How does a nation go bankrupt? Has it ever happened?
These are questions which every American should be concerned about. When I hear the other day that the national indebtedness a few year hence would be nine trillion dollars instead of the earlier estimated seven trillion dollars, I wanted to tear out my hair.
You can bet the farm that something will snap.
One possibility is a hyperinflation like the Weimar Republic in Germany experienced in the early part of the twentieth century. In 1914 one American dollar fetched 4.21 marks. By the beginning of December in 1923 a dollar would exchange for 4.2 trillion marks. In less than a decade the mark had sunk to one trillionth of its former value. The winners were those who had large debts because they were repaid with cheaper marks and the losers were the pensioners and others who held monetary assets based on the mark. The hyperinflation continued until the Germans replaced the old mark with the rentenmark at a rate of one billion to one on November 15, 1923.
Could something happen like this in America? I don’t know, but why don’t you google the word AMERO.
Thursday, August 27, 2009
Sunday, August 23, 2009
A Vow
I made a vow the other week. I made a vow to never again vote for an incumbent for federal office, regardless of any party affiliation. While the current slugs in congress are arguing about placing all of us in a socialized medical care system, they are proposing to keep their gold plated medical system for themselves – at our expense no less. Talk about Machiavellian hubris! The time has come, in fact it is past due, that the Washington “elites” are returned to the dog pile they have created and are creating for the rest of us.
They propose some form of nationalized medical care but surely they are aware of the dismal results it has had in Canada, England, Sweden, and other nations where it prevails. It is expensive and produces long queues for diagnosis and treatment - frequently with fatal consequences.
They do not consider the desires and needs of those who work in the medical community and only focus on the patient’s side of the situation. So as in Canada, young people will be discouraged from entering medicine as a profession or leave the practice prematurely.
Social Security and Medicare/Medicaid are bankrupting the nation and causing the currency to become more worthless with each passing day. Such Ponzi schemes as these dwarf that of Bernie Madoff.
To truly fix medical care what needs to be done is eliminate Medicare/Medicaid and reform the tort laws to be a “loser pays” system like England’s or Australia’s, or at least put a severe cap on nonmonetary “pain and suffering” damages as has been done in Texas. Then they must open the markets for medical insurance by permitting interstate sales and permitting insurance policy customization along the lines of not requiring maternity coverage which is totally unneeded by a woman past menopause.
The government cannot even operate the post office efficiently and you expect them to operate an insurance program or a medical system efficiently; surely you must be joking or you are very naive and foolish!
They propose some form of nationalized medical care but surely they are aware of the dismal results it has had in Canada, England, Sweden, and other nations where it prevails. It is expensive and produces long queues for diagnosis and treatment - frequently with fatal consequences.
They do not consider the desires and needs of those who work in the medical community and only focus on the patient’s side of the situation. So as in Canada, young people will be discouraged from entering medicine as a profession or leave the practice prematurely.
Social Security and Medicare/Medicaid are bankrupting the nation and causing the currency to become more worthless with each passing day. Such Ponzi schemes as these dwarf that of Bernie Madoff.
To truly fix medical care what needs to be done is eliminate Medicare/Medicaid and reform the tort laws to be a “loser pays” system like England’s or Australia’s, or at least put a severe cap on nonmonetary “pain and suffering” damages as has been done in Texas. Then they must open the markets for medical insurance by permitting interstate sales and permitting insurance policy customization along the lines of not requiring maternity coverage which is totally unneeded by a woman past menopause.
The government cannot even operate the post office efficiently and you expect them to operate an insurance program or a medical system efficiently; surely you must be joking or you are very naive and foolish!
Friday, August 14, 2009
Did He Say That?
I can’t believe I heard the president on television yesterday say what he said. He was speaking about the high cost of drugs, and suggested that the patents on drugs be reduced from twenty years to seven years so that the generics could reach the market sooner. Either the president has not taken Economics 101 or he was speaking from notes a staff member wrote who did not know the first thing about economics.
Think about it. What would happen if the patent period were reduced?
A couple of things would happen, both of which would be bad. What is the purpose of the patent and copyright laws? Do they not serve an economic purpose of encouraging innovation and inventiveness by providing an economic incentive? So innovation and inventiveness would be less encouraged, and the development of new drugs would for diseases would not be so much encouraged. I saw an example of this lack of economic encouragement a few years after the fall of the Berlin wall. I was at an airport bar in England sitting next to a couple of German businessmen and asked one of them how the reunification of Germany was proceeding. One of the men said that it was a bit rough. Their laws required that the pay workers from the East the same as workers from the West. But whereas the Western workers had progressed over forty some year to the use of computer controlled and automated machine tools, the Easters workers were still accustomed to the hand controlled machine tools of four decades earlier. Their technology had not advanced because there was no profit motive in the state controlled Eastern economy. Their productivity was lower and great expense was incurred in retraining the Eastern workers.
Secondly, if the patent period was reduced and a new drug was invented, the drug company would have to sell the drug for much more during the patent period to recover the development costs. Three times the price, assuming constant value dollars would at least be necessary. But you could double that to cover the burden of inflation. And double it again because the higher price reduces sales, What you would end up with is then one of two consequences:
1. No new drug at all, because it is uneconomical to develop.
2. Drugs that are ten, twelve, or more times or more costly while they are protected by patent.
What is really called for is a patent period of much more than twenty years, say forty, fifty, or even a hundred years of patent protection.
Think about it. What would happen if the patent period were reduced?
A couple of things would happen, both of which would be bad. What is the purpose of the patent and copyright laws? Do they not serve an economic purpose of encouraging innovation and inventiveness by providing an economic incentive? So innovation and inventiveness would be less encouraged, and the development of new drugs would for diseases would not be so much encouraged. I saw an example of this lack of economic encouragement a few years after the fall of the Berlin wall. I was at an airport bar in England sitting next to a couple of German businessmen and asked one of them how the reunification of Germany was proceeding. One of the men said that it was a bit rough. Their laws required that the pay workers from the East the same as workers from the West. But whereas the Western workers had progressed over forty some year to the use of computer controlled and automated machine tools, the Easters workers were still accustomed to the hand controlled machine tools of four decades earlier. Their technology had not advanced because there was no profit motive in the state controlled Eastern economy. Their productivity was lower and great expense was incurred in retraining the Eastern workers.
Secondly, if the patent period was reduced and a new drug was invented, the drug company would have to sell the drug for much more during the patent period to recover the development costs. Three times the price, assuming constant value dollars would at least be necessary. But you could double that to cover the burden of inflation. And double it again because the higher price reduces sales, What you would end up with is then one of two consequences:
1. No new drug at all, because it is uneconomical to develop.
2. Drugs that are ten, twelve, or more times or more costly while they are protected by patent.
What is really called for is a patent period of much more than twenty years, say forty, fifty, or even a hundred years of patent protection.
Thursday, August 13, 2009
You Can’t Push a String
Any thinking person should realize that this nation has serious problems ahead. Between the current federal debt and the underfunded entitlements of Social Security and Medicare place this nation in the position that my grandchildren’s share of the national indebtedness is about $130,000 before they even enter the workforce. Another way to look at it is they will have a mortgage on a house but no house when they are just getting started.
I do not think that any reasonable person could not see that some combination of events will occur in the near future, none of which will be very attractive. Among these events are: a very high rate of taxation, a severe devaluation of the currency, or possibly even a rebellion; and we’ve already seen the embryo of a rebellion in the recent tea parties and heated congressional town hall meetings.
Now if we’re to have a nanny state where the government is going to take care of everyone as a parent does a small child, we need a responsible parent, not an irresponsible parent; one that can say, “No, Johnny, you can’t have that, we can’t afford it.”
I do not think that any reasonable person could not see that some combination of events will occur in the near future, none of which will be very attractive. Among these events are: a very high rate of taxation, a severe devaluation of the currency, or possibly even a rebellion; and we’ve already seen the embryo of a rebellion in the recent tea parties and heated congressional town hall meetings.
Now if we’re to have a nanny state where the government is going to take care of everyone as a parent does a small child, we need a responsible parent, not an irresponsible parent; one that can say, “No, Johnny, you can’t have that, we can’t afford it.”
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