From 2000 to 2005, Lishui's population went from 160,000 to 250,000, and the local government invested 8.8 billion dollars in infrastructure for the region it administers. During those five years, infrastructure investment was five times the amount spent in the previous half century. In money terms, what was once 50 days' work is now done in one.

For the past three decades, China's economy has averaged nearly 10 percent annual growth. The economy is fueled by the largest migration the world has ever seen: An estimated 140 million rural Chinese have already left their homes, and another 45 million are expected to join the urban workforce in the next five years.

Such cities must expand and attract industry on their own, because the central government no longer provides the funding and guidance of the old planned economy.

Chinese cities aren't allowed to raise funds through municipal bonds or sharp tax increases, so they turn to real estate. Legally, all land belongs to the nation, but local governments can approve the sale of land-use rights—the closest thing to private ownership. Cities acquire suburban land from peasants at artificially low set rates, approve it for development, and sell for a profit on the open market. Across China, an estimated 40 to 60 percent of local government revenue is acquired in this way.

Formerly, the 16.5 acres (6.7 hectares) had belonged to the village of Xiahe, but in 2000 the city government bought the land-use rights for one million dollars. Three years later, Lishui flipped the land to Yintai Real Estate for 37 million dollars. Given that corruption is endemic in Chinese real estate, the actual price may have been even higher.

In such an environment, everybody gambles on growth. Most of the city's massive investment in infrastructure had been borrowed from state-owned banks, which also loaned money to the developers—Yintai had borrowed over 28 million dollars for its Jiangbin venture. If the real estate market went cold, the whole system was in trouble. During the past five years, the average price of a Lishui apartment had risen sixfold.

Concerned about a slowdown of contracted foreign investment, the Shanghai municipal government has eased restrictions to lure foreigners to invest in property development again, in a reversal of an earlier policy aimed at cooling down the real-estate sector.

"Shanghai's property market also showed signs of cooling down in January-April, although housing prices in all other major Chinese cities continued to grow significantly. The average property price in Shanghai fell 3% in the first quarter, compared with a 9% increase in the same period last year."

This is an interesting development. I smell a bubble bursting, and they need the final sucker to bail out the speculators (everyone).

An indicator of the widespread speculation gripping the Shanghai exchange came last month with a Chinese government website reporting that one in 10 maids in the city, China's financial capital, had quit their jobs to take up trading full time.

I was reading this article on rising gasoline prices and started to think about the past, particularly the late 70s when I was a kid.

This article is pointing out that gas prices are going to hurt consumers soon and cause the consumer to reduce consumption (this should be a world wide phenomenon in industrialized countries). This spending pullback may tip the economy into recession (considering that last year the economy was barely growing and 70% of the economy in consumer spending).

Remember in the late 70s we had some inflation, a little growth and then pow, a huge gas spike... That sent the economy into stagflation. I believe that we may be looking at that same scenario again. Remember how the government solved the stagflation of the early 80s??? Ronald Reagan spent about 1 trillion dollars (doubled the national debt at the time) to buy military equipment and Paul Volcker raised interest rates to insane levels.

The interest rates cause the value of the dollar to increase thus making foreign products cheaper. Producing more spending, combined with government spending righted the economy.

If the same scenario happens again the first question is: can the government make the same kind of impact? We have all seen that the Fed doesn't have anywhere near the same ability to control the interest rates as it once had almost 30 years ago. We also know that it is taking more and more spending to generate each dollar of economic growth.

In the current situation the interest rate change will make the dollar rise and make foreign products cheaper. Remember house values and interest are inversely proportional. So high interest rates could implode the housing bubble.

But a side effect of high interest rates could be a huge impact to all of the people with adjustable rate mortgages. Would people whose home values are plummeting or that are losing their houses (because that can't be sold for what they are worth) be willing to spend more for stuff (the people that lost their homes would have no place to store the stuff)??? Any interest rate increase would impact the already leaking housing bubble. I can't believe that the politicians could even fathom this option.

If the government tried to spend their way out of a stagflation scenario they would have to borrow MASSIVE amounts of money (possibly double the national debt). Currently, there is enormous downward pressure on the dollar due to all of the debt being created by the US goverment (due to the borrow and spend Republicans). The dollar has suffered about a 25% decline against the Euro since early 2001 ( Federal Reserve website). The dollar has fallen against most unpegged worldwide currencies ( Federal Reserve).

So, what would massive federal spending do?? First it would cause massive federal borrowing, causing the dollar to fall if not collapse. Since most of the goods we buy come from foreign countries debt creation would in turn cause inflation, which would make an inflationary situation worse and reduce economic growth.

Unfortunately, the government looks like they would have limited solutions in this scenario. I think they would try the easy way out first, just making the problem worse.

Charles asked me to write something about the health care system in the U.S., but before I do that, I should add a few words about my own situation. The opinions below could be read as a rant by some overpaid techie who has never been sick a day in his life. Sadly, that is not the case. I sustained a spinal chord injury at age 7, and have spent the rest of my life in a wheelchair. Long-term paralysis leads to other complications, and so I now have multiple serious conditions. I have seen more than my share of the health care system.

This is in regards to March 24th Health and Bankruptcy article. I know it's a little late in responding, but I just came off of a four day stretch at work. In that article there is a purple circle which says "I want a pill, blame someone else for my ill health". That statement screamed at me because it's so true. I have the perfect example.

This weekend I took care of a 60 year old, overweight women who has an active bleed in her colon. She has been with us for three weeks. She has refused a colonscopy among a few other treatments and tests which are needed to treat this condition. She has also continuously violated our no smoking policy as well as her diabetic diet with the help of her family. You may ask why not just send her home then. We can't because if we do and she dies at home, we will surely be sued as her family has already threatened it. The patient and the family are in no hurry to get her home even though she has no insurance. Why because Medicare pays for part of it and the rest goes unpaid by the family.

Even though we have plenty of documentation of her un-cooperative behavior in everything, we will still be sued and the family will more than likely win the case because our country is adverse to personal responsibility. Although this case is an extreme one, I would say half our patients are not willing to do what is necessary to get themselves back in better health and we as citizens pay for that.

Anyway, I thought I'd share this example with you mainly because I just needed to vent my frustration at our citizen's lack of discipline and responsibilty for their own health care.

The Berkeley Housing Authority has paid rent on at least 15 units where tenants are dead—as much as two years of rent on the deceased, failed to inspect units where substandard conditions exist, and allowed ineligible family members to “inherit” a unit ahead of others on the waiting list.

These are just a few of more than a dozen serious problems cited by City Attorney Manuela Albuquerque in a report to the Berkeley Housing Authority members. The report also recommends the removal of all housing authority staff except new manager Tia Ingram.

HUD (the Federal Housing and Urban Development department) has deemed the Berkeley agency “troubled” since 2002; if the authority does not significantly improve, it could ask an agency outside Berkeley to manage the city’s low-income housing efforts.

The housing authority “has long been the Siberia of Berkeley’s ‘no lay-off’ policy,” he said.

Employees won’t be laid off. “We’re looking at it as a major reshuffling,” City Manager Phil Kamlarz said in an interview Monday. Some employees may go through the city’s “progressive discipline” procedure in other departments, he said.

Service Employees International Union 1021 officials said Wednesday they are seeking legal advice regarding the council action, as it may have violated workers’ contracts.

Nationwide, the New York Times reported, "state and local governments owe their current and future retirees roughly $375 billion more than they have committed to their pension funds" by one estimate; that number balloons to $800 billion, it wrote, "if America's state pension plans were required to use the same methods as corporations." Public-employee pension funds are not covered by federal pension law, held to a uniform accounting standard, or protected by the PBGC; instead they're governed by boards with relatively little oversight, and must appeal to the taxpayers to fill the gap if they end up in the red.

UC Regents' plan to restart contributions to the UC Retirement Plan (UCRP) in July 2007, following a 16-year "holiday" during which UC and its employees did not pay into the pension fund.

Actually funny a little since we are on the topic there was an article review I did for one of my classes on an article from journal of finance about fund management. Basically 80% of funds fail to cover their fees and perform worse than the benchmark they pick. Only 10% of funds cover their fees with returns in excess of the benchmark. There was one funny thing in that paper: basically about 120+ funds did -5% per year or less but by luck alone only 60+ funds should have... So the others are there due to "skill".

Despite a stock market setting “new highs” even states are struggling to make ends meet. What happens as property values continue to collapse forcing a downward readjustment of property taxes causing a drop in tax receipts followed by a sharp increase in unemployment causing an even greater drop in tax receipts, followed by sharply decreasing corporate earnings due to fall off in consumption causing an even greater decrease in tax receipts.

It’s not just healthcare, it’s all the endless mind-numbing rules by our beloved nanny-state government.

You really just have to decide which ones to ignore. (which isn’t a good long term thing for any form of government)

Why do illegals own the lawn care business? Because they ignore most of the rules.

Insurance?, truck insurance? Business insurance? Liability insurance? Really think that beater POC truck is registered? And passed emissions?

Let’s not forget workman’s compensation, all the OHSA rules, all the safety rules, all the EEOC rules about who you can hire, where you can dump grass, when you can operate machinery, how old you can be, etc, etc, etc. Let’s not forget break times, when to clock in and out, keeping records for years, etc. Building inspections (of both yours and the one you work on), bidding rules, bonding. Even the type of can you can put gasoline in is tightly regulated. After a while, it’s like, well, we’re doing it, but we’re not doing it.

How can I, a law abiding citizen, compete with that? My overhead is 3 times what theirs is. Back when I used to do lawn care (before giving up and finding something with better barriers to entry) I’ve bid jobs where their bid is less than my parts cost. How can that be?

Do you know why spraying your lawn for weeds costs so much?

It’s not the chemicals, or really the equipment, it’s all the GD rules. Here in Colorado (which is probably way less than NY or Kali or somewhere else), you have to get a license (and of course pay for it), which includes taking a test and passing it. Then, your supervisor also needs to pass a bigger and harder test and the yearly license costs about $300 This needs to be with you at all times, and the supervisor needs to be on duty when you are spraying. Then of course, you need business insurance. Which, sit down, for a one person truck, with all the licenses is about $8,000 dollars per year (yes, that’s right, eight grand, my plumber, a one person truck, pays about 1200 a year)

All of this just to spray 2,4D on your lawn which you and I can buy as private citizens in WalMart. (also known as Weed-B-gone).

No, we don’t spray, and we can’t even find someone to subcontract to do it. Who wants to? And if you do find someone, it’s expensive as hell, because of all this crap.

That’s just one example. Heck, just today my wife has to go register our trailers. (why exactly do I have to register cars anyway? They don’t drive, they don’t have privileges, they don’t go out on the street by themselves at night without supervision).

1. it’s going to be a couple hundred dollars

2. it’s going to take hours

And for what? Absolutely nothing, just another damn tax.

Get the damn government out of the way and we could do amazing things.

I know this will sound crazy but I wonder if there really is something in the water. No one seems to care about what's going on. I can't find anyone I know personally that can even imagine that something could go wrong. A good friend has a navy pension, a California state pension and Social Security it is impossible to get him to even think that something might go wrong. I have a nephew who had saved up $6500 and he used every penny to buy a juke box.

I have driven around the country in my motor home during the summers and there are a huge number of businesses closed. Closed businesses are not included in the governments calculations.

I truly don't know any one personally who thinks there might be a problem. I agree with you that the stock market is on the verge of collapse. Housing is the same. What the hell is going on? Something has totally fried their brains.

Cerberus Capital Management, a New York private equity firm, will pay $7.8 billion for the iconic automaker, with almost all of that going to recapitalize Chrysler.

Nearly a decade ago, Daimler paid $36 billion to buy Chrysler. Now, the same company will pay $650 million to rid itself of Chrysler and its $18 billion in pension and health care obligations.

It will face pressure to make Chrysler more competitive. Chrysler, which lost $1.5 billion last year, estimates it pays $30 an hour more in labor costs than its Japanese counterparts. GM and Ford have similar disadvantages, which is simply untenable.

You're right on with the MEW (mortgage equity withdrawal). My realtor friend who lives on the water in (San Diego), has gone through tax records and found lots of MEW among her neighbors. Some of her neighbors almost paid cash for their homes 10-20 years ago, and then took out $1 mil loans! One of the people with a $1 mil MEW drives a $150K sports car. I suspect they used that money for investing...why would someone who was frugal their whole life all of a sudden go on a spending spree though? Maybe some of the money went for investment property?

The richer they are, the bigger the MEW. $1 mil MEW is not uncommon. About 10% of the people bought 20 years ago or more, and took out no MEW. They are the minority.

Just think of all that money swimming out in the economy.

This is very key: the areas with the highest home appreciation, is where we had the highest MEW. So the entire country's MEW was concentrated in CA, AZ, FL, and the east coast. The Midwest got passed by. They used those exotic loans to purchase homes, but no to do cash outs. They didn't have the appreciation. But they got neg-am loans to refinance into lower payments.

I would like to start with my observations about how humans process information. When something enters the mind the first thing we do is compare it to similar things from our past, then we compare the new thing to the similar things and look for differences. We compare and discriminate to process new information. If we treated all new information as unique we would over load and brain freeze ( technical term ). This works most of the time.

I don't have anything to support what I am going to say next other then a life time of reading, observing, too much education and 30 years in accounting and finance.

Here it is: Things are different now. What an over-used phrase.

Humans will not accept bad news.
Their time horizon is 1-3 years max.
The price of oil has gone from $10-13 to $50-75 a barrel in 8-10 years.
We clearly are past peak oil or so close it doesn't matter.
If we are past peak this means NO MORE GROWTH.
THE ALTERNATIVE ENERGY SOURCES DON'T COME CLOSE TO REPLACING OIL.

The bad news in the U.S. has been covered up by the expansion of credit. Never in the history of the world has there been such a huge expansion of credit, the worldwide asset bubble has never been bigger.

This is not rocket science once you accept the past peak oil idea. Think of the ramifications of no growth; this is going to be a pants crapping horror (Kunstler). Editor's note: this references The Long Emergency: Surviving the End of Oil, Climate Change, and Other Converging Catastrophes of the Twenty-First Century by James Howard Kunstler)

We have been in a recession/depression since 1990, this has been covered up by the asset and credit bubbles.

Think of what "no growth" means. No jobs for our young men leaves them only anarchy. Look around the world and see how young men cope with no jobs.

Swiss experts expect first shortfalls in electric power supply to occur within the next five years. And the energy department in Bern is already busy working on a so-called cut-off plan. Electricity suppliers are already counting on periodic power cuts to entire towns and industrial zones within the next years. Today we cannot begin to imagine twelve hour power cuts in entire cities like Zurich or Frankfurt.

I have some strange measures of the American consumerism patterns. I count self storage buildings in the areas that I travel and also monitor how many bags of trash people take out on trash day. (I have never claimed to be normal) There is some virtue to this kind of study. One has to purchase, and then throw away, a lot of stuff to have 5-6 bags of trash at the curb each week. Our household consists of my wife and myself. We usually have one bag of trash each week. Across the street is a household consisting of a husband and wife and they generally have at least 5 bags of trash. Are they 5 times as happy as Barbara and I?

I call Fred, the neighbor above, the "Tool man". He has every conceivable gadget that the Chinese can make. His yard is a little bigger than ours. I mow with a 20" push mower. Fred had three riders, a push mower, a gas leaf blower, a gas trimmer, a gas sidewalk edger, and a gas snow blower! Our society just can't go on like this. Yet when I try to talk to clients about this kind of stuff, they glaze over or say something like, 'that is depressing, I don't want to talk about it anymore." I think this kind of attitude seals our doom!

But like the distracted yuppie parent who can't bear to rein in their bratty, irresponsible child's excesses, Congress dares not tell the American public that they need to spend less and save more. But Why?

Here's the answer: the bankers would stop making money.

Federal Reserve data show that in relative terms, that debt is getting more expensive. In 1989 households earning $30,000 or less a year paid an average annual interest rate on auto loans that was 16.8% higher than what households earning more than $90,000 a year paid. By 2004 the discrepancy had soared to 56.1%. Roughly the same thing happened with mortgage loans: a leap from a 6.4% gap to one of 25.5%. "It's not only that the poor are paying more; the poor are paying a lot more," says Sheila C. Bair, chairman of the Federal Deposit Insurance Corp.

HAPPY AS SHE WAS with the Saturn she bought in December, 2005, Roxanne Tsosie soon ran into trouble paying off the loan on it. The car had 103,000 miles on the odometer. She agreed to a purchase price of $7,922, borrowing the full amount at a sky-high 24.9%.

Mainstream financial institutions are helping to fuel this explosion in subprime lending to the working poor. Wells Fargo & Co. and U.S. Bancorp now offer their own versions of payday loans, charging $2 for every $20 borrowed. Based on a 30-day repayment period, that's an annual interest rate of 120%. (Wells Fargo says the loans are designed for emergencies, not long-term financial needs.)

Terms of the Tribute MasterCard are a world away from the money-back and frequent-flier offers familiar to more prosperous cardholders. Marketed by Atlanta-based CompuCredit, a giant in the subprime card business, Tribute MasterCard offers no such fringe benefits. Rose Ajuria's card carries an interest rate of 28%, compared with about 10% on a typical card.

McBride graduated in 1992, owing $45,000 on student loans. That debt became her main financial burden, she says. The 9.5% interest rate isn't particularly steep, but she tended to view the payments as less pressing than putting food on the table or paying rent. Late fees piled up. Today she owes $159,991, up from $117,000 only 18 months ago. When dunning notices arrive, she tosses them in the stove.

Personal bankruptcy proceedings in 2003 dissolved dozens of McBride's liabilities. But by law her debt to student lender SLM Corp. (SLM ), better known as Sallie Mae, wasn't affected. Every month, $450 is garnisheed from her wages, reducing her take-home pay to $1,338. The garnishment doesn't even cover interest and penalties, let alone the principal. Says McBride: "There's no way this thing will ever be paid off."

While I'm writing you emails, I thought I'd bounce something off of you concerning your thoughts that we're careening toward a depression in the next decade ... Looking around I can't help but agree that these "good times" can't last forever. I'm dumbfounded how housing prices can double in a few years and everyone just accepts it as normal market forces. I keep waiting for tougher times to set in, yet somehow they have lasted without a serious recession since the 1970's. So, I'm in agreement with your writings that things aren't what they seem, and it won't last. I mean, the parallels to the 1920s is startling! However, this little voice in the back of my mind wonders if things won't turn out like anyone expects.

Here's my thought: You and I aren't the only ones thinking things will take a turn for the worst in 2011. Harry Dent thinks so (famous Bull from 1990s) based on his demographics research. So does Robert Kiyosaki (best selling author of Rich Dad/Poor Dad) with his Prophecy book based on the ERISA act. So, this gets me thinking ... if so many well-known folks are anticipating tough times ahead, then will it actually happen? Could something so obvious from a historical perspective actually occur?

Your thoughts would be appreciated.

You ever sit back and think which year 2007 is similar to?

In one way (real world) it really seems to be 1972, a losing war, a surge (i.e. Rolling Thunder bombing campaigns), a president under seige, a government no one trusts, inflation running rampant but no one believes it, lots and lots of industries about to go bottom up. (1972, steel, autos, 2007, IT, computers, autos (well ok, that one is the same :-) ). People living the easy life (1960’s vs. 1990’s) and no real threats to their real living about to get ALL SHOOK UP. Most of the 70s were a tough time for a lot of people and they learned to do without and learned some new skills, could it happen again, or are those skills (surviving without total government nannyism) gone forever now?

But then, there’s the stock market. Maybe it’s 1972 and the Nifty Fifty again, but I wasn’t paying attention to the stock market then but I was in the late 90’s and I was very conservative (still am, especially for a young ‘un) and yet everyone and their mothers were buying stock in 1999, 2000 and going wow, this is great, first time I’ve ever bought stock and it just goes up. The stock market goes up and up and never a down day. (It kills me that I’m in cash, but the day is coming). And the other day a friend of my wife who’s never bought stock or followed the stock market or anything (mid 40’s) tells my wife that she’s now in the stock market and having fun. If that’s not an indication of the year 2000, I don’t know what is.

I have another unrelated thought you might get a kick out of, although I guess it does relate a lot to my 1972 analogy again. In the 1970’s, a lot of the "big" companies of today were born and/or forged by people dealing with the hard times/ no jobs or had lost their jobs from their “lifetime” employers. (i.e. Apple Computer, most of the IT stuff--actually pretty much all, as the old companies reinvented themselves, or are gone). Perhaps the same is coming due again.

The only "good" jobs are those government jobs with no work and high pay and zero risk (but I’m not bitter :-) ) Most of the big companies are TOTALLY stagnant, stuck in a morass of rules and HR crap and diversity campaigns. Nothing new is rarely invented by big companies although many times it’s improved and sold. Maybe we need a big shake up (1970s?) to get people working again at things that matter and using their skills and getting rid of all the crap. Maybe, maybe it’s impossible because of all the rules (of which there are tons every year, you just have to decide as a small business which ones to ignore to be successful).

George W. Bush: the perfect combination of "nice guy" sham Cowboy/Elite. Sold the peasantry on "values" which just so happen to serve the interests of the Elite; saddled with a botched war of domination, increasingly unpopular but still got his two terms anyway.

Perhaps the most threatening Cowboy was Californian Richard Nixon. Nixon was not over his head domestically or internationally; he was a master player on the Big Board, and he took the reins at a perilous moment for the Elite: Vietnam was a quagmire, U.S. prestige was low and dropping, the anti-war movement was disruptive, the Cold War was still threatening, and rising inflation and economic malaise threatened the nation's (and thus the Elite's) wealth and power.

Like Johnson, Nixon was the consummate Outsider/Cowboy/Westerner. A Cowboy ( i.e. not Northeastern elite), a Quaker, a distrustful, private man with a fanatically loyal inner circle, he placed Elites (William Rogers et. al.) in weak "show" positions outside his inner circle. His chief advisor was outsider academic superstar Henry Kissinger, in whom he recognized a kindred Big Board player.

Though the Elite did not approve of Nixon--he wasn't "one of us"--they were so desperate to right the sinking ship that they swallowed their distaste and gave him their (mixed) blessing.

Here are two examples of Nixon's modus operandi as a player. During the Palestinian hijacking crisis of 1970, Nixon wanted to bomb the Palestinian positions (those that could be identified) but these wishes were not carried out due to "excuses" offered by Secretary of Defense Melvin Laird.

When the Israelis were in danger of losing the 1973 Yom Kippur War due to high losses of aircraft, Nixon had the 6th Fleet position aircraft carriers across the Atlantic. Limited-range A-4 Skyhawk combat aircraft were then hopped across the Atlantic to Israel, carrier to carrier, to replenish the Israeli air forces. The reinforcements enabled Israel to carry the day and overcome the Soviet-supplied air defenses of the Arab armies.

This annoyed the Saudis sufficiently that they embargoed oil shipments to the U.S., triggering the "energy crisis" of 1973 and the recession of 1973-74. Nixon imposed wage and price controls at the critical juncture and worked "Shuttle diplomacy" in the Mideast with Kissinger to cool off tensions and open the flow of oil. Needless to say, the Saudis remained our "pals" despite the little "lesson" they taught us.

Loathed by the Eastern Media Elite--and the entire Eastern Elite, behind closed doors--Nixon brought the messy Vietnam adventure to a costly, drawn-out close--but a close nontheless, and managed to pull together a "detente" which consolidated the U.S. position at the expense of the Soviets.

By triangulating with China and limiting Soviet ambitions with the SALT I treaty, Nixon planted the seeds of the USSR's decline and ultimate failure, and the rise of China as a U.S. trading partner. The Elites should have been delighted, but since he wasn't "one of us," he was never trusted. Reagan went on to mobilize his "Silent Majority," and many of Nixon's domestic innovations--block grants to state and local governments, for instance--were eventually recognized as good policy.

In other words, like him or not, he was a Big Board player. The Elite was never comfortable with Nixon, however, and so his demise was no surprise. The more amenable water-carrier Gerald Ford was ushered in, with Elite "Rocky" Rockefeller as backup in case Ford was knocked out of office (he survived two assassination attempts).

I can hear the protests: what about Watergate? Nixon was a crook! Um, have you examined the obstruction of justice which has occurred in the current administration? Do you honestly think it's mere coincidence that Nixon's crimes (as Chairman Mao so aptly put it, "All Americans play with tape recorders") were splashed across page one day after day, while the crimes of this administration are mentioned on page A-17, if at all? Why is that?

My thesis is: Bush is a coddled (incompetence is tolerated) scion of the Elite, a leader who is very adept at persuading the peasantry to fall on their swords to defend the interests of the Elite; therefore, he will be protected. Nixon was an Outsider/Cowboy, and his demise was therefore welcomed/abetted.

The sad irony is the very peasants who voted so enthusiastically for "values-based" Bush are the very peasants who will soon be bankrupted debt-serfs reduced to abject poverty by the policies of this administration. Meanwhile the President's cronies and pals will be living in unimaginable wealth, paying few if any taxes while their kids get plum positions of power--anything but military service, because, well, all that duty-honor-country crap is for peasants.

If you think I'm exaggerating, or merely indulging in "class warfare," you need to get out more--say, to Kailua-Kona Airport on the Big Island of Hawaii, an airport and area I know well, where the private $80 million jets are so numerous they're seriously overcrowding the tarmac. Homes in the $20 million range are as common as lava on the coast.

In sum: the "party affiliation" of the candidate is utterly meaningless. That "show" is the Coliseum entertainment of talk-show tirades and a lot of hooey about "values" to distract the peasants from noticing how they're serving the interests of the Elite.

So who will meet with the EMEGD's approval?

Hillary Clinton: Yes. Has shown she's a willing water-carrier for the Elite, fundamentally an Elite wannabe like her husband. Will toe the line in all important matters and will staff her administration with Insiders and Elites.

Obama. Yes. Product of an elite prep school (same one I graduated from, Punahou School, hahaha), well-versed in "safe" liberal positions which don't fundamentally threaten the Elites wealth or reach, the consummate "American success story" and "trustworthy African-American" who will also staff his administration with safely Elite "liberal" advisors.

McCain: No. Classic Cowboy, Westerner, non-elite, wild-card "loose cannon" who can't be trusted to carry water consistently for the Elite. Adamantly no.

Giuliani. Maybe, but far from first choice. No evidence he'll be guided/advised by Elites, so why gamble?

Milt Romney: No. Religious element is untrustworthy; Elites are not interested in guessing who you will be once in office.

Ron Paul, Dennis Kucinich: No way. Dangerously Outsider, both support ideas which could undermine the domestic wealth and power of the Elite. No, no, a thousand times no.

But what about all the "differences" between the parties? I hate to disillusion you, but here's how national healthcare will work: when the Elites' interests start getting squeezed, either by a peasant revolt or a reduction in profits and power, then a national plan will suddenly be hurried into law, over the objections of various entrenched interests who had successfully held it at bay for years (the AMA, etc.)

The main feature of the Plan will be that it is supported by taxes on wage-earners. Therefore its passage will have zero effect on the Elite, except in one way: by freeing corporations of the burden of providing health insurance, the Plan will increase corprorate profits. Like all products which serve the Elites, it will be packaged as a "non-partisan" bill that everyone can claim credit for. The peasantry will glance up from their entertainment and give a hearty cheer, somehow missing that the burden of paying for the plan falls to them, not the Elite.

Oh, and please don't tell me the canard about how the wealthy pay most of the taxes. The "wealthy" wage earners pay most of the taxes, but the truly wealthy (those with hundreds of millions in assets) pay little or nothing, because there are innumerable ways for them to avoid all taxes--ways we peasants cannot even grasp (interest rate swaps, offshore holding companies, and the like).

A truly fair tax would be a percentage of all assets, including all assets held overseas and in tax-free bonds. Failure to comply would mean not a slap on the wrist but revocation of your citizenship (for starters) and criminal charges akin to money-laundering by gangsters--in other words, grounds to freeze accounts. This would collect a "fair share" of wealth from those who evade income taxes. Is such a plan even feasible? Don't make me laugh. The Elites go to a lot of trouble to control the poltical process, and the last thing they will ever allow is an asset-based tax because, duh, they'd have to pay something!

Some of you may be surprised that I would lump a radical Libertarian (Ron Paul) with a radical Liberal (Dennis Kucinich) but in my view, they are cut from the same cloth: outsiders who are feared by the EMEGD. I would support either one, because either one would be sure to upset the apple cart in favor of the peasants.

Thank you David C. ($50) for your unexpectedly generous donation. I am greatly honored by your support. All contributors are listed below in acknowledgement of my gratitude.



Going to War with the Political Elite You Have


May 14, 2007


To paraphrase the recently departed Secretary of Defense: "You go to war with the political elite you have. They're not the elite you might want or wish to have at a later time, but as you know, it's always the same elite."

Wait--what did you just say? Let's consider this thesis:

The "two-party system" is a travesty of a mockery of a sham, a con perpetrated for the consumption of the peasantry.

I am a peasant, so I say this without irony. It is not demeaning, it is reality. What makes me a peasant? Do I own sufficient means of production or capital to live well without labor? No. Do I owe a vast sum of money? Yes. Do I pay more tax than a hedge fund manager who "earned" $360 million? Yes. (When the 15% FICA self-employment tax has no ceiling, and 15% of that $360 million goes to FICA, let me know--but don't hold your breath.) Am I politically powerless? Yes. I could go on, but you get the idea.

The actual political structure of the U.S.A. has roughly three moving parts: the Elite Maintaining and Extending Global Dominance (EMEGD), The Cowboys, and the peasantry/debt-serfs/occasionally-voters.

Most people don't understand the structure of the Elite because it's complicated. One of my old and dear friends earned a doctorate in cell biology at UCSF, and she had a poster depicting the immune systems' dozens of interacting cells. The Elite is very much like the immune system: very complex, with hundreds of moving parts which interact on various levels to maintain the organism--in this case, the United States' global dominance.



At a very superficial level, some pundits have sought a Master Control in the Trilateral Commission or similar elite gatherings. Such groups are certainly one cell within the EMEGD, but each is no more important than other parts, just as killer T-cells are just one of dozens of cell types in the immune system.

To be a part of the Elite, you need only be willing to carry water for one of the essential power structures. Many technocrats are members of the Elite, and they are rewarded with positions like Under Secretary of the Treasury or Assistant Deputy Attorney General or Deputy Director of the C.I.A. and the like.

Elites are also woven into the world of corporate interlocking-directories, where someone "liberal" like Hillary Clinton sat on the board of rabidly anti-union Wal-Mart for years. Conflict of interest? Are you kidding? You want to be a Player, you carry water whenever and wherever you have to.

To be a power player, though, you need connections, which are most easily gained via a "good birth" and all that follows from that: elite prep schools, elite universities, powerful mentors, plum positions as first jobs, and so on.

Power and money are often confused as being one and the same. They are not. Andrew Carnegie was immensely wealthy, but he was not a player. He was a safely apolitical "do-gooder," just as Warren Buffet and Bill Gates are safe little "do-gooders," giving PCs to libraries and funds to eradicate nasty diseases. Now if Bill Gates were to give $100 milion to Ron Paul's campaign for Presidency, he would immediately become a threat, and moves would be made to bring him round or undermine his ability to influence matters of actual importance to EMEGD.

Put simply: $100 million spent relieving pain and suffering makes you a harmless do-gooder. Spending $100 million to buy some seats in Congress makes you potentially dangerous. But most people with that kind of wealth are securely in the Elite, because their wealth ultimately flows from MEGD--the global dominance of the U.S. which ensures a market for their products and services, and guarantees access to emerging markets.

Another hopelessly naive view of the EMEGD is to see global corporations as the ultimate Power Behind the Throne. This is as misguided as thinking macrophages are the entire immune system. It isn't that simple. Sure, corporations provide donations and soft power, but they're just one node. To say that corporations led the U.S. into war in Korea or Vietnam is just plain wrong, and reveals how simplistic reductions of EMEGD are inevitably misleading.

In the Big Picture, Microsoft, IBM, Coke, et. al. are bit players in the Game of Global Dominance. At the top level, the game is going very well for the U.S., despite the "bad press" and all that nonsense about the Decline of Rome.

China has been brought into the game, and is a key supporter of U.S. global dominance. Sure, we let them have the Olympics--a real money-pit--but basically the deal all goes "our" way: in exchange for a 100 million jobs, which keeps their peasantry in line and enables the Communist Party Elite to maintain and extend their power, then China buys all the worthless money we print, enabling the U.S. to print off $1 trillion to pay for the Iraqi adventure with virtually no sacrifice required by U.S. peasants (except those in the military) or the elite's interests.

Can you believe what a sweet deal this is for our Elite? The Chinese take on all the risk of a dollar collapse for a lousy 4% interest, and they also accept all the industrial pollution. Since they were pressured into allowing foreign ownership, Western corporations have been minting profits in the hundreds of billions by making stuff in China. In exchange, China gets the jobs--at least until the recession kicks in, or the factories move on to Vietnam and Africa.

Some naive souls expect China's own middle-class to support its industry. Nice fantasy, but the reality is the U.S. consumer is 20% of global GDP, and the 25 million truly middle-class Chinese are less than 1%.

When it all blows over, what is China left with? An oil-rich neighbor to the north (Russia) which is hardly a close ally, U.S. allies or trading partners to the south (Communist Vietnam would love to poach some industry from their Communist "friends" to the north), an Islamic hotbed to the West currently being subdued by the U.S., and to the East, a resurgent Japan and the wealthy island state of Taiwan, which the U.S. may or may not defend but which already owns a big piece of the mainland.

The U.S. plays coy about defending Taiwan because, well, that's in "our" interest. If we decide it's not worth it, then we abandon Taiwan, just as we did the Kurds and many other suckers who believed our promises. But if it's in the interests of Global Domination to defend Taiwan, well, China better be careful. The smart play is often ambiguity, because the other side has to guess--and they know they might guess wrong.

If you think a "Democratic" president isn't going to approve the development of a new family of smaller, more "practical" nuclear weapons--prepare to be disillusioned.

The Chinese maintain about 100 long-range nuclear-armed missiles for "deterrent." Not a bad idea. The U.S. maintains several thousand strategic nuclear weapons and thousands more tactical (battlefield) weapons. To quote from my January 30 entry Vulnerability, or, Thinking About the Unthinkable:

Just for comparison's sake: The U.S. maintains 18 "boomers" (Ohio-Class Fleet Ballistic Missile Submarines--SSBNs), each armed with 24 D-5 Trident missiles, which are each armed with 5 independently targetable warheads (MIRVs). Each U.S. SSBN thus carries 120 nuclear warheads, launched within one minute and deliverable anywhere in the world. That's 2,160 nuclear warheads distributed among 18 very-hard-to-locate boats. Not all are at sea at any one time, but catching a few in dock would still leave 1,500 or so nuclear weapons available for a counter-stike. What nation would chance absorbing even one SSBN's load of 120 nuclear bombs?

Most of China's wealth is concentrated in a narrow band along the coast. Just one "warning" nuke on the Three Gorges Dam would do more harm than the Chinese nation could possibly afford. If you don't believe the U.S. would deploy nukes if "our interests" were at stake, I can only quote The Mogambo Guru: hahahahaha.

Sure, it's "only" military power. And yes, the U.S. is vulnerable to nuclear attack, too. But if push comes to shove, which military would you rather own?

Ditto for energy.

Those without a thorough understanding of global reach are beating the drums about China's forays into Africa, but this is a sign of weakness, not strength. The U.S. has Mexico and the Mid-East wrapped up, so Africa is the only game left to the Chinese (and most of the big oil fields in Africa like Nigeria are wrapped up as well).

They've played there before, with zero success. Back in the Cultural Revolution days of solidarity masking global ambitions, the Chinese built entire railways in Africa. And what did they get out of it, long-term? Zip, nada, zero. So while the U.S. controls the big oil fields of Nigeria, the Chinese are forced to gamble for influence with the most treacherous, most hated regime on the planet, Sudan, for a few million barrels of oil.

Are they buying access, buying allies, or really supplanting the West? Time will tell, but the history of the past 50 years suggests political turmoil at home will reel in global ambitions and adventures fast.

EMEGD takes a long view. Sure, Chavez in Venezuela nationalized oil and is trying to build an alternative power structure, but he is, after all, limited to one lifetime. Like his mentor Castro who is dying, any dictator/despot/wonderful hero can only last a few decades. Once he's gone (or overthrown), then the EMEGD can "support responsible alternatives."

Consider India. After jettisoning its ill-advised and ultimately worthless alliance with the defunct USSR, India is now a new U.S. ally--and in exchange for that alliance, the U.S. just slapped their wrist for getting nukes. And what does the U.S. get out of it? Nukes aimed at Pakistan, should that country ever threaten U.S. dominance, and a huge source of talent for U.S. global corporations, and new markets for U.S, goods. Oreos and hip-hop, baby. The dominance is on all fronts.

You might have thought it was a joke when U.S. troops played Jimi Hendrix's "Voodoo Child" over the loudspeakers to freak out General Noreiga, who was on his way out as frontman of Panama--that was no joke. Rock-n-roll and hip-hop are the "cultural shock troops" of U.S. domination--which is domination not just of financial and military assets, but of mindshare and cultural values.

Think about it: what has Germany, Japan or China "occupied" in mindshare in the global space? Hello Kitty, manga and. . . zip. Sure, dilettantes love War Kung-Wai, but on a global stage . . , have you seen a Bollywood film recently? The moves are hip-hop, the look pure Hollywood knock-off. The guy gets off the helicopter in shades and a three-day beard . . .

On to Iraq, where the Grand Strategy is playing out to the long-range benefit of the U.S., even if the actual war was botched by an incompetent administration and the U.S. military is suffering from the strain. But hey, EMEGD plays a long-term game--did you notice those U.S. Military bases in Japan and Germany, 60 years after the war ended?--and a couple thousand KIA a year is no big deal--it's not their kids dying, after all, and besides, a little war trains a new officer corps and allows the "fighting spirit" of the U.S. an outlet.

For if there's one thing the Elite understands, it's that the U.S. population is feisty and doesn't mind mixing it up when challenged. The Germans and the Japanese really didn't read the U.S. character well (i.e. "a nation of mongrels") and ironically, their challenging the U.S. enabled the U.S. to dominate both Europe and the Pacific for the duration.

My own father told me he bought two used cars as a senior in high school because he figured he would die in World War II (he enlisted in the Navy right out of high school in 1944) and he reckoned there was no point in saving his wages. His brother served as a gunner in the 8th Air Force, which suffered combat losses of about 50%--yes, half the guys died. This was only exceeded by submariners in the Pacific.

If you imagine sacrifice and bravery ended in WWII, you probably don't know any 'Nam vets or people who have served in the Gulf Wars. Despite the horrific personal losses suffered in Korea and Vietnam, those "holding actions" didn't dim the nation's willingness to fight.

So allow me to predict the end-state of the Iraqi war: the U.S. will maintain bases deep in the desert near the Iranian and Syrian borders, and maintain close ties with the Kurds (despite our abject betrayal in 1991, we're still the only game in town). Much of the personnel will be Special Forces or equivalent (Rangers, elite Marine or Navy units, etc.) The bases will soon be forgotten because they're so isolated, no hopeful suicide-bomber can even get to close them. They'll be there for "goodwill" like all those missions in Africa you don't know about, and to remind the Iranians and Syrians that there are limits to what will be tolerated.

We have to take a broad view when we read about "Imperial over-stretch." The U.S. maintains 11 carrier strike groups (CSG), while the entire rest of the planet maintains four--three British and one French. (Neither military should be taken lightly. Did I mention they're U.S. allies?) India bought a defective Soviet carrier which may never put to sea, and the Chinese have aspirations, but as of now, all carries task groups are U.S. or U.S. allies.

Does a carrier task force solve Iraq? No. Does it resolve political dilemmas? No. But it does project power, which separates nations into two groups: those who can and those who can't.

Regardless of the party, Republican or Democrat, any reduction in U.S. military force will be resisted by the Elite. Chairman Mao rather famously said, "Political power comes from the barrel of a gun," and the U.S. Elite very firmly agrees.

Here is what will mark Imperial decline: a volunteer U.S. Military of 25,000 hardy souls, and an army of 450,000 mercenaries. We aren't there yet, so all predictions of U.S. decline are premature. When we're all dancing to Chinese New Wave music and eating Chinese cookies and practising New Taoism (having left the Baptists), then the U.S. "hegemony" will be over.

But it isn't over yet, nor is that decline in the cards. For the EMEGD have resources beyond what the Islamic Revolutionaries or the New Russians or the Chinese Communist Party can even dream of. $1 trillion spent on a foreign war? No big deal. 11 carrier battle groups? No big deal. 10,000 nukes? No big deal. The list goes on. Hip-hop. $1 billion-grossing films. Technology--iPods, blogs, Web2.0, Google, you name it. The top 500 Global Corporations: all U.S. or U.S. allies or U.S. trading partners--a group in which I place China.

But in the Long View of the MEGD, there's rarely need for force. Hip-hop, KFC and Oreos are the real "shock troops" which are busily conquering Iran and Syria despite the frantic efforts of their ruling elites to muster the old tired ideologies of the past.

I know this sounds like an echo of U.S. Triumphalism, but it is simply a statement of fact. This is what drives frustrated French politicians to describe the U.S. as a "hyper-power," a force so pervasive that "super-power" does not do justice to its reach. If you research the U.S. military's presence in Africa--often a "goodwill" presence of medics--you will understand a tiny bit of the reach.

To play a little game to put things in perspective: which reins of leadership which would you want: Russia (declining in population, ruled by gangster capitalism, relying on declining oil reserves for its wealth), China (massive systemic corruption, widespread social unrest, horrendous pollution, huge unfunded social costs, heavy reliance on sales of manufactured goods to the West and Western investment, massive understated bad debts in the public banking sector, etc.) or the U.S.? Yes, the U.S. has a laundry list of huge problems, too--but be honest. Which set of conditions, strengths and problems would you prefer to own?

Yes, I anticipate a global recession, a decline in the dollar, and much suffering as a result of both. But to say the "hyper-power" is suddenly toothless and reduced to "only" military force--a skeptic has a hard time accepting such "politically-correct" views.

Yes, there will be terrible costs to the U.S.--but these will be borne by the peasantry/debt-serfs, not the Elite--and therein lies the "universal truth" of the coming recession--in every nation.

One window into the Elite is the U.S. Presidency. Once you understand how it works, you realise just how illusory the two-party system really is.

But that's the topic for tomorrow.



Thank you Joshua B. ($7, second donation) for your unexpected and generous donation. Joshua, my email "thank you" to you was returned--please email me from another account. I am greatly honored by your continuing support. All contributors are listed below in acknowledgement of my gratitude.



Don't Cough


May 12, 2007


If you will forgive a moment of sophomoric humor, please read this joke:

The owner of a drug store walks in to find a guy leaning heavily against wall. The owner asks the clerk, "What's with that guy over there by the wall?"
The clerk says, "Well, he came in here this morning to get something for his cough. I couldn't find the cough syrup, so I gave him an entire bottle of laxative."
The owner says, "You idiot! You can't treat a cough with laxatives!"
The clerk says, "Oh yeah? Look at him, he's afraid to cough!"

I humbly submit this is a perfect metaphor for the U.S. stock market and indeed, the entire U.S. economy: don't cough, or the fresh manure will hit the circular spinning air movement device.

It is almost laughable how former Federal Reserve Greenspan is trotted out after every modest dip in the stock market--regardless of where he might be on the planet--to dutifully reassure us peasants that a recession is unlikely, despite the overwhelming evidence that a prolonged recession lies just ahead.

The laxative which has been administered in excess is credit, and the unfortunate consequence is excessive borrowing and the misallocation of that borrowed capital on leveraged buyouts, re-purchase of shares (which generates no new products, services or jobs), energy-wasting McMansions and an astonishing array of largely underutilized or just plain worthless consumerist gew-gaws (please see the Readers Journal entry by James C. this week for elucidation).

But enough of tasteless metaphors. Let's look at a chart of the fabulous, ever-rising, never-will-decline-again Nasdaq--which looks like it can't hold back a good hard cough much longer:



Note the similarity between the divergence between price and RSI/MACD which presaged last May's sharp decline in the market and the past few month's divergences. It's just a guess, but based on this chart, it sure looks like Nasdaq's long-suppressed cough may come, depsite Greenspan's plea for continued complacency.

Check out the new entry in This Week's Readers Journal by Matt L. on national health insurance and "baseline-plus" services:

Your entries on health care and the two reader responses you posted got me thinking again (As your site always does). I see at least two additional reasons why national health care is a good thing." (more)

Thank you M.C. ($5) for your generous donation. I am greatly honored by your support. All contributors are listed below in acknowledgement of my gratitude.



Housing Affordability: Crushed by Debt


May 11, 2007


Yesterday we considered the possibility that interest rates might rise for the next 15-20 years, effectively lowering the value of housing with each tick upward. Today let's consider affordability in terms of the percentage of household income which "should" go toward housing.


Back in the good old days, the calculation was simple: your mortgage payment shouldn't be more than a quarter of your gross income. This was also a simple calculation because few people had revolving credit or any debt other than a car payment.

No credit cards? You're kidding, right? I recall rather vividly the year my Mom started to complain about her Mastercharge bill (as Mastercard was called back then)--1968. Prior to that, a business type might have a Diners Card, which was not revolving credit but a charge card like American Express which had to be paid off monthly.


Sure, you might have had a Sears card, but the credit limit was $200--enough for a new washing machine or table saw and not much else. Credit was issued sparingly, and used sparingly. The typical limit on revolving credit was perhaps $1,000 or at most $2,000 in today's (depreciated) dollars--$500 was a big limit. Now just about all of us receive $20,000 credit-limit card offers every week.

Student loans? Nonexistent. Now people are still paying off student loans in their 40s, with their kids' college just a few years away.

Talk about becoming debt serfs. Take a look at this chart and notice that deficit spending (living off borrowed money) has been the order of the day, violating decades-long trends of fiscal prudence.

Frequent contributor Harun I. provided this insightful commentary on the topic: (emphasis added by me)

I like to run and bike ride. As I ride and run through neighborhoods and look at the local real estate rag the whole affordability question has been nagging me. Anything listed at your modest $250,000 is a shack I wouldn't want Ned-the-wino to live in and yet people are buying homes $300,000 and up like everything is okay.

About.com's description of debt to income ratios

U.S. Census Bureau's Three-Year-Average Median Household Income


Call me old fashioned but consider the link that shows "traditional" debt to income ratios and then look at the link showing median incomes by state. If we agree for the time being that traditional debt to income ratios were fiscally sound then for someone to afford your modest $250,000 the household income based on the first number would have to be $1,875 / .28 X 12 = $80357.14 annual gross salary. (I am not going to consider recurring debt because median household incomes simply don't support current prices using any sort of fiscal responsibility to begin with.)

This leads me to believe that most people are in over their heads and the problem is not just confined to sub prime borrowers. Considering the numbers above even many prime borrowers have bought more house than they could comfortably afford. With mortgage debt to income reaching into the 40-60% levels before we consider any other debt and living expenses it is no wonder that the savings rate is negative. We passed the affordability curve long before sub-prime became an issue.

With MEW (mortgage equity withdrawal) effectively shutdown people are turning to credit cards to stay afloat but how long can that last? With unemployment at historic lows the only place to go is up. Even if one person losing a job in a household will cause chaos. I think foreclosures will work their way up the food chain regardless of credit score.

As I write this Thursday, the stock market is down due to the "surprising decline" in retail sales. Meanwhile, the market was up just days ago on the "surprising rise" in consumer debt. No need to connect the dots--they're so close they're touching. As these charts show, consumers have been living off borrowed money for years; household debt has leaped.

As an exercise, let's take the median household income of about $45,000 and see how much house that supports in a traditional (i.e. prudent) setting.

Onetime Asian corporate basket cases are seeking investors, and foreigners are lining up to buy their stocks and bonds, as hedge funds and institutional investors -- many sitting on cash piles -- scour the globe for new ways to deploy their money.

Leading the way: Family-owned conglomerates whose borrowing binges a decade ago gave them a starring role in the Asian financial crisis of 1997-1998. Among the most recent is the family of Indonesian tycoon Eka Tjipta Widjaja. In 2001, one of its companies, Asia Pulp & Paper Co., was responsible for the largest emerging-market bond default in history: $13.9 billion. Investors are still trying to get their money back.

Nevertheless, last month another Widjaja company raised $540 million in a share placement on the Singapore stock exchange. After the placement, the Widjajas have a 48.5% stake in Singapore palm-oil company Golden-Agri Resources Ltd.

Visitors to Ownit Mortgage Solutions’ offices here are met by an abandoned reception desk and three dying potted plants that appear to have gone months without water.

How appropriate.

Ownit filed for bankruptcy protection late last year; since then, several companies that specialized in loans to people with weak, or subprime, credit have followed it into bankruptcy as the once-thriving business has withered on the vine. Gone are the lavish parties, the extravagant trips and the executive salaries and sales commissions that routinely topped a million dollars.

Lenders like New Century Financial and Ownit, many of them based in Southern California, have cut an estimated 12,000 mortgage jobs in California since the start of 2006, according to MortgageDaily.com, a trade publication. Nationally, 16,000 jobs have been lost.

What used to be a profitable partnership between subprime lenders and Wall Street banks has now degenerated into a cross-country blame game.

The authors of the report wrote, "We are moving incrementally away from traditional sources of insurance, such as employer-based coverage, to a system comprising more federal and state government-provided health care." According to John Poisal, lead author of the report, "We will continue to face tough questions about how we finance our health care bill" as that shift occurs (Wall Street Journal, 2/21). The report did not make health care policy recommendations but warned of the possibility "that we will have to make important sacrifices to pay for health care" and of a need for "constant assessment of the value we associate with our health care investment".

HHS Secretary Mike Leavitt said, "America's per capita health spending is the highest in the world. There is simply no place on the economic leader board for a nation that spends a fifth of its domestic product on health care".

Robert Bixby, executive director of the Concord Coalition, said that the cost of health care "is really the key issue for the fiscal future of the nation," adding, "If health care costs continue to drift up -- unless you dramatically raise taxes -- you will have health care pushing out everything else government does. Nobody can say exactly when you reach a point that it's unsustainable, but you can look at something and say it's unlikely." Ron Pollack, executive director of Families USA said, "As health care spending increases faster than earnings, it means more and more people will find health care unaffordable and join the ranks of the uninsured and underinsured".

Roland Sturm used regression analysis to show that obese adults incur annual medical expenditures that are 36 percent higher than those of normal weight incur. This analysis, however, was limited to people under age sixty-five. People age sixty-five and older now account for roughly one-fourth of the obese population, and, because of the chronic nature of obesity-attributable diseases, medical spending for treating elderly obese people is likely to be much higher than spending for nonelderly obese people.

Rising health care costs are eating up more of retirees' savings, with a 65-year-old couple retiring this year needing about $215,000 to cover medical costs after they stop working, Fidelity Investments said Tuesday.

Hedge-fund manager John Paulson made $1 billion using a complex financial instrument to pump up a bet that the subprime-mortgage market would crater. The parent company of retail giant Sears made $74 million using a similar device to boost its wager that a basket of stocks would rise in value.

Both were playing with leverage -- the magical power that allows investors to make big investments without putting big money on the table. These days, they have lots of company. Thanks to advances in financial engineering, investors have never had so many different ways to make commitments that exceed their bankrolls. And never before has leverage wormed its way into so many nooks of the financial world.

We're living on planet leverage, and regulators and market gurus are growing nervous.

WOULD-BE share punters, keen for a piece of China's booming stock market, are queuing to open accounts at a Beijing branch of China Merchants Securities. A busy manager, handing out application forms, says he is taking on 100 new clients a day, perhaps five times as many as a year ago. Bunches of small investors, ranging from students to pensioners, crowd around computer terminals to carry out their trades, keeping an eye on the prices as they flicker across big electronic screens. China's biggest-ever stock market boom may be turning into a bubble—and the country's leaders are getting worried.

If the bubble were to pop, it could have a bigger impact on social stability than any previous downturn in the stock market's 16-year history. There are now more than 91 million accounts held by individuals at brokers or in mutual funds.

I graduate this June with a BS in Journalism, a minor in Sociology, and a Women's Studies Certificate. Until then, most of my energy is going toward finishing my honors thesis, in which I'm looking at the use of feminist ideology, specifically empowerment, in advertising to motivate women's consumption. My conclusion is that feminist ideology, when co-opted by marketers, is used to further a capitalist, patriarchal system that feminists actually work to subvert.

As for the future, right now I have absolutely no idea! I want to take a year or two off before going to grad school, so it looks like I'm going to go the "job" route. Ideally, I'd like to end up working in the non-profit sector, which it turns out is hard to break into at an entry-level when you're also looking to make a salary to live off of.

Perhaps after I graduate I'll also expand the essay that I sent you. I've written a few short pieces on the same topic, and your contest made me seriously consider writing the rest down and sharing it with more people. In fact, I had never spoken a word of what I'd written to my family, and winning the contest forced me to open the dialogue with my parents. It was a very tentative conversation, but also very good in the long run--keeping silent on such issues isn't going to change anyone's perspective. A lot of my friends were shocked, too, and had nothing to say other than, "I had no idea..."

Around the same time last year, I ran across a blog on xanga of an adoptee who expressed feelings of mixed identity similar to mine, and I realized that it's not that no one else has these struggles, it's just that no one voices them. And that's the point of your contest, right? So thank you very much for your efforts to spread awareness.

We may have life and liberty. But the pursuit of happiness isn't going so well.

As a country, we are richer than ever. Yet surveys show that Americans are no happier than they were 30 years ago. The key problem: We aren't very good at figuring out what will make us happy.

We constantly hanker after fancier cars and fatter paychecks -- and, initially, such things boost our happiness. But the glow of satisfaction quickly fades and soon we're yearning for something else.

Similarly, we tell our friends that our kids are our greatest joy. Research, however, suggests the arrival of children lowers parents' reported happiness, as they struggle with the daily stresses involved.

Levenstein explores the disturbing existence of hunger in the midst of agricultural abundance. Describing the economic, political, and cultural factors that have influenced the American diet, he exposes the role that major food processors, the medical establishment, and the American government have played in modifying the taste buds and nutritional ideas of its citizens while ignoring the plight of its increasing numbers of malnourished poor. He also examines the national obsession with dieting and the impact on eating habits of married women entering the work force in record numbers.

In 1994, seafood may have peaked. According to an analysis of 64 large marine ecosystems, which provide 83 percent of the world's seafood catch, global fishing yields have declined by 10.6 million metric tons since that year. And if that trend is not reversed, total collapse of all world fisheries should hit around 2048. "Unless we fundamentally change the way we manage all the oceans species together, as working ecosystems, then this century is the last century of wild seafood," notes marine biologist Stephen Palumbi of Stanford University.

Marine biologist Boris Worm of Dalhousie University in Halifax, Nova Scotia, gathered a team of 14 ecologists and economists, including Palumbi, to analyze global trends in fisheries. In addition to data from the U.N. Food and Agriculture Organization stretching back to 1950, the researchers examined 32 controlled experiments in various marine ecosystems, observations from 48 marine protected areas, and historical data on 12 coastal fisheries for the last 1,000 years. The latter study shows that among commercially important species alone, 91 percent have seen their abundance halved, 38 percent have nearly disappeared and 7 percent have gone extinct.

Although the trend is grim, the study of protected areas offers some hope that marine ecosystems can rebound, according to the paper presenting the analysis in the November 3 issue of Science. The 48 studied showed an overall increase of 23 percent in species diversity and a fourfold increase in available catch. "It's not a miracle. It's something that is do-able, it's just something that requires a big chunk of political will to do it," Worm observes. "We have a 1,000-, probably 10,000-year habit of taking the oceans for granted and moving from one species to the next, or replacing it with a technological fix like aquaculture. To me, the major roadblock is we have to change our perception of what the ocean is." Should we fail, we may lose the ocean's bounty entirely.

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John B.	Steve A.	Donald L.	Roger H.	Leo P.	Renee S-J. (2nd donation)
Steven O.	Joshua B.	Adam T.	Matthew L.	Christopher P.	Donald E.
Reed H.	Anita B.	Albert C.H.	Kelly L.	Ralf S.	Sonic Promote LLC
Vera K.	TG. Neason	Amazing Arizona Land	Doug B.	John B.	Peter S.
Michael C.	Joshua B.

                                                                       


I would be honored if you link any essay to your website, print a copy for your own use or add my RSS or Atom feed. And of course I appreciate your recommendations of this weblog and your comments: csmith@oftwominds.com.

                                                                       

wEssay noun, combination of 'web' and 'essay,' denoting a short online essay which exploits the hyperlinks, interfaces and interactive capabilities of the World Wide Web; coined by Charles Hugh Smith on May 1, 2005, in Berkeley California.

Aphorisms I like:

"Economic history is a never-ending series of episodes based on falsehoods and lies, not truths. It represents the path to big money. The object is to recognize the trend whose premise is false, ride that trend, and step off before it is discredited." (George Soros)

"The way of the Tao is reversal." (Lao Tzu)

"Chance favours the prepared mind.” (Louis Pasteur)

"It is neither necessary to hope to undertake, nor to succeed to persevere." (French proverb)

"You must have a willingness to do something when everyone else is petrified. You must learn the lesson of following logic over emotion." (Warren Buffett)

"Success consists of going from failure to failure without loss of enthusiasm." (Winston Churchill)

"May a fair road always be open to you." (CHS, April 2, 2006)


All content and images copyright © 2006 - 2007 Charles Hugh Smith, All rights reserved in all media, unless otherwise credited or noted.