Tonight, while I'm writing this, I'm watching Steve Schmidt talk down the candidacy of Mitt Romney.
MSNBC isn't an honest dealer when it comes to news. Whoever is serving as producer of their news division would be fired if they worked for me. The Executive Producer would be pounding the pavement. Inserting Steve Schmidt--purportedly a "Republican Operative"--in their attacks on the Republican Party does more to solidify my opinion that MSNBC has totally left the rails.
Don't cover up mistakes. Provide some analysis of what policies mean. That's what "news" organizations do, or should do.
How did Sarah Palin get so excoriated by the press? Reading about the last election cycle, one name keeps popping up. Steve Schmidt.
I don't think I'm alone in wishing that Mr. Schmidt would have a "come to Jesus" moment, and admit his own hatred for ideals and beliefs of which I subscribe. MSNBC is a faux "news source." Steve Schmidt is a faux conservative.
Ten Mile Island
Thursday, August 30, 2012
Monday, August 27, 2012
What Is An Interest Rate?
Interest rates are the most important rates that exist.
The best known, and most followed rates are the Federal Reserve Rate and the LIBOR.These rates are amongst the least risky rates in the Western hemisphere.
To access the Fed rate, you must be a federally chartered bank. There are a lot of banks that look to the unaware consumer as a "bank." But there are significant differences between federally chartered banks, and state banks.
Reserve rates for banks are set by the Fed. Reserve rates are important, because the amount of liquid reserves--cash, in most cases--determine the amount of money a bank is able to use for investments. Or, other uses. Like, loans. Banks are being regulated today at historically stupid levels, so, banks are using their funds to create the greatest possible returns, with the lowest possible risks. Purchasing federal notes are currently amongst the lowest risk assets that a bank can own. So, when an auction for notes comes up, banks are buying. And, with the current level of repo coming from Treasury, buying federal notes actually results in a negative interest rate.
Between the Fed and Treasury, billions of dollars have been created; hundreds of billions. Since the U.S. has become the greatest holder of U.S. debt, fiscal policy has overwhelmed monetary policy. When you hear that the U.S. has a "fiscal cliff," part of the problem is that we have a fiscal (spending from the federal treasury) problem, and the other part is, there is so much cash in the system--held in part by Treasury--that when the economy begins a comeback, there is going to be "so much" cash that the system won't be able to halt the rush to inflation.
Interest rates are the costs associated with choosing between cash and enterprise. Interest rates also have a distinct characteristic; interest rates measure risk.
Today, the demand for cash is, and has been, at historic lows. Just as a sideline note, the current DOW levels, when taken as a measure of economic activity are deceiving, since there is so much cash in the market, that traders, flush with cash, are chasing stocks, looking for the greatest, short-term returns. We're building a new bubble in intangibles. Yet, when I last checked today, we're only three days from returning to what I believe are long-term trend levels; 11950 to 12950. All the cash in the system is based upon trading. And buddy, trading is different from investment. It isn't 1928. We all know that, at the margin, trades can make you money. And trading will continue after the bubble bursts. If you want to invest, buy land. God doesn't make any more of that.
Interest rates are the cost of money.
It wasn't that long ago that Oregon had an usury law. I think that under Oregon's usury law, lending institutions were limited to an interest rate of twelve percent. The Oregon State Legislature had determined--in order to protect the "consumer"--that twelve percent interest rates were sufficient to lending institutions.
Usury is a word associated with evil guys, like Ebenezer Scrooge.
The problem for Oregon was, at twelve percent, a major portion of Oregonians found themselves without a credit outlet. If you were alive, and aware, during the 1980's, you know that the interest rate being offered by banks was above seventeen percent. How much lending occurred at, or under, twelve percent?
Zero.
When legislatures mandate interest rates, lending stops. Interest rates are the most important rates of any economy. Interest rates compare the costs of money. If you have money and simply hold money, the rate of interest you achieve is zero. If you have money and invest it, the rate of return can vary. Some times, the rate of return will be negative (below zero.) At times it will be positive (above zero.) Interest rates are easy to figure; given the return, divide by the investment. The larger the numerator, the smaller the denominator, the greater the return.
Interest rates determine whether or not you should borrow money. At the same time, interest rates determine whether or not you should borrow money. (H/T http://mathdude.quickanddirtytips.com/what-are-numerators-and-denominators.aspx)
The single rule of interest that I'd like to leave you with is risk. If a bank is willing to pay you a rate of interest for your deposit with that bank, as long as your deposit is less than $200-thousand, you have a basically risk less asset, with a positive interest rate.We haven't seen those days for years.
Cash, today, is a risky asset.
Why do you think that the value of gold has gone from 800 dollars to 1600 dollars?
Risk.
So, I'm done. Interest rates are the most important rates, or measure of economic activity, that exist. They are a reflection of how markets are doing--markets that produce real goods and services--and everything else. Interest rates reflect risk, which is why a 20-year old buying a used car pays a 20 percent interest rate on his loan, and a guy with a lumber yard pays 3 percent. The lumberyard guy is a better risk.
Legislation can affect rates. Simple borrowing between classes of borrowers show that a 20-year old used car purchaser presents a greater risk than a 50-year old lumberyard owner.
Social Justice demands that each is treated in the same way. Common sense determines that interest rates are a function of a market, that rely on information that changes on a daily--if not momentary--basis.
Legislating interest rates doesn't work. They are that important. The most important financial data that exists.
Friday, August 24, 2012
Thursday, August 23, 2012
Chairs
I'm an old guy.
There are things that old guys know. One of those things is, what a chair is for.
I own a business that helps other businesses decide whether or not they are in the chair business, or some other enterprise. These isn't as simple as it may look to the outsider. In business, what you may choose to do on the day of your founding, may not be what you end up doing, years later. IBM is one of those enterprises. I still own several Selectric II's. The finest typewriter ever built. But, within years of the Selectric II's introduction, a cheaper variant, using the Daisy Wheel was introduced. And when word processors came around, the early variant of what we would now recognize as the home computer, it was the Daisy Wheel that was used in early letter typing. In 1978, I used one of the first Wangs to put out a mass mailing piece. Remarkable piece of machinery. I could type up a letter and leave a blank field that would be filled out from a data base of names, street addresses, city and state. Garbage In/Garbage Out was prevalent at the time, since simple inputting errors would produce egregious errors, such as "Dear Mr. SusanandJamesSmith."
Being one of the first guys to put his hands on the machinery, I worked hard to make sure that my data bases were clean and clear. The Wang could only do so much. Care on data entry was an enormous responsibility, and since my client was dependent upon my skill, I only had one goal; perfection.
Typewriters were, at the time, perfect. What wasn't perfect at times was the typist.
What Wang Labs introduced was the possibility of perfection. An individually typewritten letter, to a discreet individual. Load the data base, stack in the paper, and let 'er fly! Carpal tunnel, high thee to a nunnery!
When it worked, the results were extraordinary. Personalised invitations to be a part of something greater than themselves. From a regional/national campaign. Add a blue ink "signature," and you have a personal appeal to someone who would have never expected to be singled out for attention. The Wang was brilliant.
At the same time, advances in printing technology was occurring. Machines were being built that allowed one to create fonts for ad copy that allowed one to type in copy, and end up with a tape that allowed for the first instance of "cut and paste." Aesthetics existed before, but it required an art department to produce camera ready fonts for non-standard fonts. Now, you could print up to 20 pt. tapes with your copy, and simply take a blade and move your copy around your white sheet. San serif? No problem. Peter Max?
Take a back seat.
So, for some forty years, I've been earning my living from simple things; who are you, what do you do, and what do you offer others? The field of enterprise I've belonged to has been for years under assault. Somehow, letting people know who you are, what you do, and what you offer to others is a sinful enterprise. The reduction of this process? Advertising.
Since Marshall McLuhan's book, "The Medium is the Massage," the value of truth and promise has been undermined by a Chomsky-like re-telling of fables. That is, if it is a commercial message, it must be false.
It is "commercial speech." And back in the early part of the Twentieth Century, commercial speech has found not to have First Amendment protection. I bring this up in order to establish one single thing.
Most speech is commercial speech.
It is either intended to generate a transaction, or to culminate a transaction. It's what speech does. I'm not talking about mere utterances. "How are you?" Polite, but a mere utterance. Devoid of intent, other than to recognize the existence of another. Just about anything else out of your mouth is either an entreaty to a transaction, or a response to a transaction. Have I asked you for your interest in my predicament? Have I told you of how your predicament has created a response? Non-transactional speech is pretty boring, innit? Even the "nice shoes" has a transaction in mind.
So, let's talk about Windows.
I don't mind that Microsoft has a need to generate revenue. We've moved from Smith-Corona to Windows or Apple and printers. I haven't tried to purchase a typewriter recently, but something tells me, there are still typewriters being made and sold. There are "apps" available, to make your keyboard typing sound like the classic typewriter. How coochy is that?
My point is, why does Windows have to obsolete their products? Why can't we purchase a product, software, and not be able to rely upon that software to do a job? I quit buying HP printers when, after a two-year period and and upgrade to XP (which I didn't want to make), I found that my Desktop Jetprinter was no longer supported by HP.
I buy office equipment. Thirty years ago, when you bought office equipment, you expected the lifetime of that equipment to be 15 to 30 years. Today, when you buy anything, you cannot be sure of the lifespan of the product you're purchasing.
Which is why I like chairs. I want to upgrade a chair? Buy a pillow.
But I know why I bought a chair. Someplace to plant my butt.
There is a whirlwind of "new" products and technologies that are being offered on the Market these days. Perhaps, a maelstrom. It isn't the first time that a lot of new, competing technologies have been offered. Just look at the late '70's and early '80's and word processing. A Wang machine cost tens of thousands of dollars. At the time, it was cheaper than paying a pool of typists to re-create a single letter. And would work around the clock, without complaint.
Cloud computing is not "just over the horizon." Too many of my friends are moving their businesses to the cloud. Which, to me, is kind of ironic.
When I had my first Trash 80, all of my programs were run off discs. That is, they weren't "resident" programs. And I could do a lot with under a meg of ram.
Because the app wasn't resident on my system. With a dual disk drive, I could work with a program on one drive, and write to the other. So, cloud computing is kind of a laugh for me. R/W processes could/should be faster, and yet a person should be able to maintain proprietary control over his own machines. The drive for cloud computing is simply an hat-tip to an older technology, that promises greater control over personal privacy.
I recently bought a server from a company that wanted to move to another location. I don't have it installed yet, but what I'm hoping for, is a central place where apps can be installed and accessed with a ring with a much lighter OS. And firewalled. Why would you ever put your data in a place that wasn't under your control?
I know what chairs do. What I'm not sure of is what the cloud does.
There are things that old guys know. One of those things is, what a chair is for.
I own a business that helps other businesses decide whether or not they are in the chair business, or some other enterprise. These isn't as simple as it may look to the outsider. In business, what you may choose to do on the day of your founding, may not be what you end up doing, years later. IBM is one of those enterprises. I still own several Selectric II's. The finest typewriter ever built. But, within years of the Selectric II's introduction, a cheaper variant, using the Daisy Wheel was introduced. And when word processors came around, the early variant of what we would now recognize as the home computer, it was the Daisy Wheel that was used in early letter typing. In 1978, I used one of the first Wangs to put out a mass mailing piece. Remarkable piece of machinery. I could type up a letter and leave a blank field that would be filled out from a data base of names, street addresses, city and state. Garbage In/Garbage Out was prevalent at the time, since simple inputting errors would produce egregious errors, such as "Dear Mr. SusanandJamesSmith."
Being one of the first guys to put his hands on the machinery, I worked hard to make sure that my data bases were clean and clear. The Wang could only do so much. Care on data entry was an enormous responsibility, and since my client was dependent upon my skill, I only had one goal; perfection.
Typewriters were, at the time, perfect. What wasn't perfect at times was the typist.
What Wang Labs introduced was the possibility of perfection. An individually typewritten letter, to a discreet individual. Load the data base, stack in the paper, and let 'er fly! Carpal tunnel, high thee to a nunnery!
When it worked, the results were extraordinary. Personalised invitations to be a part of something greater than themselves. From a regional/national campaign. Add a blue ink "signature," and you have a personal appeal to someone who would have never expected to be singled out for attention. The Wang was brilliant.
At the same time, advances in printing technology was occurring. Machines were being built that allowed one to create fonts for ad copy that allowed one to type in copy, and end up with a tape that allowed for the first instance of "cut and paste." Aesthetics existed before, but it required an art department to produce camera ready fonts for non-standard fonts. Now, you could print up to 20 pt. tapes with your copy, and simply take a blade and move your copy around your white sheet. San serif? No problem. Peter Max?
Take a back seat.
So, for some forty years, I've been earning my living from simple things; who are you, what do you do, and what do you offer others? The field of enterprise I've belonged to has been for years under assault. Somehow, letting people know who you are, what you do, and what you offer to others is a sinful enterprise. The reduction of this process? Advertising.
Since Marshall McLuhan's book, "The Medium is the Massage," the value of truth and promise has been undermined by a Chomsky-like re-telling of fables. That is, if it is a commercial message, it must be false.
It is "commercial speech." And back in the early part of the Twentieth Century, commercial speech has found not to have First Amendment protection. I bring this up in order to establish one single thing.
Most speech is commercial speech.
It is either intended to generate a transaction, or to culminate a transaction. It's what speech does. I'm not talking about mere utterances. "How are you?" Polite, but a mere utterance. Devoid of intent, other than to recognize the existence of another. Just about anything else out of your mouth is either an entreaty to a transaction, or a response to a transaction. Have I asked you for your interest in my predicament? Have I told you of how your predicament has created a response? Non-transactional speech is pretty boring, innit? Even the "nice shoes" has a transaction in mind.
So, let's talk about Windows.
I don't mind that Microsoft has a need to generate revenue. We've moved from Smith-Corona to Windows or Apple and printers. I haven't tried to purchase a typewriter recently, but something tells me, there are still typewriters being made and sold. There are "apps" available, to make your keyboard typing sound like the classic typewriter. How coochy is that?
My point is, why does Windows have to obsolete their products? Why can't we purchase a product, software, and not be able to rely upon that software to do a job? I quit buying HP printers when, after a two-year period and and upgrade to XP (which I didn't want to make), I found that my Desktop Jetprinter was no longer supported by HP.
I buy office equipment. Thirty years ago, when you bought office equipment, you expected the lifetime of that equipment to be 15 to 30 years. Today, when you buy anything, you cannot be sure of the lifespan of the product you're purchasing.
Which is why I like chairs. I want to upgrade a chair? Buy a pillow.
But I know why I bought a chair. Someplace to plant my butt.
There is a whirlwind of "new" products and technologies that are being offered on the Market these days. Perhaps, a maelstrom. It isn't the first time that a lot of new, competing technologies have been offered. Just look at the late '70's and early '80's and word processing. A Wang machine cost tens of thousands of dollars. At the time, it was cheaper than paying a pool of typists to re-create a single letter. And would work around the clock, without complaint.
Cloud computing is not "just over the horizon." Too many of my friends are moving their businesses to the cloud. Which, to me, is kind of ironic.
When I had my first Trash 80, all of my programs were run off discs. That is, they weren't "resident" programs. And I could do a lot with under a meg of ram.
Because the app wasn't resident on my system. With a dual disk drive, I could work with a program on one drive, and write to the other. So, cloud computing is kind of a laugh for me. R/W processes could/should be faster, and yet a person should be able to maintain proprietary control over his own machines. The drive for cloud computing is simply an hat-tip to an older technology, that promises greater control over personal privacy.
I recently bought a server from a company that wanted to move to another location. I don't have it installed yet, but what I'm hoping for, is a central place where apps can be installed and accessed with a ring with a much lighter OS. And firewalled. Why would you ever put your data in a place that wasn't under your control?
I know what chairs do. What I'm not sure of is what the cloud does.
Tuesday, August 21, 2012
The Bum's Rush
What Senate candidate Todd Akin said about rape was based upon dumb. As I've been able to drill down onto the "scientific evidence" that women who are/or were raped under duress failing to conceive is borne out by the seminal research of some Middle European scientist, probably a Nazi, it isn't the first time that I'd heard of such research, or the results reported by whatever sketchy reports are coming in on the Todd Akin statement.
I'm pretty sure that Kurt Vonnegut wrote about this.
Of course, Kurt was a novelist, so he didn't have to adhere to the truth. Not a literal truth. Suffice a figurative truth. A truth of worthy intent.
What I am amazed about is the clinker between the mis-statements of Akin, and the voting record of President Obama.
Sperm is sperm. Babies is babies. And the anti-abortion argument runs toward the ethical beginning of human life, which I believe begins at zygote. The miracle of life is simple. The male and female of a species comes together in coitus, and life begins anew. For me, there is no greater miracle. Imagine, all these disparate chemicals, the human body, able to discriminate between air and oxygene, the aglomeration of molecules, iron, water, calcium, all ending up in this standing form that we call...us.
I've listened to Todd Akin's speech about "legitimate rape," and yet don't understand whatever it was that he may have intended to impart to the casual listener. Speaking abstractly, I can be called for whatever comes off as gibberish to the casual listener. I have gibberred.
I'd only ask you to compare and contrast the comments of Todd Akin with the vote of President Obama. However egregious Mr. Akin's comments may be interpretted, or construed, I'd ask you how you would condition the vote of our President, to condone the death of a child who was born, following a botched abortion?
In Oregon, the fetus doesn't gain personhood, under law, until birth. I think this is crazy. If my then pregnant wife had been murdered while carrying either of my sons, then I would have wanted her murderer to pay, not only for her death, but for the death of an unborn son. Even though my sons were unborn, I knew that I was expecting, and waiting for, their births. God had given me sons. (You could even see their little pee-pees!)
President Obama voted to allow the death of born children. Mr. Akin said some dumb stuff about rape.
I know that many would condemn Mr. Akin's campaign and ask that he evalutate his electability in the face of the response his comment has generated. If he decides to remain in the race--and I think that taking one for the team may be the best political outcome for the party--I hope that every dime and dollar that he has reminds voters that while off-base, wrong, or ignorant, he believes that life is the most precious commodity on Earth. And unlike President Obama, who voted to allow for the termination of living children, he erred on the side of unborn life.
Yes, I know I'm letting you know that I'm an intellectual troglydite. If you've been here before, you should have already gleaned that truth. I'm not as smart as you. And never intend to be. But there are fundamentals. Life either begins at conception, or it don't.
President Obama voted to terminate life--murder--after live birth.
Which is more reprehensible?
I'm pretty sure that Kurt Vonnegut wrote about this.
Of course, Kurt was a novelist, so he didn't have to adhere to the truth. Not a literal truth. Suffice a figurative truth. A truth of worthy intent.
What I am amazed about is the clinker between the mis-statements of Akin, and the voting record of President Obama.
Sperm is sperm. Babies is babies. And the anti-abortion argument runs toward the ethical beginning of human life, which I believe begins at zygote. The miracle of life is simple. The male and female of a species comes together in coitus, and life begins anew. For me, there is no greater miracle. Imagine, all these disparate chemicals, the human body, able to discriminate between air and oxygene, the aglomeration of molecules, iron, water, calcium, all ending up in this standing form that we call...us.
I've listened to Todd Akin's speech about "legitimate rape," and yet don't understand whatever it was that he may have intended to impart to the casual listener. Speaking abstractly, I can be called for whatever comes off as gibberish to the casual listener. I have gibberred.
I'd only ask you to compare and contrast the comments of Todd Akin with the vote of President Obama. However egregious Mr. Akin's comments may be interpretted, or construed, I'd ask you how you would condition the vote of our President, to condone the death of a child who was born, following a botched abortion?
In Oregon, the fetus doesn't gain personhood, under law, until birth. I think this is crazy. If my then pregnant wife had been murdered while carrying either of my sons, then I would have wanted her murderer to pay, not only for her death, but for the death of an unborn son. Even though my sons were unborn, I knew that I was expecting, and waiting for, their births. God had given me sons. (You could even see their little pee-pees!)
President Obama voted to allow the death of born children. Mr. Akin said some dumb stuff about rape.
I know that many would condemn Mr. Akin's campaign and ask that he evalutate his electability in the face of the response his comment has generated. If he decides to remain in the race--and I think that taking one for the team may be the best political outcome for the party--I hope that every dime and dollar that he has reminds voters that while off-base, wrong, or ignorant, he believes that life is the most precious commodity on Earth. And unlike President Obama, who voted to allow for the termination of living children, he erred on the side of unborn life.
Yes, I know I'm letting you know that I'm an intellectual troglydite. If you've been here before, you should have already gleaned that truth. I'm not as smart as you. And never intend to be. But there are fundamentals. Life either begins at conception, or it don't.
President Obama voted to terminate life--murder--after live birth.
Which is more reprehensible?
Saturday, August 18, 2012
Tuesday, August 14, 2012
Oregon: It's Working!
Hey, good news, sports fans! Oregon's unemployment rate is up two percent!
It's pretty cool when the unemployment rate increases more quickly than the growth in revenue of the private sector. That means we're spending more federal and state tax money as a percentage of state outlays!
Yay!
If you can stand it, you can listen to the audio clips here.
It's pretty cool when the unemployment rate increases more quickly than the growth in revenue of the private sector. That means we're spending more federal and state tax money as a percentage of state outlays!
Yay!
If you can stand it, you can listen to the audio clips here.
Monday, August 13, 2012
Insurance VI
I've danced around a lot of issues that involve insurance companies; things like how they were started, early intervention by governments, but one of the elements I've merely hinted at is one of the most important aspects of insurance. What do insurance companies do with the money they are paid to protect their customers from risk?
Insurance companies, and, especially health insurance companies, are among the most regulated of industries in the United States. Politicians know when to take advantage of their electorate. Insurance was several hundred years old, when the Great Depression hit. And yet, prior to the Twentieth Century, few people ever had need for insurance. Hedging against risk was a novel idea for most people. When it came to medicine, having a doc within miles of your home was rare. Much closer were people who were experienced with injuries, and their personal experience in how to treat the injuries presented. Health care wasn't an expression one would have heard, an hundred years ago. Doctors? Sure. But most "doctors" were simply men or women of experience. They didn't have any form of recognized training. In terms of what we refer to as "science," medicine was distinctly unalloyed with any form of scientific inquiry that we would refer to today. Gentlemen scholars, such as Joseph Lister, were ridiculed by his contemporaries.
The science, it seemed, was settled.
Disease was not a thing that any company would want to address, in terms of offering insurance. Disease, for the most part, was an enigma.
By the mid-20th century, insurance had matured. When we look at the procedures being offered by modern medicine in the early part of the 20th century, most of what we viewed as the domain of medicine was the treatment of trauma, and the treatment of disease. It wasn't until the Great Depression that insurance was widely adopted. It was a sop to the wage limits being imposed by the government. Can't pay a man what he's worth? Give him an incentive. Health insurance to cover you, and your family. And we'll pay for it.
One of the greatest, unintended consequences of moral provision by any government.
The Grange Movement spawned insurance during the Depression. Farms were going under, and legislatures were looking at ways to compel damages. Protection came from insurance companies. If you had insurance, you had a company on your side. With enough coverage, you actually had an advocate on your side, willing to provide for legal counsel if, or when, you found yourself on the wrong side of the legal ledger. Protection became a racket in the 1920's and -30's. "It would be a shame if your business burned down" was a hellavu closing line, when it came to protection.
There were, at the time, associations that were created, in order to counter the worst of the protection rackets. Companies were formed to afford insured parties protection against the protection rackets.
And loss, but if you lived in a metropolitan area, chances are, you learned from your friends and neighbors that it was better to find a way to indemnify yourself against loss, than to fall prey to the rackets.
The demand for insurance was increased due to these types of forces; exposure to risk, protection against loss, and external forces that would create economic havoc. While all this is going on, during the 30's, a the same time, the number or tortuous claims was increasing in the courts system. As racketeering rises, tortuous claims were raised, too.
By the 1940's, insurance in the United States was on a course of expansion never seen in a single industry. Millions of young boys were exposed to insurance for the first time, through their service in the military. The idea that ones death could result in a payment to ones kin was an unheard of sentiment. When the mule kicked you in the head and you died, you died. Simple. Your kin either moved in to help you farm, or you eventually would lose the farm. The ebb and flow of gain and loss isn't a recent chapter of the human condition. It's been going on for millennia. Bad things happen to good people.
(There was no EST in 1935.)
What was created was the first mutual fund that was created without restriction.
Money began pouring into insurance companies, who were more than willing to provide coverage, with limits to the insured. Medical, health insurance was a new commodity, one that hadn't existed previously, and therefore, had no externally imposed constraints upon the companies that issued the coverage. The simplest way to make money for health insurance was to sell policies. And then take the money. And then take more money.
If the beneficiary of a health insurance policy got ten percent of the value of the policy's cost, how could he or she complain? The cost was borne by the employer. The benefit was a delayed payment to the employee. The disconnect between the payer and the beneficiary was a total disconnect. No matter what the amount the beneficiary received, it was above and beyond the costs that an uninsured purchaser of health care would have received.
For a guy with a family, finding out that an insurance company would pay twenty dollars for the cost of putting a cast on his son's broken arm, that benefit, which he never felt the cost, was immeasurable.
But health insurance wasn't driven to compete. It was coddled and enhanced.
It was never in the health insurance industries portfolio to deal with health care costs. Not that it couldn't be.
The industry was never set up to deal with anything more than their profits. Not a bad thing. So, what stops an ethical company from getting into the health insurance market, and driving the costs of health insurance down?
Insurance companies, and, especially health insurance companies, are among the most regulated of industries in the United States. Politicians know when to take advantage of their electorate. Insurance was several hundred years old, when the Great Depression hit. And yet, prior to the Twentieth Century, few people ever had need for insurance. Hedging against risk was a novel idea for most people. When it came to medicine, having a doc within miles of your home was rare. Much closer were people who were experienced with injuries, and their personal experience in how to treat the injuries presented. Health care wasn't an expression one would have heard, an hundred years ago. Doctors? Sure. But most "doctors" were simply men or women of experience. They didn't have any form of recognized training. In terms of what we refer to as "science," medicine was distinctly unalloyed with any form of scientific inquiry that we would refer to today. Gentlemen scholars, such as Joseph Lister, were ridiculed by his contemporaries.
The science, it seemed, was settled.
Disease was not a thing that any company would want to address, in terms of offering insurance. Disease, for the most part, was an enigma.
By the mid-20th century, insurance had matured. When we look at the procedures being offered by modern medicine in the early part of the 20th century, most of what we viewed as the domain of medicine was the treatment of trauma, and the treatment of disease. It wasn't until the Great Depression that insurance was widely adopted. It was a sop to the wage limits being imposed by the government. Can't pay a man what he's worth? Give him an incentive. Health insurance to cover you, and your family. And we'll pay for it.
One of the greatest, unintended consequences of moral provision by any government.
The Grange Movement spawned insurance during the Depression. Farms were going under, and legislatures were looking at ways to compel damages. Protection came from insurance companies. If you had insurance, you had a company on your side. With enough coverage, you actually had an advocate on your side, willing to provide for legal counsel if, or when, you found yourself on the wrong side of the legal ledger. Protection became a racket in the 1920's and -30's. "It would be a shame if your business burned down" was a hellavu closing line, when it came to protection.
There were, at the time, associations that were created, in order to counter the worst of the protection rackets. Companies were formed to afford insured parties protection against the protection rackets.
And loss, but if you lived in a metropolitan area, chances are, you learned from your friends and neighbors that it was better to find a way to indemnify yourself against loss, than to fall prey to the rackets.
The demand for insurance was increased due to these types of forces; exposure to risk, protection against loss, and external forces that would create economic havoc. While all this is going on, during the 30's, a the same time, the number or tortuous claims was increasing in the courts system. As racketeering rises, tortuous claims were raised, too.
By the 1940's, insurance in the United States was on a course of expansion never seen in a single industry. Millions of young boys were exposed to insurance for the first time, through their service in the military. The idea that ones death could result in a payment to ones kin was an unheard of sentiment. When the mule kicked you in the head and you died, you died. Simple. Your kin either moved in to help you farm, or you eventually would lose the farm. The ebb and flow of gain and loss isn't a recent chapter of the human condition. It's been going on for millennia. Bad things happen to good people.
(There was no EST in 1935.)
What was created was the first mutual fund that was created without restriction.
Money began pouring into insurance companies, who were more than willing to provide coverage, with limits to the insured. Medical, health insurance was a new commodity, one that hadn't existed previously, and therefore, had no externally imposed constraints upon the companies that issued the coverage. The simplest way to make money for health insurance was to sell policies. And then take the money. And then take more money.
If the beneficiary of a health insurance policy got ten percent of the value of the policy's cost, how could he or she complain? The cost was borne by the employer. The benefit was a delayed payment to the employee. The disconnect between the payer and the beneficiary was a total disconnect. No matter what the amount the beneficiary received, it was above and beyond the costs that an uninsured purchaser of health care would have received.
For a guy with a family, finding out that an insurance company would pay twenty dollars for the cost of putting a cast on his son's broken arm, that benefit, which he never felt the cost, was immeasurable.
But health insurance wasn't driven to compete. It was coddled and enhanced.
It was never in the health insurance industries portfolio to deal with health care costs. Not that it couldn't be.
The industry was never set up to deal with anything more than their profits. Not a bad thing. So, what stops an ethical company from getting into the health insurance market, and driving the costs of health insurance down?
Wednesday, August 8, 2012
Insurance V
Thanks for bearing with.
A friend of mine is going through a bad patch--cancer--and I've had to spend more time taking care of things than I would have had, normally.
Business is still extremely touchy, for those of you who are making their first visit here, I live in a town of less than six thousand people. When you live in a rural community, there is great deal of bifurcation socially; those who have elitist views, and those who only want to be left alone. Life is bad enough without having the know-it-alls telling you what to do, or what to believe.
Hope and change is alive in this small town.
If you're an employee, chances are you're a hope and change person. If you have a business in town, chances are you aren't. Under Oregon law, you cannot tell your employees what your political views are, or how the policies of any particular political view may impact your business negatively. So, we can't, under Oregon law, tell the folks who rely upon my business for their livelihood, why the policies that are being advanced by Democrats make it harder for me to provide them with their jobs. Nor, can any Oregon employer.
In Oregon, we do things differently here.
Back to insurance.
Had a comment from Jardinero1. "Say what you will about fractional reserve lending and I may agree with you. But, it's a gross simplification to equate insurance companies with banks." Guilty. And thank you, Mr. Jardinero, for finding the obvious.
The reason why I refer you to the banking rules is to introduce to you one of the realities of insurance; you don't have to have all the cash your insured send you at any given moment. If you have an hundred insured, paying you an hundred a month, against a policy that will pay out one thousand dollars, how many of those payments must you hold? Ten. That thousand dollars. If you have an hundred insured, how likely is it that any of those insured will make a claim upon their insurance?
Face it, the likelihood of calling your insurance company to file a claim is relatively low.
Car insurance?
Higher likelihood.
Flood insurance? Close to nil?
Health insurance?
Well, here's the conundrum.
Health care has a higher degree of dispersion than any other form of insurance. What is the likelihood of your finding yourself in need of medical care? Is it different between 6am and 7pm, or 7pm and 6am? Is it more likely to be found Monday through Friday than Saturday-Sunday? When you're an old guy, finding yourself with a temperature of 102 is less likely to raise an alarm than when you're a 36 year old father, with a child with a temperature of 103. Old guy, 102, spend some time in bed and take fluids. Child? 103? You're going to make a call.
If you don't have a Primary Care Physician, who do you call? I have a Doc. I don't bother him much. He does check his voice-mail, so, if I have a problem, I can reach him within hours of leaving a message. He's a good doc. If you don't have a primary care physician, you are just like the guy whose car is acting up, looking for free advice as to what you should do to get your car working again.
Your probable solution? In an emergency, you're going to end up in the Emergency Room of your local hospital. The most expensive place in the world to deal with a medical problem.
Me? I take my car in every three thousand miles. Care and maintenance for my motor vehicle is fairly inexpensive. But only because, I write the big checks, when needed. The transmission on my car went out. I could have bought a re-built tranny, but my mechanic explained why I should replace my transmission with a new transmission. That was expensive. Not as expensive as a new car, but expensive.
There are different degrees of urgency that you will face as you go through life. If you are broke, and facing the possibility that you won't have a car to drive you to work, take care of the shopping, moving the kids around, finding that you don't have a transmission that works leads you to several alternatives; buying a new POS, repairing the tranny yourself, buying a re-built tranny, or in my case, buying a factory replacement. There is a wide range of possible outcomes based upon your choice.
If you buy a new POS, you've still got the old iron sitting in your front yard, or sitting somewhere. If you are clever, and have the tools and friends with the right equipment, rebuilding isn't necessarily a bad idea. But most shade tree mechanics aren't able to rise to the level of mechanic necessary to pull it off. Buying a factory tranny made sense, since it included all the computer upgrades that were available for the car I own, plus, it renewed the drive train warranty of my car. It was a win/win for me, although it was the most expensive alternative.
Amusingly, I recently received a call from a fellow, looking for information about an after-market automotive warranty plan. You've heard the ads, haven't you? Why pay for fixing your car? Let insurance do it? What the caller had found out is, that attempting to insure your vehicle against the cost of repairs didn't have the success that he had hoped. He was surprised. Drive an older car, and the chances that you'll need repair, a)increase or, b)decrease? You make the call.
What do you think is more likely? As a car gets older will it need an increased amount of repair, or a decreased amount of repair? I don't find it shocking that the coverage for used vehicles is limited. And, in this particular case, the amount spent by the man who called me to provide himself "insurance" would have gone a lone way toward covering his repair costs. Without insurance. Which, it turns out, didn't cover the costs of his repairs. When you buy insurance, what is it that you're buying? Insurance is a form of derivative financing, that offers itself to cover costs when certain conditions are met. From investopedia, "Derivatives are generally used as an instrument to hedge risk, but can also be used for speculative purposes." This is what insurance is. An hedge.
That is, each of us, most of us, are involved in buying derivatives on a daily basis. Without a derivatives market, there would simply be too much risk for any of us to go into business. Not simply to protect us against loss, but to protect us against claims. (F***ing attorneys.) Even if we appropriately conduct ourselves in our business, there is no guarantee that an attorney will attempt to file a tort claim alleging misconduct. When your insurance agent tells you that you are insuring yourself against the unknown, make sure he means what he says. Tortuous claims can kill your business and leave you with nothing more than the skin on your back. And, we're not yet talking about "health insurance."
When you give your money to an health insurance company, you're buying yourself protection against future harm. The quality of that coverage may differ from policy to policy, from company to company. I've several insurance companies that I work with. Those companies have track records of performance. I would suggest, that most of us never question the reliability of the insurance companies that we give our money. We look for bargains when it comes to insurance. What kind of value do you allow yourself to purchase, when you're sole concern is the cost of that value? Didja ever wonder why there is so much criticism about the coverage one purchases, how that coverage didn't satisfy the purchaser, when it is discovered that the sole determinant of insurance was its cost?
Purchasing insurance, of any type, is an important contract. And you need to see it as a contract, between you and your insurance provider. The quality of your insurance is indeed, related to the quality of the company providing you your insurance. There is a progressive insurance company that advertises a great deal. I would avoid that company at every turn. The cheapest is not the best. That a single insurance company is the largest advertiser in the United States wouldn't be, for me, its greatest benefit.
Why is it that companies are able to offer you "discount" rates? Would you shop for "discount" dentistry? Discount clothes? Discount shoes?
I own two pair of shoes called brouges. Wingtips. I paid more than two hundred dollars for these pairs of shoes, each, twenty years ago. I still wear them today. Purchasing a thing of value has a worth greater than its cost. Buying quality is important. Buying cheap, or shoddy, is a waste of money. So, too, with insurance.
Purchasing health insurance is similarly worthy of this same type of criticism. Unfortunately, in an attempt to protect us from ourselves, government has stepped in to assure us that we can't purchase the type, kind or quality of insurance that we should be able to purchase for ourselves. Why is insurance so expensive? Because, legislators have told insurance companies that they cannot make rational decisions about the costs of insurance, which would depend upon who purchases said insurance. According to a certain political view, it is unfair for someone in a higher risk pool to pay a higher price for coverage. Once you break price from risk, you increase costs for the lower risk pool, while reducing costs for higher risk pools.
Insurance companies never complained.
Why would they?
Thank about it; when you live in a world where politics determine your costs, as against the costs of your competitors, what disadvantage have you, when mandated costs are created for all participants in the market? Zero.
If you provide a service that has mandates, the mandates have to be viewed as zero costs in terms of competitive advantage. In terms of market forces, it is, of course, insane. But politicians know, that if men could buy insurance from insurance company A, and women could only purchase from insurance company B, that women would pay more for insurance than men.
Government can level the playing field by requiring all insurance carriers to provide certain types of coverage to "all" insured, whether they are male or female. It's simple theft through law. I'm not a woman. But, if I want to purchase health insurance, my coverage will cover the same medical issues, abortion, birth control, pregnancy, mental health, as if I was a woman. Because, politically, it's death to point out that the reality of the world is, it costs more to insure a woman than it does to insure a man.
But women are unwilling to cover the costs of their own healthcare. It's easier for them to claim that their healthcare costs are discriminatory, and therefore are the burden of the entire society of which they belong. This came across my desk a couple of days ago:
"It gives the woman the decision to decide what her family size will be. It gives her control over her life."
What was the topic? Abortion and birth control under the Affordable Care Act.
The government paying for abortion and birth control "...gives the woman the decision to decide what her family size will be. It gives her control over her life."
Think about it.
We have a political class that has determined that women who can't figure out that having sex is the single, greatest determinant of pregnancy, have a right to depend upon their government for dealing with their terminally stupid decision to have unprotected sex is a form of "control over her life"? Are you serious? Do you view a woman's ability to abort a child with the same level of intellectual clarity when one is suggesting taking the life of an unborn child? If a woman was actually able to decide what her family's size would, or should, be, or wanted to gain control over her life, wouldn't one of her first decisions be, whether or not to procreate? To fuck? To make babies?
Insurance companies don't care. They are in on the fix. Cost controls? Check. Limits to care? Check. Free abortions and birth control? Check.
How does all this come about, without interference? Most people don't know where insurance companies make their money. And, most people don't know that the regulations over insurance companies really don't have anything to do with how they make their money, or how their costs are allocated.
Hopefully, I can wrap this damn thing up after another post. But, getting back to the comment of Jardinero at the top; yes, it was a simplification to compare fractional reserves in banking to the reserve components of the insurance industry. But, Mr. Jardinero, can you tell me why the insurance industry is an even more wild card in finance?
Next time.
A friend of mine is going through a bad patch--cancer--and I've had to spend more time taking care of things than I would have had, normally.
Business is still extremely touchy, for those of you who are making their first visit here, I live in a town of less than six thousand people. When you live in a rural community, there is great deal of bifurcation socially; those who have elitist views, and those who only want to be left alone. Life is bad enough without having the know-it-alls telling you what to do, or what to believe.
Hope and change is alive in this small town.
If you're an employee, chances are you're a hope and change person. If you have a business in town, chances are you aren't. Under Oregon law, you cannot tell your employees what your political views are, or how the policies of any particular political view may impact your business negatively. So, we can't, under Oregon law, tell the folks who rely upon my business for their livelihood, why the policies that are being advanced by Democrats make it harder for me to provide them with their jobs. Nor, can any Oregon employer.
In Oregon, we do things differently here.
Back to insurance.
Had a comment from Jardinero1. "Say what you will about fractional reserve lending and I may agree with you. But, it's a gross simplification to equate insurance companies with banks." Guilty. And thank you, Mr. Jardinero, for finding the obvious.
The reason why I refer you to the banking rules is to introduce to you one of the realities of insurance; you don't have to have all the cash your insured send you at any given moment. If you have an hundred insured, paying you an hundred a month, against a policy that will pay out one thousand dollars, how many of those payments must you hold? Ten. That thousand dollars. If you have an hundred insured, how likely is it that any of those insured will make a claim upon their insurance?
Face it, the likelihood of calling your insurance company to file a claim is relatively low.
Car insurance?
Higher likelihood.
Flood insurance? Close to nil?
Health insurance?
Well, here's the conundrum.
Health care has a higher degree of dispersion than any other form of insurance. What is the likelihood of your finding yourself in need of medical care? Is it different between 6am and 7pm, or 7pm and 6am? Is it more likely to be found Monday through Friday than Saturday-Sunday? When you're an old guy, finding yourself with a temperature of 102 is less likely to raise an alarm than when you're a 36 year old father, with a child with a temperature of 103. Old guy, 102, spend some time in bed and take fluids. Child? 103? You're going to make a call.
If you don't have a Primary Care Physician, who do you call? I have a Doc. I don't bother him much. He does check his voice-mail, so, if I have a problem, I can reach him within hours of leaving a message. He's a good doc. If you don't have a primary care physician, you are just like the guy whose car is acting up, looking for free advice as to what you should do to get your car working again.
Your probable solution? In an emergency, you're going to end up in the Emergency Room of your local hospital. The most expensive place in the world to deal with a medical problem.
Me? I take my car in every three thousand miles. Care and maintenance for my motor vehicle is fairly inexpensive. But only because, I write the big checks, when needed. The transmission on my car went out. I could have bought a re-built tranny, but my mechanic explained why I should replace my transmission with a new transmission. That was expensive. Not as expensive as a new car, but expensive.
There are different degrees of urgency that you will face as you go through life. If you are broke, and facing the possibility that you won't have a car to drive you to work, take care of the shopping, moving the kids around, finding that you don't have a transmission that works leads you to several alternatives; buying a new POS, repairing the tranny yourself, buying a re-built tranny, or in my case, buying a factory replacement. There is a wide range of possible outcomes based upon your choice.
If you buy a new POS, you've still got the old iron sitting in your front yard, or sitting somewhere. If you are clever, and have the tools and friends with the right equipment, rebuilding isn't necessarily a bad idea. But most shade tree mechanics aren't able to rise to the level of mechanic necessary to pull it off. Buying a factory tranny made sense, since it included all the computer upgrades that were available for the car I own, plus, it renewed the drive train warranty of my car. It was a win/win for me, although it was the most expensive alternative.
Amusingly, I recently received a call from a fellow, looking for information about an after-market automotive warranty plan. You've heard the ads, haven't you? Why pay for fixing your car? Let insurance do it? What the caller had found out is, that attempting to insure your vehicle against the cost of repairs didn't have the success that he had hoped. He was surprised. Drive an older car, and the chances that you'll need repair, a)increase or, b)decrease? You make the call.
What do you think is more likely? As a car gets older will it need an increased amount of repair, or a decreased amount of repair? I don't find it shocking that the coverage for used vehicles is limited. And, in this particular case, the amount spent by the man who called me to provide himself "insurance" would have gone a lone way toward covering his repair costs. Without insurance. Which, it turns out, didn't cover the costs of his repairs. When you buy insurance, what is it that you're buying? Insurance is a form of derivative financing, that offers itself to cover costs when certain conditions are met. From investopedia, "Derivatives are generally used as an instrument to hedge risk, but can also be used for speculative purposes." This is what insurance is. An hedge.
That is, each of us, most of us, are involved in buying derivatives on a daily basis. Without a derivatives market, there would simply be too much risk for any of us to go into business. Not simply to protect us against loss, but to protect us against claims. (F***ing attorneys.) Even if we appropriately conduct ourselves in our business, there is no guarantee that an attorney will attempt to file a tort claim alleging misconduct. When your insurance agent tells you that you are insuring yourself against the unknown, make sure he means what he says. Tortuous claims can kill your business and leave you with nothing more than the skin on your back. And, we're not yet talking about "health insurance."
When you give your money to an health insurance company, you're buying yourself protection against future harm. The quality of that coverage may differ from policy to policy, from company to company. I've several insurance companies that I work with. Those companies have track records of performance. I would suggest, that most of us never question the reliability of the insurance companies that we give our money. We look for bargains when it comes to insurance. What kind of value do you allow yourself to purchase, when you're sole concern is the cost of that value? Didja ever wonder why there is so much criticism about the coverage one purchases, how that coverage didn't satisfy the purchaser, when it is discovered that the sole determinant of insurance was its cost?
Purchasing insurance, of any type, is an important contract. And you need to see it as a contract, between you and your insurance provider. The quality of your insurance is indeed, related to the quality of the company providing you your insurance. There is a progressive insurance company that advertises a great deal. I would avoid that company at every turn. The cheapest is not the best. That a single insurance company is the largest advertiser in the United States wouldn't be, for me, its greatest benefit.
Why is it that companies are able to offer you "discount" rates? Would you shop for "discount" dentistry? Discount clothes? Discount shoes?
I own two pair of shoes called brouges. Wingtips. I paid more than two hundred dollars for these pairs of shoes, each, twenty years ago. I still wear them today. Purchasing a thing of value has a worth greater than its cost. Buying quality is important. Buying cheap, or shoddy, is a waste of money. So, too, with insurance.
Purchasing health insurance is similarly worthy of this same type of criticism. Unfortunately, in an attempt to protect us from ourselves, government has stepped in to assure us that we can't purchase the type, kind or quality of insurance that we should be able to purchase for ourselves. Why is insurance so expensive? Because, legislators have told insurance companies that they cannot make rational decisions about the costs of insurance, which would depend upon who purchases said insurance. According to a certain political view, it is unfair for someone in a higher risk pool to pay a higher price for coverage. Once you break price from risk, you increase costs for the lower risk pool, while reducing costs for higher risk pools.
Insurance companies never complained.
Why would they?
Thank about it; when you live in a world where politics determine your costs, as against the costs of your competitors, what disadvantage have you, when mandated costs are created for all participants in the market? Zero.
If you provide a service that has mandates, the mandates have to be viewed as zero costs in terms of competitive advantage. In terms of market forces, it is, of course, insane. But politicians know, that if men could buy insurance from insurance company A, and women could only purchase from insurance company B, that women would pay more for insurance than men.
Government can level the playing field by requiring all insurance carriers to provide certain types of coverage to "all" insured, whether they are male or female. It's simple theft through law. I'm not a woman. But, if I want to purchase health insurance, my coverage will cover the same medical issues, abortion, birth control, pregnancy, mental health, as if I was a woman. Because, politically, it's death to point out that the reality of the world is, it costs more to insure a woman than it does to insure a man.
But women are unwilling to cover the costs of their own healthcare. It's easier for them to claim that their healthcare costs are discriminatory, and therefore are the burden of the entire society of which they belong. This came across my desk a couple of days ago:
"It gives the woman the decision to decide what her family size will be. It gives her control over her life."
What was the topic? Abortion and birth control under the Affordable Care Act.
The government paying for abortion and birth control "...gives the woman the decision to decide what her family size will be. It gives her control over her life."
Think about it.
We have a political class that has determined that women who can't figure out that having sex is the single, greatest determinant of pregnancy, have a right to depend upon their government for dealing with their terminally stupid decision to have unprotected sex is a form of "control over her life"? Are you serious? Do you view a woman's ability to abort a child with the same level of intellectual clarity when one is suggesting taking the life of an unborn child? If a woman was actually able to decide what her family's size would, or should, be, or wanted to gain control over her life, wouldn't one of her first decisions be, whether or not to procreate? To fuck? To make babies?
Insurance companies don't care. They are in on the fix. Cost controls? Check. Limits to care? Check. Free abortions and birth control? Check.
How does all this come about, without interference? Most people don't know where insurance companies make their money. And, most people don't know that the regulations over insurance companies really don't have anything to do with how they make their money, or how their costs are allocated.
Hopefully, I can wrap this damn thing up after another post. But, getting back to the comment of Jardinero at the top; yes, it was a simplification to compare fractional reserves in banking to the reserve components of the insurance industry. But, Mr. Jardinero, can you tell me why the insurance industry is an even more wild card in finance?
Next time.
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