Archive for February, 2010

A peevish post

2010/02/25

Sometimes, I get so frustrated that I wish we would see the results of inaction.  You don’t believe in health care reform, than watch what happens to health care in a few years.  Global warming strikes you as a joke,  just hang around for a while.    The only trouble is, inaction is what we are seeing.  Foot dragging by the wealthy, conservative powers is making action almost impossible.  No matter what is proposed, it is wrong, doesn’t go far enough, goes too far, or is in some other way flawed.

This, of course, is if you can get an admission that there is a problem.  Many conservatives don’t see any problems with our current health care system, in spite of the millions of Americans without access to any other care than what they can get in the Emergency Room.  Or that the costs of health care insurance are pushing states, local governments, and companies into bankruptcy.  Hospitals are providing so much charity care that it threatens their survival.

Perhaps market forces are about to arrange a restructuring of the health care system; As more and more healthy people are dropping their health insurance in these troubled times, the insurance companies are forced to raise their rates to remain profitable.  This leads to the ‘death spiral’, where the only persons with health insurance are the sick ones, and their claims wipe out the insurance company.

One way or another, the system is going to change, because we are not able to afford the continuing rise in costs.  Letting market forces dictate what kind of change we will see means most Americans losing access to health care, as providers leave the field, and insurance premiums keep rising.  Companies will stop offering health care benefits, as well as governments, and the majority of people will not have health care insurance.  Health care will become difficult to find, as doctors and hospitals go out of business.

We have that to look forward to if we continue as we are.

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Future money?

2010/02/24

We live in a country where it is legal to borrow something from somebody, then sell that thing to someone else, for less than it is worth.  Then, when the price for that thing has gone down even more, we buy it back, and return it to the owner.  Of course, it is worth much less now, but that is not our problem.  That is the process of short selling, a financial gimmick that lets people profit on other people’s misfortune.

This is comparable to borrowing somebody’s car, keeping for a while, and then returning it all scratched up.  And I have to wonder, does the person who owns the share know that it is being borrowed for the purpose of short selling it?  Or are the shares being ‘borrowed’ coming from a broker who is representing the owner?  I don’t think that I would lend something to someone with the knowledge that they were going to try to decrease the value of what I was lending them.

The American financial industry seems to have lost all semblance of morality, a reflection perhaps of the greed that it represents   Our materialistic society puts so much emphasis on wealth that people will go to any lengths to have it.  Wealth supersedes family, friends, community, physical health, spirituality, and self-respect.  How can you have self-respect when you know that you will do anything for money?

The malaise affecting the United States right now is the result not of loose regulation, but of the greed of Americans.  Because we are a materialistic society, we equate our self-worth with our wealth.  To have more is to be more worthy.  We do not attach worth to spiritual affairs; a person who is deeply spiritual, with many friends, who has no money, is considered a poor man, of little import.  Helping others, sharing what exceeds our needs of what we have, giving our time to another, these are considered signs of weakness in our culture.

The more we define ourselves by what we own, what we possess, the less likely we are to believe in ourselves when we lose those things.  No one can take away your spirit, your ability to give, your strength.  We surrender those things with our association of wealth with superiority, defining ourselves with qualities that come from outside of ourselves.  To believe in one’s self means to know that you are strong, that you have much to offer those around you, and that you have value by being who you are.  That is where true security comes from, and this is why wealth is false security.

Our beliefs have been manipulated by the greedy, so that we have turned away from the things that made our forbears strong.  We have sacrificed practically everything to promote the accumulation of wealth, while doing little to implement the creation of new wealth.  Short selling a stock does not create new wealth, it merely produces the illusion that wealth has changed hands.  But the value of the stock has declined, which means that wealth has disappeared.  Is this how we are going to make our money in the future?

Losses from profits

2010/02/23

How much profit should there be in a system?  How much money can we extract from something before it stops working?  We have seen what happens when too many people are trying to extract too much money from the system, and push prices to unsustainable levels.  But what about health care insurance?  Should substantial profit be allowed from providing access to health care?  Because that is what the insurance companies are doing, is controlling access to health care, while making a  profit.

And, in order to make a profit, they must first cover all of their costs, which include the people who process the claims, the bookkeepers, the managers, the janitors.  As the insurance industry has grown in size, the percentage of the proceeds from selling insurance going into overhead has probably increased, which means that rates must be increased in order to provide a steady level of profit.  These profits are necessary so that the companies can pay their shareholders dividends every quarter, as well as their own salaries.

Calls for larger dividends mean squeezing more profit out of the system, which usually starts with raising rates.  I would really love to know what the total cost of health care is minus the costs of insurance.  Just the amount that the doctors, the hospitals, the labs, the technicians charge in a year.  By comparing that to the total cost of health care for that year, we could perhaps gain some understanding of what the real cost of health care insurance is.  And, of that cost, how much is pure profit.

Personally, I find it difficult to believe that we can ever reform our health care system as long as the insurance industry is such a major player.  By incorporating their costs and profits into total health care costs, we see a steady increase in what we pay, even though the providers of the health care are not seeing a corresponding increase in their income.

Maintaining large profit margins has other negative effects, such as outsourcing jobs.  Why is this a negative?  Because the people who used to do the jobs that have been outsourced frequently lose the ability to buy the products that they used to make.  This reduces the market for the product, which lowers profits.  Yet, the justification for outsourcing the work was to increase profitability.  Not merely to maintain it, in most cases, but to increase it.

Repeatedly, I have seen American companies managed right into the ground, as profits have taken precedence over quality and service.  What have been thriving businesses going broke because the owners took too much of the income for themselves.  Companies which manipulated their books to appear more profitable than they really were, to keep their stock price up.  Corporations which have ignored sustainable practices in order to maximize profitability.

Unfortunately, there is not enough profit in the economy for everyone to quit working, which is what seems to be the goal these days.  Nobody is interested in doing a job that they can take pride in, they don’t want to even work.  Somehow, being useless, a drone, has become fashionable.  Working for a living is looked down upon, a sign of poor financial sense.  Well, if we keep on pursuing extravagant profits, no one will have to work, because there won’t be any jobs.

Building a better beast

2010/02/22

The United States economy is a sick puppy right now, reeling after over 1 trillion dollars evaporated.  The driving force of the economy in the past, consumer spending, has fallen drastically, as the middle class has been forced to live within its means.  Credit is almost impossible to get, and has become more expensive.  The declining value of homes has made the home equity loan a thing of the past.  Unemployment is scaring people into paying off credit cards, and building up savings.  Federal stimulus money has kept states from laying large numbers of employees, but the money is running out.

Maybe we ought to think about spending some of our money making the country more efficient.  This would reduce our dependence on foreign energy sources, as well as cutting the emissions of greenhouse gases.  Money would be freed up from energy costs, which could be used to increase spending.  Consider:  Many commercial buildings have no insulation.  That is right.  None.  The average home more than 20 years old is seriously lacking in insulation, and often leaks air copiously.

Putting people to work right now is difficult, because plans have to be drawn up and approved, bids taken, and contracts let.  But retrofitting homes and businesses could commence within weeks, if done properly.  Although President Obama talked about a program such as this a few months ago, little has been said regarding it recently.  Could it be that energy companies don’t want to see consumption reduced?  Could it be that Congress doesn’t like giving money to the average American, although they have provided plenty to the big banks and two of the car companies?

Perhaps we could couple improved efficiency with greater reliance on solar and wind power.  Low interest loans for solar panels and wind farms would probably increase the numbers in use considerably.  We are falling behind the rest of the world in the use of renewable energy, especially in the field of solar.  Building and installing solar panels would employ many people if we were to make a national push to utilize them.

Buses are a good way to save energy, and many parts of America have very few.  Building buses financed by federal loans to local transit operators would create employment in the parts of the country which have been hit so hard by the fall in auto sales.  People who ride buses save money which they can use to take their cars out for recreation, whereas people who drive to work often cannot afford Sunday drives.

There are ways to put people to work, right now, doing things that we would benefit from for years and years.  Some seem socialistic, but saving our society seems a worthy enterprise to me.  If we are going to keep borrowing money from China, at least we ought to do something worthwhile with it.

A new economic model

2010/02/21

Right now, we don’t have time for dealing with health care costs, new legislation regarding the financial industry, or immigration reform.  We have a great need to re-invent our economy, immediately, before we slip further into recession.  Our old economy depended too much on manipulating money to make money, on huge profits on inefficient automobiles, and credit.  Consumer spending was the engine of the economy, accounting for 70 percent of all economic activity.

Those days are long gone, and they are not coming back soon.  But our economic model has not changed, and millions of people are sliding into permanent unemployment.  Somehow, we have to find a way to create things that other people, people outside the United States are going to want.  They do not want our automobiles, they do not want our computers, they do not want our clothes.  What does America do better than anybody else?  Besides screw, start wars, and piss people off in general, I mean.

We are the world’s leader in advanced aerospace technology right now.  We are currently operating the only reusable spacecraft in the world.  We have learned tremendous amounts about getting into space and getting back.  By applying that knowledge to the development of a new generation of spaceplane, spacecraft designed solely to climb a short distance out of the atmosphere, and then return, we could lay the groundwork for another industrial revolution, one which would create more new wealth than has been made in all of Earth’s history.

The most difficult part of space travel is the getting into space.  We have to accelerate ourselves to a velocity of 5 miles per second, 17,500 miles per hour, to be able to stay in orbit.  There are several different rockets that can put freight into space, but only a few which can carry people.  The space shuttle is one of them, and it is set to be retired this year.  After that, the United States will not have a way to reach space, and will have to buy seats from the Russians to send our astronauts to the International Space Station.  NASA had been developing an old-fashioned rocket to carry a small number of people into space, but it duplicates the capabilities of several existing American rockets in most ways.  And none of the current or projected rockets will be able to carry more than a few people at a time.

This coming industrial revolution is going require people, lots of people, people who will be living and working in space.  Getting them there is the only thing holding up this new revolution.  Once that bottleneck is broken, investment in space stations; laboratories and orbital factories, is going to start.  The United States has a head start in building the type of spacecraft that will be the backbone of space travel in the future, which will look a lot like the space shuttle.  But, unlike the space shuttle, this spacecraft will only carry people, at least at first.  The parts for the space stations can be sent up on freight rockets that already exist.

But having people use a rocket means that it has to be ‘man-rated’, which means that the chance that a malfunction will result in the death of the crew is minimized.  These requirements add so much weight to existing rockets that they cannot be used.  That is because they all take off straight up, which means that failure will have the crew right in the middle of a whole bunch of explosive materials.

But there is another way of reach space, besides going straight up in a rocket.  By carrying the spacecraft to about 50,000 feet of altitude, the spacecraft can be launched where the air is thin enough that the spacecraft can fly horizontally and still go fast enough that it will reach space.  Lower down in the atmosphere, the air is too dense to be able to do that, which is why rockets launch straight up, then curve toward the horizon.

The United States, under the guidance of NASA, could build the immense carrier wing needed to carry the spacecraft to launch altitude, and the spacecraft that will then fly to orbit, and return, to land where it took off, where it will be prepared to fly again.  This kind of launch system can operate in bad weather, which rockets generally avoid, and does not require huge numbers of people to monitor every aspect of the spacecraft, the launch site, and the surrounding area.  Because a malfunction will simply result in the spacecraft flying back to the landing sight, and not blowing itself apart, with the crew section floating to earth by parachute, it is not necessary to be aware of every detail.

Space flight which does not have to wait for perfect conditions, perfect performance, is the prerequisite of this industrial revolution.  It must be low-cost, safe, and reliable.  We have the ability to make it happen, and doing so in a short time would require the work of many people.  It would also result in many people being paid enough that they could afford to hire housekeepers, gardeners, and music teachers.  Coupled with a national program to improve the energy efficiency of the United States, employment for all could be achieved in a matter of months.

What was spent on the fiscal stimulus program would have paid for the complete development of this new spacecraft, the carrier wing, and the launch and recovery facilities, as well as the ground support needed to operate it, several times.  No other investment we can make offers the potential for larger returns, for new wealth to be created.  Other nations are anxious to take part in this revolution, and some are planning to start it themselves.

But this revolution will need people on the spot, people who can perform experiments, people who can figure out how to make things work, people to keep things working.  Lots and lots of people.  People who will ride to work on spacecraft that take off and land like airplanes.  Spacecraft that we can, and need, to build.

What will the Republicans do if they win?

2010/02/10

Suppose that the Republican party wins back control of Congress in the next elections.  Will they continue to pretend that there is no real problem with health care in America?  Will they scuttle or undue any changes to the financial system?  Will the continue to insist that there is no such thing as global warming?  Will they insist that the government stop supporting the housing market?  Will they begin witchhunts for illegal aliens, condoning armed border patrols by vigilantes?  Will they gut safety net programs to balance the budget?  Will they continue to embrace the radical far right?

These questions come to mind when considering the recent behavior of Republicans in Congress, who have not offered suggestions on how to deal with some of the most serious problems facing this country.  Even though the Democrat proposals on health care reform are very modest, the Republican response has been extremely hostile.  Their proposals are for the ‘market to work things out.’  In other words, let the health insurance companies go on making huge profits while the number of people with access to health care declines.

The Republicans are adamantly opposed to cap and trade legislation for carbon emissions, saying that we cannot afford to mess with the energy sector in this time of reliance on foreign energy.  They steadfastly refuse to acknowledge that possibility that dumping billions of tons of greenhouse gases into the atmosphere every year might have any effect on the environment.  To them, it seems that profits are more important than survival.

Republicans have been very vocal about stopping illegal immigration, yet it seems that the majority of employers who provide those illegal immigrants with jobs are Republicans.  Will they actually reduce the profitability of their enterprises by driving the low cost labor force back to Mexico?  Or will they turn their backs on illegal immigration, but deny these people any access to health care, education, or food?

The Republicans are opposed to the bailouts that were initiated during the administration of the last Republican president.  Are they willing to see home prices fall even more?  They don’t believe that Fannie Mae and Freddie Mac should be given money to make it possible for new home buyers to enter the market, so they must believe that having millions of houses standing empty is a good thing.  Helping people find work is not their way of saving the economy, cutting taxes is.  Somehow, allowing rich people to get richer faster will create new employment, according to that thinking.

It is a lot easier to say “No” than it is to agree to work with someone you don’t like.  If we keep saying “No” long enough, we won’t have to worry about working with anyone, because there will be nothing left to save.  And, no matter what happens, the Republicans can blame it on the Democrats.  That is certainly comforting.

A different kind of space program

2010/02/10

Recently, President Obama released his proposed budget, which strips away funding for the Constellation program, which was created during the last Bush administration to create a replacement for the space shuttle, and provide a means of returning to the Earth’s moon, and going to Mars.  At the same time, this budget increases funding for NASA, without specifying any goals for the agency.

In spite of the apparent contradiction, this is a rational and well thought out approach.  The Constellation program was a giant step backward for the United States, which would have returned us to recovering spacecraft from the ocean when they returned from orbit.  It provided a major defense contractor with huge sums of money for building a rocket which would duplicate the abilities of rockets which already exist, while leaving no money for developing any of the equipment needed to actually land on the Moon and explore it.  Worse, the investment that we have made into the International Space Station would have been thrown away, to allow funds to be diverted to the Constellation program.

The United States has never had a well-defined, sustainable space program.  We have sent people to the Moon, but with no intent of staying there.  We developed the most advanced spacecraft in the world, but refused to use it to its best potential.  We avoided building a space station until prodded by our allies.  Our plan for returning to the Moon was only a stepping stone for going to Mars, but we lack much of the knowledge of how to keep people alive long enough to make the trip there and back.

The most difficult part of space exploration is simply getting from the Earth’s surface into orbit, which requires accelerating to 5 miles per second, while traveling most of the way through an atmosphere which will destroy an object moving at half of that speed.  Returning to Earth means getting rid of all of the energy that was used to reach orbital velocity.  Once we are in orbit, traveling to other places requires very little energy.  It is when we want to land on another world that things get hard.

The technology to reach space is still in its infancy, and has hardly changed in 50 years.  Armies of people are required, perfect weather is needed, and everything must work flawlessly.  This makes it very expensive to get into space, and unreliable.  What we need is a system which would be like the airlines, operating in most weather conditions, with great safety, and without huge costs.  This is what the space shuttle was originally to provide, but the program was never developed properly.  The size of the cargo that could be carried into orbit was made much larger than what had been proposed, and funding for the development was repeatedly cut.

But we still learned a great deal, and we have an opportunity to build upon what we have learned.  By keeping the size of the payload, the cargo that is to go to orbit, small, we could build a space shuttle which would be much cheaper to operate.  By carrying this smaller shuttle to an altitude of 50,000 feet before we launch it, we can drastically reduce the amount of energy needed to reach orbit.  No breakthroughs are required to make this kind of spacecraft possible, no new knowledge must be gained.

For space exploration to progress properly, and for business to get established in space, people are going to have to go into space in ever-increasing numbers.  Currently, the space shuttle can carry 7 or 8 people into orbit, but we are going to retire the space shuttle.  The next biggest spacecraft can only carry 3 people at a time, and one them has to be the pilot.  To make exploiting space feasible, we need to be able to put at least 10 people at a time in orbit.

The United States is the only nation with experience operating a reusable spacecraft.  It has the most advanced technology on the planet.  We have a chance to develop a spacecraft which would be in use for many years, ferrying people to and from Earth orbit.  This is the kind of future we should be investing in.  This is the kind of technology that would make us money.  This is what is needed to open up space for development, not another rocket which can send 4 or 5 people to the Moon.

Before we start planning trips to other places, we need to learn how to get from Earth into space safely, cheaply, and reliably, with at least 10 people at a time.  We need to be able to go into space in all kinds of weather, and without having hundreds of people involved.  Space will be the setting for the next industrial revolution, for the creation of more wealth than has been created in all of human history.  People will have to go into space to make this happen, lots of people.  Sending them there 3 or 4 at a time is not going work.  We need to take the next step in space technology, to develop the next generation of space vehicle.  Once we master getting into space, the rest will be easy.

Let’s see some real financial regulation!

2010/02/02

President Obama’s push to reform the financial system is causing disquiet in many executive offices.  Yet he has not proposed any serious changes in the way that business will be done, instead merely expressing a desire to create a source of funds which would be used to bail out big banks that get in trouble, as well as seeking some form of protection from predatory lending for the average consumer.

No one has suggested taking steps to stop the underlying problem with the financial system, which is the selling of debt to investors.  What used to be standard practice was never regulated, because there was no need.  Banks traditionally carried the loans that they originated to maturity, even 20 year mortgages.  There was no law saying that they had to, it was just the business model.

Bet greed changed things around, and banks discovered that they were able to sell those loans to other banks, which then packaged vast numbers of those loans into single investment vehicles, the infamous ‘collateralized debt obligation.’  Add the ratings agencies willingness to give these vehicles AAA ratings, and a whole new realm opened up.  Gone are the days when the bank that wrote the mortgage was there to keep an eye on the borrower, or when a borrower could call the bank to talk about altering some aspect of their mortgage.

Mr. Obama also wants to stop the credit card companies from engaging in loan shark behavior, but his proposals do not address the penalties which banks can impose when a creditor is late with a payment, or goes over their credit limit.  Nor does his proposal prevent credit cards from being issued to people who are likely to get behind on their payments.  This has been a source of great revenue for credit card companies, at least on paper, because they can impose fees which, when combined, exceed the amount of the monthly payment whenever a creditor slips up.  These fees can add up very quickly, so that a person with a 500 dollar credit limit is suddenly 1200 dollars in the hole over a credit card.

The credit card company counts that 1200 dollars as real money, which increases their net worth, irregardless of the ability of the creditor to pay.  This can lead a person to file bankruptcy over credit card debt, which hinders their ability to rent an apartment, get a job, or even to travel, while the credit card company is faced with charging off substantial amounts of money it had been treating as already in its pocket.  Instead of increasing consumption, the credit card company has hurt the prospects of consumption growing.

The business leaders of this nation have got to stop trying to increase consumption by handing out easy credit, and banks have got to stop trying to grow their profits by selling debt over and over again.  Investors need to be putting their money into ventures which will create real, concrete growth, not numbers in accounts which can disappear overnight.