Anandakos's Comments

People vs. Profits: The Great Health Insurance Myth

Sat, 19 Dec 2009 14:54:56 -0500

This article merely demonstrates that "health care insurance" as commonly understood is only partially insurance. There are really three distinct elements of health care: "wellness" support, public health activities and catastrophic emergency care. Emergency care can reasonably be insured because it is episodic, but wellness and public health cannot, because it happens continually.

We need to separate the three elements by periodicity and funding mechanism.

Wellness is to some degree a personal decision. The ways in which I may choose to support my physical and emotional health may not be the same as yours. We should have the freedom to choose modalities and the extent to which we pursue it. "Wellness" would include treatment for a sprained ankle or a bad cold as well as checkups and lifestyle counseling. Most of this care could and should be personally paid for, with public support for children and poor people.

There is room for non-profit providers of wellness for people who want to pay monthly instead of episodically in order to maintain a budget. Tax sheltered health care savings accounts are another way to accomplish this.

However, in order to make personal responsibility for wellness possible, negotiated "discounts" for health care systems greater than the average loss from unpaid services given to direct payers should be outlawed. Most physicians have "cost reductions" of up to 40% extorted by the carriers, most of which increases the carriers' profits or is consumed in lower premiums to employers.

Providers need to charge direct payers a little more as a result of losses on deadbeats, but they do so much more as a result of the extorted discounts.

Public health is by definition "public" and should be supported by taxation. This should include immunization, pregnancy and well-baby care, and lifelong care for sufferers from genetic diseases like Muscular Dystrophy, type 1 diabetes, and birth defects. The patient has and had no responsibility for these sorts of illnesses.

On the other hand, catastrophic health emergencies -- and by "emergency" I don't mean only traffic accidents and falling off a ladder -- CAN be provided by regulated insurance providers, who should be allowed to make a reasonable profit, obviously. THIS is the place for mandated coverage so that the risk pool includes the greatest number of low risk individuals.

The entire health care fiasco has been warped by our historic conflation of these three elements of health care provision into one employer-provided package. Because only a portion of the money flowing through the system can in fact be invested against catastrophe, the incentives for ethical behavior as an insuror outlined in the headline post are overwhelmed by incentives to cheat patients and providers.

Is the Market Reversal Already Happening?

Mon, 23 Nov 2009 05:10:50 -0500

I very much agree that taxing carbon would have been FAR better. The current cap and trade is so eviscerated that it won't accomplish much, but will guarantee trading profits for big coal and utility companies.

I'd prefer to see a mandatory universal single payer catastrophic system and leave the rest to the private sector. I think some fellow from the Hoover Institute suggest that "catastrophic" be defined as a percentage of last year's income. Something like 25% or thereabouts.

That gives people the opportunity to save up a quarter of their annual earnings or buy private insurance to get to the Federal level, preventing fiscal Armageddon for families, but allowing reasonable premiums.

In the years following the onset of a debilitating disease, the threshold of Federal payment would fall because a debilitated person has no income.

It also removes the quarrels about pre-existing conditions, rescission, and the "public option".

Do calm down about "protectionism" though. Since we don't make much except airliners, grain and CDO Squareds here in the US anymore, what do we care if other people raise tariffs on our exports? With a few well-placed tariffs we might be able to make some things again.

You're smoking some old leftover John Birch brand pre-Fidel Cuban stogies if you think that organized labor controls this administration. Ha. Ha. Ha.

And finally, how in hell do you propose to pay for the debt which means so much without raising some taxes? Yes, spending needs to be cut, mostly on Imperial Wet Dreams and no-bid contracts. But most of the difference between 19% brought in and 25% spent is W's tax cuts and the spending to catch the economy falling off the step ladder.

Your characterization of Democrats shows an excessive intake of Vitamin G. Poisoning by this vitamin is shown by enlargements of the abdomen and buttocks caused by lethargically channel surfing between Fox News Channel and the WB.

On Nov 22 10:52 AM FB5000 wrote:

> I have to admit I quit reading when I saw a 90% correction in the
> S&P.
>
> Market PE of 88? Really?
>
> Where do they find keep finding these Klowns?
>
> You are in a low inflation, low interest rate environment. Productivity
> is high, corporate profits are increasing, world trade is increasing,
> retail sales are rising
>
> The negatives are housing - expect it to continue to lag - and large
> and growing govt. debt and an expansion of entitlements. Increased
> taxes are coming. This is not a bad thing if the money used on good
> programs and to pay down debt. And if the tax burden is more evenly
> spread over the society.
>
> The market is where it was in 1998. On balance you should expect
> continued improvement from these levels. Especially as economic growth
> accelerates into 2010, profits rise and rates stay low.
>
> We will see employment growth in first half 2010 and rising inflation
> later into 2010. Rates will have to rise.
>
> This is not a bad environment and markets reflect that - once Armageddon
> was averted.
>
> The real risks are political
>
> 1. Cap and Trade - a stupid piece of legislation. Just tax carbon.
> Cap and trade will impose costs but not achieve the desired outcome.
>
> 2. Healthcare "reform" - a very stupid piece of legislation. This
> could be done at a much lower cost. I hope the bill is thrown out.
> This would be very bullish.
> 3. Protectionism. Obama is an instinctive protectionist. This is
> very very very bad. I hope he gets better advice. The Clinton approach
> would be far better - Larry Summers are you listening? Or is nobody
> listening to you? Hard to imagine
> 4. Organized Labor. Andy Stern is now basically living in the White
> House. This is very bad. Andy would like to organize the world. He
> may do it. Obama needs to get away from this concept. It is the job
> killer.
> 5. A stupid desire to Tax the life out of the "rich". Class based
> ideologically driven garbage thinking does not lead to prosperity.
> Ask the British who lives through the 1960's and 90% marginal tax
> rates.
>
> Avoid those 5 things or get rational Carbon and Healthcare legislation
> and smart Tax reform and we will see new highs in the S&P and
> 4% unemployment before the next Presidential election. Obama gets
> re-elected and the Republican party splits into a moderate wing and
> crazy - Glen Back wing. Guaranteeing the next 20 years of Democrat
> rule.
>
> That's all.

The Bair-Miller-Moore Haircut: Answering Felix Salmon

Mon, 23 Nov 2009 04:49:55 -0500

Hey folks. Anybody here willing to pay 1.1% more on your home mortgage in trade for making sure that the banks don't go blooey again? Line up!

The Bair-Miller-Moore Haircut: Answering Felix Salmon

Mon, 23 Nov 2009 04:48:00 -0500

Ah the good old days when we bankers could bloviate about how policies to make us rich would make other Americans fabulously weathy. That was a hale and halcyon era my friends. We could make any stupid shit at all up and people would buy it hook line and sinker. A sucker born every second! Screw the minutes; they'll take care of themselves. Seconds lever us up 60X.

Chinese Exports: Can Emerging Markets Replace the U.S. Consumer?

Sun, 15 Nov 2009 23:22:16 -0500

Silver-bug,

Unfortunately, you can't put your bets on China. They won't let you. While they have certainly welcomed investments by foreign corporations with open arms -- providing that they brought lots of technology to steal -- they do not actually allow foreign individuals to invest in their stock market.

When you buy a "China" fund you're buying shares in businesses that have factories or other operations in China, not Chinese companies themselves.

So good luck betting on China. When they're satisfied that they have bled those foreign companies dry of technology, they'll tax them out of existence and you'll lose your entire investment.

On Nov 13 05:17 PM silver-bug wrote:

> Good charts and diagrams, but I would like to see the demographics
> of the Chinese population, because that is the driving force of their
> economy. China has a growing middle class, as opposed to the shrinking
> middle class in America. It has a labor force of over 800 million
> people, and these are hard-working people who save money to buy things
> instead of using credit. China has $2.3 trillion worth of reserves
> to spend, and it spends this money wisely, developing infrastructure
> and obtaining vast amounts of natural resources for growth. And
> Chinese government is also providing a fiscal stimulus for it's people,
> which is also being spent wisely by the people.
>
> So, I think China has the ability to soak up the export slack with
> an increase in domestic consumption. It may slow down a bit, but
> it won't be significant. Most of the economic growth in the world
> will be driven by China and then followed by India, and other smaller
> eastern emerging market nations.
>
> I would put my bets on China.

Understanding Energy: Professional Money Management and Peak Oil

Wed, 28 Oct 2009 04:17:57 -0400

Finc 101,

I worked for ten years as an I/T person in the geosciences departments of Sohio, Amoco, and Shell. I've seen the large-scale deposit maps. There are over 2.5 million ten-digit API base numbers (the well head identifier) in the continental United States.

They are everywhere<... that igneous or metamorphic rocks are absent at depths of less than 15,000 feet. The cheap glory holes you are imagining have all been drilled. The only significant hydrocarbon accumulations in onshore North America are trapped in thin strata between impermeable shales, like the Bakken deposits underneath the upper great plains.

Many have been known about for a long time, but the thin "pay" made them uneconomical to exploit with vertical drilling techniques. Now that we have horizontal drilling and fully steerable bits we can exploit them, but the thin pay is still a limitation to the total deposit. There are no more supergiants in North America, expect perhaps offshore in the Gulf.

Anything else is a gnat bite compared to America's voracious appetite for liquid hydrocarbon fuels.

On Oct 27 11:51 PM Finc101 wrote:

> The reason why oil is so expensive is because drilling is so expensive.
> In the early days of oil almost all discoveries were made by the
> inexpensive cable tool method. This is a slower drilling process,
> but requires only 2 men crews and can drill thousands of feet deep.
> It is very simple and requires no mud pits, pumps or other capital
> intensive equipment. In fact, almost all of the great Texas oil fields
> were discovered this way. If we wanted more domestic oil production
> and more domestic oil discoveries, the US must allow wildcatters
> to utilize this cheap drilling method and find more oil. Currently,
> this method is made impractical by regulations require anti blowout
> equipment and other devices designed to elimiate waste and damage
> to the environment. If drilling is cheaper, then the well exploration
> process can be riskier (producer or dry hole) and dont have to produce
> as many barrels per day to be profitable. It changes the whole economic
> picture of drilling from one of hiring expensive contractors to a
> DIY proposition potentially. There is no way that the fields in
> P.A. or Texas would have been discovered by using todays expensive
> methods, no one would have taken the risk to drill. We need wildcatters
> again to discover new fields on the cheap.

Understanding Energy: Professional Money Management and Peak Oil

Wed, 28 Oct 2009 04:09:28 -0400

Perceptions,

Well said. And this is another reason to put money on China. We may all be leery of the techno-fascist government of the country, but they are following exactly the correct path for an oil-constrained future.

In ten years they have opened as many kilometers of HSR as exist in Europe. They have stated a national goal that 20% of cars sold in the country will be electrically powered by 2015. Yes they're building coal plants too rapidly, but they're also dumping gigayuan into solar energy production and use.

On Oct 27 08:55 AM perceptions_now wrote:

> Regrettably, I am of the opinion that Oil Production has already
> effectively Peaked in 2005, in that it has subsequently failed to
> keep up with inflation, Demand or Population growth.
>
> There are no new sources of Oil, which will now prove sufficient
> in size to overcome the depletion of the existing, but decaying old
> super fields.
>
> If we were just treading water, with no growth, we would need 1 new
> Saudi Arabia every 3 years!
>
> If Production were to keep up with inflation, Demand & Population
> growth, then another 2 Saudi Arabia's would need to be found &
> put into production every 3 years.
>
> New unconventional sources such as Canadian Tar Sands & Shale
> and the newer deep water fields are simply not sigificant enough
> to offset the depletion rates at the old super fields, such as Ghawar.
>
>
> I suspect the current Production plateau may continue, for a short
> period, but production will fall behind Demand. However, as Demand
> outsrips Supply and Prices rise, those very Price rises will trigger
> the cost ratio to run ahead too much, thus triggering the next Economic
> & Share Market pullback.
>
> The old rules are changing, the return on Money & Energy are
> being irreversibly delevered. The EROEI (Energy Return O Enrgy Invested)
> was 100/1 in the early days of Oil, it is now less than 10/1 and
> falling. New Oil is going to be much more costly to find & Produce
> and the Investment return is not going to be anywhere near what it
> used to be.
>
> When perceptions finally accept that Oil has Peaked, then the rush
> away from Oil, into the search for something that may not be there,
> will also severely dilute the capital needed for Oil Exploration,
> as the EROEI will be decimated!
>
> In fact, even though Demand and Price has been rising, the investment
> in new Exploration has already been falling!
>
> There are no guarantees in life, but the likely outcomes suggest
> that 5-10 years from now, the Global Economic outlook, will be significantly
> different to today and I am not talking of upsides!

Fannie and Freddie: Worthless?

Tue, 20 Oct 2009 15:15:13 -0400

@Duude,

In actual fact, the total indebtedness of the all sectors of the US economy is very nearly exactly the same today as it was twenty-four months ago at the first rumblings of the crisis. Yes, government debt has ballooned, but private debt has shrunk by the same amount.

Would you really have preferred an actual shrinkage of the total capital debt of the US economy by 2.5 trillion dollars in two years?

Yes, over time it needs to come down a percentage of GDP, most likely by growing more slowly than does GDP. Actually shrinking total debt when investors are rushing equity capital out of the country to emerging markets would be insane. Are you a bond ghoul who would love to be paid back with ever scarcer and hence more valuable dollars? If so, admit it so we can evaluate your posts accordingly.

Since the capital base of American industry is steadily shrinking through disinvestment and depreciation, for the US to "grow its way out of this recession" -- everybody's favorite prescription -- it must have capital. Long term equity capital is vanishing from America as rapidly as the middle class. We either borrow (more productively than in the past to be sure) or we sink into genteel poverty like most of quaint and lovely old England.

On Oct 20 10:09 AM Duude wrote:

> These companies will survive but not as private companies. They're
> simply an arm of the US government. They will never be recapitalized,
> broken up or spun off with a new public offering. They have far too
> much bad debt and taxpayers won't stand for more tax dollars to recapitalize
> it. This is unfortunate because it only means the government will
> continue to subsidize mortgages, creating a bigger and more dangerous
> bubble. Government believes the best fix for a bubble is to make
> it bigger still. Taxpayers are already buried in debt and the government
> is now building a mountain with more and more dirt on the corpse
> of taxpayers everywhere.

When Morgan Stanley Almost Died

Mon, 05 Oct 2009 14:57:08 -0400

Whoops. Apparently HTML tags are persona non grata on Seeking Alpha. Especially those with no matching closing tag......

On Oct 05 02:56 PM Anandakos wrote:

>
> Felix,
>
> Thanks for having the courage to advocate for better regulation.
>
>
> My favorite is revoking deposit insurance from any depository institution
> which has more than 2% of national deposits or is a part of a larger
> group which does. It would have to be withdrawn over a period of
> time, of course, in order to prevent runs on the big banks.
>
> But over that implementation period it would force them to retrench
> to a smaller size and force the breakup of the financial supermarkets
> which have so much inherent risk.
>
> Yes, it would increase the risk of direct banking> failure for each surviving individual bank, because they'd have less
> ability to cross-capitalize from unregulated siblings. And, they'd
> inevitably be more regional, since it would be impossible for a nationwide
> depository to have less than 2% of total deposits.
>
> But it would greatly reduce the risk of infection from those same
> unregulated siblings and the temptation to inflate earnings by financial
> engineering gambles. It would reduce banking to the regulated utility
> it should be. There are plenty of talented bankers running
> regional banks and large credit unions who would be glad to step
> up to running the sorts of large regional banks that would survive.
> Let the Dimon's, Lewis's, Blankfein's, and Kovacevich's of the world
> run investment banks. There fill an important role in a truly free
> capitalist system, but gamblers like them should never have
> been allowed into the no risk world of FDIC and Fed backed commercial
> banking. Never.
>
> One simple regulatory change with enormous> restructuring.

When Morgan Stanley Almost Died

Mon, 05 Oct 2009 14:56:01 -0400

Felix,

Thanks for having the courage to advocate for better regulation.

My favorite is revoking deposit insurance from any depository institution which has more than 2% of national deposits or is a part of a larger group which does. It would have to be withdrawn over a period of time, of course, in order to prevent runs on the big banks.

But over that implementation period it would force them to retrench to a smaller size and force the breakup of the financial supermarkets which have so much inherent risk.

Yes, it would increase the risk of direct banking
But it would greatly reduce the risk of infection from those same unregulated siblings and the temptation to inflate earnings by financial engineering gambles. It would reduce banking to the regulated utility it should be. There are plenty of talented bankers running regional banks and large credit unions who would be glad to step up to running the sorts of large regional banks that would survive. Let the Dimon's, Lewis's, Blankfein's, and Kovacevich's of the world run investment banks. There fill an important role in a truly free capitalist system, but gamblers like them should never have been allowed into the no risk world of FDIC and Fed backed commercial banking. Never.

One simple regulatory change with enormous

Why U.S. Government Should Cut Federal Workers' Lavish Compensation

Wed, 09 Sep 2009 12:29:14 -0400

You jealous carpers are completely ignoring that over 70% of non-military government workers have a Bachelor's degree or higher. Since Reagan's day there has been an accelerating trend to outsource all of the positions that ordinary workers once held in the government: janitors, mail delivery staff, cafeteria workers and so on.

What is left has on average nearly three times the college attainment of the wider society. Further, anyone above a GS-10 nearly always has a graduate-level degree.

I'm not a Federal employee so don't accuse me of arguing my self-interest. However, I know several, all of whom are sharp and work hard. Most of you have just drunk Reagan's jealousy Kool-Aid.

How PHEVs and EVs Will Sabotage America's Drive for Energy Independence

Fri, 28 Aug 2009 03:35:15 -0400

Fred Linn,

Railroad locomotives do not use lead acid batteries as a storage technology for traction power. They do have batteries to crank the prime mover if its shut down, but the batteries are not in the power train.

They work as follows: a diesel engine of significant power turns a large alternator by direct drive. If the engine uses A/C traction motors the output from the alternator is fed directly to the traction motors through a control system. If the older direct current motors are used, the output from the alternator is passed through silicon rectifiers to product direct current which is then fed to the motors.

No batteries are used in standard diesel-electric locomotives.

Now there are some new hybrid designs coming on the market in order to store the electricity generated by regenerative braking in batteries for later traction use. However, the diesel electric locomotives "we have been building for the last 70 years" emphatically are not hybrids. They dissipate the regen braking energy through large steel grids on the roof of the locomotive. They function as resistive heaters to radiate the energy from braking.

On Aug 28 03:12 AM Fred Linn wrote:

> Mr. Peterson--------" Fred Lin, in an HEV you use the batteries to
> recover the energy lost in braking and use it to help with acceleration.
> In PHEVs and EVs I'm with you, why bother? "----------
>
> Exactly my point Mr. Peterson. People should not believe what
> they are being told----and this has been going on for YEARS.
>
> Hybrid vehicles offer about a 25% fuel savings overall, depending
> on driving conditions. There is lttle if any savings on highway
> driving----most of the savings are in stop and go city traffic.
> Compare that to 200% increase in thermal efficiency using biofuels.
> Hybrids seem to me to be paltry by comparison.
>
> Then add the fact that hybrids add another $2,000 to $5,000 to the
> price. Biofuels can be produced using all off the shelf parts,
> and are well tried and well proven.
>
> Of coarse automakers want people to believe that they can only have
> cars with power and efficiency if they pay a premium price.
> They are only interested in getting the premium price---not delivering
> the goods.
>
> There is no technical reason for using all the exotic battery types
> people are mentioning here. Good old lead/acid batteries work
> just fine----we've had 150 to perfect them(this year). The Baker
> Electric is a classic car that ran on lead/acid batteries and is
> widely recognized as one of the finest cars ever built---and performed
> admirably within the limitations of its battery/charging format.
> We can build hybrid cars just fine with lead/acid batteries.
> Railroad locomotives are one of the most efficient means of transport
> we have----and we have been building diesel/electric locomotives
> (hybrids using diesel engines to charge lead acid batteries) for
> over 70 years. If we can build locomotives capable of producing
> horsepower in the 4,000 to 6,000 range----we can easily produce cars
> needing only 100-200 hp.
>
> Look back through these posts. Everyone is brainwashed on "new"
> technology. The truth is, the clamor for "new" technology is
> just coporate manuevering to get hands deeper into your pockets.
> We can do everything we want our vehicles to do, right now, in a
> clean, renewable and sustainable way, using technology we have right
> now, and have had for over 50 years.
>

How PHEVs and EVs Will Sabotage America's Drive for Energy Independence

Fri, 28 Aug 2009 03:21:01 -0400

You say that Priuses use Nickel Metal Hydride batteries while the PHEV's and pure EV's use Lithium Ion batteries. Are you assuming that both kinds are manufactured in the same facility? It seems to me that's the only way that building more of one could necessitate building fewer of the other.

On Aug 26 11:14 AM John Petersen wrote:

> Mrfnd, the scarce commodity is the batteries. One GM Volt uses the
> same batteries that could be used to power 10 Prius class hybrids.
> One Nissan uses the same batteries that could be used to power 15
> Prius class hybrids. So for every EV you build, you are going to
> keep 10 to 15 Prius class hybrids off the road.

New Unemployment Insurance Claims Keep Rising

Thu, 20 Aug 2009 16:22:38 -0400

Karl,

I didn't know that jobs were even on a leash....;-). The proper spelling of the word that sounds like "loo-zing" is "losing". The word you wrote is pronounced "loose-ing" and though it is occasionally used -- viz. "he was loosing the hounds for the chase" it's pretty stilted and archaic.

You are right that we have "some deeper problems on our hands". Specifically, we don't make much that individuals want to buy these days. Yes, we're still the world's largest exporter, but a significant portion of that is agricultural commodities. Most of what we assemble from components consists of high end capital goods (Dreamliners!), chemicals, and machinery.

Those industries can only employ a small fraction of the workforce because they're so technology intensive. Now that the rest of the world is suspicious of our financial "products" -- not our stocks and traditional bonds, no, the "creative" stuff -- we are not going to be able to sucker them into buying dead tree certificates at a 99,000% markup. So yes, we have a problem.

Chap08,

Very true. But I'm not sure we want the dollar to fall to its "true value". How much DO you want to pay for that new Dell laptop? Ten grand?

Unlike AmEx, Capital One's Defaults Worsening

Tue, 18 Aug 2009 15:46:43 -0400

This could not happen to a nicer group of scumbuckets.

Cash for Clunkers May Cost Up to $45,354 Per Vehicle

Tue, 04 Aug 2009 12:36:24 -0400

Good post, Love. Sounds like your "don't use the brakes" takes the place of a Prius' econometer. Well done.

It is odd how much extra fuel is consumed on curvy roads. It must be the greater tire friction from the turns. Yes, that's surely it.

On Aug 04 06:49 AM H. T. Love wrote:

> On Aug 02 09:04 PM Old Wizard wrote:

Cash for Clunkers May Cost Up to $45,354 Per Vehicle

Mon, 03 Aug 2009 14:08:43 -0400

My bad. Not "$6,000 in gasoline" in the part about the Prius, but "6,000 gallons of gasoline".

On Aug 03 02:06 PM Anandakos wrote:

>
> Whaffle,
>
> You are SERIOUSLY computationally challenged. Even if one of the
> newly purchased cars goes 300K miles and is at the extreme low end
> of the allowable mileage range (23 MPG = the 18 MPG max for eligibility
> of the trade-in plus 5 MPG minimum improvement for the $3,500 rebate),
> it will use 13,050 gallons of gas in its lifetime. Most vehicles
> don't go 300K and most of those bought will get more than the legal
> minimum for the program, but let's assume the worst case scenario.
> Any higher mileage vehicle will pay less in Federal fuel taxes over
> the life of the vehicle.
>
> The Federal fuel tax is 18.4 cents per gallon, which is a total tax
> payment of exactly $2,400 over the life of that worst case new vehicle.
> That is ONE PERCENT of what you claim. And that's not even the DIFFERENCE
> between the new and old cars. If indeed the difference is only the
> minimum of 5 MPG (the "Clunker" gets 18 mpg) the loss in Federal
> fuel taxes is only $652.50. That is the minimum that the fuel tax
> will lose over the life of a 300K mile vehicle.
>
> Now lets look at your "worst case" scenario. Say the traded in vehicle
> gets 15 mpg and the new one gets 30. That is 10,000 gallons of gas
> over the new vehicle's 300K mile life or $1,840 in Federal fuel taxes.
> Assuming that the 15 mpg vehicle could last another 300K miles --
> unlikely at best -- it would have consumed 20,000 gallons of gas
> and paid $3,680 in fuel taxes.
>
> That is a difference of $1,840.
>
> How about if the old vehicle gets 10 and the new one 30? The old
> vehicle would have paid $5,540 in fuel taxes and the new one will
> still pay $1,840 for a difference of $3,680.
>
> Let's be really bizarre and assume you're trading in a Dodge Ram
> 7 liter crew cab and buying a Prius. I don't know exactly what the
> Ram would get but if we assume you were a idiot and didn't get it
> with a diesel, it would probably be in the seven to eight mpg range.
> If 7 mpg and it made it another 300K miles it would consume 42,850
> gallons and pay $7,886 in Federal fuel taxes. The Prius is rated
> at about 50 combined, so it would consume $6,000 in gasoline, paying
> $1,104 over its lifetime. Even this completely implausible scenario
> would cost the fuel tax fund only $6,782, about 2.7% of what you
> mooted.
>
> Think before you type. Also, you might want to change your alias
> to "Whiffle" in honor of the ball that packs no punch.
>
> On Aug 03 01:32 PM Whaffle wrote:

Cash for Clunkers May Cost Up to $45,354 Per Vehicle

Mon, 03 Aug 2009 14:06:20 -0400

Whaffle,

You are SERIOUSLY computationally challenged. Even if one of the newly purchased cars goes 300K miles and is at the extreme low end of the allowable mileage range (23 MPG = the 18 MPG max for eligibility of the trade-in plus 5 MPG minimum improvement for the $3,500 rebate), it will use 13,050 gallons of gas in its lifetime. Most vehicles don't go 300K and most of those bought will get more than the legal minimum for the program, but let's assume the worst case scenario. Any higher mileage vehicle will pay less in Federal fuel taxes over the life of the vehicle.

The Federal fuel tax is 18.4 cents per gallon, which is a total tax payment of exactly $2,400 over the life of that worst case new vehicle. That is ONE PERCENT of what you claim. And that's not even the DIFFERENCE between the new and old cars. If indeed the difference is only the minimum of 5 MPG (the "Clunker" gets 18 mpg) the loss in Federal fuel taxes is only $652.50. That is the minimum that the fuel tax will lose over the life of a 300K mile vehicle.

Now lets look at your "worst case" scenario. Say the traded in vehicle gets 15 mpg and the new one gets 30. That is 10,000 gallons of gas over the new vehicle's 300K mile life or $1,840 in Federal fuel taxes. Assuming that the 15 mpg vehicle could last another 300K miles -- unlikely at best -- it would have consumed 20,000 gallons of gas and paid $3,680 in fuel taxes.

That is a difference of $1,840.

How about if the old vehicle gets 10 and the new one 30? The old vehicle would have paid $5,540 in fuel taxes and the new one will still pay $1,840 for a difference of $3,680.

Let's be really bizarre and assume you're trading in a Dodge Ram 7 liter crew cab and buying a Prius. I don't know exactly what the Ram would get but if we assume you were a idiot and didn't get it with a diesel, it would probably be in the seven to eight mpg range. If 7 mpg and it made it another 300K miles it would consume 42,850 gallons and pay $7,886 in Federal fuel taxes. The Prius is rated at about 50 combined, so it would consume $6,000 in gasoline, paying $1,104 over its lifetime. Even this completely implausible scenario would cost the fuel tax fund only $6,782, about 2.7% of what you mooted.

Think before you type. Also, you might want to change your alias to "Whiffle" in honor of the ball that packs no punch.

On Aug 03 01:32 PM Whaffle wrote:

> Using cars generates gas/road tax money.
> Therefore, more efficient cars will lower government revenue.
>
> Let's say every car purchased under cash for clunkers is 2x as efficient.
> Then, according to our mathematical and statistical manipulators
> (I mean, genius'es) , we'll see a 50% reduction in gas tax revenue
> over the life of the car.
> Pulling out my SWAG slide rule, that comes out to a cost of over
> 250,000$ per car.
>
> Clearly, we need less efficient cars if we want to "save our grandchildren
> from the vast debt we are creating".
>
> Disraeli was right , "there are lies, damn lies and statistics".

Cash for Clunkers May Cost Up to $45,354 Per Vehicle

Mon, 03 Aug 2009 12:33:37 -0400

Mud Engineer,

What foolishness; the people buying these new cars are not poor. The government is not buying the car for them, lock, stock, and barrel. It is basically providing a bigger trade-in allowance on guzzlers worth less than $4,500; most buyers still have to take out a loan. It's just somewhat smaller than it would have been.

Nobody whose car is worth more than $4,500 trade in is going to participate; if they were going to buy anyway, they'll take the trade-in offered by the dealer. I hope you're able to understand that.

Because of this there will be an economic cost, paid by the buyers of relatively low-priced used cars over the next few years. The truth is that anyone who can afford a new car in this economy is probably already driving a decently running, reliable vehicle. Those worth less than $4,500 are being trashed irrevocably and removed from the pool of available used vehicles. While that's a bit of a fuel economy and emissions benefit, it is an economic cost for people who are struggling anyway.

So in fact the people who you so hate -- the "losers" of society who "don't have to pay taxes or even get a so called tax refund -- will be the ones most hurt by this program, since reliable used cars will rise in price.

I surprised you aren't cheering their comeuppance, Ebeneezer.

On Aug 03 11:35 AM MudEngineer wrote:

> This cash for clunkers program "is not a tax rebate". This is taking
> money from the people who pay taxes and giving it to the people who
> make so little money that they don't have to pay any taxes and may
> even get a so called tax refund even though they paid no taxes.
> That my friend is exactly "socialism".
>
> Your wonderful "cap and trade" will really screw the people who have
> no or little money as energy in all forms will rise in cost and they
> can least afford to pay those new taxes. All because of a few idiots
> who mistake CO2 as the cause of global temperature change when sun
> spots actually cause this cycles naturally. If cap and trade and
> the healthcare plan both pass, we will be permenantly in a recession
> or a depression. THANK YOU LORD OBAMA, OUR NEW DICTATOR!

Cash for Clunkers May Cost Up to $45,354 Per Vehicle

Mon, 03 Aug 2009 12:15:49 -0400

WD216,

Many Americans have "an anti-business mentality" because their interactions with business are unpleasant, unsafe, and unfair. Businesses deploy armies of lawyers against their customers, collude with one another to fix prices and limit service, exploit the employees who generate the revenue keeping the lights on, and buy legislation from Congress making it all legal and protecting the processes.

There is no doubt that the limited liability corporation is the economic organization best able to accomplish large projects lasting an extended period of time. But giving such legal enterprises access to Bill of Rights protections was stupendous folly. Sure, they need access to courts and court procedures as a "person" in order to defend themselves against torts and to initiate them against one another in order to protect their contract rights. But they should not be assumed to have the POLITICAL rights guaranteed by the first ten amendments (free speech, petition of grievance, bearing of arms, and so on).

Since we don't have the initiative at the Federal level I have no idea how to correct this one hundred and thirty year old catastrophe, but it is the root of most of the distortions that afflict our democratic republic today.

On Jul 31 01:39 PM WD216 wrote:

> If those are the correct numbers, then is program costing $1 billion
> and 22,000 vehicles were sold, then the $45,000 per vehicle is correct.
>
>
> However more importantly, are the lines, "This government is, unfortunately,
> a reflection of the current state of economic immaturity that prevails
> in America. The vast majority of people, including most people in
> Congress, do not understand the forces that drive the real economy"
>
>
> Brilliant lines, they sum up the entire mess. We have a bunch of
> good speakers in office that don't know their a*s from their elbow
> when it comes to the economy. The American people don't either as
> they have an anti-business mentality, learned mostly through our
> liberal education system.
>
> The country is going to come out of this recession, only because
> of the trillions that are being spent. However, within 2 to 3 years
> you will see disaster strike due to these same spending policies.
> Our problems will be much worse then. This all due to ignornat Americans
> electing people that speak well.

Shift in U.S. - China Dialogue Is Louder than Words

Thu, 30 Jul 2009 11:15:58 -0400

King,

Much of what you say has a strong element of truth, but your assumption of "an adequate social safety net" assumes continued access to borrowed capital by the government. The point of this article is that continuation of that access is in doubt. I don't see that you disproved that point, so your argument that the US middle class is an advantage is flawed.

The only way out of our dilemma here in the US is to abandon empire and redirect the resources consumed by it to productive assets here: a better energy grid, renewable energy generation, a revamp of our transportation infrastructure, and significant improvements in education.

Those steps would revitalize the social safety net over time without unsustainable borrowing.

On Jul 30 10:59 AM KingGeithner wrote:

> Feng -
>
> I completely agree. China is in the process of creating its own massive
> bubble. While its recent stimulus spending has allowed for China
> to maintain its critical 8% growth rate (again one always has to
> question the reliability of these figures coming out of China), its
> state controlled banks have been shelling out easy money left and
> right, with lending standards ever more dubious. Apparently the Chinese
> government has not learned an important lesson: that lowering loan
> and banking standards in order to spur growth will always come back
> to bite a country in the rear years down the road. The main reason
> the U.S. saw growth after the internet bubble burst was because we
> lowered banking standards and began peddling ever more complex financial
> weapons of mass destruction. Thus, China can claim they have 8-10%
> GDP growth every year over the next 5 years, much like how we had
> nice GDP growth during the mid 2000s; let's see how sustainable China's
> growth will be.
>
> I think people are too quick to write off the U.S. and upgrade China
> as the world's sole future financial power. The U.S. has the world's
> strongest middle class and an adequate social welfare safety net.
> China has no safety net for its citizens, and a nonexistent middle
> class. It will forever be dependent on the U.S. and the rest of the
> world to sustain its growth, unless it can guarantee a basic safety
> net for its citizens and close the income gaps so that a healthy
> middle class can actually develop. China is essentially at the mercy
> of the economic situation of the U.S.

Shift in U.S. - China Dialogue Is Louder than Words

Thu, 30 Jul 2009 11:04:09 -0400

Pax,

It doesn't matter that the US has been keeping "ancient and deep enmities" in check in various parts of the world. While that may have been a beneficial result, it occurred as a result of actions taken from less than altruistic motives, at least for the past three or four decades.

In any case, it can't continue. Every empire in history has undergone the same cycle of scrappy ascendancy, hegemony for a shorter or longer time, and bankrupt overwhelm. It seems that each lasts for fewer years than the former, but I have a feeling that China's coming one will endure for quite a while, simply because there will be no credible competitor.

You are correct that we have a highly productive agricultural base at this time. But at least 20% of our grain production is over the rapidly failing Ogalalla Aquifer and will be gone in ten years. When you fly over the region between the 100th Meridian and the Front Range of the Rocky Mountains and see all those green circles, you're over Ogalalla country.

When it goes we will have great difficulty feeding ourselves at the level to which we're accustomed, never mind exporting our golden river of wheat and barley.

On Jul 29 03:46 PM Pax Americana wrote:

> The USA is not, and will not, be "swept aside" as easily as you presume,
> the US military still is the Arbiteur of Global power reach, and
> maintains a tenuous peace in extremely fractious corners of our planet.
> Without Americas overiding Military power in these regions, Ancient
> and deep enmities would again raise their head. Secondly America
> is the "Bread Basket" of the planet, and food is, and will become
> increasingly important. We also issue more scientific patents than
> anyother Nation, "right off America at your peril!

24 Trillion Reasons to Buy Gold

Fri, 24 Jul 2009 12:34:30 -0400

Woo-hoo! All aboard the Tinfoil Hat Express. "arcane European cliques" with their "Ticino banks" (ah yes, that World Financial Center, Ticino)..."inflation spawned by deflation" (or is it deflation triggered by hyperinflation? I forget), "information kept in prison" (with manacles????)

All aboooooaaardd!

On Jul 23 07:31 PM AuGod! wrote:

> A massive devaluation of the US$ is probable with concommitant competitive
> devaluations thus sending price inflation to unprecedented levels
> globally. That is the medicine. The disease is inflation spawned
> by deflation and the cause is hoarding by banksters and the terra
> incognita of fast and cheap money back-channelled through direct
> government monetarist interventions. The stock market rally is a
> symptom of the problem and a tipping point that the problem persists.
> The price of gold bullion, a small market dwarfed by the general
> market, is thwarted by paper issues for which there is probably insufficient
> physical gold to cover. Still, when the stock market tanks, which
> it must, (it may even be planned) much gold and other liquid assets
> will be thrown over in a mad rush to deleverage and cover. It is
> then that the realization will come to the financially savvy, that
> physical gold's liquidity is more important than its SPOT price.
> That SPOT price could be extremely high. But that value (of the metal)
> will not be obvious immediately during the rush to cover. It will
> only become obvious after it all shakes down and people get up off
> the floor, dust themselves off and realize how much pre-hyperinflationary
> or devaluation FIAT was spent on < US$1000. per ounce gold bullion
> by entities with strange names. Many of those names will be on the
> rolls of very old, arcane European cliques through their private
> Ticino banks. The "end" always precedes a beginning. That is an Historical
> fact. We are approaching the event horizon. Information is fuzzy
> and/or is kept in a prison. Everyone here at SA knows or suspects
> this but drifting through ambiguity is no way to go through life.
> My bet is on physical gold because my "best" information supports
> that conclusion.

Jon Stewart Takes on Goldman Sachs [Video]

Sat, 18 Jul 2009 14:39:20 -0400

Hedge Fund,

That swipe against Judge Sotomayor was uncalled for.

On Jul 18 02:15 PM Mad Hedge Fund Trader wrote:

> ) I am frequently asked where I find my best sources of market data.
> Well here they are: Saturday Night Live, David Letterman, and the
> Jon Stewart Show. Unfortunately, Jay Leno retired and won’t be back
> until his new show starts in September. I’ve found my investment
> returns are much better when I keep the Comedy Channel on all day,
> instead of CNBC, which is basically a giant fan club for its owner,
> General Electric (seekingalpha.com/symbo...). How else would
> I know that Jim Cramer argued vociferously that Bear Stearns wouldn’t
> go under, or that Dora the Explorer had been appointed to the Supreme
> Court? For a perfect example of this, take a look at the video clip
> above outlining John Stewarts take on the Goldman Sachs (seekingalpha.com/symbo...)
> earnings

Jon Stewart Takes on Goldman Sachs [Video]

Sat, 18 Jul 2009 14:37:46 -0400

Wisdom,

Actually, they are ("writing the laws and hiring the bureaucrats"). Or at least, supplying them.

On Jul 18 03:37 AM Wisdom vs. Information wrote:

> GS is not writing the laws and hiring the bureaucrats that are taking
> away your money and rights-- that would be the politicians (that
> jon stewart supported, BTW). stewart is funny, but he is a symptom
> of the problem

Washington's Dilemma: This Isn't a Recession, It's a Collapse

Sat, 18 Jul 2009 14:13:22 -0400

You aren't real up on your US history, are you, Mojo? We fought a war about that exact proposition, and the quitters lost.

As I stated in the immediately previous post, it would probably have been better had the quitters won, because you've had 144 years to repent (i.e. "change your mind") but you haven't. Still with the same skinflint "I got mine f*&# you" attitude. But.....delivered with an oily "Christian" smile.

On Jul 18 01:42 PM Moto wrote:

> And if they sought to join the union they have the right to leave
> the union.

Why Economic Dogma Threatens Our Future Prosperity

Sat, 11 Jul 2009 00:48:09 -0400

Rosey,

Not just drafted, inducted for the duration..... There will be no cease fire or peace accord in this economic disaster. The US is Napoleon's army in Russia; we didn't take Moscow, it's FRICKING cold, the food's gone, and it's 1500 klicks back to gay Paree.

The saddest thing about all this is the degree to which the flim-flam artists on Wall Street have snookered so many otherwise intelligent people in Congress into carrying their water in this grand Shell Game.

I'm not excluding either party from that assessment; you have to be pretty darn smart to get into Congress these days. I even include Michelle Bachmann; she's not dumb, just ill-educated.

I may take a nolo contendere on James Inhofe, though; the bell curve pretty much works on any group greater than 35. Even though the median is probably about 120 in the Senate, there have to be 1.4% (one or two people in this case) who are two normal distributions on the dumb side. One of those would definitely be Inhofe.

On Jul 10 02:41 PM rosey99 wrote:

> Ballsy play to criticize Saint Ronald here on SA, though the bulk
> of the comments reflect our collective, and deep, denial.
>
> For those of you who still don't get it: It was grossly irresponsible
> to cut taxes, mostly for the very wealthy, while increasing spending.
> Accepting the tax cuts without requisite spending cuts was immoral.
> Combined with trickle-down - or voodoo - economics it was grossly
> immoral.
>
> The intellectual gymnastics one has to go through to rationalize
> tax-cut and spend behavior is frightening to behold. It speaks volumes
> about who we are, and the thinness of our moral fabric. This mess
> is now so huge, I don't know that those of us tasked with cleaning
> it up will be able to do it in a single generation. The budgetary
> wars to come will not allow for college deferments, though running
> off to Canada may remain an option. We're all gonna get drafted,
> and that pisses me off.

Why Economic Dogma Threatens Our Future Prosperity

Sat, 11 Jul 2009 00:32:46 -0400

StopWhining,

Right on. We do need to lower stupid spending -- Empire and agri-business subsidies can play hell with the fiscal balance sheet. But we also need to steepen the tax curve, in particular by getting rid of personal deductions and replacing them across the board with refundable credits.

Deductions benefit high bracket payers much more than do credits, because they lop off the "last dollar" on AGI which is taxed the highest. Credits, especially if refundable, benefit everyone equally; a $3,000 tuition credit provides the same value to a poor person as it does to a rich one. One could even say they yield a greater value since the three thousand are a higher proportion of the poor person's total pool of dollars, allowing for proportionately greater freeing of discretionary dollars. This is especially true when they are refundable.

Since high income people typically have so many ways in which to transform their income into "capital gains" taxed at a very much lower rate, the reduction in the value of tax exclusions by substituting credits for deductions seems eminently reasonable and justified to me.

Overall I agree with your assessment of the relative value of inherent ability and circumstance in determining income. How can it not be obvious that a child born at the same time and with the same intellectual skills as Bill Gates in North Korea he would not now be the rich person he is. Obviously that's an extreme example, but the same would probably be true had he been born black in Tuskegee, Alabama.

I have no doubt that in that case he would have been a successful black entrepreneur, but he would not have founded Micro$oft. That required access to Seattle Prep's nearly unique in its day computer lab.

On Jul 10 07:52 PM stopwhining wrote:

> Herein lies the ultimate question. Is a person entitled to keep
> what he/she earns since gains are ultimately a product of superior
> efforts, or is success equally a product of luck, timing, and surroundings?
> If the former, then taxes should be low and spending reduced along
> with it, if the latter, then everyone should get over themselves
> and chip in for the greater good.
>
> We all like to believe we rise or fall on our steam, but based on
> those I've met in this world, I would only ascribe 50% of any given
> outcome (on average) to the underlying persona.
>
> Bring back the estate tax, raise taxes on the wealthy, lower gov't
> spending across the board, nationalize healthcare, and provide economic
> incentives to help make the U.S. energy independent. These are
> the keys to our long term success, but I have no confidence that
> they will be undertaken.

Why Economic Dogma Threatens Our Future Prosperity

Sat, 11 Jul 2009 00:15:03 -0400

Jeff,

"Unless Americans believe that 80% of their population are a bunch of losers who DESERVE to get poorer and poorer every year..."

Well I think that most of the posters here DO believe that. In my heart of hearts I hope they hear Marley's chains clanking before it's too late.

On Jul 10 01:15 PM Jeff Nielson wrote:

> What a SUPERB essay! I've bookmarked this - to refer to it myself
> in the future.
>
> For those criticizing the author's tax "heresy", it's important to
> focus. It's not the poor and middle-class who have been "under-taxed",
> it's the filthy-rich. 1% of the U.S. population holds more than 35%
> of ALL wealth - and 55% of ALL stock. And their grip on America's
> wealth grows stronger every year.
>
> Meanwhile 80% of the U.S. population holds only 15% of total wealth
> (about 25% less than in other industrialized nations).
>
> Unless Americans believe that 80% of their population are a bunch
> of losers who DESERVE to get poorer and poorer every year, then the
> numbers are unequivocal. The very wealthy have been grossly UNDER-TAXED
> every year - and as a result, they are the ONLY people who have been
> benefiting from Ronald Reagan's "trickle-down" economics of giving
> the wealthy a free-ride (at the expense of everyone else).

Supreme Court Rules Against Banks: A Win for Consumer Protection

Tue, 30 Jun 2009 15:53:08 -0400

Angry Banker,

I am so VERY willing to "bear the burden of those costs" if it wastes some -- or even lots -- of Dimon's, Kovacevich's, and Lewis' time. That would be time that they would otherwise spend squeezing yet more regional banks in pursuit of their complete oligopoly wet dream.

You go states Attorneys General!!!! (Yes, I know, it's a lame cheer, but heart warming one.)