A Novel Proposal

Ian Mathias writes:

Here’s a good idea: Credit Suisse has been paying its hotshot bankers with
mortgage-backed securities. Since the end of 2008, the Swiss bank has been
paying out most of its bonuses with stock — not shares or options of CS, but
shares of a fund the bank created that’s composed of its own distressed
mortgages and toxic assets.

As the WSJ put it, “This means the performance of bets these bankers
were originally involved in structuring will help determine whether their 2008
compensation turns into big money or big losses.” It’s actually a double win for
Credit Suisse: Not only does the move insentivise accountablity among its ranks,
but the bank is able to jettison these bad assets off its balance sheet and into
a separate bonus pool.

And surprise, surprise… when you’re forced to “eat your own cooking,”
the food ends up tasting just fine. The fund is up 17% this year, well ahead of
the Dow and S&P 500.

Thoughts on Health Care Reform

Am I optimistic that we are going to make major headway in solving the problems in our health care system?

Not really.

There are just too many powerful forces opposing significant reform, and our political system is too paralyzed by its elaborate set of checks and balances. And then there is the fact that our politicians have become too dependent on political contributions from the big industries and wealthy contributors.

If Obama could just come up with a system from scratch, using the experience of the other industrialized countries like France, Canada, Germany, and Sweden, he would probably do a pretty decent job of creating a workable, universal, cost-effective health care system. But he can't. So he's trying to take the current system, that leaves too many people out and that costs too much, and bring all the major players together in such a way that it's win-win for everyone. And I just don't think it's going to work.

All the private players, such as the insurance companies, the pharmaceutical companies, the equipment manufacturers, the medical malpractice lawyers, and the medical specialists, have ridden the gravy train for so long, that they will oppose any curtailing of the flood of money.

And to make matters worse, there is no easy way that the free market can function in health care. When you go buy a car or a dress, you have choices, you check out the quality, the price, and you may even negotiate for a lower price. But when's the last time you checked how much the doctor really charges, or how much your hospital stay is going to cost before you go in? Even in getting our prescriptions filled, few people check out prices. You pay the copay, which is always the same, and forget about it. (Sometimes we ask for generic over brand, but we rarely know how much even the generic really costs.) The only time we really care about how much health care really costs is when we have to pay some or all of the premiums (or pay for the care itself, if we don't have insurance).

It is ludicrous to think that the free market can work effectively in health care. And if the market can't function, then some other mechanism has to plan and control the system. In utilities, it's heavy regulation of semi-private utilities. In defense, it's government operation and control. Isn't health care really more like the latter?

Another huge problem is the current fee-for-service system, which rewards doctors and hospitals for ordering more and more tests and procedures and operations. Hospitals, like Cleveland Clinic and the Mayo Clinic, spend about half of what many other hospitals and clinics charge, because their doctors are on salary and therefore don't directly benefit from more procedures. But most places aren't like that.

But an even bigger problem is that we in America have become very spoiled. We expect to live until we're 95, have every ache and pain and health issue solved with the latest drugs and medical tests, and all without any mistakes made or waiting in any lines. And so we're opposed to any changes that might cause these expectations not to be met.

What many people fail to realize is that all of the above is simply going to bankrupt us, individually and as a nation. People don't seem to be able to make the connection between the care they want and think is their right, and the cost. There is a vast ignorance about all of these things, and a consequent vulnerability to demagoguery.

My guess is that we'll expand coverage to more folks, perhaps eliminate pre-existing conditions as a reason for loss of coverage, and make it cheaper for persons to buy insurance on the individual market. All of these are good things. But none of it will contain costs, and therefore health care costs will continue to skyrocket at 8-10% a year. In a decade, few people will be able to afford normal health care, Medicare will be bankrupt, and we'll be right back in the same crisis we're in today.

No True Recovery Anytime Soon

Contrarian economic analyst Bill Bonner of the Daily Reckoning writes:

Yesterday, we estimated that it would take 19 years for the economy to
complete its de-leveraging. It was not a very scientific estimate. But total
debt has gone down about $2 trillion over the last 24 months. So, if it
continued at that rate, it would take about 19 years to erase the extraordinary
amount of debt built up in the bubble years.

Now, along comes the Comstock crowd with roughly the same guess - two
decades. They figure that the savings rate will go up to 10% and that the effect
of taking that money out of the consumer economy will be to put the United
States into a long, soft slump - just as we predicted in our first book.

And there's another reason to expect a very long period of downsizing:
that's just the way economies work. Market cycles are very long. Interest rates
went up from the Great Depression all the way to the Reagan Administration.
Then, they went down...and may still be going down. Stocks go up and down in
cycles that last 30-40 years, peak to peak. The peak in '29 was followed by
another peak in '66, which was followed by another peak in '99.

Economic cycles are long too. Consumer debt, compared to disposable income,
hit a low in 1945. It went up for the next 62 years. It only peaked out in 2007.
If the chart were symmetrical, the process of deleveraging (getting rid of debt)
would show a downtrend until 2069! And maybe it will.

But there's no point in looking that far ahead. What we have in front of us
is the opening stage of a depression...a market crash followed by a major
economic re-adjustment. The new reality is that consumer demand is down...and
will stay down for a very long time, at least until debt has reached more
manageable proportions. Ken Rogoff says that will take 6-8 years. We say it
could take 19 years. There's about $20 trillion in excess private sector debt to
be eliminated. It will take time to get rid of it.

Ships Passing in the Night

Most of the protesting that has been done over the years since the 60s has been done by the Left. (The one exception to that that I can think of is the Pro-Life movement.) But recently, in 'town hall' meetings with congressmen and senators, it's been the Right that has been on the barricades, carrying their placards, interrupting speakers, and in general, trying to disrupt the political process. The first thing I want to say is that if it didn't bother you when the Left was doing it, one probably shouldn't be too outraged about it now. Just take it in stride, realizing that it represents a small percentage of the American people.

But why is this happening now? Because the Right is adamantly opposed to this Administration and what it is trying to accomplish. They don't like or trust Barack Obama, first of all. And that is putting it mildly. My relatives who are hard Right DESPISE Obama. They hate the fact that he is a liberal, hasn't served in the military, has a Kenyan father, has a Muslim background, and has big ears. They don't really listen to what he says, they don't really care about his policies. (Nor did they in the campaign last fall, when they were calling him a 'socialist' and a 'Muslim'.) What they do listen to is what people like Rush Limbaugh and the various blowhards on Fox News say about Obama's policies, and take it as gospel. They are ready to believe the worst and put the most radical Right spin on everything.

So they have worked themselves up into hysteria, believing that Obama represents a dramatic threat to the American Way of Life, and by God, they're not going to just take it lying down! And I have to say, if Obama did represent a threat to America, was truly some kind of tyrant, then I would join their ranks or at least would applaud them.

But of course he doesn't. It is ludicrous to think that this most thoughtful, centrist, articulate, calm, compassionate president represents a threat to America. His attempt to reform our health care system is a thoughtful, centrist, reasonable effort to come to grips with what has become a serious threat to our country. It is our current health care system that is the threat to our future, not Obama.

I find it hard to understand where these people are coming from. And they return the favor. We are ships passing in the night. Let us hope that they keep their guns in their holsters and in their closets.

A New Kind of Medicine

Dr. Andrew Weil has been a medical doctor who takes alternative medicine seriously. I've read his writings for a long time and admire him very much. Here is his take of the recent health care debate:

But what's missing, tragically, is a diagnosis of the real, far more
fundamental problem, which is that what's even worse than its stratospheric cost
is the fact that American health care doesn't fulfill its prime directive -- it
does not help people become or stay healthy. It's not a health care system at
all; it's a disease management system, and making the current system cheaper and
more accessible will just spread the dysfunction more broadly.

It's impossible to make our drug-intensive, technology-centric, and
corrupt system affordable. Consider that Americans spent $8.4 billion on
medicine in 1950, vs. an astonishing 2.3 trillion in 2007. That's $30,000
annually for a family of four. The bloated structure of endless, marginal-return
tests; patent-protected drugs and "heroic" surgical interventions for virtually
every health problem simply can't be made much cheaper due to its very nature.
Costs can only be shifted in various unpalatable ways.

So, a far more salient question that must be addressed is: Are we getting
good health for our trillions? Unfortunately, the answer is a resounding, "No."
The U.S. ranked near the very bottom of the top 40 nations -- below Columbia,
Chile, Costa Rica and Dominica -- in a rating of health systems by the World
Health Organization in 2000. In short, we pay about twice as much per capita for
our health care as does the rest of the developed world, and we have almost
nothing to show for it.

I'm not against high-tech medicine. It has a secure place in the diagnosis
and treatment of serious disease. But our health care professionals are
currently using it for everything, and the cost is going to break us.

In the future, this kind of medicine must be limited to those cases in
which it is clearly indicated: trauma, acute and critical conditions, disease
involving vital organs, etc. It should be viewed as a specialized form of
medicine, perhaps offered only in major centers serving large populations.

Most cases of disease should be managed in other, more affordable ways.
Functional, cost-effective health care must be based on a new kind of medicine
that relies on the human organism's innate capacity for self-regulation and
healing. It would use inexpensive, low-tech interventions for the management of
the commonest forms of disease. It would be a system that puts the health back
into health care. And it would also happen to be far less expensive than what we
have now.

Humble Before the Mysteries

"...in 1885, Berthelot, a leading French scientist, declared that owing to the progress of science the world became free of mysteries. Then came a rash of unexpected discoveries: cathode-rays, X-rays, electrons, radioactivity and quanta. The world suddenly looked so mysterious that even politicians took note. On January 21, 1910, Jean Jaures, a leader of the French socialist party, told the Chambre des Deputes: 'The admirable scientist who once wrote that the world is without mystery seems to me to have uttered a naivete as great as his genius.'"

--Stanley Jaki

Smooth Jazz

When we were up in Canada on vacation a few weeks ago, we found this super FM smooth jazz station. When I got back home, I found it online and it has become my favorite streaming music on my computer. Here's the link: http://www.wave947.fm/, and when the website comes up, click on the upper right corner to stream. And then enjoy.

Not Prepared for the End of Life

A reader responds to my 'Benjamin Button' post:

Well, having been a nurse and cared for the elderly over the years with in
our church family, including grandparents and now parents...I've realized that
for some time now. Therefore, I am considering that all the vitamins and acts of
prolonging ones life may not be such a good thing. The nursing homes are filled
with very sad individuals who are just waiting to pass on. It is quite
interesting to me that we are counseled before we get married, we educate
ourselves by reading books and taking classes on having children but no one
prepares us for the end of our lives...thus I applaud that portions of Obama's
health plan that encourages the public to become educated as how to live out our
"golden years".

Benjamin Button

It has dawned on me that the next 20 to 25 years of my life (I'm 58) will be basically the equivalent of the first 20-25 years, only in reverse. I'll initially have more freedom when I retire, which will seem something like college (liberation from things that oppress--parents/responsibilities of adult life). Then as I age, I'll begin to become more like a child, quite dependent upon and accountable to those who care for me (parents/children). And I'll finally become like an infant, totally dependent upon others for care, until I leave this world, just as I entered it, by the act of stopping/starting breathing.

Thank you, Benjamin Button.

Picking Our Partner

"I once heard a therapist say that we marry the part of us that's missing."

--Diane Rehm