of reposting that myself, but hesitated because it's a reaction to a non-story, a plant.
Interestingly, the deal Obama made with the pharmaceuticals last week, in which the government has pledged not to seek lower drug prices, includes a $150 million ad blitz campaign by the industry in support of a universal health care plan. It's set to start this month, and will likely be presented as a huge victory for the president, certainly since the official line is that the industry has agreed to lose $80 billion in drug costs. Imagine what profits will be made to make this worth their while.
This guarantees that a new plan will down the line turn out costlier than the existing situation. It also illustrates once more, if anyone were still in doubt, that it's the industry that dictates policy, not the other way around. US health care cannot be reformed without the explicit promise of higher profits for the corporate world. And that's a sad fact for all Americans, not just for the poorest.
One of the contentious issues lies in expiring medicine patents, something that for instance the Netherlands aggressively and successfully uses to force a switch to generic drugs, thus saving huge amounts of money.
Obama has now pledged that will not happen in the US. The drug- and insurance industries don't care what sort of system there is, they care about profits. And 50 million uninsured Americans constitute an enormous profit potential, which will become accessible by making the government pay.
Obviously, systems such as exist in Western Europe are viable only when these ultimate profit policies are kept in check. They are, to a large extent, though obviously the pressure is ever- and omnipresent there as well.
NPR last summer ran a good series on the European vs the American situation, which might be of interest to many Americans. There are a lot of stories available from the starting page, Health Care for All.
" schopenhauer vs internet trolls"is an article on The Telegraph that speaks to our recent debate on anonymous postings.
http://blogs.telegraph.co.uk/technology/paulcarr/100002832/rascal-your-name-schopenhauer-vs-the-internet-trolls/
Regarding health care - it drives me nuts to see so many people willingly act as shills for the corporations. Parroting the corporate line and acting as if they're some kind of radical. I have relatives like this - they get all righteous and angry, never understanding that they're being manipulated. Perhaps if they understood they won't have job or health care at all. I would love to see a system like that in the rest of the Western world, but that will not happen in the US.
And then on the other hand I see that the government is a corporate tool, that nothing is as it pretends to be, and that all the things these deceivers do will be turned upside down. Such a shame - we've learned so much and could do so much to help people, but it's all been corrupted by money and greed.
One ring to rule them all....
I guess it's like everything else - learn to grow your own food, to generate your own power, to solve your own health problems. The alternative is to count on the corporate/government system, in which case you will pay too much, receive too little, and (in the case of food and medicine) be subject to chemical experimentation for a variety of reasons. And in the end be left without if you cannot pay or if the corporations cannot keep it working.
A Portuguese acquaintance once told me that America is the most fascistic nation on the planet. I now believe him. And I have to admire Ilargi’s allegiance to polite phraseology when he refers to Americans as uneducated. “Stupid” would have been a far more appropriate term. These spitting and snarling fascists came out of hiding and revealed themselves during the Presidential campaign; one year later and their back on the public health-care reform stage thumping their chests and baring their teeth.
And once again, MSM claims of objective journalism are proven to be a sham. They have, in essence, magnified a pile of shit into the equivalent of Mt. Everest. At the most, these fools (and I do mean fools, one day soon they will find themselves rejected by the precious insurance companies they are so vigilantly committed to) deserve a cursory glance on the way to the trash dumpster. Instead we are treated to the likes of a WWF circus with miles and miles of footage devoted to the drooling anger of those who could not even run a lap around the block if their life depended on it. In that regard, they are a pathetic simulations of their right-wing media doughboy masters who never managed to show up when it was military service put-up time.
What we have here is a few slick and privileged right-wing media masters pulling the puppet strings of ignorant philistines in order to further entrench the interests of their insurance industry corporate barbarians. The same barbarians who would knife their front-line propaganda ground troops in the back in order to save ten cents.
We are no longer a nation that reads and contemplates, that sits around the radio and discerns the most subtle and profound inference from a fireside chat. We are now a nation that drowns out wisdom, celebrating and amplifying the Spingersque antics of the lowest-common denominator of behavior and sentiment. Gone are the working-class men and women of the Depression and WW2 who learned the hard way the repugnant results of dog-eat-dog capitalism. They tried to bend an ear and issue a warning, but we were too busy with the Ipod, weekend sporting event, and game show for profit to hear their voices of experience and concern over the social, political and cultural decline.
Right-wing Americans like to fancy themselves above the decadence of boom-thudding pop culture. But they are exactly the same. In order for their vile message to penetrate, the right-wing media vitriol’s have to increasingly up the snarl volume when injecting ever larger doses of adrenalin based anger and resentment. And make no mistake, this narcotic of diversion serves to shift attention away from the very pushers who are making their lives increasingly empty and desperate and replace it instead with cocktails facilitating hallucinations of the black, brown and “socialist’ straw man pulling the rug out from under the once very stable feet of white suburbia.
A deaf, dumb and blind group of foaming at the mouth drama queens with a proclivity for deranged and irrational targeting.
Be afraid, be very afraid.
Aesthete
Why is it so difficult to understand that Americans do NOT want their government involved in their health care? We have had Medicare/Medicaid for almost 40 years and the costs for it have been spiraling higher than the inflation rate for decades. Why does that point always get forgotten by the socialists? MORE government health care is NOT the answer. Yes the corporate system we have now is a disaster, mainly because certain entrenched health care interests (i.e Pharma) own big chunks of congress. But health care insurance as a general concept doesn't work-- whether it is provided by private industry or the government-- because health risks are very difficult to manage statistically. Cash for services works, and controls costs best. When patients don't have cash, they can negotiate barter, or rely on pro-bono services. That's the way it used to work. Unfortunately we haven't had a truly cash-for-services health care system in 50 years.
People like to cite anecdotes from France, Italy, or Canada as "proof" that socialized medicine "works" or "doesn't work". The problem is, each side can come up with plenty of anecdotes. Bottom line is, Americans left Europe behind for a reason-- they were fed up with invasive government regulation. The ones that stayed behind were more comfortable with it-- hence, the legacy of socialism in Europe today. Well, real Americans aren't socialists, thank you very much. If you like socialism so much, move to Canada.
Funny,
But it was here in the USA that my wife was thrown out of the hospital after the birth of our first child. After 14 hours of labor and 2 hours of pushing she was understandably exhausted. Our son was born shortly before midnight. The actual deivery process wasn't finished until around 2am.
Because delivery was before midnight, our insurance required that we be out the next day. We left the hospital in the evening and it was quite a challange for us that first night.
Ilargi,
Thanks for the great intro. Quite creative, too. :)
Yes, the corporatocracy rules!
El G @ 8:41
Thanks for saying it so well!
anon 11:39 - the spin meisters would have you believe it's about anecdotes. It's not. Have a look at any objective review of health systems and health status and you will see that the US significantly lags all other developed countries.
Your desire to revert to a mythical pastoral past is not practical. Try trading some farm produce for bypass graft surgery.
We have friends who have immigrated here from the US and they can't believe their good luck (weather notwithstanding).
@Twilight
"I have relatives like this - they get all righteous and angry, never understanding that they're being manipulated."
The persuasion techniques are powerful after almost 100 years of refinement and Americans are born into this environment. Likewise it is clichéd but fish probably don't notice the water they are in either. Pity is called for.
@ Ilargi
You nailed it again!
"...The drug- and insurance industries don't care what sort of system there is, they care about profits. And 50 million uninsured Americans constitute an enormous profit potential, which will become accessible by making the government pay."
Unfortunately, the financial meltdown, and the actions of the "lawmakers" will result in fewer "clients" and higher costs.
It's more profitable to take one penny from 300M (eg. flash trading), than to "nickel and dime" the people to death.
Since I used the word "death" ... if +35% of the population, (Obese), are dying faster than the population growth, then it will affect the GDP and the profits of the health industry.
The health care industry is driving a knife into their own heart.
They cannot be categorized as stupid, therefore, THEY must be doing this because they see the brick wall.
jal
Aesthete @11:34am
Excellent comment.
By all means, do except more blubber in the vein of anon 11:39. After yesterday's first attempts, it will continue.
I readily admit that American healthcare is "broken", though for me it has worked just fine all my professional career.
The troubling point for me, though, is that I see both private insurance healthcare and gov't healthcare as "broken", just in different ways.
For my family's private-care docs, it is easy to see the expense picture associated with insurance care -- they employ as many clerks to handle insurance as they do to run all the rest of the business. We routinely go back and forth on every denied bill just to get the insurance care codes handled right on both ends, and it is obvious that the insurance company intentionally kicks back major bills 3 times before actually looking into them in detail.
I had an unexpected opportunity to compare Medicare cost-control versus private insurance a year ago, when we had home care provided for wound support by a company that mostly handles Medicaid. The company billed my insurance for bandages and care products at such a high rate (and some mis-coded for a higher price) that my 20% co-pay was greater than the cost to buy them outright on the web. Eventually I did just that, returned the supplies to the care company, and got them to take them off my bill. They shrugged and said they never had reimbursement issues with Medicaid.
In the end the only way that ANY purchase process is optimized is when the party that pays the bill is the same party that receives the product (or service), and thus can assess value. Once you add middlemen the process will always become less efficient. Neither corporate-paid insurance nor gov't-paid care will do this adequately, IMHO.
Now, if we want to talk major-medical policies, gov't back-stop care, IRS-managed individual spending accountes, itemized medical deductions with negative tax rates, and other innovative mechanisms that provide public support for the needy but still provide individually-driven value incentives, I'm on-board.
Paleocon - you are correct in your observation that a level of accountability is lost when the consumer of service and the payer are not one and the same. I studied this when I ran a large drug benefit plan. On the other hand, why would you (ie the US) not want to trade your expensive hodge-podge of a system with 50 million uninsured for one like ours which costs about 1/3 less and covers everyone at zero cost to the patient. Nobody in Canada ever has to worry that medical bills are going to bankrupt them. Sure, there are providers who game the system. That is true of any system, health care or otherwise. There is always more to do on that front. But if you look at the big picture, why in the world wouldn't you want to at least start with a system like ours?
Off the tractor for a few minutes before lunch.
Aesthete: " These spitting and snarling fascists came out of hiding and revealed themselves during the Presidential campaign; one year later and their back on the public health-care reform stage thumping their chests and baring their teeth."
:-) Well, yes. But I find it more useful to look at it from a slightly different perspective.
In addition to being a "herd" animal, humans are - tribal. Very, very tribal; it's a huge part of human social dynamics.
The Redneck Republican Underclass belongs to a different tribe than we do- and it is, indeed, a completely rationality-free world they live in.
It really would be entirely impossible for a rational poor person to have voted for George The Least. He was not in any way from their world; and was clearly owned by Big Oil.
Which made NO difference to their votes. Their tribal leaders, who have had their allegiance all their lives- and all their parents' lives; and all their grandparents' lives- told them with great chest-thumping lies (the best kind) - that their way of life was/is threatened by... THE OTHER TRIBE.
And they grab their spears and hand axes- with vast patriotism- no thinking necessary or even desirable. You should be blindly faithful to your tribe and tribal leaders.
Their counterparts certainly do exist in the other tribes competing with them- though in the Liberal tribe, "rationality" is worshiped as a fetish, or possibly god. So a tiny amount of thinking may happen, from time to time.
Just step back in time 40,000 years- and here we are. They are the tribe in the next valley; and we mutually consider each other to be - not "human"- and therefore inferior; and lawful prey, like any other subhuman animal. A great many primal tribes' name for their own tribe translates as "the human beings" - and the next tribe - is truly not human.
All just part of being a member of our species. Not going away any time soon; if ever.
@Anon 11:39
Excuse me for saying so, but, what a load of crap "Real Americans aren't socialist". Pray tell, then, what are they, Fascists? I think, either you're a troll (but I doubt it) or you have absolutely no idea what you're talking about. Have you ever lived either in Europe or in Canada? I don't think so, given the tone of your letter.
BTW, my family, on both my mother's and my father's side, immigrated to America when it was still British and as such they were subject to all that bothersome government interference (socialism?) that you go about.In fact, as British subjects they weren't interested in going to New Spain (Mexico) or New France (Quebec). No, they went to the BRITISH colonies.
Grisu(and Joe Strummer) wrote
"when they kick in your front door"
This morning CBC Radio's "The Current" interviewed Chris Hedges about his book and thoughts on an "imminent" totalitarian state in the US.
He spoke of corporate/fascict totalitarianism AND also of the destruction of the middle class. However, to the best of my knowledge, corporations exist primarily to make money, but how can they make money with no-one to buy anything? The looting has to stop sometime, and then what?
CBC podcasts most of their programs these days, so it is probably available at their website.
"The cost of mopping up after the world financial crisis has come to $11.9 trillion (£7.12 trillion), enough to finance a $1,779 handout for every man, woman and child on the planet."
Especially when you consider some people EARN around us$300 a YEAR in decimated countries.
Oh, and; in case it wasn't obvious- rational discourse is of NO use whatever in converting members of other tribes. Ever.
“There's an old adage about poker that goes something like this: If you don't know who the sucker is at the table, it's you.”
Eliot Spitzer's Wise Investment Advice: You Can't Win, So Don't Play
Dr J,
My biggest problem with the healthcare reform is the way it's being handled -- pretty much just like the financial "reforms". When somebody says, "trust me - vote for it" and they've already screwed my grandkids out of a trillion bucks, I'm wary. The simple fact that 1000-page bills drop onto lawmakers desks and they feel compelled to vote before they've read them is a major red flag. There is no urgency here, yet somehow there is a sense that it must therefore be manufactured.
Let's first "fix" Medicaid and address some glaring issues with private insurance, and then move to national support if it makes sense. A few easy steps:
1) Disallow cost shifting -- everybody pays the same.
2) Disallow direct charging for hospital errors and acquired infection -- these are overhead costs that should be reflected in the varying costs versus qualities of institutions and doctors (malpractice insurance factors in the same way).
3) Make all care codes uniform and per-institution procedure costs public. When you go in for a colonoscopy you should get an estimate that is accurate just like you do when go in for a transmission flush.
4) Require every plan to offer a major medical / catastrophic care option, such that each family can decide whether to go HMO, PPO, or just pay their way in cash (or with a healthcare spending account) yet with a back-stop option.
5) Merge all public care plans, including that for Congress, into Medicaid before requiring any private-industry person to join up. If a public plan is good enough for me, it damn sure better be good enough for a Senator, bureucrat, or a gov't pension retiree!
There is room for revision of regulations on pharma profits as well, but I haven't quite wrapped my head around that yet. Pharma needs to be incented to cure as much as treat -- profits from AIDS drugs shouldn't preclude a search for an AIDS vaccine, for example. Somehow shifting vaccine and other "cure" research away from pharma makes sense.
This is kind of off topic, and also seemingly tinfoil, but HOLY COW!
http://online.wsj.com/article/SB124986154654218153.html?mod=googlenews_wsj
http://rawstory.com/08/news/2009/08/10/us-losing-in-afghanistan-top-general-admits/
"why in the world wouldn't you want to at least start with a system like ours?"
Excellent question Dr J. There are many working models (Canada, Europe) to draw upon and yet our govt thinks they must reinvent the wheel.
Catering to Corp. interests, the Republicans (who must deal with their own misguided base) and trying to "reform" within some new hybrid capitalist/ socialist framework is leading this discussion down a dead end path.
Between Big Insurance, Pharma and the Wingnuts... talk of true reform is getting lost amid the imbecilic noise.
Paleocon - I would be suspicious of a 1000 page bill, too. The Canada Health Act is 14 pages long.
http://laws.justice.gc.ca/PDF/Statute/C/C-6.pdf
Maybe they should just cut and paste.
Another instance of Predatory America: KD's latest post points out that overdraft fees for POS and ATM purchases should be prohibited, since the bank already knows what funds you have in your account at the time of the transaction. Not much, just a little thing, but just another day in the country where big institutions prey on the wilfully ignorant citizenry.
"There is no chance that a paid propagandist left wacky comments on your web page."
hilarious. On the contrary, my contacts in US military intelligence tell me it's nearly a certainty.
Ilargi,
There is no chance that a paid propagandist left wacky comments on your web page.
There are plenty of unpaid automatons who gladly do so daily, everywhere on the Internet.
Self-censorship is even more prevalent. This is why almost nobody has the balls to mention economic collapse or peak oil. Even you may censor your thoughts.
Here's a test. After watching video of WTC7 being demolished by explosives (http://www.wtc7.net/) do you believe the government's story?
Even if you don't, I doubt you'd say so here, because if you did, people would discount everything else you say, because you're just a crazy conspiracy nut.
Well, most people already discount everything you say, because you are a crazy conspiracy nut who talks about economic collapse and peak oil.
Of course, the truth is that you have a lot of interesting and valid things to say about the economy and resource depletion.
But, even you aren't an agent of truth all the time.
These people who leave nutty anti-healthcare comments are like you and me, except their boundaries of self-censorship and self-delusion are in different places.
Greenpa - Like you, my lunch break TAE check. Anyway,
"...Just step back in time 40,000 years- and here we are. They are the tribe in the next valley; and we mutually consider each other to be - not "human"- ..."
Actually, there were Miami's right around here about 250 years ago whose name for themselves was "the people", which was also true of many other local tribes, shawnee, etc.. Maybe we will be back to that in another 200.
GPa - "...Oh, and; in case it wasn't obvious- rational discourse is of NO use whatever in converting members of other tribes. Ever..."
On second thought, maybe we are already there! ;-)
Stoneleigh --
I hope you can help clear up my confusion.
Today, Leo K. wrote the following post:
http://pensionpulse.blogspot.com/2009/08/beware-of-bulls.html
I had the following Q&A with him:
ca said...
What about the belief by some analysts that there will be a bond market dislocation that will drive rates significantly higher?
Leo said..
The great dislocation will come when the bond market prices in long-term deflation, not inflation. The big surprise in the next decade might just be that bonds might outperform stocks on an absolute and risk-adjusted basis.
ca said...
Could you expand on your reasoning? How can governments continue to borrow trillions a year for the foreseeable future, as the sources of surplus capital (China) dry up? Isn't it possible that even with deflation, rates will rise?
Leo said…
This is the common view, that all the budget deficits will lead to higher rates and inflation. But go back to read that quarterly comment from Hoisington Investment Management. Also, if you factor in the pension crisis, the end game will likely be a long bout of deflation. That is why monetary authorities are desperately trying to reflate the bubble again, and again.
From my understanding, you believe that rates will rise following the bond dislocation. How would you account for the disparity in the perceived outcome?
My favorite Oil Drum moment was when Leanan complained about Denninger, who deletes all peak oil comments on his Market Ticker forums.
I then posted a 9/11 comment, which was promptly deleted from the Oil Drum.
The irony was delicious. =)
RE: WORKMAN COMPENSATION
This is a parallel health system that is as expensive as the health care system.
Both systems are being gamed to the point that businesses found it to their advantage to move their operations offshore, (China).
I heard a story from an ex-British … old story
The widow of a coal miner was given, as compensation, for the accidental death of her husband, a ton of coal per year, for life. Being destitute, in order to survive, she had to move in with her brother.
Is that what capitalist think is fair compensation? It must be. They have moved their operations away from countries that offer more compensations to those countries that give them free rein to do pretty much what a capitalist wants.
Many small businesses, that cannot move offshore, have an “opting out of the system” mechanism.
“If you pay cash … I can offer a reduction of 10%”.
They could offer a 25% - 50% reduction and still make more money.
Geee! Maybe we will end up with a sustainable health system ... 50% off if you pay cash ... and the “middle men will wilt from lack of revenue.
jal
BTW I agree with those who believe we should mirror, with adaptations for U.S. peculiarities, some of the good working health care systems already in place. That only makes good common sense.
Aesthete 11:34 - You left a very interesting comment, more intense and articulate then myself, but heavy stuff. Unfortunately, I especially agree with this -
"...We are now a nation that drowns out wisdom, celebrating and amplifying the Spingersque antics of the lowest-common denominator of behavior and sentiment."
I still hold on to the hope that tough times will bring a renewal (or initiation) of kindred spirits working together.
Ilargi - On today's subjet we are certainly in resonance. Thank you.
I sure hope we move past the health care debate on here soon - I get as tired of the "Republicans suck"/ conservatives are evil rhetoric in the comments here as I do the "Democrats suck" / liberals are evil comments I read at other sites.
Sheesh!
Bob I agree. I have stayed out of the healthcare discussion simply because I simply cannot stand the partisanship on both sides. I for one am in favor of single payer healthcare. However, I am not interested in reading all of the mindless partisan sniping.
Bob the next thing is if the government is about to get squeezed, a theory I agree with, then the whole healthcare debate becomes academic. So why even bother?
Rick James - " I for one am in favor of single payer healthcare. "
That would work for me! As I stated above, with minor U.S. adaptations.
Australia's Medicare, Canada's Medicare, and healthcare in Taiwan are examples of single-payer universal health care systems.
Uncle Bob - I agree that partison bickering does not move the discussion forward.
I am trying to cool my heels a bit, but I do find the Beck-Limbaugh ditto-head types totally unable to engage in facts and realities without tossing the box-in label "socialism" or "leftist" about.
back to work
A comment from the ground on blight in the Northeast. We lost about 90% of our potato vines. There is about 1/3 of the crop underground, of which maybe half is blight free. I'm thinking the vines which escaped blight are my next year's seed potatoes.
This has been a horrible year for tomatoes and peppers. They must have sun, there has been less than one day a week. Blight seems to be killing any fruit that is set (I don't think a pepper has set yet), but the poor miserable vines are hanging in.
And Paleocon, IIRC Hillary's bill was 2500 pages. Progress is being made.
Max
The Eliot Spitzer headline is misleading:
What he says is, "Stop trying to beat the market and just buy index funds." How about anti-index funds? He really doesn't get into the rigged game aspect of the entire market, just that amateurs shouldn't buy individual stocks."
@Bryan McNett
"Here's a test. After watching video of WTC7 being demolished by explosives (http://www.wtc7.net/) do you believe the government's story?"
Interesting test. Last time I tried (other than a couple of snarky one-liners), Ilargi became incensed and threatened to do something drastic if it didn't stop.
But I sort of agree with him now. The whole 9/11 truther thing goes really deep. David Ray Griffin shows that accepting the truth would be a repudiation of America's secular religion - that the American government and its leaders may make honest mistakes, but it and they are basically "good." Sort of like going into a Catholic Church and yelling that Jesus was a child molester. See what kind of reaction you get. It's a bad analogy because the second statement is false - I am just trying to describe how the herd reacts emotionally when its religious mythos is threatened. Of course Cheney and Co. understood this thoroughly or they wouldn't have taken the risk.
While I agree with Ilargi that TAE is not a good venue to discuss 9/11 and would be detrimental to the purpose of this site, his problem, as indicated by his radio interview is that he actually appears to believe the government's conspiracy theory. For a man of his intelligence, that is almost unforgivable.
Ilargi wrote :
"the only band that ever really mattered" (ie The Clash)
Hope you don't find this sacrilegeous, but if you are that much of a Clash fan you might be interested in a link to an Arabic version of Rock the Casbah. (Rachid Taha in Halifax 2008)
See track 12 below
http://www.cbc.ca/radio2/cod/concerts/20080718rtaha
I was fortunate to be in Halifax during the jazz festival last summer and was in the front row for this show (for 30 seconds, then the rows disappeared) Also note the track titles listed are mostly incorrect. This is only 2/3 of the show, but better than nothing.
el gallinazo
Perchance Spitzer is trying to get back in the game?
What may I ask is the point of having a healthcare debate?
Hello!
It doesn't matter whether you're in America, Canada or Europe at this point. The healthcare system is going to fail due to a lack of money and resource surpluses.
There might be a very real shortage of medicines and medical equipment as companies go out of business due to a lack of credit. Government's can't afford the social safety nets - no revenue. And once the bond market goes to hell, they won't even be able to borrow any money at a reasonable cost.
The system is designed to fail due to it's inherent limitations. Regardless of whether you are in Cuba, Switzerland or America.
A columnist in the Toronto Star writes today about the fiscal strangulation of the federal Canadian government and its growing inability to effect any national policies.
Eyes glaze over when such facts are laid out, but Canadians must resist and recognize this trend toward fiscal weakness means our national government will be unable to fulfill its duties across the broad spectrum: national standards for social, educational and environmental programs; comparable national public services and infrastructure; strategic investments in innovation and leading-edge industries; adequate support for our troops; equity and justice for aboriginal Canadians.
Almost every aspect of our daily lives, every serious challenge, has a global dimension necessitating global cooperation and solutions. Yet Canada's influence and effectiveness on the international stage are being undermined by our internal incoherence and diminished national strength.
It's interesting to me to contrast this in light of our concerns here that growing fiscal and eventually energetic and climate deficits will lead to stronger, more authoritarian central governments, as the centre tries to hold together. The Canadian government has never been a particularly strong central government, and the current party in power is actively attempt to weaken it even further, at least in the sense of the ability to pursue social welfare. It should be noted of course that the current government is highly secretive and authoritarian in other areas, particularly criminal law and foreign affairs.
Oops; Star article is here.
It's worth noting that some people were wise to the Canadian government's planned starvation of itself at least more than a year ago. Helps in that came in so small part, as it often does with respect to the current gov't, from the party's former campaign strategist who loves to see himself in the news.
VK - This was the exact point I made above. Of course, some one here have their partisan blinders on so tight they can't see the reality, that they themselves moan about everyday.
It does not matter people! The government won't have the resources to implement any kind of healthcare reform whatsoever. So is the point of all of the bickering simply to bicker?
AARP has some web pages about the health care reform:
There are special interest groups trying to block progress on health care reform by using myths and scare tactics. Like the notion that health care reform would ration your care, hurt Medicare or be a government takeover. Actually, these are false statements.
Don't Let the Myths About Health Care Reform Scare You.
Coyote, Aesthete:
I think you'd both enjoy Chris Hedge's book, 'The Empire of Illusion.' Hedge is in top form, the book is great, a razor-edged update of Neil Postman's somewhat outdated 'Amusing Ourselves to Death.
When I was a kid, my parents knew a guy who was high up in ICI, the chemical giant of yesteryear.
He said that after building an airport and creating a beer, the next thing a fledgling country should build was a brine electrolysis plant - to produce sodium hydroxide and chlorine, primary feedstocks for a chemical industry.
I've just heard today that the only plant in the UK (Runcorn)doing this has failed to roll over its debt (as of now) and is set to close.
I think we're starting to see the next level of systemic collapse - Ilargi's five years for oil keeps ringing in my ears :(
@ Oarwell:
I think you'd both enjoy Chris Hedge's book, 'The Empire of Illusion.'
I think Truthdig recently posted an excerpt from Hedge's book. I don't have the link handy.
I also highly recommend Morris Berman's Dark Ages America, published in 2006 or so, IIRC.
VK and Rick - Your point is well taken. Enough. We are a few years (or decades) too late. The U.S. turnip is bloodless.
We're better off tending to the gardens, AE systems, and self sufficiency projects.
Oarwell - Thanks for the reference to CH, I like most of Chris Hedges "Crash Course", enough to think it should be a part of one's viewing list.
Greenpa - ""There is no chance that a paid propagandist left wacky comments on your web page."
;-) Actually I think it's Ahimsa, that dangerous, conspiratorial person--quotes "foreigners" like Ghandi and talks peace and harmony. Why, it's unamerican!
Tsunami alert across Indian Ocean as 7.6 Magnitude earthquake hits area. Also a 6.6 magnitude earthquake near Tokyo.
Blogger Frank said...
A comment from the ground on blight in the Northeast. We lost about 90% of our potato vines. There is about 1/3 of the crop underground, of which maybe half is blight free. I'm thinking the vines which escaped blight are my next year's seed potatoes.
This has been a horrible year for tomatoes and peppers. They must have sun, there has been less than one day a week. Blight seems to be killing any fruit that is set (I don't think a pepper has set yet), but the poor miserable vines are hanging in.
I agree Frank. I've never seen a summer like this in New England. Some crops are doing well though like lettuce, onions, butternut squash and some cucumber cultivars. Green and yellow string beans are abundant. Blueberries are phenomenal. Some fruit tree crops are doing OK but disease problems like molds and mildews have made an appearance due to saturated soil conditions, high atmostpheric humidity levels and predominately cloudy days.
Greenpa, I enjoyed your post, thanks.
I have read the why bother with health-care reform sentiment expressed before on this blogsite--most notably by El G. Of course all nations eventually succumb to hard times and decline, but that hardly strikes me as a good reason not to enact legislation that will help people in the here and now. The why bother sentiment suggests that one has a good predictive handle on exactly when the collapse will occur, which strikes me as ostentatious in its assuredness. Furthermore, if and when a collapse occurs of the magnitude that so many here seem to think inevitable, health-care will simply be another social safety net to hit the skids. In the meantime, do the right thing. A strange marriage and bond has been formed between the prognosticators of eventual collapse and those who oppose health care reform under any circumstance, even in the best of times. Someone and somebody is being used like a philosophical broom to sweep up for the right-wing health-care opponents. And even though Ilargi is not inclined to jump into the health-care reform debate, I do appreciate his denouncement of the myths and ignorance displayed on the topic of “socialized’ medicine.
In my opinion, and without health-care reform, there will be an increase in the dysfunction and erosion of the medical system as it is now practiced in America. As the number of unemployed grows along with the uninsured, corporate insurance companies will further tighten the bottom line resulting in more exclusionary practices and stratospheric fee increases. (This spiral of descent and elimination is already in effect and President Obama is correct in tying both the the short and long-term prospects of the country to health-care reform).
But inside of every bitter pulp resides a sweet irony, and those who were previously termed ‘very happy’ with their coverage will be shaking their fists at the insurance companies when the house movers vacate their medically foreclosed residences.
Aesthete
Well put, Aesthete. I tend to agree, and your argument parallels Stoneleigh's explanation yesterday of the merits in pursuing renewable energy development even in the face of declining capital/materials/energy availability.
VK, Rick,
My main reason to cover health care at this point is "follow the money". There'll be some sort of plan down the line, and it's going to cost. And since this is a topic that already takes over $2 trillion a year out of the US GDP, you can bet it's going to cost a lot.
Well, there's also the absurd "facts", invariably from third parties, about parts of the world that I happen to know quite well, that are quoted as gospel truth by those who wish to disrupt the town hall process. Those heckler groups are well organized, nothing grass roots about them.
Hot on the heels of Wall Street, it's both the most expensive and the most blatant annihilation of what was left of the democratic process.
They expect inflation, but first the market plunges.
The Wonder Rally Continues
“According to report in Bloomberg today, traders are now betting that the rally is about to come to a screeching halt…
Aug. 10 (Bloomberg) -- Options traders are increasing bets that the steepest rally in the Standard & Poor’s 500 Index since the 1930s won’t survive September, historically the worst month for U.S. equities.
Traders were betting the VIX, a gauge of expected stock swings, would increase 13 percent in the next five weeks, according to futures prices at the end of last week compiled by Bloomberg. That’s the biggest spread since August 2008, before the S&P 500 suffered the steepest two-month plunge in 21 years. The indexes have moved in the opposite direction 81 percent of the time over the past five years, Bloomberg data show.
My well-documented belief is that we’ll see another leg down in equity markets – and for many commodities as well – as economic realities associated with everything from housing and commercial real estate to high levels of unemployment unfold. Further, that as the numbers for housing and unemployment turn around for the worse, the level of disappointment will send equity investors scrambling for the exits, causing a sharp, steep setback.
That said, I think it’s important to keep an open mind and to consider alternative scenarios.
For instance, there’s no ignoring that the government has pumped a lot of money into the system. Money that is now making its way into the economy and that will likely pick up momentum as “shovel ready” projects and outright giveaway schemes such as Cash for Clunkers come on stream.
With the inevitable setbacks, this spending could help keep the stock market artificially at these levels for awhile longer, as it did in Japan throughout the period that the government engaged in aggressive quantitative easing.
[…]
As an investor, you have to make your own decision as to the risk and rewards – but right now we believe that, given the long rally, the risk of being in this market today far outweighs any possible upside. At best, in our opinion, the market could trade in a range for a bit longer – but, per the signals being given by VIX options and good old common sense, it is just as likely to hit a wall. As bad as things were in Japan then, they are far, far worse here and now. “
Aesthete,
All the regular posters on this blog site would like to see a single payer system similar to France or Italy. However, it's not going to happen in the USA. The FIRE MOTU simply won't let it happen.
For those of us that believe that the next phase of the collapse will occur within the next four months and that it will be far more severe than the first phase, the debate is ironic. It's simply a distraction and a waste of time. Even countries that are not composed primarily of pithed frog morons and with well structured single payer systems in place will be facing a huge uphill struggle.
Since single payer is off the table of the Republicrat party, why should one even pay attention? It's like watching the sentencing hearing of wrongly convicted man deciding whether they will hang him or shoot him.
The whole purpose of the exercise is to drive what remains of the middle class further into involuntary debt. And in a few years typical Usacos will be giving fascist salutes as they expire on their deathbeds from preventable diseases.
More Deflation News?
As a timber owner I am well aware of this.
Business weekly Barron’s reported Sunday that U.S. timber prices could fall as much as 50% in the coming years, saying timberlands “may be one of the world’s most overvalued asset classes,” Reuters reported Aug. 9.
The drop in prices would be a severe blow to wood and paper companies, the publication reported.
A crash in timber products would also hurt university endowments and other institutional investors, which have invested approximately US$40 billion into timber in the past 10 years, according to the publication.
Apologies if posted prior to this.
Bigelow,
The government has not pumped much money into the real economy. Most of the money has gone into the black hole of the Fed's alphabet soup cash-for-trash programs and either is being used as reserves or speculation in equities, commodities, or derivatives. Of the trillions printed, I bet that less than $300B has gone so far in any sense to main street.
OTOH, the trillions the Fed has pumped into the banks for speculation, could stall off the crash a bit longer. I am still betting that TSHTF in Oct/Nov.
@rumor
"Well put, Aesthete. I tend to agree, and your argument parallels Stoneleigh's explanation yesterday of the merits in pursuing renewable energy development even in the face of declining capital/materials/energy availability."
Well, I respectfully disagree, particularly to your analogy of the health care "debate" to Stoneleigh's RE of yesterday. Stoneleigh is primarily focusing on how individual households and perhaps small communities can generate renewable energy. The health care "debate" is how a national government can extract taxes to pay people who are already very rich. Apples and oranges.
A true analogy to Stoneleigh would be how individuals and small communities can prepare for the health needs in the future with the understanding that only obstruction and confiscation will come from the central powers.
http://www.ahd.tudelft.nl/~jerry/jw2/Suzie/Birth_in_Holland.html
Pregnancies and deliveries in the Netherlands
http://www.expatica.com/nl/news/local_news/Epidurals-now-standard-practice-in-Dutch-hospitals_47776.html
Epidurals now standard practice in Dutch hospitals
http://www.npr.org/templates/story/story.php?storyId=92641635
Netherlands' Health Care Reflects National Values
@ Ilargi
Won't the major health insurance companies go bankrupt and bust in the coming year or so?
I mean they've probably got a lot of toxic assets on their balance sheets, probably heavily invested in stocks as well.
I'm thinking that 2 trillion dollar industry is going to crumble and wither away.
A systemic bank run can bring the system down in less then 6 hours I reckon. That nearly happened in September last year. This year the US govt has far less set aside. It can't keep committing trillions indefinitely.
Healthcare will be a thing of the past at some point, let alone Universal Coverage.
The only band that matters? The Clash? How about another PC band...U2? They matter too?
"VK said...
@ Ilargi
Won't the major health insurance companies go bankrupt and bust in the coming year or so?"
I mean they've probably got a lot of toxic assets on their balance sheets, probably heavily invested in stocks as well."
Yeah, but we're still talking about Goldman Sachs as well.
Does Chris Hedges have "Crash Course" too? Chris Martenson has a series of videos entiled 'The Crash Course'.
CA small business owners sue the state over its handling of the IOU situation:
California Won't Even Accept Its Own IOUs
Sergei Aleynikov files a subpoena against Gollum Sucks:
Sergey Aleynikov Strikes Back, Files Goldman Subpoena
My Dear Mr Ilargi...
"The overall direction is clear: appeal to poorly defined fears that will always linger among a poorly educated population..."
That is the whole point of high stakes standardized testing, right? Not can you think, analyze and read with comprehension...
But rather can you show up on time, follow directions, pick one of five bubbles and fill it in with in the bubble lines.
Perfect training for compliance in a society and a no brain career at Walmart.
Smart enough to run the machinery, not smart enough to figure out what the machinery does and to whom the machinery does it...
"...in order to manipulate them for your own gains."
Time and time again. I have watched my fellow citizens march to the corporate and social wedge issue tunes of the manipulators that push their buttons. I watched as they invariably march out the door, stepped onto a rake that flies up and hits them in the head...AGAIN. How many times before we catch on?
How long, my fellow Americans, will you continue to vote against your own economic self interest and allow your selves to be distracted by knee jerk pragmatism and reaction?
"The problem is that we've seen that film before. It uses Goebbels’ propaganda techniques..."
That is right. Read Alex Carey's "Taking the Risk Out of Democracy"
http://www.amazon.com/Taking-Risk-Out-Democracy-Communication/dp/0252066162
The definitive well sourced analysis of US corporate propaganda and how it is used to control the debate. The effective use of sacred and satanic symbolism to evoke pragmatic (action before thinking) and reactionary zeal in the American public against their own interests.
The book is well researched with historical facts and economic figures to support Carey's analysis.
Hitler marveled at US corporate propaganda that Wilson used to goad the American public into WW1... that and the sedition act, the Brown Shirt act, and letting corporate interests actually run the War procurement boards...
Every American needs to understand the use of Sacred and Satanic symbolism and when it is being used on you... since it rules your lives.
"...to achieve Mussolini's ideals of a state run by faceless corporations."
Corporate owned governance. Washington?
Wall Street spending $400 million in the last election cycle to buy no prosecutions and $13 trillion bail out to boot for the greatest criminal malfeasance of all time?? Ever heard of a better $400 million investment?
Corporate owned governance IS the first tenant of fascism...
Riot at the California state prison - Chino this weekend.
Allegedly due to overcrowding – 5900 inmates in a prison with the capacity for 3000. I wonder if it was a privately run prison, and as tax revenues fall, what will be done with prisons. I see a vicious cycle of less public support for social programs feeding more crime, resulting in more need for prisons and even less money to pay for them.
http://www.msnbc.msn.com/id/32359552/ns/us_news-crime_and_courts/
@El G
"OTOH, the trillions the Fed has pumped into the banks for speculation, could stall off the crash a bit longer."
Could be. This is too simplistic but when MCAD crosses back over its signal line the July S&P 500 Index rally at least should be over.
Now THIS may be fun. Looks like the SEC may have had the extraordinarily bad luck to run into an honest judge- with a brain- and a mouth.
Judge refuses to OK SEC/BOA deal
“Don’t I need to know what the truth is to make a determination?” Rakoff asked. If Bank of America broke the law by not disclosing the bonuses, “is there not something strangely askew in a fine of $33 million,” given the size of the deal, Rakoff said.
I love it!!! Strangely askew!!!! lol!
Oh, and RIck James,
I haven't forgotten your first comment in today's thread, and I'm aware it was not the first time you posted it, either, but I have the idea that we answered that topic many times, and basically continue to do so on a daily basis, so I didn't really know what to say.
"Concerning the turning of the maker stoneleigh expects the market to tank this fall. However, since the main thrust of the stimulus is for now until next year, isn't it possible we could see a flat economy and stock market until a out the middle of next year? This is particularly directed at stoneleigh and/or Ilargi. This was mentioned by Stoneleigh but I would really appreciate if either could flesh this out, since this is an important concept. Appreciated"
That would be a no. Or a 99% no, if you will.
About that issue, I read something on Daily Kos today suggesting that the health care problems could be paid for with Wall Street profits. That’s not true, though. There are no real profits, there only seem to be because toxic debt issues are not being addressed.
Neither Stoneleigh nor I think this can last beyond this fall. The confidence question, once on everyone’s lips, has almost been forgotten in the last few months, probably mainly due to Obama’s appearance on the scene and the hope and belief he brought to the table. But they are not real items, and the ones that are have remained as unremedied as before.
That will change. Already, companies are hoarding cash again like there’s no tomorrow. That’s no coincidence.
The amounts of simmering and festering losses far outnumber the ultimate effects of any stimulus, including a 2nd one, and any bear rally. Actually, the bigger the rally, the deeper the fall will be.
Still faithfully reading TAE everyday -
Thank you Stoneleigh for the rundown on RE.
Ilargi: you have some of the best commentators on the net, some others not so much.
I appreciate your calling out those who think they see it all, yet they have tunnel vision.
@ zwick
the Clash were true anti-establishment (although Ilargi, you should include the Sex Pistols, also)- U2 is not.
In fact, U2 is a high gloss Christian band. Think about it.
Bluebird - You are quite right! I got the two Chris's mixed. Thanks for the reminder.
I was referring to the Martenson "course."
CR: New Market Graph
Scary chart porn
*Raised eyebrow*
http://www.nytimes.com/2009/08/11/business/economy/11expats.html?_r=1
American brain drain to China!
__________
BEIJING — Shanghai and Beijing are becoming new lands of opportunity for recent American college graduates who face unemployment nearing double digits at home.
Even those with limited or no knowledge of Chinese are heeding the call. They are lured by China’s surging economy, the lower cost of living and a chance to bypass some of the dues-paying that is common to first jobs in the United States.
______________
One word: WOW!
VK - Yes indeed, quite interesting.
Such as... The Yale Club of Beijing!
"Grace Hsieh, president of the Yale Club in Beijing and a 2007 graduate, says she has seen a rise in the number of Yale graduates who have come to work in Beijing since she arrived in China two years ago. She is working as an account executive in Beijing for Hill & Knowlton, the public relations company."
"The worst U.S. recession since the Great Depression will probably end in the third quarter!"--Reuters
http://tinyurl.com/m6lk2m
We can all relax now. ;-) (not)
ta ta
ilargi
I am flattered by your segue today
@ogardener
further south we have been dealing for years with fungal problems [anthracnose, blackspot, powdery mildew etc] in the garden due to high heat and humidity.
I find that, after a thorough debris cleanup and pruning of affected leaves, a bottle of b.t. attached to the garden hose and a light dusting of copper sulfate [use facemask] does the trick. At all other times, water from below with a soaker hose.
I am sorry to hear that New England must deal with it now too. Is that climate change effect already? If so, look out next for overwintering nonbeneficials!
-gylangirl
I think this blog post sums up nicely just how retarded the healthcare "debate" is in the US :
"AJC columnist Jay Bookman noticed that in the latest Investors Business Daily editorial about how the 'death panel' will condemn all handicapped or disabled people to death on some horrid wind-swept mountain, it notes that ...
"People such as scientist Stephen Hawking wouldn't have a chance in the U.K., where the National Health Service would say the life of this brilliant man, because of his physical handicaps, is essentially worthless."
Needless to say, Hawking, who is recognized as one of the great theoretical physicists of the 20th and 21st century, was born in the UK and has lived his entire life there."
Looking forward to tonight's new post. Great stuff.
Persephone
Thanks for linking that chart.
Reminds me of the Dylan song
I see my light come shining
From the west unto the east.
Any day now, any day now,
I shall be released.
The purpose of the Republican 'brown shirts', both on tv and at health care town meetings, is to make sure that the Democratic 'useful idiots' never get drawn into substituting a single payer proposal for the insurance industry-approved proposal already on the table.
-gylangirl
In addition to The Clash, you need to add Rancid, The Hives, The Sex Pistols, The Ramones, early Green Day, NOFX, ....
From David Rosenberg. Stoneleigh's euphoria gets some "hard numbers."
"Reuters did some nifty work and showed that in this last leg of the rally, which started on July 10th, CCC-rated stocks have surged 26.4%, BB-rated stocks are up 19.3%, while AAA-rated stocks have risen 9.5%. Look — when China is up 80% year-to-date, India 60%, and both the Kospi and Hang Seng up 40% — and dare we say, the SOX index up 60% in less than six months — it’s probably safe to assume that we have a huge speculative junky market on our hands. And, we know from the 2000-2001 and 2007-2008 experiences, they don’t tend to end well."
---------------------
We mentioned how bullish the latest Market Vane Sentiment reading was, and now we have the latest data-point on the Investors Intelligence poll. The envelope please:
• Bulls: 47.2% versus 42.2% a week ago
• Bears: 25.8% versus 31.1% a week ago
The bull/bear spread widened by over 10 percentage points this week; a nightmare for the technical analyst (from a contrary perspective).
Blagojevich covers Elvis' "Treat me Nice".
http://thelede.blogs.nytimes.com/2009/08/10/blagojevich-v-elvis-you-be-the-judge/?hpw
Can the Apocalypse be far away?
@el gallinazo - I agree with you concerning that which must not be discussed here. I will hand it to the Ilargi, though - as far as I saw, he did not ridicule other ideas. He just said he didn't want the issue discussed at all.
I am not against public health care. Can we afford it? Usually you break issues down econommically, but for you have not provided an ecomic reason for this.
My biggest problem with the current legislatslation is that it is being encouraged to pass before it is even written.
What do you believe the effect will be on the US econimically?
Normally I like TAE but today is an all out straw man attack (Wingnuts/ Nazi Holocaust) on anybody who does not agree or has reservations about the proposed health care plans.
The Greedy, the partisan, the Tin-foil hats, the dupes, and the wonks. I might as well be trying to reason with Bill O'Rielly.
I've had great health care in the United States. I do think we need to help the poor, though my primary concern is children. I do understand health care should travel with you.
But this plan is being shoved down our throats. The Obama supporters seem to have the same tact as the Bush supporters, "If you're not with us your against us"
I thank you for your web site. Keep up the good work. I normally enjoy the comments as well.
anon 11:35 - what is being "shoved down your throat" is an opportunity to start catching up with the rest of the civilized world. In Canada, nobody has to worry about losing their health care if they change jobs or if they become unemployed, nobody has to worry about losing their home if they become ill, everyone has access to the top specialists, nobody falls through the cracks for lack of coverage. Why is the "Greatest Nation on Earth" unable to provide that which is provided by all other developed countries? Equitable access to health services is a human right. I don't mean andy disrespect but, frankly, I don't understand why you, as an American, are not more embarrassed by this state of affairs and less concerned about the possibility of some minor perturbation of your personal circumstances.
Vinca
I agree and also have come around to the point that there are better venues for it than TAE. And I visti them. I was referring to comments on the radio interview. When I have time I will get the direct quote.
Dr J. you make good points and I thank you for a civil response. The fact that I wish to take time to understand what is in the legislation still remains.
I wish the main article used your tact.
anon 11:59 - Ilargi's combination of passion and crankiness is what makes him adorable.
Good luck trying to understand the legislation. Truth be known, I fear there be dragons there. In other words, much the way a lot of legislation gets loaded with parasitic infestations in the form of earmarks, I think the fact that it takes 1000 pages to spell it out means that a lot of special interests are still being served. That doesn't bode well, as Ilargi explains in today's essay.
Anon 11.35, Don Julio
First of all, I'm not trying to push Obama's plan on anyone. I don't know what the original said, but before the ink was dry, it was already so diluted that it wouldn't do any good. I'm not in favor of it, but that doesn't make many of the counter-arguments out there any less ridiculous.
As for the "can we afford it issue", the average European universal plan cost was about half of what Americans paid in 2004. Can you afford not to? Not really, it would seem. And no matter how much some may like the present deal, do realize that you pay $1000's more than Europeans do for what is pretty generally recognized as, to put it mildly, at least the same quality of service. If you had the German or Dutch system, you'd have saved $3000 per capita back in 2004, for a total of $1 trillion. The Italian, Japanese or British systems would have added another $500-600 extra in savings. You're talking $10,000-$15,000 for a family of four, which could have been used differently.
Oh, and did I mention that you would also have had lower child mortality and higher life expectancy while you'd have been saving all that money?
If this were indeed socialism, you would at least have to admit that it's run far more efficient than whatever the US system is called.
The real problem in America is political (and I'm not talking partisan politics here), the decision making process -and obviously the propaganda machine- has been preempted by corporate interests. Not something to cheer, I would say.
I just hear Jon Oliver say that the biggest disgrace is that 50 million Americans have no access to death panels. Maybe that's a good way to deal with this nonsense.
...seems music is our minds...
Most may forget a old Canadian who was the hero of my youth..Gordon Lightfoot.His ballads an songs of life filled many country homes with a Canadian twang well remembered.And loved.
snuffy
Blogger Persephone said...
@ zwick
the Clash were true anti-establishment (although Ilargi, you should include the Sex Pistols, also)
I'm kinda partial to Quicksilver Messenger Service myself. :o)
Ilargi - I agree with your proposal on healthcare. I also agree that Obama's plan is utter garbage. Like VK though, I still think it is academic, since healthcare of all forms are going to get stripped to bare bones pretty soon.
Oh, and thanks for answering the question. :)
By the way, I tend to be passionate and snarky in person, so I understand your style on this blog.
DR. J. are you serious
"The Canada Health Act is 14 pages long." That's amazing. I like your idea to copy it.
Could you provide some insight. As a US citizen, if I get sick while in Canada, will I get free health care?
I hear a lot of concerns about covering people who illegally entered the US in our legislation.
To me it's not about the money and I've always defended Canada's Health care system. My father recruited many of your doctors and they work though out rural Kansas and he has the complete opposite opinion I do as do many of the doctors he recruited.
As for being embarrassed, the war in Iraq already takes the cake along with our military spending. Everything else shooting BB's at a tank in comparison.
ilargi
followed up on french system. Docs average 115000 per year, here is the link
http://www.sante.gouv.fr/drees/etude-resultat/er457/er457.pdf
that is with malpractice paid, vacation paid, 35 hour work week and the ability to balance bill, which I can not do under medicare rules. If you work past 35 hours you get more pay. Also, no med school debt.
DEAL!
Anonymous -gylangirl said...
@ogardener
further south we have been dealing for years with fungal problems [anthracnose, blackspot, powdery mildew etc] in the garden due to high heat and humidity.
I find that, after a thorough debris cleanup and pruning of affected leaves, a bottle of b.t. attached to the garden hose and a light dusting of copper sulfate [use facemask] does the trick. At all other times, water from below with a soaker hose.
I am sorry to hear that New England must deal with it now too. Is that climate change effect already? If so, look out next for overwintering nonbeneficials!
---
Hello gylangirl,
The current recommendation is to either completely bury infected plants or seal them in plastic bags to keep the spores from spreading. I try to use as little plastic as possible so I'll bury the infected plants. I've been using Bt and copper for years but the infection is so severe this year it's not helping much. Even commercial preparations are having little effect. Keeping the garden area tidy is additionally recommended. The specific epithet for late blight is Phytophthora infestans for those interested. Tons of info available on w3.
Illargi, Thank you for the response. I assume it was aimed at myself, perhaps I'm vain.
I should not compare you to Bush supporters, my apologies. Over reaction on my part to feeling like I am being lumped together with Cement Heads.
To me socialism is not a bad thing. I am all for national health care and I hope we work out a plan that benefits the less fortunate.
I agree with everything you say in the follow up. Keep up the good work.
Karl D. is really, really pissed off ...
Here is what I posted.
You have identified what is being done and by who, You have identified the enemy. It's not socialism. It's not capitalism. THE ENEMY IS THE BANKING INDUSTRY.
They are using the tools of credit and usury.
There is no way that gov. regulators can control the banksters. (As you have pointed out)
Is it possible to go back in time to when there was no usury?
How will the economic spectrum be changed if you remove their tools?
What is plan B?
jal
Why are you people going at each other? The Obama plan IS utter garbage, designed purely to further enrich the big insurance companies and big pharma, both of whom are heavy Democrat campaign donors (go figure).
There has not even been a discussion of any real single payer system in the US. The entire debate, BOTH sides, are controlled by corporate fascists who have a desired outcome in mind and which they will get.
Final point - any resource that is not infinite, is, by definition, rationed in some manner. Health care is no exception. The only difference being that in the US it is rationed by price. Why do we do it that way? Because the majority in the US have been brainwashed into thinking that the "free market" is the answer to everything. Don't get me wrong, the free market (when it really is free) is great for lots of things.
But it's also the wrong answer when your question is not "how do I maximize profits?" because that is what free markets do. If your question is how do I maximize redundancy and resilency (maybe for the electric grid) then the free market is the LAST thing you want to allow near that problem.
The key to deciding how to handle anything is to find the right questions about it. So the question, in the realm of health care, is do we want to maximize profits? If yes, then stick with what we've got and let tens of millions suffer the consequences and stop pretending to be compassionate. If no, then the answer is something other than free markets.
What you see happening right now is not even a debate. Both sides are staged political theater and if you are bothering to support either side in this "debate" then you are part of the problem.
Anonymous snuffy said...
...seems music is our minds...
Most may forget a old Canadian who was the hero of my youth..Gordon Lightfoot.His ballads an songs of life filled many country homes with a Canadian twang well remembered.And loved.
Listened to "The Wreck Of The Edmund Fitzgerald" tonight as a matter of fact. Having lived on the Ontario side of Superior for a time the song has special meaning.
jal, Karl still think we can avoid the majority of the pain somehow through American ingenuity. He bats about a 90% in my book. His analysis is flawless. His predictions are a bit scattered. He calls for a depression -> The Great Depression -> Panic of 1873 -> Maybe a depression, etc. It really just depends on how bearish he is feeling that day.
Anything the government is even remotly involved in turns to shit. Why does anyone want them to do more?
Ilargi-
No one, rich or poor, has a right to "health". Ditto "healthcare". You don't have a right to a job, house, food, clothes, or HDTVs either. You do have a right to pursue happiness for yourself, your family, and those you care about provided your "happiness" does not impede other's similar pursuits (and, yes, robbing your neighbor through taxation does impede his/her ability to pursue happiness). If you want healthcare, food, clothes, housing, or even toilet paper, then you had better save your money or become a charity case.
Our current system takes 16% of all wages to pay for social security and a spoil system for the elderly and the poor's healthcare. Meanwhile, the people paying the bills (those still working paying 8% of their wages matched by the employers 8%)get nothing in return, except for a hope that the next generation will return the favor? Is it any wonder, people these days are irrate at town hall meetings?
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