With Malice Toward None

noreply@blogger.com (Rick Riebesell) — Fri, 25 Sep 2009 16:12:00 +0000

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Measuring the Wealth of Society

noreply@blogger.com (Rick Riebesell) — Sun, 06 Sep 2009 16:03:00 +0000

In talking to a friend about what I see on the streets and why health care must be reformed (see the prior post), his answer was swift and direct. “I don’t like to see sick people on the streets either but how much are you willing to pay?

Arianna Huffington (http://www.huffingtonpost.com/arianna-huffington/so-we-cant-have-single-pa_b_276644.html) writes:

“What I see on the other side of the mountain is a single-payer education system.

“In a single-payer health care plan, the federal government provides coverage for all U.S. citizens and legal residents. Patients don't go to a government doctor -- they just have the government pay the bill.

“And that's how it would work with education. In a single-payer education plan, the federal government, in conjunction with the states, would provide an education allotment for every parent of a K-12 child. Parents would then be free to enroll their child in the school of their choice.

“In a single-payer health care plan, all citizens would be free to select the physician and hospital of their choice. And, unlike in our education system, no one backing single-payer health care ever suggested that patients can only see a doctor in their own district or can only be operated on at the hospital down the street. If we don't hold people's health hostage to the health of their property values, why do we do this with their children's education?

“The single-payer health plan would be financed by a payroll tax. In education, the annual cost per child -- equalized for urban and suburban school districts across each state -- would come from the current education funding sources.”

The seduction of the single-payer system is that the cost, spread among many, seems to be much less significant. It is the cumulative effect of this thinking that can be alarming. How much am I willing to pay? But there is something more to the objection to the single-payer system.

I read Atlas Shrugged and liked it. Much of what I hear in conservative thinking comes from the John Galt monologue in that book. The philosophy of objectivism as espoused by Galt in the monologue is essentially that a pure free market system would allow the geniuses of society to carve out the progress of our culture and civilization in the most efficient and rewarding way. It is a compelling and accepted part of our governmental philosophy – essentially the less government interference and regulation, the better. But this philosophy has not focused on the incompetent and weak in our society? Private charity has not been an answer. What responsibility does society have for those who cannot or will not take care of themselves?

There is a balance upon which Ayn Rand and the philosophy of objectivism does not provide answers. Is our society about creative thought and progress or is it about improving the lives of its members? There is perhaps an analogy to a family.

Members of a family constitute the roles from being a burden to being the primary support of the family. In most families the desire is to facilitate a life for each family member that as much as possible allows them the pursuit of happiness. This goal is within the framework of the need of the family members to live on a reasonable basis. As Jay Hughes points out in Family – The Compact Among Generations:

“The vision and mission underlying a system of family governance must be to preserve the family wealth – that is, its human, intellectual, and financial capital – over the long term and to achieve that preservation by enhancing the pursuit of happiness of each individual family member as part of the enhancement of the family as a whole.”

We understand that in a family not all will contribute to the financial wealth of the family, but there will be contributions, individual and a part of each individual family member pursuing happiness. I do not see the pursuit of happiness as a guaranty of a state of comfort or satisfaction. Satisfaction or happiness is a fleeting thing, and it is the opportunity of pursuit, not a satisfied or complacent state that must be preserved.

Let us not ignore the most important concept: the wealth of a family is not measured merely by financial wealth but by its human, intellectual, and financial capital. As our creative geniuses make progress in all areas (human, intellectual, and financial), we are enriched and our wealth - human, intellectual, and financial capital – is increased.

Going from the family to society, if we understand that human achievement must be measured in a variety of ways involving the growth of human, intellectual, and financial capital, we see contribution as being something other than financial contribution. Given that financial contribution is essential, how is it best provided with the understanding that other contributions (human and intellectual) are also important?

Where there is a single payer funded by that part of society that is financially productive, it has been stifling, not enabling, to increasing the wealth in human and intellectual as well as financial terms. With the power of payment comes the ability to control. This is what goes awry in single-payer systems. Those who can contribute financially are not efficiently able to distribute payment. Whether this is provable as a fact, it is a part of our culture and an emotional factor that will affect acceptance of reform.

In the 1930s, liberals imagined a universal right to health care tied to compulsory insurance, like Social Security. Johnson based Medicare on this idea, and it survives today as the “single-payer model” of universal health care, or “Medicare for all.”

The alternative proposal, starting with Eisenhower, was to create a market for health care based on private insurers and employers; that legislation locked in a tax break for employee health benefits. Nixon came up with notions of prepaid, competing H.M.O.’s and urged a requirement that employers cover their employees. Everything since has been a variation on one or both of these competing visions. The plan now emerging from the White House and the Democratic Congress combines an aspect of the first (the public health care option) with several of the second (competing plans and an employer requirement to “pay or play”). The so called “public option” provides government sponsored health insurance to compete with private health insurance plans.

If we provide health care by requiring employers to purchase health insurance for employees we cover employees, but we do not accomplish health care for non-working or self-employed society members. Rand Corporation studies have established that universal health care coverage cannot be accomplished through employer plans. Analysis of current plans shows that a mandate requiring individuals to obtain health insurance — an option in various current legislative proposals — would increase the number of Americans with coverage by 9 million to 34 million, while a mandate requiring employers to offer insurance would boost the figure by 1.8 million to 3.4 million. See the Rand web site at: http://www.rand.org/news/press/2009/08/24/health-reform-reduce-uninsured.html.

There will be inertia to push against reform. See the astute comments of James Surowiecki on this topic at http://www.newyorker.com/talk/financial/2009/08/31/090831ta_talk_surowiecki.

True universal health care coverage will not be obtainable. A sole-payer system similar to Medicare will not be possible because of our cultural heritage. The public option involves negotiation about malpractice reform, interstate access to insurance, and other issues apparently dealt with in the San Francisco program (see prior post). At the bottom of all of this are the unmet issues of increasing medical costs and the increasing federal deficit.

We must evaluate our society as we should evaluate our families. How do we increase the true wealth of our society? We must increase the human, intellectual, and financial capital of society – this includes education and health care with a concern for the well being of all members of society and cannot ignore realistic financial constraints. May this perspective be a part of the health care and educational debate and legislative negotiation.

10 Steps to Better Health Care

noreply@blogger.com (Rick Riebesell) — Thu, 03 Sep 2009 20:16:00 +0000

An article from the New York Times by Atul Gawande, Donald Berwick, Elliott Fisher, and Mark McClellan (available at http://www.nytimes.com/2009/08/13/opinion/13gawande.html?_r=1):

WE have reached a sobering point in our national health-reform debate. Americans have recognized that our health system is bankrupting us and that we have dealt with this by letting the system price more and more people out of health care. So we are trying to decide if we are willing to change — willing to ensure that everyone can have coverage. That means banishing the phrase "pre-existing condition." It also means finding ways to pay for coverage for those who can't afford it without help.

Both of these steps stir heated argument, not to mention lobbyists' hearts. But what creates the deepest unease is considering what we will have to do about the system's exploding costs if pushing more people out is no longer an option. We have really discussed only two options: raising taxes or rationing care. The public is understandably alarmed.

There is a far more desirable alternative: to change how care is delivered so that it is both less expensive and more effective. But there is widespread skepticism about whether that is possible.

Yes, many European health systems have done it, but we are not Europe. And evidence that places like the Mayo Clinic in Minnesota or the Cleveland Clinic are doing it is likewise dismissed because their unique structures (for example, their physicians work on salary rather than being paid for each service) make them seem as far from Middle America as Sweden is.

Yet in studying communities all over America, not just a few unusual corners, we have found evidence that more effective, lower-cost care is possible.

To find models of success, we searched among our country's 306 Hospital Referral Regions, as defined by the Dartmouth Atlas of Health Care, for "positive outliers." Our criteria were simple: find regions with per capita Medicare costs that are low or markedly declining in rank and where federal measures of quality are above average. In the end, 74 regions passed our test.

So we invited physicians, hospital executives and local leaders from 10 of these regions to a meeting in Washington so they could explain how they do what they do. They came from towns big and small, urban and rural, North and South, East and West. Here's the list: Asheville, N.C.; Cedar Rapids, Iowa; Everett, Wash.; La Crosse, Wis.; Portland, Me.; Richmond, Va.; Sacramento; Sayre, Pa.; Temple, Tex.; and Tallahassee, Fla., which, despite not ranking above the 50th percentile in terms of quality, has made such great recent strides in both costs and quality that we thought it had something to teach us.

If the rest of America could achieve the performances of regions like these, our health care cost crisis would be over. Their quality scores are well above average. Yet they spend more than $1,500 (16 percent) less per Medicare patient than the national average and have a slower real annual growth rate (3 percent versus 3.5 percent nationwide).

Caveat: Because we relied on Medicare data for our selections, it is possible that some of these regions are not so low-cost from the viewpoint of non-Medicare patients. But overall data strongly suggest that most of these regions are providing excellent care for all patients while being far more successful than others at not overusing or misusing health care resources.

So how do they do that? Some have followed the Mayo model, with salaried doctors employed by a unified local system focused on quality of care: these include Temple, where the Scott and White clinic dominates the market, and Sayre, where the Guthrie Clinic does. Other regions, including Richmond and Everett, look more like most American communities, with several medical groups whose physicians are paid on a traditional fee-for-service basis. But they, too, have found ways to protect patients against the damaging incentives of a system that encourages fragmentation of care and the pursuit of revenues over patient needs.

The physicians and hospital leaders from Cedar Rapids told us how they have adopted electronic systems to improve communication among physicians and quality of care. Last year, they decided to investigate the overuse of CAT scans. They examined the data and found that in just one year 52,000 scans were done in a community of 300,000 people. A large portion of them were almost certainly unnecessary, not to mention possibly harmful, as CAT scans have about 1,000 times as much radiation exposure as a chest X-ray.

"I was embarrassed for us," said Jim Levett, a cardiac surgeon and the head of a large physician group. More important, the area's doctors and clinics are turning that embarrassment into change by seeking out solutions to reduce the expense and harm of unnecessary scans.

That number of scans in Cedar Rapids may seem shocking, but there is nothing surprising about it. Nationwide, we do 62 million CAT scans a year for 300 million people. So Cedar Rapids's rate was actually better than average. But all medicine is local. And until a community confronts what goes on in its own population — to the point of actually seeking the data and engaging those who can solve the problem — nothing will change.

The team from Portland told us of a collaboration of doctors, state officials, insurers and community leaders to improve care. For more than four years, physicians have been tracking some 60 measures of quality, like medication error rates for their patients, and meeting voluntary cost-reduction goals.

Asheville, after gaining state support to avoid antitrust concerns, merged two underutilized hospitals. In Sacramento, a decade of fierce competition among four rival health systems brought about elimination of unneeded beds, adoption of new electronic systems for patient data and a race to raise quality. Sacramento also went from being one of America's high-cost areas for health care to being among the low-cost elite.

In their own ways, each of these successful communities tells the same simple story: better, safer, lower-cost care is within reach. Many high-cost regions are just a few hours' drive from a lower-cost, higher-quality region. And in the more efficient areas, neither the physicians nor the citizens reported feeling that care is "rationed." Indeed, it's rational.

Many in Congress and the Obama administration seem to recognize this. The various reform bills making their way through the process have included provisions to protect successful medical communities by incorporating payment approaches that reward those that slow spending growth while improving patient outcomes. This is the right direction for reform.

There is a lot of troubling rhetoric being thrown around in the health care debate. But we don't need to be trapped between charges that reforms will ration care and doing nothing about costs and coverage. We must instead look at the communities that are already redesigning American health care for the better, and pursue ways for the nation to follow their lead.

Atul Gawande directs the Center for Surgery and Public Health at Brigham and Women's Hospital in Boston and is a staff writer at The New Yorker; Donald Berwick is the president of the Institute for Healthcare Improvement in Cambridge, Mass.; Elliott Fisher directs policy-reform efforts at the Dartmouth Institute for Health Policy and Clinical Practice; and Mark McClellan is the director of health care reform policy at the Brookings Institution. All are physicians.

A Public Option that Works

noreply@blogger.com (Rick Riebesell) — Sat, 22 Aug 2009 15:34:00 +0000

An article from the New York Times by Willian H. Dow, Arindrajit Dube, and Carrie Hoverman Colla (available at http://www.nytimes.com/2009/08/22/opinion/22dow.html?th&emc=th):

Two burning questions are at the center of America’s health care debate. First, should employers be required to pay for their employees’ health insurance? And second, should there be a “public option” that competes with private insurance?

Answers might be found in San Francisco, where ambitious health care legislation went into effect early last year. San Francisco and Massachusetts now offer the only near-universal health care programs in the United States.

The early results are in. Today, almost all residents in the city have affordable access to a comprehensive health care delivery system through the Healthy San Francisco program. Covered services include the use of a so-called “medical home” that coordinates care at approved clinics and hospitals within San Francisco, with both public and private facilities. Although not formally insurance, the program is tantamount to a public option of comprehensive health insurance, with the caveat that services are covered only in the city of San Francisco. Enrollees with incomes under 300 percent of the federal poverty level have heavily subsidized access, and those with higher incomes may buy into the public program at rates substantially lower than what they would pay for an individual policy in the private-insurance market.

To pay for this, San Francisco put into effect an employer-health-spending requirement, akin to the “pay or play” employer insurance mandates being considered in Congress. Businesses with 100 or more employees must spend $1.85 an hour toward health care for each employee. Businesses with 20 to 99 employees pay $1.23 an hour, and businesses with 19 or fewer employees are exempt. These are much higher spending levels than mandated in Massachusetts, and more stringent than any of the plans currently under consideration in Congress. Businesses can meet the requirement by paying for private insurance, by paying into medical-reimbursement accounts or by paying into the city’s Healthy San Francisco public option.

There has been great demand for this plan. Thus far, around 45,000 adults have enrolled, compared to an estimated 60,000 who were previously uninsured. Among covered businesses, roughly 20 percent have chosen to use the city’s public option for at least some of their employees. But interestingly, in a recent survey of the city’s businesses, very few (less than 5 percent) of the employers who chose the public option are thinking about dropping existing (private market) insurance coverage. The public option has been used largely to cover previously uninsured workers and to supplement private-coverage options.

Through our experience working on health-care-reform efforts in California and Washington (one of us worked for President George W. Bush’s Council of Economic Advisers), we have seen how concern over employer costs can be a sticking point in the health care debate, even in the absence of persuasive evidence that increased costs would seriously harm businesses. San Francisco’s example should put some of those fears to rest. Many businesses there had to raise their health spending substantially to meet the new requirements, but so far the plan has not hurt jobs.

As of December 2008, there was no indication that San Francisco’s employment grew more slowly after the enactment of the employer-spending requirement than did employment in surrounding areas in San Mateo and Alameda counties. If anything, employment trends were slightly better in San Francisco. This is true whether you consider overall employment or employment in sectors most affected by the employer mandate, like retail businesses and restaurants.

So how have employers adjusted to the higher costs, if not by cutting jobs? More than 25 percent of restaurants, for example, have instituted a “surcharge” — about 4 percent of the bill for most establishments — to pay for the additional costs. Local service businesses can add this surcharge (or raise prices) without risking their competitive position, since their competitors will be required to take similar measures. Furthermore, some of the costs may be passed on to employees in the form of smaller pay raises, which could help ward off the possibility of job losses. Over the longer term, if more widespread coverage allows people to choose jobs based on their skills and not out of fear of losing health insurance from one specific employer, increased productivity will help pay for some of the costs of the mandate.

The San Francisco experiment has demonstrated that requiring a shared-responsibility model — in which employers pay to help achieve universal coverage — has not led to the kind of job losses many fear. The public option has also passed the market test, while not crowding out private options. The positive changes in San Francisco provide a glimpse of what the future might look like if Washington passes substantial health reform this year.

The Streets Compel Action on Health Coverage

noreply@blogger.com (Rick Riebesell) — Sun, 16 Aug 2009 16:39:00 +0000

There are some very basic axioms involved in the health care debate.

Many people do not live healthy lives. They become obese, diabetic, have respiratory problems, and lose circulatory capability.

Diseases caused by poor health habits are estimated to be 70% of all health care costs. 74% of all costs are confined to four chronic conditions (cardiovascular disease, cancer, diabetes and obesity). 80% of cardiovascular disease and diabetes is preventable, 60% of cancers are preventable, and more than 90% of obesity is preventable.

The United States traditionally has attached rights to the quirk of individual freedom that compels certain individuals to risk their lives, whether for a moment or over a long period of time. What is the difference between riding a motorcycle without a helmet and smoking or overeating? We clearly, for a variety of reasons some legal and some practical, cannot legislate healthy habits. We also, clearly, have to balance individual rights with societal rights.

Countries with a greater tolerance for socialistic solutions have adopted universal health care with success. One can argue about its efficiency, but there can be no argument that it is humane. This system absorbs into the incalculable mass of a governmental insurance scheme the contributions of individuals to their various diseases and simply pays no attention to it.

The debate in the United States over universal health care is more than a debate about money. At the heart of the debate is the right of the individual to do something that is against the common interest (live in such a way as to become ill and not have the resources to treat the illness) and the humane instinct to nurture and care for a fellow human in need. At the heart of this is the concept of self determination.

If you believe that you can control your life, plan your fortune, and be rewarded for your efforts, then you feel justified in damning those who do not exercise such prudent practice. They simply make their own beds. There is no obligation to care for them.

If you believe that we essentially have little control over our fate, whether we become rich or mentally ill, then it is cruel to damn the unfortunate. There is an obligation to nurture and care for the unfortunate.

Most of us bounce between these concepts, our judgments swayed by circumstances and knowledge of the individuals involved. Our social compact requires that we give up some measure of individual freedom for the benefit of living in a society governed reasonably. At some level the common good requires a solution for the diseased, whether mental, physical, or both. At a very human level, the United States has failed at this task. We need only look at the homeless and sick on our streets. On the other hand, we should preserve and reward the aspects of human effort that can, if not alter, at least affect the course of lives.

Insurance when it works correctly can reward the prudent over the risk takers. We should not abandon this concept. The Safeway and AmeriGas examples (see previous posts) show the course that must be taken. But there must be coverage and answers for all in medical (physical or mental) need. Whether the insurance solution is private or governmental, the insurer must not be in the position of denying coverage to make money. The motivation must be to provide care on an intelligent basis. Prudent conduct can be rewarded through intelligent use of premium payments. Some will have to pay more than they should and others will pay nothing and be a burden to the system. That should not stop us from providing advantage to those who behave responsibly and providing nurture to those who need it.

It is unacceptable for the richest nation on earth to leave its diseased dying on the streets.

AmeriGas Propane Experience

noreply@blogger.com (Rick Riebesell) — Thu, 09 Jul 2009 16:49:00 +0000

From When All Else Fails: Forcing Workers Into Healthy Habits, by Anna Wilde Mathews in The Wall Street Journal, July 8, 2009 (http://online.wsj.com/article/SB20001424052970203577304574274102603258642.html#mod=djemITP):

Last year, AmeriGas Propane Inc. gave its employees an ultimatum: get their medical checkups, or lose their health insurance.

The nationwide propane distributor took the unusual step after facing years of steep increases in the cost of health coverage for its roughly 6,000 workers. The company’s work force was aging, and many employees had unhealthy habits—the average worker is 46, and around 44% are smokers. And people weren’t getting tests or preventive care that could help them avoid heart attacks, diabetes or cancer.

AmeriGas had tried a number of voluntary wellness programs to encourage healthy habits in its employees. But the company concluded that “optional programs just don’t work,” says Bill Katz, vice president for human resources.

Then, beginning last year, the company mandated that all employees would have to get physical exams, blood-pressure checks and cholesterol and blood-sugar tests. Women also were required to get Pap smears, and mammograms for those 40 and older.

Workers and their covered spouses would have a year to complete the tests, which are covered 100%, or lose their insurance. And they’d need to keep getting the checkups at least every two years in order to retain the health benefits.

John Adams, an AmeriGas operations supervisor in Temecula, Calif., says he was initially skeptical of the company-mandated medical care. But he says he changed his mind when he learned during his required checkup that he had high “bad” cholesterol and showed early signs of diabetes. “It was a very good wake-up call,” says the 41-year-old, adding that he’s lost 36 pounds through a new diet and an exercise program.

As Congress ramps up the debate over health reform, efforts to prevent and manage chronic conditions like diabetes are a major focus. Such illnesses affect more than 130 million Americans and account for about three-quarters of total health spending. Already, well over half of big companies have launched initiatives to improve employee health.

AmeriGas, based in Valley Forge, Pa., is one of just a handful of companies that have mandated health testing, but benefits consultants say it is at the cutting edge of a growing trend. In a February survey by consulting firm Towers, Perrin, Forster & Crosby Inc. 45% of companies said they planned to, or were considering, adding penalties for employees who didn’t participate in wellness activities.

Many employers have steered clear of wellness requirements because of legal concerns. Mandated health tests might be “problematic” under the Americans with Disabilities Act, says Sharon Cohen, an attorney at human resources consultant Watson Wyatt Worldwide Inc.

AmeriGas’s Mr. Katz says the company’s legal department closely vetted its program before it moved forward, and ruled it was acceptable. The company doesn’t force employees to take any action based on their test results, which because of medical-privacy laws aren’t shared with AmeriGas.

Labor officials say they object to the idea of mandated health tests. “This is a personal health matter,” says Gerry Shea, assistant to the president of the AFL-CIO. “To bring it into the workplace and tie it to benefits is inappropriate. It’s like Big Brother.” Fewer than 2% of AmeriGas workers are unionized.

Among the first voluntary wellness efforts at AmeriGas was a poster campaign in 2001 that featured health tips and recipes. It offered a disease-management program from an outside vendor, which was available to counsel employees with certain chronic conditions. Other initiatives included promising discounted health-insurance premiums to nonsmokers and cash rewards for employees who filled out health-risk assessment forms. An exercise program was supposed to help workers get in shape.

Despite these efforts, Mr. Katz and benefits director Carol Guinan found themselves in April 2007 chewing over some unpalatable numbers. Besides annual health-expense increases of 10% or more, the company, which self-insures its health plan, had paid more than two dozen insurance claims in the previous year for amounts greater than $100,000. Its workers had high rates of diabetes and heart disease.

Moreover, only 6% of the adults enrolled in the AmeriGas health plan had gotten recommended cholesterol checks in the previous 18 months. Just 20% had their blood sugar tested. Among women, 44% were getting appropriate mammograms and Pap smears.

So Mr. Katz floated a suggestion: Maybe AmeriGas should require the health tests. He and Ms. Guinan conferred with other officials, including the company’s chief executive, its legal department and Aetna Inc., AmeriGas’s health benefits administrator. Eventually, they settled on a list of checkups to be included in the program, and some limitations.

Mr. Katz decided not to include colonoscopies, because they were “too intrusive,” and mandating them might “create a lot of resistance and resentment,” he says. Also, the program would include only workers who had been with AmeriGas for two years or more, since such employees tended to remain with the company for the long term. Besides making the checkups free, the plan also doesn’t charge for generic drugs for diabetes, blood pressure, asthma and cholesterol. Co-payments were reduced for brand-name medications for those conditions.

The program, dubbed Operation Save-A-Life, was unveiled in August 2007 and took effect the following January. Each worker received a DVD at home to explain the effort and discuss cost and health statistics. One fact: AmeriGas employees younger than 60 were dying of natural causes at nearly three times the expected rate for that age group based on actuarial data.

Many workers didn’t welcome company-mandated medical care. “You get rolled eyes—‘We don’t really have time for this,’ ” says Eric Rath, a sales and service manager in Temecula, Calif. The former Marine says he was used to fitness standards and didn’t object to the plan.

Dennis Price Sr., a 48-year-old propane-truck driver in the company’s Warrenton, Va., office, says he was “a little shocked” by the idea at first. “I thought it was an invasion of our privacy,” he says. Mr. Price had never gotten his cholesterol checked, and generally avoided doctors. But he decided the initiative was a good idea after he got his required physical in October and found he was healthy. Without the mandate, he says, he never would have gone.

There were some early problems with the AmeriGas program. Some employees, for example, were mistakenly charged by doctors for what should have been free exams. Such mixups made it tough to figure out which employees had completed the required medical tests. So AmeriGas decided to extend its deadline for getting the tests until May 2009. The company hasn’t yet stripped anyone of insurance.

AmeriGas estimates that more than 90% of its workers have gotten the required exams. Use of cholesterol drugs rose 13.6% in 2008 from a year earlier. For diabetes drugs, the increase was 7.7%, and for asthma medications and blood-pressure medicines, it was 7.4% and 2.5%, respectively.

The company also points to anecdotal evidence suggesting the program has helped improve some workers’ health. Jeff Blanzy, a market sales manager for AmeriGas in Fremont, Mich., says he would never have gotten the medical checkups if they weren’t mandatory. But after the 52-year-old went in for his exam, he learned he had fatty liver disease, and the doctor warned he was at risk of eventually losing his liver. “That scared the daylights out of me,” says Mr. Blanzy, who has since lost 78 pounds after changing his diet and starting to work out.

Ellen Hendren, a customer-service representative in St. Augustine, Fla., discovered she had early-stage breast cancer when she went for a mammogram last August. If the test hadn’t been required, the 63-year-old says she likely would have put it off and delayed the diagnosis by several months, allowing the cancer to grow. “It really has made a difference for me,” she says.

AmeriGas projected that the screenings would cost about $500,000 in 2008. Mr. Katz declines to give the size of AmeriGas’s health-care budget. But he says health costs in 2008 were at least 3% higher than they would have been without the program. He attributes the increased spending to the cost of additional exams and follow-up care.

Despite their popularity, many preventive health programs fail to deliver savings. Those focused solely on detecting disease are often costly to their sponsors. However, corporate wellness programs that resulted in participants making changes such as losing weight or quitting smoking have saved money.

So far, Mr. Katz says, “we still don’t know if it’s going to work.” But, he says, the company hopes to “improve the health of our employees and save money over time.”

Safeway's Health-Care Plan

noreply@blogger.com (Rick Riebesell) — Thu, 02 Jul 2009 16:28:00 +0000

What follows is a opinion article by Steven A. Burd appearing in the Wall Street Journal (http://online.wsj.com/article/SB124476804026308603.html) on June 12, 2009:

Effective health-care reform must meet two objectives: 1) It must secure coverage for all Americans, and 2) it must dramatically lower the cost of health care. Health-care spending has outpaced the rise in all other consumer spending by nearly a factor of three since 1980, increasing to 18% of GDP in 2009 from 9% of GDP. This disturbing trend will not change regardless of who pays these costs -- government or the private sector -- unless we can find a way to improve the health of our citizens. Failure to do so will make American companies less competitive in the global marketplace, increase taxes, and undermine our economy.

At Safeway we believe that well-designed health-care reform, utilizing market-based solutions, can ultimately reduce our nation's health-care bill by 40%. The key to achieving these savings is health-care plans that reward healthy behavior. As a self-insured employer, Safeway designed just such a plan in 2005 and has made continuous improvements each year. The results have been remarkable. During this four-year period, we have kept our per capita health-care costs flat (that includes both the employee and the employer portion), while most American companies' costs have increased 38% over the same four years.

Safeway's plan capitalizes on two key insights gained in 2005. The first is that 70% of all health-care costs are the direct result of behavior. The second insight, which is well understood by the providers of health care, is that 74% of all costs are confined to four chronic conditions (cardiovascular disease, cancer, diabetes and obesity). Furthermore, 80% of cardiovascular disease and diabetes is preventable, 60% of cancers are preventable, and more than 90% of obesity is preventable.

As much as we would like to take credit for being a health-care innovator, Safeway has done nothing more than borrow from the well-tested automobile insurance model. For decades, driving behavior has been correlated with accident risk and has therefore translated into premium differences among drivers. Stated somewhat differently, the auto-insurance industry has long recognized the role of personal responsibility. As a result, bad behaviors (like speeding, tickets for failure to follow the rules of the road, and frequency of accidents) are considered when establishing insurance premiums. Bad driver premiums are not subsidized by the good driver premiums.

As with most employers, Safeway's employees pay a portion of their own health care through premiums, co-pays and deductibles. The big difference between Safeway and most employers is that we have pronounced differences in premiums that reflect each covered member's behaviors. Our plan utilizes a provision in the 1996 Health Insurance Portability and Accountability Act that permits employers to differentiate premiums based on behaviors. Currently we are focused on tobacco usage, healthy weight, blood pressure and cholesterol levels.

Safeway's Healthy Measures program is completely voluntary and currently covers 74% of the insured nonunion work force. Employees are tested for the four measures cited above and receive premium discounts off a "base level" premium for each test they pass. Data is collected by outside parties and not shared with company management. If they pass all four tests, annual premiums are reduced $780 for individuals and $1,560 for families. Should they fail any or all tests, they can be tested again in 12 months. If they pass or have made appropriate progress on something like obesity, the company provides a refund equal to the premium differences established at the beginning of the plan year.

At Safeway, we are building a culture of health and fitness. The numbers speak for themselves. Our obesity and smoking rates are roughly 70% of the national average and our health-care costs for four years have been held constant. When surveyed, 78% of our employees rated our plan good, very good or excellent. In addition, 76% asked for more financial incentives to reward healthy behaviors. We have heard from dozens of employees who lost weight, lowered their blood-pressure and cholesterol levels, and are enjoying better health because of this program. Many discovered for the first time that they have high blood pressure, and others have been told by their doctor that they have added years to their life.

Today, we are constrained by current laws from increasing these incentives. We reward plan members $312 per year for not using tobacco, yet the annual cost of insuring a tobacco user is $1,400. Reform legislation needs to raise the federal legal limits so that incentives can better match the true incremental benefit of not engaging in these unhealthy behaviors. If these limits are appropriately increased, I am confident Safeway's per capita health-care costs will decline for at least another five years as our work force becomes healthier.

The Healthy Measures program currently applies only to our nonunion work force. While we have numerous health and wellness provisions in our union contracts, we are working with union leaders like Joe Hansen of the United Food and Commercial Workers to incorporate healthy measures provisions in our union work force as well.

While comprehensive health-care reform needs to address a number of other key issues, we believe that personal responsibility and financial incentives are the path to a healthier America. By our calculation, if the nation had adopted our approach in 2005, the nation's direct health-care bill would be $550 billion less than it is today. This is almost four times the $150 billion that most experts estimate to be the cost of covering today's 47 million uninsured. The implication is that we can achieve health-care reform with universal coverage and declining per capita health-care costs.

There is a very real possibility that we will see positive transformational health-care reform in the near future. I am encouraged by the effort I see on Capitol Hill, particularly the bipartisan effort in the Senate. While some tough issues remain, if we continue to work in a bipartisan manner I believe we will resolve these issues successfully and find agreement on meaningful reform.

Mr. Burd is CEO of Safeway Inc., and the founder of the Coalition to Advance Healthcare Reform.

What You Do Not What You Say

noreply@blogger.com (Rick Riebesell) — Tue, 09 Jun 2009 15:47:00 +0000

In answer to the question posed in the previous post, here is an article printed from Pajamas Media: http://pajamasmedia.com (URL to article: http://pajamasmedia.com/blog/in-dresden-obama-does-not-disappoint-germans/) entitled In Dresden, Obama Does Not Disappoint Germans:

For his home audience in the United States, the focus of President Obama’s brief visit to Germany was, undoubtedly, Buchenwald. But for Germans, it was all Dresden. As discussed in my earlier PJM report (http://pajamasmedia.com../../../../../blog/the-next-europe-trip-will-obama-apologize-for-wwii/), for Germans Dresden has become the symbol bar none of German suffering at the hands of the Allies and even of Allied “war crimes.” Dresden was the target of heavy Allied bombing in February 1945 and much of the city was destroyed in the attacks. Neo-Nazis make an annual pilgrimage to the city to commemorate the event, the most famous episode in what they describe as a “bombing Holocaust.” But the notion that the Allied raids constituted a “crime” against Germans and Germany is by no means the reserve of Nazis. It has, in the meanwhile, become part of the German mainstream.

In the run-up to Obama’s Germany visit, the White House appeared to be at pains to downplay the significance of the stop of Dresden. Asked whether the president had chosen Dresden “just because it’s close to Buchenwald,” (http://www.whitehouse.gov/the_press_office/Briefing-on-Presidents-Upcoming-Trip-to-Saudi-Arabia-Egypt-Germany-and-France/) that the president’s conversations with Chancellor Merkel had piqued his interest in the former East Germany and that he was “looking forward” to seeing “the major changes in the former East.” But a simple look at the map reveals the disingenuousness of the attempts to explain the choice of Dresden as just a matter of “logistics” (http://www.time.com/time/world/article/0,8599,1903033,00.html). As a matter of fact, Dresden is not particularly close to Buchenwald. Buchenwald is located just on the outskirts of the Weimar of Goethe and Schiller fame. Several major Eastern German cities — including, for instance, Leipzig — are closer to it than Dresden.

Germans, in any case, knew better. Dresden is, as Angela Merkel put it in her joint press conference with Obama on Friday morning, a “highly symbolic city.” And within this highly symbolic city, there is no more symbolic monument than the historic Frauenkirche or “Church of our Lady.” The Frauenkirche was destroyed in the fires provoked by the Allied bombing and it was left in ruins for decades. The renovated church was first reopened to the public in 2005. The symbolic significance of Obama’s visit to Dresden could hardly be made complete without a visit to the Frauenkirche. But as late as Friday morning, there were still doubts about whether Obama would go to the church. Seemingly cognizant of the controversy that his Dresden visit had sparked back home, the president and his handlers were reportedly resisting the entreaties of his German hosts.

A big screen had been set up in Dresden’s Altmarkt or Old Town Square to watch the stages of the Obama visit. Reporting from the Altmarkt, Natalie Steger of Germany’s ZDF public television noted that when Obama finally did cross the threshold of the church, the images set off “downright jubilation” among the assembled Dresden residents. “That was definitively the highlight,” Steger added.
Inside the Frauenkirche, Obama lit a candle under the battered “old cross” that formerly stood atop the church’s dome. It is said that the Frauenkirche is a symbol of “reconciliation.” But, as noted in the Saturday edition of Frankfurter Allgemeine Zeitung (FAZ) (http://www.faz.net/s/Rub594835B672714A1DB1A121534F010EE1/Doc%7EEDD0637B42D03416CAC1A1CC3F1E90762%7EATpl%7EEcommon%7EScontent.html), the “old cross” obviously symbolizes something else. The cross “used to be the highest point of the church,” the FAZ writes: “[I]t was rediscovered under the rubble. In its twisted metal, one can still perceive what the cross went through in the firestorm, and with it the church and with it the people. A symbol of the suffering of Christ reinvested with the significance of German suffering. It was before such a cross that Obama placed a candle in Dresden."

Obama did not say much about the significance of his visit. During his press conference in Dresden, he merely alluded vaguely to the “tragedies” that the city had undergone. It is interesting to note that Angela Merkel did not even go that far. She merely noted matter-of-factly that the city was “destroyed during the Second World War” and “then rebuilt.”

But as the ZDF’s Guido Knopp would note later in the day, Obama did not have to say anything. The heavily loaded symbolism of the Frauenkirche visit did the talking for him. By virtue of his visits to Buchenwald and the Frauenkirche, as Knopp put it, Obama had paid tribute to “all the victims,” i.e., both the victims of Nazi persecution and the German “victims” of the Allies. Knopp, the director of numerous popular television documentaries on the Third Reich, even mumbled something about remembering everybody’s “crimes,” thus making the assertion of moral equivalence more explicit still.
. . . .

Obama from Buchenwals to Dresden

noreply@blogger.com (Rick Riebesell) — Fri, 05 Jun 2009 15:55:00 +0000

What can one now say about what happened in these cities? It will be interesting to see what Obama will say.

From Wikipedia
(http://en.wikipedia.org/wiki/Bombing_of_Dresden_in_World_War_II):

The Bombing of Dresden by the British Royal Air Force (RAF) and United States Army Air Force (USAAF) between 13 February and 15 February 1945, twelve weeks before the surrender of the Armed Forces (Wehrmacht) of Nazi Germany, remains one of the most controversial Allied actions of the Second World War. In four raids, 1,300 heavy bombers dropped more than 3,900 tons of high-explosive bombs and incendiary devices on the city, the baroque capital of the German state of Saxony. The resulting firestorm destroyed 13 square miles (34 km) of the city centre. Estimates of civilian casualties vary greatly, but recent publications place the figure between 24,000 and 40,000.

A 1953 United States Air Force report written by Joseph W. Angell defended the operation as the justified bombing of a military and industrial target, which was a major rail transportation and communication centre, housing 110 factories and 50,000 workers in support of the German war effort. Against this, several researchers have argued that not all of the communications infrastructure, such as the bridges, were in fact targeted, nor were the extensive industrial areas outside the city centre. It has been argued that Dresden was a cultural landmark of little or no military significance, a "Florence on the Elbe," as it was known, and the attacks were indiscriminate area bombing and not proportional for the commensurate military gains.

In the first few decades after the war, some death toll estimates were as high as 250,000. However, figures in the regions of hundreds of thousands are considered disproportionate. Today's historians estimate a death toll of between 24,000 and 40,000, with an independent investigation commissioned by the city itself stated that around 18,000 victims had been identified and that the estimated total number of fatalities was around 25,000. Post-war discussion of the bombing includes debate by commentators and historians as to whether or not the bombing was justified, and whether or not its outcome constituted a war crime. Nonetheless, the raids continue to be included among the worst examples of civilian suffering caused by strategic bombing, and have become one of the moral causes célèbres of the Second World War.

Also from Wikipedia (http://en.wikipedia.org/wiki/Buchenwald):

In 1937, the Nazis constructed Buchenwald concentration camp, near Weimar, Germany. Placed over the camp's main entrance gate, was the slogan Jedem das Seine (literally "to each his own", but figuratively "everyone gets what he deserves"). The Nazis used Buchenwald until the camp's liberation in 1945. From 1945 to 1950, the Soviet Union used the occupied camp as an NKVD special camp for Nazis and other Germans. On 6 January 1950, the Soviets handed over Buchenwald to the East German Ministry of Internal Affairs.

Buchenwald (German for beech forest) was chosen as the name for the camp because of the close ties of the location to Johann Wolfgang von Goethe, who was being idealized as “the embodiment of the German Spirit” (Verkörperung des deutschen Geistes). The Goethe Eiche (Goethe's Oak) stood inside the camp's perimeter, and the stump of the tree is preserved as part of the memorial at KZ Buchenwald. Similarly, the camp could not be named for another town nearby (Hottelstedt) because of administrative considerations (it would have resulted in a lower pay grade for the camp’s Schutzstaffel (SS) guards).

Between July 1938 and April 1945, some 250,000 people were incarcerated in Buchenwald by the Nazi regime, including 168 Western Allied POWs.

From The Wall Street Journal, Obama and Dresden by Daniel Schwammenthal (http://online.wsj.com/article/SB124416516521087573.html#mod=djemITP):

On his way to the 65th D-Day commemorations in France, President Obama plans a curious stop-over in Germany, my home country. He will travel to Buchenwald, the concentration camp his great uncle helped liberate, a visit that makes personal and historical sense. It is his other German destination, Dresden, that seems out of place. Will the president, who likes to apologize for America's alleged sins, now also apologize for World War II?

For many Germans, the destruction of Dresden in February 1945 has become a symbol of Allied "bombing terror." Many still believe the true number of deaths is closer to the Nazi propaganda of 200,000 than the 20,000 to 35,000 historians believe is correct.

Google "Dresden" and "Kriegsverbrechen," the German word for "war crimes," and you'll get almost 26,000 results. Neo-Nazis marched through the streets of Dresden this February commemorating the "Bombing Holocaust." A flood of recent books, articles and documentaries has shifted Germany's historical debate from its war crimes to its own war victims. As part of this trend, in 2006 public TV station ZDF broadcast "Dresden: The Inferno," the most expensive German television production at the time. Its graphic display of carnage and burning people is at odds with German movie tradition. Films about the Holocaust tend to be more subtle and less emotional.

Mr. Obama's visit to Dresden is an unfortunate gesture. Even if the president were not to make an outright apology for the allied bombings, he could hardly not mention them in this city so preoccupied with its wartime history. And even if he were not to give any speech at all and just toured the city, he'd inevitably be led to the many landmarks that were once reduced to rubble.

His mere presence in Dresden -- on the heels of a visit to Buchenwald and just before attending the Normandy commemorations -- would boost the revisionist cause. It would suggest a sort of moral equivalence between industrialized genocide and the bombings of German cities -- bombings, remember, that were designed to bring an end to the genocidal regime.

China and Russia Discuss Super Currency

noreply@blogger.com (Rick Riebesell) — Fri, 10 Apr 2009 15:55:00 +0000

China will continue to push for a global reserve currency that is not a national currency. The motive is to allow China to maintain its export economy without the necessity to buy US dollars and securities. The ability of the US to sustain its stimulation spending is directly dependent on China continuing to purchase US dollars and securities.

From China Daily, April 10, 2009 (http://www.chinadaily.com.cn//china/2009-04/09/content_7663843.htm):

Chinese, Russian experts discuss super currency
(Xinhua)

MOSCOW -- A lot of work still remains ahead in the world's efforts to build a fair, efficient global financial system, Chinese and Russian experts say.

Experts from Beijing and Moscow on Thursday held a video conference to discuss the possibility of creating a "supra-national reserve currency."

Creating a "supra-national reserve currency" suggested by China on the eve of the London G20 summit is a long-term idea, said Chen Daofu, an expert with the Development Research Center of the State Council of China.
In the short term, the current US dollar-dominated global currency system cannot be easily changed, he said.

The system, however, has congenital flaws, Chen said, pointing out such issues as no restrictions on the issuance of dollars and the great risk of dragging the entire global financial system into turmoil when the dollar fluctuates drastically.

The idea to use a national currency to replace another cannot fundamentally rectify the flaws, he said.

A feasible measure to stabilize the current global currency system is diversifying the reserve currency, said Guo Hongyu, a finance professor with the University of International Business and Economics of China.

China is speeding up the regionalization of the Chinese yuan. China and Russia are gradually enlarging the scope of settlements in bilateral trades by using the yuan and Russian ruble, she said.

Mutual cooperation or integration of currency can only be brought into discussion when major currencies have similar influence and strength, she added.

Vladislav Inozemtsev, founder and director of the Center for Post-Industrial Research in Russia, believes that either the ruble or the yuan is eligible to become a regional currency.

However, because both currencies still account for a small share in international trade settlement, they cannot be used as global currency now, he said.

Mikhail Khazin, president of the Neocon consulting company, said that to create a "supra-national reserve currency" is not merely a financial issue, but also involves accountability for the global economy.

He suggested setting up a new global economic pattern, in which every economic entity can adequately allocate profits, ensure sufficient resources and realize relevant duties and rights.

UN Backing China's Plan?

noreply@blogger.com (Rick Riebesell) — Sat, 04 Apr 2009 17:52:00 +0000

We do not want to be indifferent to the poor, but is that really what is going on here?

From China Daily, April 3, 2009 (http://www.chinadaily.com.cn//china/g20/2009-04/03/content_7645609.htm):

LONDON: A UN advisor has suggested that a basket of currencies - including a regional currency in Asia - could replace the US dollar in shaping the global financial system.

"I think China should play a cooperative role with Japan, South Korea and other Asian countries to introduce a regional currency while the world is trying to replace the old reserve currency system," Jeffrey Sachs, special advisor to UN Secretary General Ban Ki-moon, told China Daily on Wednesday. Sachs is also professor of Columbia University.

He said China's central bank governor Zhou Xiaochuan has come up with an innovative idea to introduce a global currency in an effort to redefine the rigid global financial regime, which has undergone no major change since World War II.

"However, I think the US dollar, British pound, euro and a regional currency in Asia can shape a basket of global reserve currencies with their own special drawing rights," said Sachs, who is with the UN delegation attending the G20 summit.

He believes the US's previous supply side monetary policies and the US dollar's monopoly were the roots of the financial crisis.

However, Sachs was more reserved about the idea of introducing a global currency to replace the US dollar and said China should cooperate with Japan, South Korea and some other countries.

Sachs hoped the G20 leaders combined stimulus packages, economic development and sustainability when designing polices for growth.

He said stimulus packages can rescue the world's economy, and the ensuing development can ensure the whole world, not merely rich countries, is able to share in the benefits. Sustainability, meanwhile, can address the world's grave risks of climate change, stress on the water supply and loss of biodiversity.

He said the world's 3 billion poor, especially the 1 billion poorest of the poor, are suffering terribly from the crisis, and the situation could become worse.

"But the pity is that the poor have got zero attention so far, while many countries are busy bailing out banks and businesses," Sachs said.

G20 Meeting Accomplishments

noreply@blogger.com (Rick Riebesell) — Sat, 04 Apr 2009 16:49:00 +0000

The meeting resulted in an agreement to fund the International Monetary Fund (IMF) in the amount of $750 billion - $500 billion to lend to struggling economies and $250 billion for an “overdraft facility.” Also established was $250 billion funding to improve world trade and $100 billion that international development banks can lend to poorest countries. IMF will raise $6 billion from selling gold reserves to increase lending to the poorest countries. Another G20 meeting has been scheduled for New York in September.

From The Wall Street Journal, April 3, 2009 in the Opinion Journal (http://online.wsj.com/article/SB123872213415985213.html#mod=djemEditorialPage):

The headline news out of the G-20 meeting concluded in London yesterday was that the leaders plan about $1 trillion in new spending through the International Monetary Fund. Beyond that big, easy-to-remember number, the loudest sound from the group's communique was that of 20 hands mutually patting each other's backs for a job well done.

"Taken together," the 20 national leaders said in unison, "these actions will constitute the largest fiscal and monetary stimulus and the most comprehensive support program for the financial sector in modern times."

Before stepping further, let us note that some prudent soul in the G-20 process managed to insert into this grandiloquent spending statement a needed note of restraint.

Buried in the middle of the communique is a paragraph about "exit strategies" to ensure "price stability." This is reassuring. It suggests there is at least some awareness that the U.S.-led strategy of printing many trillions in dollars to pay for global stimulus carries the threat of significant future inflation -- unless central banks tighten this expansionary monetary policy before the inflation arrives.

The second-best takeaway is that most of the group's other commitments will have to be implemented not by a single unit called the G-20 but by 20 or more separate, sovereign nations. In other words, don't hold your breath waiting for Nicolas Sarkozy's new Financial Stability Forum to write global regulations for hedge funds and "all systemically important financial institutions, instruments and markets." That could take awhile. The Europeans have been working for years to create a standard system of banking supervision. They're still working on it.

. . . .

As for near-term global growth, perhaps the communique's two most telling measures concern tax and trade policy. On taxes, the G-20 makes a forceful commitment to eliminate "tax havens." The nominal point of this effort is to ensure fairness and eliminate "banking secrecy." In fact, it looks more like a last-ditch effort by nations whose spending has reached such levels that they've become desperate for tax revenue. If the real point is to mandate "harmonization" across borders at relatively high levels of taxation, one has to ask where the world is going to find incentives for new economic growth.

One traditional answer has been trade. The primary vehicle for producing more of that is the Doha free-trade round. The G-20 commits itself to Doha and rejects protectionism and competitive currency devaluations. Good. But it pointedly did not set a date for renewing the Doha trade round. Bad.

On balance, the G-20 meeting ended as a reality check. The leaders arrived in London with the media billing it as virtually the Committee to Save the World. Led by the Obama Presidency, we are living through a period of inflated roles for government in the lives of nations. What emerged from London suggests these leaders recognize that even they are mere mortals and the real work of economic recovery will have to resume when their planes touch down back home.

The subtle victory for the United States is the continuing reliance on the US dollar as the reserve currency of the world. China will be forced to continue buying US dollars and debt. The reforms are being pushed and discussed, however, and whether the excuse be stability or inflation (the real reason not being the stated reason), the currency exchange issue is coming up again.

Two Goldfish

noreply@blogger.com (Rick Riebesell) — Thu, 02 Apr 2009 21:51:00 +0000

There are two goldfish swimming thoughtfully in their bowl. One says to the other, “OK, if there is no God, who changes the water?”

This is a favorite old joke. It was brought to mind after I listened to a very interesting video on You Tube: http://www.youtube.com/watch?v=-rg3uNrI8tE.

The world is like an out of control soup bubble. There could be other soap bubbles. We are on the cusp of a new Copernican revolution. We are not a universe but a multiverse. Look for the umbilical chords. A timeless nirvana may exist constantly giving birth to multiple Genesis stories. Parallel worlds (universes) may be in another dimension but detectible through gravity. Dark matter is invisible but detectible through its gravity. Our universe may be a white hole – at the other end of a black hole – with an umbilical cord connecting us to earlier universes.

From Wikipedia, http://en.wikipedia.org/wiki/Michio_Kaku:

Michio Kaku (加來道雄 Kaku Michio?) (b. January 24, 1947) is a Japanese-American theoretical physicist specializing in string field theory, and a futurist. He is a popularizer of science, host of two radio programs, and a best-selling author.

Kaku was born in San Jose, California to Japanese immigrant parents, and attended and played first board on the chess team of Cubberly High School in Palo Alto in the early 1960s. At the National Science Fair in Albuquerque, N.M., he attracted the attention of physicist Edward Teller, who took Kaku as a protégé, awarding him the Hertz Engineering Scholarship. Kaku received a B.S. degree summa cum laude from Harvard University in 1968 where he placed first in his physics class. He went on to attend the Berkeley Radiation Laboratory at the University of California, Berkeley and received a Ph.D. degree in 1972, and held a lectureship at Princeton University in 1973. During the Vietnam War, Kaku completed his US Army basic training at Fort Benning, Georgia and his advanced infantry training at Fort Lewis, Washington. However, the Vietnam War ended before he was deployed as an infantryman.

Kaku currently holds the Henry Semat Chair and Professorship in theoretical physics and holds a joint appointment at City College of New York, and the Graduate Center of the City University of New York, where he has taught for more than 30 years. Presently, he is engaged defining the "Theory of Everything", which seeks to unify the four fundamental forces of the universe: the strong force, the weak force, gravity and electromagnetism. He has also been a visiting professor at the Institute for Advanced Study in Princeton, and New York University. He is a Fellow of the American Physical Society. He is listed in Who's Who in America, Who's Who in the World, Who's Who in Science and Engineering, and American Men and Women of Science.

Too Big to Fail

noreply@blogger.com (Rick Riebesell) — Wed, 01 Apr 2009 16:34:00 +0000

In an earlier post I suggested that one elemental strategy that should be implemented as a result of the current economic crisis is a method of preventing institutions from getting to big to fail.

From the Wall Street Journal, April 1, 2009, article entitled Preventing ‘Too Big to Fail’ Isn’t Easy (http://online.wsj.com/article/SB123854770575776359.html#mod=djemITP):

By Sudeep Reddy

WASHINGTON -- Stronger regulation alone won't prevent firms from becoming so large that their failure threatens the financial system, current and former Federal Reserve officials said Tuesday.

Gary Stern, the president of the Federal Reserve Bank of Minneapolis, has long warned about the dangers of institutions that are "too big to fail." He said in a speech at the Brookings Institution that policy makers in recent years had ignored warnings about firms becoming too big, and, as a result, raised the costs of the current financial crisis.

"They situated themselves in the flood plain, ignored the flood warning and hoped for the best," said Mr. Stern, the longest-serving Fed bank president. Creditors of financial institutions must risk losing money to restore market discipline, he said.

Speaking at the same event, former Fed Chairman Alan Greenspan cast doubt on the latest push to give a single regulator the job of watching for risks across the financial system. Regulators can identify when markets underprice risk, he said, but they can't always forecast events accurately.

"Knowing when the crisis will happen is not possible for human beings," Mr. Greenspan said.

Firms seen as "too big to fail" can enjoy lower borrowing costs based on the expectation that creditors will be backed by the government. Mr. Greenspan said capital requirements should be set to erase any such benefits for big companies.

"What we have got to do is to eliminate the competitive advantage which is implicit in being designated as too big to fail," Mr. Greenspan said. "If you can neutralize for those who are currently too big to fail, their competitive advantage, it takes away the incentive for bigness as a protection."

Top government officials are struggling to address the growing too-big-to-fail problem throughout the financial system. At several points in the past year, policy makers believed they had little choice but to save major financial institutions -- and their creditors -- to prevent a broader destabilization of the financial system.

Mr. Stern has been president of the Minneapolis Fed for 24 years and wrote a book on bank bailouts five years ago, "Too Big to Fail: the Hazards of Bank Bailouts," with Minneapolis Fed Senior Vice President Ron Feldman. The book sought to raise concerns about inadequate regulation of ever-larger banks. Most of their proposals were dismissed or ignored at the time, when the economy was growing and banks were expanding.

The Obama administration and Fed last week proposed new authority for government officials to seize and unwind large, complex financial institutions in a similar way that the Federal Deposit Insurance Corp. takes failed banks into receivership.

Vincent Reinhart, a former director of the Fed's monetary-affairs division, said the approach would simply "add another layer on top of an already complicated system."

Mr. Stern said "society will be better off" with such a framework, preventing the complications around the government takeover of insurance titan American International Group Inc. But he doubts that approach "will correct as much of the [too-big-to-fail] problem as some observers anticipate." The FDIC resolution regime, he says, does not put creditors at banks at sufficient risk of facing losses. "A new regime will not, by itself, put an end to the support we have seen over the last 20 months," he said.

In an interview, Mr. Stern said creditors must face the potential for losses that are "sufficiently significant" for them to pay more attention to risks, but not so great that it creates the "spillover" that hurts the broader system. Bank supervision is still important, he said, but management "frequently has ample incentive to get around the spirit of the regulation, even if they adhere to the letter of it.”

China - IMF - G20

noreply@blogger.com (Rick Riebesell) — Tue, 31 Mar 2009 16:06:00 +0000

From the Wall Street Journal article, China Seeks More Involvement – and More Clout, by Andrew Batson on March31, 2009 (http://online.wsj.com/article/SB123837953546968375.html#mod=djemITP):

BEIJING -- China is showing more willingness to aid organizations like the International Monetary Fund, reflecting its desire for a stronger voice in global economic affairs. But as leading economies prepare for a summit, Beijing's push for clout to match its financial resources is creating friction with rich countries.

The European Union's commissioner for external relations, Benita Ferrero-Waldner, said Monday during a visit to Beijing that the G-20 summit is "not the right moment" to negotiate IMF votes, which are set to be updated by January 2011. She also called China's proposals for dealing with the global financial crisis "imprecise."

Over the past week, Beijing officials have said China, with nearly $2 trillion in foreign-exchange reserves, is willing to add funding for the IMF to increase the lender's ability to help countries hurt by the crisis. An agreement on putting more money into the IMF could be one of the most concrete achievements of this week's summit of the Group of 20, a gathering of the world's major economies.

The IMF is aiming to boost its war chest to at least $500 billion from $250 billion, and is already close to that goal. Japan has lent $100 billion, and the EU has committed €75 billion ($100 billion). Countries such as China and Saudi Arabia are being asked to help come up with tens of billions of dollars more to make up the difference. The U.S. is looking to chip in nearly $100 billion, but wants it as part of a separate kitty the IMF can tap in emergencies.

Beijing wants something in return for new funding. "China sees this as a good opportunity to increase its influence," said Jun Ma, China economist for Deutsche Bank. China doesn't want to miss out on the chance to help rewrite the rules that will govern global finance for coming decades. "China is more actively contributing their thoughts. This is very different from 10 years ago, when China was much quieter and more low profile," said Mr. Ma, who previously worked for both the IMF and the Chinese government.

China wants more IMF voting rights in exchange for any new funding, which most countries agree makes sense given its weight in the global economy. Chinese officials have also said the country could contribute in ways that don't require an immediate overhaul of the organization, for instance by buying bonds issued by the IMF.

An increase in China's IMF voting power would likely come at the expense of smaller European nations.

. . . .

China seems to want to strengthen and redirect the IMF, not undermine it. Central bank governor Zhou Xiaochuan's proposal last week for a new global reserve currency would give the IMF even greater clout. Mr. Zhou was a member of an outside panel of current and former officials who last week called for a "re-energized" IMF, concluding that "the world needs a multilateral institution at the center of the world economy to help anchor global financial stability."

. . . .

But China's positions have gained more credibility internationally because of its aggressive response to the economic downturn: Its stimulus plan is one of the biggest in the world.

China is in a position to leverage more power at international economic institutions such as IMF and at meetings such as the ongoing G20 meeting in London. Those institutions need China’s financial support, and China has a large share of the international economy. China is in a difficult position because of its stimulus plan for its own economy. That plan has resulted in China holding significant amounts of United States currency and debt. China’s push with the international economic groups will be designed to alleviate the pressure with its own economic stimulus to hold US currency and debt. The fact that China has continued its stimulus policy and continued to purchase US debt has made the stimulus package possible to date. John McCain, Republican Senator from Arizona, on his appearance on Meet the Press Sunday said that one of his largest fears is that China will stop purchasing US debt.

Human Capital

noreply@blogger.com (Rick Riebesell) — Tue, 31 Mar 2009 00:45:00 +0000

Jay Hughes, in two insightful and valuable books about families, has argued that the most important capital asset of families is human and intellectual capital. (James E. Hughes, Jr. Family Wealth, Bloomberg Press and Family: The Compact Among Generations, Bloomberg Press.)

The human capital of families is developed primarily by education, but its measure is competence. The nurturing of family members to be capable of managing their lives and then competent to understand risks is critical to the long term success of the family. Over time competent family leaders will make more wise decisions than poor decisions. Families need to understand that the family balance sheet has a net worth not in only in currency values but also stated in terms of the number of family members successfully pursuing happiness.

As we view decisions being made about stimulating the economy, especially those relating to infrastructure and community projects, there should be a dialogue on the importance of investing in human capital. Will we not be better served by investing funds in educating citizens to be competent, to understand risk, and to be wise managers of their own lives, than by building bridges and highways?

Money is not the cure for the problems of education in this country, but money can enable meaningful programs to develop the human capital of our country. The analysis is important. If capital is what enriches us and our most important capital is human, how do we develop this capital? Hughes lists the following ideas to nurture human capital of families: (1) achieve well-being to the maximum extent, including medical care and psychological care; (2) ensure basic requirements for food, shelter, and clothing; (3) ensure that each member understands the family governance system and his or her role in the system; (4) emphasize the importance of the dignity of work; (5) encourage the diversification of human assets; and (6) encourage the recognition and practice of the family’s spiritual values.

The country is not a family and not all the nurturing of human capital is appropriate for a government, but when allocating funds for investment in a recovery, we should not forget the most important capital investment is in human capital.

China’s Response to Export Drop

noreply@blogger.com (Rick Riebesell) — Sun, 29 Mar 2009 15:39:00 +0000

From China Daily (http://www.chinadaily.com.cn//china/2009-03/28/content_7625243.htm):

BEIJING - China raised the export rebate on 3,800 items to maintain growth, the Ministry of Finance and the State Administration of Taxation (SAT) said Friday.

It was the sixth increase since last August when the government decided to raise refunds in an attempt to tackle slumping exports amid the global financial crisis.

The export rebate for the textile and garment, iron and steel, non-ferrous metal and petrochemical items will be effective April 1, according to the departments.

The tax rebate for textile and garment items would be 16 percent.

A special item, CRT televisions, would have a 17 percent of tax refund.

"It was an extraordinary measure taken under extraordinary conditions," said Zhao Yumin, a researcher with the Ministry of Commerce.
He said slumping exports presented the Chinese government with unprecedented challenges. The refund increase underscored the government's resolution to maintain economic growth and secure employment.

China's exports plummeted 25.7 percent year-on-year in February, the worst decline in more than a decade, as global demand deteriorated amid the deepening recession.

Although previous data showed some signs of economic recovery, the economic outlook remained uncertain as profits of China's major industrial enterprises contracted 37.3 percent year-on-year during the first two months of 2009, the National Bureau of Statistics (NBS) said Friday.

Bai Jingming, economist with the Ministry of Finance said more refunds meant enterprises could retain more cash in hand and they could use that money to restructure their business and improve production technology.

The SAT said last week that the actual export tax rebate in the first two months increased 20.8 percent year-on-year to 66.7 billion yuan (US$9.77 billion).

Experts said nearly all Chinese exports had a 17 percent export rebate during the Asian financial crisis. Compared to that, China still has room for further rebate increases.

In response to the international financial crisis China has moved to maintain its economic growth. China, as is the case with almost every government, is loath to deal with international monetary exchange issues by allowing its economy to regress instead of grow. As the article indicates, China has room for further rebate increases, but in the long term the pressures will increase for China to look to an international solution to help maintain its economic growth.

G20 A Make or Break Event?

noreply@blogger.com (Rick Riebesell) — Fri, 27 Mar 2009 18:34:00 +0000

From the New York Times Deal Book, March 27, 2009 (http://dealbook.blogs.nytimes.com/2009/03/26/g20-a-make-or-break-event-for-markets-soros-says/):

The Group of 20 nations meeting next week is a “make or break event” for the global markets, investor George Soros said on Wednesday.

“Unless it comes up with practical measures to support the countries at the periphery of the global financial system, markets are going to suffer another sinking spell just as they did on Feb. 10, 2009, when the authorities failed to produce practical measures to recapitalize the United States banking system,” Mr. Soros said in testimony to the Senate Foreign Relations Committee, according to Reuters.

Mr. Soros said President Obama could help make the G20 meeting a success by raising a possible solution that would involve increasing the amount that developing countries — from Eastern Europe to Africa — can effectively borrow from the International Monetary Fund.

The urgent task of re-inflating the global economy has to be carried out mainly by the IMF, “imperfect and beleaguered as it is, because it is the only institution available,” Mr. Soros said.

While the IMF’s resources were likely to be doubled at the G20 meeting of big developed and developing countries, that would not provide a systemic solution for the developing world, Mr. Soros said.

But a systemic solution was readily available in the form of special drawing rights, or SDRs, an international reserve asset created by the IMF in 1969 that has the potential to act as a supersovereign reserve currency.

In addition to the one-time increase of the IMF’s resources, there ought to be substantial annual SDR issues, say $250 billion, as long as the global recession lasts, he said.

While it is too late to agree on issuing the SDRS at the G20 meeting, “if it were raised by President Obama … it would be sufficient to give heart to the markets and turn the meeting into a resounding success,” Mr. Soros said.

Mr. Soros also warned that if the United States failed to live up to its responsibility in helping solve the global crisis, “we shall cease to be the dominant financial power.”

If the global financial system falls apart, “China is liable to come up ahead,” he said.

While the G20 meeting has received sporadic attention, a number of informed and influential parties have viewed it with great concern. President Obama, based on the comment made at his new conference and the quick retraction of the statement by Treasury Secretary Timothy Geithner statement that the US would be open to an international reserve currency. The G20 should be followed carefully. The BBC has an excellent guide to the G20 at http://news.bbc.co.uk/2/hi/in_depth/business/2009/g20/default.stm.

Float or Capsize?

noreply@blogger.com (Rick Riebesell) — Thu, 26 Mar 2009 15:56:00 +0000

From the Wall Street Journal Review and Outlook, March 25, 2009 (http://online.wsj.com/article/SB123802521198942455.html#mod=todays_us_opinion):

As if the dollar didn't have enough problems, Timothy Geithner took China's bait yesterday and said he was "quite open" to its suggestion this week to displace the greenback with an "international reserve currency." The dollar promptly fell and stocks followed, before the Treasury Secretary re-emerged to say "the dollar remains the world's dominant reserve currency. I think that's likely to continue for a long time."

Mr. Geithner is learning on the job, and yesterday's lesson is that it isn't smart to fool with currency markets when you are already tempting fate with a gigantic U.S. reflation. Treasury and the Federal Reserve are flooding the world with dollars to break the recession, and the world is rightly getting nervous. The solution floated by Chinese central bank governor Zhou Xiaochuan -- an increased role for the International Monetary Fund -- isn't desirable. But his warning about the dangers of dollar weakness and exchange-rate instability is still worth heeding.

According to economic theory floating exchange rates allow an economy to reduce trade deficits by letting the currency adjust. A weaker exchange rate drives up the cost of imports and makes exports more competitive, thus reducing trade deficits. Under fixed exchange rates, an economy has to constrict to eliminate imbalances, reducing imports and lowering prices to make its exports more competitive. Causing an economy to shrink is a prohibitive political act. America went to a floating exchange rate as has been discussed here, but has been able to avoid having the currency adjust.

The economic theory has not become practice because the rest of the world holds dollars as investments. Foreign central banks use dollars predominantly for their reserves. The liabilities of the U.S. are the main assets of the rest of the world. Since the world takes American money, there is no currency adjustment. As a result, America can spend more than it earns and save less than it invests. The difference is made up by foreigners accepting dollars and lending dollars back to America (by buying U.S. debt instruments).

China’s trade surplus with America brings it dollars. According to the economic theory of floating exchange rates that should make China’s currency, the yuan, rise, which would make Chinese exports pricier in world markets. China is trying to maintain the growth of its economy and does not want the price of its exports to rise. China's central bank therefore accumulates dollars and invests in U.S. securities. The currency rate does not adjust.

Chinese officials are understandably concerned about holding of U.S. debt and dollar assets. As the U.S. prints money and issues debt to satisfy the multitrillion dollar stimulus packages to the U.S. economy, the dollar will depreciate. China will have to continue buying dollars to support its economic growth. Obviously, this is an increasingly difficult investment for China to continue.

From the China example, it is clear that America's main creditors will try to avoid future forced consumption of dollars. China and Russia are now proposing expanding the use of the International Monetary Fund's Special Drawing Rights (SDRs) as a substitute for dollars. SDRs, based on a sampling of currencies, are used primarily for IMF transactions.

Next week, the Group of 20 (G-20) nations will discuss the turmoil that is the world's economy. Great Britain and Australia have expressed support for giving China more of a say in IMF affairs, especially since China is being asked to help fund IMF by additional bond purchases. In the balance may be the ability of America to print the money and sell its debt instruments to fund the proposed and ongoing stimulus packages.

China Wants New International Reserve Currency

noreply@blogger.com (Rick Riebesell) — Wed, 25 Mar 2009 18:23:00 +0000

From Bloomberg (http://www.bloomberg.com/apps/news?pid=20601103&sid=acneRCVQY09Y):

March 25 (Bloomberg) -- China’s call for the creation of a new international reserve currency may signal its concern at the dollar’s weakness and ambitions for a leadership role at next week’s Group of 20 summit, economists said.

Central bank Governor Zhou Xiaochuan this week urged the International Monetary Fund to expand the use of so-called Special Drawing Rights and move toward a “super-sovereign reserve currency.” The dollar weakened after the Federal Reserve said that it would buy Treasuries and the U.S. government outlined plans to buy illiquid bank assets.

“China is concerned about the potential for a slide in the dollar as the U.S. attempts to stimulate its economy,” said Mark Williams, a London-based economist at Capital Economics Ltd. The “rare” sight of a Chinese official attempting to reframe an international debate may be “a sign of China becoming more engaged,” he said.

. . . .

The yuan traded at 6.8317 against the dollar as of 3:54 p.m. in Beijing from 6.8296 yesterday.

The IMF’s Special Drawing Rights are monetary units valued against a composite of currencies. Zhou said they should be used for international trade, financial transactions and commodity pricing, rather than just between governments and international financial institutions.

President Barack Obama affirmed support for the dollar at a press conference at the White House in Washington.

“I don’t believe there is the need for a global currency,” Obama said.
Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben S. Bernanke told lawmakers at a House Financial Services Committee hearing that they rejected such a move.

. . . .

G-20 leaders will gather in London on April 2 to forge a common response to the financial crisis that has spawned a global recession. The summit will discuss proposals for reforms of the International Monetary Fund.

Russia made a similar proposal during the preparations for the G20 meeting. The proposal will not succeed because central banks around the world hold more US dollars and dollar securities than any other currency. See http://online.wsj.com/article/SB123780272456212885.html.

China has been under pressure to contribute to the funding of the IMF. This is an offensive response to that pressure. But the proposal is grounded in the argument that the dominance of one or a few currencies exaggerates the volatility of those financial systems backing the currency. China does not want to hold US dollars, but dollars continue to come to China from trade and investment. One argument is that international monetary system allowed the Federal Reserve to keep US interest rates artificially low helping to create the housing market bubble.

China will continue to resist financial support to the IMF until that commitment enables China to have more authority in the IMF and in the international marketplace.

Hazy Shade of Winter

noreply@blogger.com (Rick Riebesell) — Tue, 24 Mar 2009 19:37:00 +0000

In 1966 Paul Simon wrote the lyrics to Hazy Shade of Winter:

Time, time, time, see what’s become of me
While I looked around
For my possibilities
I was so hard to please
But look around, leaves are brown
And the sky is a hazy shade of winter

Hear the Salvation Army band
Down by the riverside, it’s bound to be a better ride
Than what you’ve got planned
Carry your cup in your hand
And look around, leaves are brown now
And the sky is a hazy shade of winter

Hang on to your hopes, my friend
That’s an easy thing to say, but if your hopes should pass away
Simply pretend
That you can build them again
Look around, the grass is high
The fields are ripe, it’s the springtime of my life

Ahhh, seasons change with the scenery
Weaving time in a tapestry
Won’t you stop and remember me
At any convenient time
Funny how my memory slips while looking over manuscripts
Of unpublished rhyme
Drinking my vodka and lime

But look around, leaves are brown now
And the sky is a hazy shade of winter

Look around, leaves are brown
Theres a patch of snow on the ground...

Time is a perplexing concept. It is a way of saying nothing stays the same. What is the purpose of that? The change that is occurring is ongoing and regular. At least we think it is this because we measure time, but we invented the process of measurement.

Animals do not measure time. When was the last time you saw a dog with a wrist watch? Yet, try to ignore feeding time. Animal trainers say animals live in the moment, but they also have an accurate sense of time without the watch to measure it.

Humans, being what they are, have desired to measure and quantify time. There are calendars, watches, metronomes, and the like. We have quaint sayings (which frequently make no sense) such as: “just passing time,” “the more I hurry the longer it takes,” and “hurry up and wait.” The best adjective that goes with time is “inexorable.” Sometimes time seems to slow as in right before an accident. Some things happen so fast we have no perception of events. Our watches tell us time did not become faster or slower, our perceptions of time changed.

Art in many cases can free us from the regular process of time. Music establishes time. The time in music is stated by the beat, and the meter of that beat does change - unlike our perception of time. This escape from the regularity of time is one of the freedoms of music. Similarly a play or movie can compress years into hours or minutes. A great painting can take you to a moment that can last for as long as the viewing. This release from our inexorable concept of time is a challenge as well. Does our measurement really confirm what we have such difficulty describing? What we do know is we cannot change it. It seems time is out of our control unless we have art.

Watching Jumpers

noreply@blogger.com (Rick Riebesell) — Tue, 24 Mar 2009 00:35:00 +0000

In the October 13, 2003 issue of The New Yorker, Tad Friend wrote a “letter from California” (http://www.newyorker.com/archive/2003/10/13/031013fa_fact). The article was entitled Jumpers, and carried the subtitle: “The fatal grandeur of the Golden Gate Bridge.

Every two weeks, on average, someone jumps off the Golden Gate Bridge. It is the world’s leading suicide location. In the eighties, workers at a local lumberyard formed “the Golden Gate Leapers Association”—a sports pool in which bets were placed on which day of the week someone would jump. At least twelve hundred people have been seen jumping or have been found in the water since the bridge opened, in 1937, including Roy Raymond, the founder of Victoria’s Secret, in 1993, and Duane Garrett, a Democratic fund-raiser and a friend of Al Gore’s, in 1995. The actual toll is probably considerably higher, swelled by legions of the stealthy, who sneak onto the bridge after the walkway closes at sundown and are carried to sea with the neap tide. Many jumpers wrap suicide notes in plastic and tuck them into their pockets. “Survival of the fittest. Adios—unfit,” one seventy-year-old man said in his valedictory; another wrote, “Absolutely no reason except I have a toothache.”

Eric Steel a documentary film director read that article and then did what he had to do to spend all of 2004 watching and filming the Golden Gate Bridge. The result is The Bridge, a documentary released in 2006. It contains film coverage of a number of suicide jumps off the bridge. There are interviews with family members and one survivor. Stephen Holden in the New York Times Movie Review (http://movies.nytimes.com/2006/10/27/movies/27brid.html) stated:

“The Bridge” juxtaposes breathtaking scenes of the Golden Gate and its environs, shot in digital video, with the harrowing personal stories of family members and friends of those who jumped. Because their testimony is remarkably free of religious cant and of cozy New Age bromides, this is one of the most moving and brutally honest films about suicide ever made.

Watching this movie is like watching an automobile accident. You see the elements come together, almost in slow motion you know it will happen, and you watch the jump knowing there is nothing you can do. What must it have been like watching (filming) it live? Ending a life is one way of taking control. But you lose control of what happens after your death and add to the suffering of those who remain and are left to ask what could they have done.

Slow People

noreply@blogger.com (Rick Riebesell) — Sun, 22 Mar 2009 23:52:00 +0000

Slow people have a basic obligation to the rest of the world. They need to be aware of their condition and place themselves where they do not obstruct the pace of those not so leisurely inclined.

I understand that there are many good reasons why people are slow. Some are good reasons, and others are pathetic. I have great empathy for a disabled person or a mother with small children and none for the obese. But the reason is not the point. It does not matter why, it matters where.

If you are on a two lane road and you are slow, pull over and let faster traffic go by. If you play golf slowly, let others play through. If you saunter down the aisles at stores, stay to one side or the other so those with something to do with their lives can get at it. If you are walking slowly on a running path, be aware of the faster traffic. If you are in a checkout line, please get out your credit card before the clerk has to ask you.

Is it too much to ask those who stagger through life, to simply be aware of others who are not so inclined? I have had small children, and I kept them out of other people’s way. I have had injuries and could not walk quickly; I stayed to the side and let others pass. When in line, I am ready for my turn, even if I am not in a hurry. I have had to drive a slow vehicle, when I could I pulled over to let traffic pass. It is nothing but common courtesy.

So what is the proper behavior for the times when slow people do not show courtesy? At the least, the “excuse me” request should be appropriate to remind someone of their discourtesy. But people do not take well to being corrected. Most recognize an error and then are courteous, but a few deem it a right to block others even when they could move aside. Certainly violence and most of the time screaming is not the right thing to do. Nonetheless, slow people have an obligation to others – get out of the way.

The Obama Budget – Congressional Budget Office Projection

noreply@blogger.com (Rick Riebesell) — Sat, 21 Mar 2009 18:25:00 +0000

From the New York Times (http://www.nytimes.com/2009/03/21/washington/21deficit.html?th&emc=th):

WASHINGTON — The Congressional Budget Office placed a new hurdle in front of President Obama’s agenda on Friday, calculating that the White House’s tax and spending plans would create deficits totaling $2.3 trillion more than the president’s budget projected for the next decade.

The difference largely reflects the administration’s more optimistic forecasts of economic growth through 2019.

The budget office figures, which will guide Congress as it takes up Mr. Obama’s proposals in earnest next week, were worse than Democratic leaders expected and further complicated their job of achieving the president’s priorities on health care, energy policy and much more.

. . . .

Mr. Obama’s budget predicted total deficits for the next decade of nearly $7 trillion. The Congressional Budget Office analysis of his plan put the figure at nearly $9.3 trillion, or a third higher.

The House and Senate Budget Committees are planning to draft their versions of a budget next week, and both chambers expect to vote the following week before leaving for an Easter and Passover recess.

Congress’s budget resolutions do not require the president’s signature and do not have the force of law. But the blueprint that the House and Senate ultimately agree to will go far in determining the odds for success of Mr. Obama’s domestic program for this year and beyond.

Obama’s projections are based on economic growth. It is not clear how this economic growth will occur, but the economic theory embraced by the Obama administration is that of government spending stimulating the economy. Not just a little of this depends on the management of the currency and monetary schemes to promote credibility rather than having a fear of the deficit undermine the economic recovery.

Full Faith and Credit of the U.S. Government

noreply@blogger.com (Rick Riebesell) — Sat, 21 Mar 2009 00:04:00 +0000

From an Op-Ed article for the New York Times by James Grant, editor of Grant’s Interest Rate Observer (http://www.nytimes.com/2008/09/24/opinion/24grant.html?_r=1&hp):

. . . Every year but one since 1982, this country has consumed much more than it has produced, and it has managed to discharge its debts with the money that it alone can lawfully print.

No other nation ever had it quite so good. Before the dollar, the pound sterling was the pre-eminent monetary brand. But when Britannia ruled the waves, the pound was backed by gold. You could exchange pound notes for gold coin, and vice versa, at the fixed statutory rate.

Today’s dollar, in contrast, is faith-based. Since 1971, nothing has stood behind it except the world’s good opinion of the United States. And now, watching the largest American financial institutions quake, and the administration fly from one emergency stopgap to the next, the world is changing its mind.

. . . .

The dollar emerged at the center of the monetary system that took its name from the 1944 convention in Bretton Woods, N.H. The American currency alone was made exchangeable into gold. The other currencies, when they got their peacetime legs back under them, were made exchangeable into the dollar.

All was well for a time — indeed, for one of the most prosperous times in modern history. Under the system of fixed exchange rates and a gold-anchored dollar, world trade boomed (albeit from a low, war-ravaged base). Employment was strong and inflation dormant. The early 1960s were a kind of macroeconomic heaven on earth.
However, by the middle of that decade it had come to the attention of America’s creditors that this country, fighting the war in Vietnam, was emitting a worryingly high volume of dollars into the world’s payment channels. Foreign central banks, nervously eyeing the ratio of dollars outstanding to gold in the Treasury’s vaults, began prudently exchanging greenbacks for bullion at the posted rate of $35 per ounce. In 1965, William McChesney Martin, chairman of the Federal Reserve, sought to reassure the quavering dollar holders. He lectured the House Banking Committee on the importance of maintaining the dollar’s credibility “down to the last bar of gold, if that be necessary.”

Necessary, it might have been, but expedient, it was not, and the Nixon administration, on Aug. 15, 1971, decreed that the dollar would henceforth be convertible into nothing except small change. The age of the pure paper dollar was fairly launched.

It was the very lack of gold-standard inhibition that permitted the buildup of titanic dollar balances overseas. At the end of 2007, no less than $9.4 trillion in dollar-denominated securities were sitting in the vaults of foreign investors. Not a few of these trillions were the property of Asian central banks. So, although the United States has run heavy and persistent current account deficits — $6.7 trillion in total since 1982 — they have been “deficits without tears,” to quote the French economist Jacques Rueff. The dollars American debtors sent abroad America’s creditors sent right back in the shape of investments in American stocks, bonds and factories.

Under the Bretton Woods system, worried foreign creditors would long ago have cleaned out Fort Knox. But, conveniently, the dollar is uncollateralized and unconvertible. America’s overseas creditors hold it for many reasons. Some — notably Asian central banks — acquire dollars simply to help make their exports grow. But even the governments that scoop up dollars for no better reason than to manipulate their own currency’s value presumably put some store in the integrity of American finance.

The world’s monetary system is based on respect for the full faith and credit of the United States government, not on gold. This faith-based system works only so long as there is faith. Since Americans have overspent and sent their debt overseas, it is the world, not just Americans that must have faith. So the question arises, what happens if there is a loss of faith?

The current financial crisis likely will do away with any faith in the system. The International Monetary Fund will have difficulty mediating the currency relationships between countries. It is very possible that the US currency will cease to be the reserve currency for international use. Chaos and a lack of control over monetary relationships will not be conducive to an increase in faith in the currency or economy of the United States either in the United States or abroad. The inflationary pressure of increased spending of the United States government will be felt. Americans will want to maintain faith in the economic system, but that faith will be severely tested.