Saturday, June 30, 2007

Over on Youtube, andyj2287 asked the following:

My only question for him is how will his privatized health care system function differently than what we have now. HMO's are ruining the American economy while we have almost every other Western nation providing national health are to its citizens.

How would the incentive structure in such a way as to make people more healthy for less money, instead of trying to bilk money out of an increasingly sicker American public and trying to provide as little service as possible.

Well, we do NOT have a free market in medicine right now. FDA regulation of prescription drugs makes the price of bringing new drugs (and new applications of old drugs) to market makes it so only the most massive of corporations can afford to sell pharmaceuticals. By reducing the scope of the FDA to it's original scope, simply ensuring that the contents of the packaging match the label, enormous competition would be (re)introduced to the pharmaceuticals industry, reducing prices drastically.

In addition, the model where businesses buy health care services and distribute them to employees is also an artifact of government regulation (specifically wage controls during WWII, which lead employers to offer health benefits to compensate for not being allowed to pay people as much as they wanted to). Remove government rules that force all medical care through employers, and the power of consumers to choose from whom they purchase service, and on what terms they choose to pay, would reduce costs, as well as restructuring the medical system to the benefit of patients, rather than corporations trying to just barely meet government requirements.

Finally, there is currently an anticompetitive cartel, protected by the government, that is in control of almost all medical care in this country. Remove that government protection, and AMA certified MDs would soon find themselves in competition not only with a few wacko alternative healers, but medical practitioners of varying levels of training. Nurses would be freed from having to be overseen by an MD, and would be able to do the simple stuff for cheap. Fully trained doctors, having less to do, would have to compete more fully for patronage from people needing more complex medical care.

Simply put, a free market in medicine would work now. A free market in medicine is NOT to be confused with the status quo.

Wednesday, June 27, 2007

What 70 Hard-Won Greenbacks Will Buy Today

In this article, Mark Crovelli makes the observation that, whatever the government chooses to say on the subject, prices ARE rising. I, too, have noticed this in my daily life. I used to rarely pay more than $.89 per pound for fuji or gala apples (generally, one or the other is cheap); now I never see them for less than a dollar, while granny smiths, which were previously an ultra-cheap alternative to these (not to mention those god-awful red "delicious") have risen to the level previously occupied by fujis and galas. I'm definately paying more for fast food; it wasn't long ago I could eat--and eat well--for less than three dollars. Now I drop four and change any time I go anywhere, including Taco Bell. New video games once averaged out at $45.00 or so for top-tier titles; now you probably won't pay less than $60.00, and $70.00 is becoming increasingly common.

It is becoming increasingly obvious that government reports of low general price increases are little more than propaganda. Inflation is always here, but it has sped up in the last few years.I take issue with blaming the Federal Reserve for this higher-than-usual rate of inflation, however. While the FED is inherently inflationary (and not the guardian against inflation they try to claim to be), the current trend is injurious not only to the public, but to the cartel of banking interests that makes up the FED. What's behind the current inflation is not monetary policy from the FED (outside its enabling role, that is), but fiscal policy from Congress.Simply put, all that spending they are doing--particularly the war, but that's hardly the only spending that has increased under the present administration--is being done not with taxes, not even with borrowed money, but with money printed from nothing and spent into the economy. Let me review again, how it works.

Congress overspends. The difference is made up through the selling of treasury bonds. This absorption of available capital by the government would result in a rising interest rate, left as it is. This rising interest rate would slow economic growth, in addition to making it increasingly difficult for the government to finance its own loans. This is the direct result of any kind of borrowing (a reduction in available money, and the resulting increase in the price of money, ie. interest rates), but the destructive uses the government puts it to means that money will never actually be returned; no profit is made, no supplies increased.The FED attempts to avert rising interest rates by buying up treasury bonds. The money they buy it with comes from nowhere; this is where US Dollars see their birth. More dollars are circulating, but this increase in the money supply has no relation to any increase in available goods. Thus, prices rise, while interest rates are held low.

It comes down to the fact that the crisis is caused by Congress. The FED does its best to hide the crisis, which enables Congress to continue, making the problem worse. I have little doubt that a day is coming--and possibly soon--when the probem becomes so large it can no longer be hidden. In the meantime, the rest of us will experience a steady drop in our standards of living. It's a bad situation, overall.

read more digg story

Sunday, June 03, 2007

Three Unproductive Drains of Value: More on Land

My study of the use of comoddities as a backing for money (or as money, itself) has given me a better understanding of what the problem is with land.

A thing has a use. The more people who want to use a thing, the greater the demand. The price of the thing is determined by the demand in relation to the supply. So, for example, if lots of people want toasters, and there aren't many toasters on the market, the price will be high. The result of this is that computer manufacturers will profit, encouraging others to enter the toaster industry, while buyers of toasters will take good care of their toasters so they don't have to replace them, resulting in more left for others. This will result in an increase of supply, which will result in a lower price. This is the typical rationale for capitalism: price works well for dealing of problems of scarcity.

Gold also has uses. You can make electrical contacts. You can make jewelry. Good does not tarnish. I'm sure there are many other uses for gold. And gold follows the same market dynamics as anything else: low supply and high price results ultimately in increased gold mining, which raises the supply, which lowers the price.

However, gold is also used as a store of value. Whenever investors are unsure of the future of the dollar and/or the stock market, they start buying gold. When prospects look good, they tend to sell their gold and buy other things with the proceeds. This use of gold as a store of value is yet another demand; the price of gold is influenced not only by industrial and commercial use, but by its financial use, as well. If we suddenly went from a gold market in which it is only used for its industrial uses to one that uses it as a store of value, the price would go up until production increased sufficiently to meet the new demand.

An example that could well end up happening is the Liberty Dollar. Silver is also used as a store of value, in addition to having uses as jewelry and in photography. However, the Liberty Dollar Organization is attempting to put silver into circulation as a barter medium. This adds an additional demand. The Liberty Dollar goes up with the value of silver. However, if the Liberty Dollar becomes popular, the demand of the LDO for silver will likely end up raising the price, in and of itself.

Land is the same. It is a vital component in wealth generation; no economic activity can take place without land. Because of this, land has a very stable value, one that increases steadily as the economy grows. Because of that, people use land as a store of value. Many buy land not for their own use, but simply so they can sell it at a profit at a later date. In the meantime they may or may not allow others to use it in exchange for rent. The existance of blighted regions is evidence that land investors are not always quick to lower their price to a level people are willing to pay.

When gold, silver, or toasters are used as a store of value, the price goes up. This stimulates production, and the price eventually reaches an equilibrium. This is not the case with land, because land is, by definition, not something that can be produced. If it can be, it is not land. The use of land as a store of value raises the price, making it more difficult for people to establish homes and businesses, thus raising unemployment and/or reducing people's economic independence. However, because land cannot be produced, there is no process that lowers the price of land.

A rise in the price of gold results in increased profits not only for those who are currently holding gold, but also increased activity in gold mining--more jobs, more profits, which ultimately spills over into other areas of the economy as investors in mining look for ways to spend their increased profits. A rise in the price of land has no such spillover benefits. Indeed, higher land prices results in a reduced rate of job creation, because the most vital component of any business plan--land--is harder to get. Fewer people can buy it, thus fewer people can start homes and businesses.

If the use of land as a store of value could somehow be reduced (and I will get to that), it would result in more opportunites for self employment, less urban blight, more efficient land usage, and thus more jobs. More jobs is another way of saying more demand for labor, which means the price of labor (wages) would be higher.