Recently I read this article on the soccer-mom outrage of the week: Child labor in chocolate. The article is basically saying that chocolate comes from child slavery and therefore we should give only certain "fair trade" corporations all our money. To put it mildly, the article has some inaccuracies. Though it does seem like a good portion if not the majority of chocolate is produced in part with child labor, only a small portion of that is likely to actually be slavery.
Ignoring the slavery issue (as we all can agree that slavery is bad and should be stopped or at least not supported), I don't think it to be the case that the parents of children in the 3rd world love their children and care for their welfare any less than those of western countries. That is not only racist but silly. If parents could keep their children home or in school, they would. The real question is: Why aren't they? Working in sweatshops, or in this case, a cocao farm, is usually the best of a short list of options. Usually, in fact, the other option is subsistance farming which is utterly horrifying.
When child labor was banned in Bangladesh, a study by the humanitarian organization Oxfam found that the majority of children moved from working in sweat shops to child prostitution, more dangerous / low paying jobs, or simply starved to death. Children in Bangladesh were responsible for about 25% of the family's income. For the impoverished, this often makes the difference between eating and not.
We are educated in our western schools to think that simple laws and boycotts can alter these practices because we are mislead as to our own history. For hundreds of years, people in what would become the United States assumed that it was pretty much a given that you were going to work as soon as you are able until the day you die. This is because the productive capacity per capita was so low, the family literally could not support anything else. By the time the US started outlawing child labor, the free market had already created enough disposable capital so parents could allow their kids not to work--this is about when "common schools" (aka Public schools) started coming about in the United States. The early progressives of the late 1800's and early 1900's take credit because they made "laws," but in reality, it was just the increased productivity of voluntary exchange and technology (AKA the market) allowing parents a new option other than putting their children to work, and politicians grandstanding on beating a horse that was already dead or dying.
If we were to suddenly boycott all chocolate that is guarantied to be child-labor free, the first thing that would happen is all those children making it would lose their job, and the second thing is what happened in Bangladesh. A return to subsistance farming is a serious step back for these societies.
What we should do instead is make sure we are buying from areas that don't have strict government interventions or are taking the excess productive capacity through slavery, taxes, and other extortive practices, preventing the markets in those areas from developing naturally. The poorest places on Earth are usually the ones with the most economically oppressive governments. (128,572)
NOTE: The images and media in this video are presented under fair use for educational purposes, all rights reserved by the original owners.
This wont be part of the Cost of Care Series, simply because it would make the title too long. It is in a similar vein though, probably some repeat material as I didn't bother to read why I already posted. Here is the Transcript:
(Pic: O'Rourke quote) In the previous video we talked about how the United States doesn't have a free market in Healthcare, and alluded to why the prices are so high. I spoke mostly about Medicare and Medicaid and mentioned that over half of all healthcare dollars are actually managed and spent directly by the government. (Pic: Tea party) When people compare our system to a "socialized" system, what they are forgetting is that our system is greater than 50% socialized already.
(Graph: Healthcare Vs GDP) Here is a graph of healthcare expenditures as a percentage of GDP. In 2011, >18% of the total productivity of the United States was devoted to healthcare. In pure dollar terms, the numbers are even more dramatic, even adjusted for inflation. The United States government alone spends more per capita than any other government in the world on healthcare, and that only covers medicare and medicaid patients. (Graph: Per Capita Vs Others) With public and private insurers combined, we spend more per-capita than any other country, and our per-capita spending is 50% higher than the runner-up. We now have an idea of the scope.
(Graph: Obesity Rate)There are many other contributing factors for the rise in medical care. People are demanding more care due to poor lifestyle choice. The obesity rate is now at 40%. In addition, people have more disposable income than they used to have, and the quality of healthcare as well as availability is better. It makes sense that they would want to spend it on something to help their quality of life and to attempt to live longer.
(Graph: Tort Costs) In addition, the cost of dealing with medical malpractice have risen dramatically. Though these costs are still only a small part, there's also the matter of increased spending on tests due to doctors being more and more worried about getting sued, which is extremely difficult to quantify. (Graph: Trial Lawyer Donations) Making things worse, trial lawyers donate more money to congressional elections than the entire healthcare industry, making reform in this area impossible.
(Pic: Colonoscopy) People are also demanding more and more preventative medicine, which costs far more than it saves. In addition, the demand for elective procedures is rising as they become safer and doctors start recommending them more. (Pic: Cialis ad) That's not to mention the demand for expensive new prescription drugs both by doctors and patients which often provide little benefit over cheaper existing medications, or are for conditions that are not medically vital. This is, of course, perfectly fine, however in other industries consumption usually rises as prices fall, often corresponding with less share of personal income being spent on the product.
(Graph: Meat Consumption)For instance, You can see from this graph that people have been eating more meat over time. (Graph: Disposable income Vs Food) However over time, people have been spending less of their disposable income on food. (Graph: What Work buys) In fact, take a look at this graph which shows how many hours of work the average American would have to put in to earn common consumer goods. (Pic: black) Why is it that healthcare doesn't follow this trend? Quality may be rising, but costs are rising even faster.
(Pic: black)In this video, I'll talk about a problem that bares even greater responsibility than the the elephants in the room run by Uncle Sam and all the aforementioned factors. This is something totally ignored by politicians but most economists say it is central or even the most important reason costs are rising.
(Pic: Third Party Payer big) Of course I'm talking about 3rd party payer, and why government is to blame for the astronomical cost of medical care.
Third party payer refers to the practice of health insurance companies taking your money and using it to pay your medical bills for you. Insurance is supposed to pay for things that are unlikely to happen. Health insurance by contrast, has come to mean reimbursement for just about anything health related. On the face of it, this doesn't really make sense. Here's John Stossel's take on 3rd Party Payer
(Pic: 3rd party payer cartoon1)No one would want to purchase car insurance that pays for regular maintenance on your car like oil changes and new tires. This adds a large transaction cost to everything bought and paid for using the service, but that's only a small part of it. Clearly your insurance premiums would never add up to more than you could hope to get reimbursed for. (Pic: Car Fire)Any insurance company that reimbursed more than uncollected would go out of business. You would have to slice your tires every day on the way home from work and buy the best tires in the store to replace them just to get your moneys worth. Unfortunately, people treat health insurance differently than other insurance, but there is a reason for this.
(Pic: Cartoon: 3rd party payer2) As ridiculous as it is to have a middleman on common things that everyone buys like regular checkups and screening tests, there's an even bigger problem. Since you're paying a flat fee for all the services and drugs you could ever want, there's no incentive to shop around or to use them in moderation. This allows incredibly inefficient institutions to exist in spite of their high prices, as well as inflated prices on drugs, hospital stays, and doctor visits. Here is Nobel Prize winning economist, Milton Friedman, on the subject.
(Pic: Middleman cartoon)It's clear that health insurance is a great thing to have in case of serious injury or illness, or a chronic or terminal disease that is expensive to treat, but having a middleman setting up an "all you can spend" health buffet is not something that makes economic sense. As with common practices that don't make economic sense, the origins of this are squarely rooted in government policy.
(Pic: Tax Seq1)For decades, taxes have been rising on the wages of employed Americans. The average personal income tax rate on median family income was(Pic: Tax Seq2) 7.4% in 1955 and had (Pic: Tax Seq3)risen to 12.2% by 2010. On top of that, you add in Social Security and medicare taxes, which were at (Pic: Tax Seq4) 4% in 1955, and had risen to (Pic: Tax Seq5) 13.3% by 2010. It should be noted also that the maximum taxable income of Social Security and Medicare taxes is rising as well.
I only point out these taxes to make one observation: The total average American family's wages have increased in taxation from roughly (Pic: Tax Seq6) 11% in 1955 to (Pic: Tax Seq7)25% today, (Pic: Tax Seq8) and that's just on the federal level. At the same time, compensation by employers in the form of healthcare has been (Pic: Tax Seq9) totally untaxed. Again: 11% taxes in 1955, 25% today, and all the while employer-provided health insurance has been taxed at zero. The results of this tax policy are as one might expect, but before we get into that, how about a little history?
(Pic: FDR Cartoon) Employer provided health insurance is said to have arisen because of the wage and price controls of WWII. Employers wanted to pay their employees more but FDR's misguided war-time technocrats were trying to micromanage the economy. Therefore, their only option was to find other ways of reimbursement besides wages. Health insurance as a form of reimbursement was taxed much less than other wages until 1954 when all remaining taxes on the practice were removed. It was only natural therefore that employers and employees follow the incentives right into this arrangement. (Graph: Rise of Insurance 1940-60) Between 1940 an 1960, the number of insured went up 7 fold.
By 1965, a little less than 75% of the population had some form of health insurance, and that number was rising rapidly. (Pic: 1960's Insurance) However, even with this rapid rise in the insured, it was rare that anyone be insured for care not involving surgery or hospitalization. For patients seeking treatment in an outpatient doctor's office or wanting a yearly checkup, it was traditional to pay out of pocket. Medicare Part B, passed in 1965, helped changed this trend, but the economic reasons for the insurance companies to adopt this are obvious.
(Pic: HealthCareDollarsAt Work)Because of these government policies, health insurance has changed from actual insurance to a way for employers and employees to subvert the tax code. This leads to modern "insurance" covering much more than insurance ever should. Regular checkups, preventative medicine, elective procedures, and chronic medications are all covered by the majority of todays plans.
(Graph: Rise of 3rd party payer) Now let's take a look at the rise of 3rd party payer and the fall of patients directly paying for their own medical care. In 1960, roughly 47% of all dollars spent on health care were paid out of pocket, by 2008, that number was down to 12%. The rest is paid for by government and private insurance companies.
(Graph: Healthcare Vs GDP) Take a look at the graph of Healthcare Vs GDP once again. These costs are rising far too astronomically to be accounted for by other factors. There is something fundamentally wrong with the incentive structure of this industry. Also, it seems to be inexplicably immune to recession, unlike other industries. This is the typical pattern of government intervention. Given that these things are true, what do you think the effect of Obama's 2010 healthcare reform will be?
(pic: black) Essentially, the Patient Protection and Affordable Care Act of 2010 AKA Obamacare will force the market to increase coverage and therefore will increase costs. It's said by some economists that there's a critical mass for healthcare spending. If that's true, we're certainly moving in that direction a lot faster.
(Pic: serenity) The good news is, there's a simple and elegant solution to solve this issue in an orderly and decisive way. Government could start to once again tax employer-provided health insurance. Alternatively and in my opinion, preferably, the government could (Pic: abolish IRS) abolish the income tax altogether. This would eliminate the incentive for employer provided healthcare, and over time the practice would be eliminated. As that is happening, people will realize that high deductible insurance is actually much cheaper. Removal of other government intervention could further lower costs, like state insurance regulations that reduce competition. (Pic:Medicare Monster) It would also be beneficial to eliminate Medicare's "discriminatory pricing" policy whereby if a doctor sees someone for free or less than they charge medicare in his/her office, they can be subject to a raid by the federal government as well as fines and imprisonment. Essentially, the further government gets away from healthcare, the more affordable and accessible it will become.
(Graph: Government Spending Vs 3pp) Unfortunately the largest 3rd party payer is government. Though prices will come down dramatically if government stops manipulating the private sector via the tax code, (Pic: Old Lady Sequence) the problem of government being such a large payer will likely still remain. Obviously raising co-pays and instituting a deductible into Medicare and Medicaid would help, but these solutions are so politically impossible it gives one a headache to even contemplate. In fact, Americans are so addicted to Medicare that even the accusation of mentioning cuts in medicare is considered a devastating attack in political campaigns. With elderly voters flocking to the candidate who promises to continue this unsustainable system, it will likely be the sacred cow of the US government for years to come, even with our impending fiscal issues.
(Chart: Negative Income Tax) I would also like to mention at this time Milton Friedman's elegant solution to the problem of entitlement spending: Instead of offering food stamps and healthcare, Friedman and most other economists suggest a "negative income tax" whereby the government just writes an impoverished individual a check for an amount to bring their income up to an acceptable level. They could then use the money at their discretion, and make decisions that are best for them, rather than what the government deems appropriate.
(Pic:MLK sequence) Under a truly free market system, customers would purchase health insurance like they do life insurance: When they are very young, for their whole lives, and at very low premiums. Just like with Life Insurance, they could keep their plans when they switched jobs, moved from State to state, or developed a chronic or debilitating disease. Perhaps insurance could be purchased even before birth. It sounds far fetched, but with a high deductible plan and the prices of healthcare actually coming down instead of rising, this is not only feasible, but likely.
So in case the policy decisions of raising income taxes for the upper brackets and printing money to give away to large corporations (especially banks) were too subtle for you to understand the point, Geithner spells it out in this congressional hearing.
He's basically acknowledging that a tax on people making over 250k is going to directly impact small businesses. He acknowledges small businesses create the majority of jobs but continues to assert that we need the money to "stimulate the economy." He is saying that if the government shrinks, the Keynesian perpetual motion machine will break down and all the worthless government employees we pay for will have to find new jobs.
I'm glad someone in the administration is willing to admit they hate small business in favor of huge government and big corporations. At the same time, it's highly depressing he can openly admit it like this with basic impunity. (238,829)
The thing is, the logical conclusion of Keynesian policy is that it's ultimately impossible to know when there are "good times." Thus, the constant overspending by the government is a logical conclusion of Keynesianism because central planners will never get their predictions right. - vagabondvet
I went to an astrologer once to "get a reading" (before you judge, it was a friend and I was curious). On a few points in the interview, I asked questions that were apparently a little too specific. She shuffled around her half-crumpled papers with scribbles and symbols and would eventually point at one random spot in the gibberish and proclaim "Ah! Here we go. As you can see, this calculation here indicates that ______."
I'm embarrassed to say that I actually knew a thing or two about how the calculations were done and gently inquired about why she was pointing at things that clearly had no relevance to what she was saying they did. At one point she rotated the paper 90° and started talking about "seeing through the numbers" and then defensively reminded me of how long she'd been doing it and her "results."
Our overlords can see through the numbers. It's best to just take their word for it and go about your business.
The law, signed last week by President Obama, exempts the SEC from disclosing records or information derived from "surveillance, risk assessments, or other regulatory and oversight activities." Given that the SEC is a regulatory body, the provision covers almost every action by the agency, lawyers say. Congress and federal agencies can request information, but the public cannot.
Now that Greenspan is no longer working for the government, he's once again turned into a capitalist.
In a rant he recently wrote for the WSJ, he said “The United States, and most of the rest of the developed world, is in need of a tectonic shift in fiscal policy ... Incremental change will not be adequate.”
He went on to say that “Perceptions of a large U.S. borrowing capacity are misleading,” and current long-term bond yields are masking America’s debt problem. “Long-term rate increases can emerge with unexpected suddenness,” such as the 4 percentage point surge over four months in 1979-80.
“The federal government is currently saddled with commitments for the next three decades that it will be unable to meet in real terms,” Greenspan said. “[The] very severity of the pending crisis and growing analogies to Greece set the stage for a serious response.”
He also says that yields on U.S. Treasuries have decreased in recent months (demand has increased) because of the European debt crisis--a situation that is likely only temporary. This is of course directly contradicting Bernanke's latest tirade against the Gold Rally in which he suggested that the low yields on US Treasuries in recent months were a sign of long-term stability (a pack of lies Latewire immediately called out).
10-year Treasury notes yielded 3.20 percent as of 12:11 p.m. in Tokyo on June 17th, down from the year’s high of 4.01 percent in April and compared with as high as 5.32 percent in June 2007, before the recession began. Yields continue to be low “despite the surge in federal debt to the public during the past 18 months to $8.6 trillion from $5.5 trillion". Greenspan says this shift in demand from European into American Bonds is “temporary.”
“Our economy cannot afford a major mistake in underestimating the corrosive momentum of this fiscal crisis,” Greenspan said. “Our policy focus must therefore err significantly on the side of restraint.”
I couldn't have said it better myself. Can you please tell your former underlings that?
Federal Reserve Chairman Ben Bernanke says he’s a bit puzzled by surging gold prices. The 30% rally from a year ago, on top of gains in previous years, ... Gold is seen by many investors as a hedge against inflation risk.
Mr. Bernanke notes that the inflation signal isn’t confirmed by movements in other asset classes.
That's because the CPI is complete BS, and everyone knows it (with the possible exception of Bernanke). Of course he's also leaving out such asset classes as "Food" and "Energy" (apart from Oil). Plus his whole "reflation" strategy is keeping prices high as household income declines (fewer hours, worse wages, unemployment), plunging everyone but the super-rich into horrible poverty (worse than we would've had even with just the recession).
Yields on Treasury bonds tend to rise when investors worry about inflation, but those yields have been falling recently.
1) People are fleeing the Euro 2) The fed is BUYING THE FREAKIN BONDS IN RECORD NUMBERS ON THE SECONDARY MARKET
Inflation expectations as measured in Treasury Inflation Protected Securities (TIPS) markets remain low.
And other commodity prices are falling. Gold is breaking records, but copper prices are down 17% so far this year.
Demand for copper, now that the housing market is on its last legs, is going to be reduced from the highs the federal reserve and other government agencies artificially raised them. The copper bubble popped with the housing bubble, and as of yet Bernanke hasn't been able to inflate your way out of it. Not to mention the fact that China is no longer stockpiling all the copper on the planet. (274,471)
Markets are panicking, Greeks are rioting, Hungarians are having conniptions, and the rest of the over-leveraged world is finally asking the question: when is it going to be my turn?
Meanwhile, the economics enthusiasts here at Latewire/InflationHell, as well as some of the actual experts have been notably silent. You may be wondering why that is (or you may be wondering how water-activated growable sponge animals work, but we're not going there so shut up). I think even some of the more famous soothsayers (who we plagiarize unabashedly) have been a little quiet lately on the bad reports (only today did Peter Schiff release something about it).
The reason why is that... well... what's there to say? The writers here as well as other believers in Austrian Economics have put enormous effort into writing essays, books, lectures, and even publishing educational videos on history and governmental fiscal figures. We explained why 2+2 does not equal 5, no matter how much the Fed says it does. We told you things were unsustainable, we told you the how and the why. You'll notice that some other economists/financial "experts" who were predicting a continued rally or recovery are either scared speechless or rationalizing/modifying their statements.
It dawned on me today, after a long night of heavy drinking, that there is one thing we should probably be reporting at this point.:
We told you so.
But don't worry, this is only the beginning. This is just the tip of the debt-crises iceberg.
Yes, we realize that these numbers are wacky partially out of fear and panic, and they'll wax and wane for a while as the changes set in. We also realize that it is extremely early in the decline, and that these "bumps in the road" are unpredictable in the temporal sense. Rest assured though, soon enough the people of these countries will finally realize how leveraged they are, that their standard of living has been a lie, and that now they and their children are going to pay for their mistakes with compounding interest for a very, very long time. At that point, you wont have to come to our website to view images like these, you can just look out your front window.
In possibly the biggest revelation in history: Could my favorite talking head (actually, the only one I can stand) also be a fellow fan of Dewars' White Label? For those not in the know, Dewars is the best scotch under $100/fifth (at least from what I've found). It's also my liver's arch nemesis as they have done battle on many, many occasions.
In his latest installment of his show "Stossel" (his show on gambling), John throws in clips of him and others playing Texas Hold 'Em with a fifth of Dewars' White Label sitting right in front of him. Is that his beverage or is that a prop? This question must be answered, John.
A few days ago Sachs was sued by the SEC, ostensibly out of nowhere (they weren't even given the customary prior-notice to prepare). This is an unquantifiable mountain of horse-shit. I'm not saying they haven't done anything wrong, I'm saying that everybody knows it's a show-trial and nothing will come of it... well, everybody but the average American, that is.
The average American will see this as a fresh reminder of why we "need" financial reform. When Obama gets up on stage and finally signs this shit into law, most Americans will be watching it live on TV--clapping their sausage-digitted mits together, resulting an enormous orange plume of Dorito-dust which will likely be the 3rd of man's creations that will be visible from space.
Make no mistake: This isn't being done to penalize Goldman Sachs. This fact is so obvious that even the GOP is calling them out on it.
It's not just about the financial reform bill, either. What makes this particular moment in time the most strategic for distraction is that the SEC was finally forced to acknowledge 13 years of epic failure. Long story short: A guy ran a $7 billion ponzi scheme, was investigated by the SEC for 13 years and found to be extremely dirty. Four Times. They never prosecuted--that is, until now. This whole Goldman Shit-fit is almost certainly related. (301,759)
Someone pointed this out to me earlier and it seems pretty obvious:
1) The goal of every elected official is to get reelected above all else 2) The Republicans probably could have blocked or stalled the bill if they'd really, really wanted to 3) It helps Republicans get elected a lot more if they run against a hated opponent rather than running on the "I stopped the healthcare bill" 4) People will hate Republicans regardless, but if they hate the Democrats more for a brief stint, they can win back congress 5) Given all this, do you really think they put forth their best effort to block the bill?
Don't fall into the trap. Reps would've passed this bill (or one close to it) too if they were in power, just like they passed the Medicare Drug plan and all that other crap.
Next time you go to the polls, just remember who these assholes are, ALL of them. (289,222)