Changes in the Canadian National Health Care doesn’t Factor in Age, a Problem for British Columbia

Posted by PITHOCRATES - January 14th, 2012

Week in Review

Many in the United States (population about 300 million) who favor national health care like to point to their neighbors to the north.  Canada (population around 30 million).  Where they believe there is a health care utopia.  But it’s not quite the utopia.  It’s pretty expensive.  And they’re always looking for ways to cut costs (see B.C. premier balks at federal health funding plan posted 1/13/2012 on CBC News British Columbia).

B.C. Premier Christy Clark says announced changes to federal government health-care transfers to the provinces won’t work for British Columbia, where a rapidly growing senior population is dramatically increasing medical costs to the province…

“You cannot allocate health-care dollars on a per capita basis until you adjust it for age,” Clark said in Vancouver during an interview with Rosemary Barton on the CBC Newsnet program Power & Politics. “You just can’t run a country or look after senior citizens [unless] that’s the way you do it.”

Clark said the fastest growing demographic in B.C. is people over 85, and the province would be especially hard hit unless the per-capita formula changes.

“It costs an average $22,000 a year for health care for someone who is over 85 versus $2,000 for someone who is 29 years old,” the premier said.

Canada has the same problem all nations have.  Including the U.S.  An aging population.  That consumes more and more health care services.  Which means the problem of trying to pay for health care is a problem that won’t go away.

Clark did praise the federal decision to give provinces more responsibility for health-care policies, saying it is a step in the right direction.

“They are going to vacate the policy field … which provincial premiers have been asking for for [sic] something like 30 years, [to] do the policy in health care. So I think that’s a great thing.”

For 30 years the provinces have been trying to decentralize their national health care system.  Some 30 years later they finally get their wish.  Which, incidentally, is the direction Britain (population about 60 million) is trying to take their NHS.  And yet the U.S. is moving in the opposite direction with Obamacare.  The country with five times the population of the UK.  And ten times the population of Canada.  Which means they’ll have 5 and 10 times the cost problems of the UK and Canada.  If they are lucky.

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Does the Criegee Biradicals make Global Warming a thing of the Past?

Posted by PITHOCRATES - January 14th, 2012

Week in Review

Looks like the science of understanding climate has taken another step forward  (see Eureka! Newly discovered molecule ‘could reverse global warming’ by Rob Waugh posted 1/13/2012 on Mail Online).

A little-understood molecule in the atmosphere could play an important role in reducing pollution and global warming, scientists believe.

The ‘Criegee biradicals’ could lead to aerosol formation – and ultimately to clouds, with the potential to cool the planet.

Fascinating.  Now only if we could make these Criegee biradicals and get them into the atmosphere.

Co-author Professor Dudley Shallcross, from the University of Bristol, pointed out that chemicals released naturally by plants aided the production of Criegee biradicals.

‘Natural ecosystems could be playing a significant role in off-setting global warming,’ he said.

Then again I guess we don’t have to.  Mother Nature is already doing that.  The environment.  How about that?  So maybe there isn’t any such thing as manmade global warming.  Because as fast as we may dirty the environment the environment may be cleaning itself.  Which probably explains why those scientists at the University of East Anglia played with the data to get the results they wanted.  Because they had to play with the data.  For the fear of manmade global warming is a manmade fear.  And nothing more.

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Capitalism and Crony Capitalism are not the Same Thing

Posted by PITHOCRATES - January 14th, 2012

Week in Review

A lot of people condemn capitalism.  But the thing they attack isn’t capitalism.  It’s crony capitalism.  Where some in business buy favors from their friends in government (see Crony Capitalism? Blame the Progressives by Warren Meyer posted 1/5/2012 on Forbes).

The core of capitalism has nothing to do with, and is in fact inherently corrupted by, the exercise of state power.  At its heart, capitalism is one simple proposition — free exchange between individuals based on mutual self-interest.  There is no room in this definition for subsidies or special government preferences or bailouts.  The meat and potatoes activities of crony capitalism are corruptions rather than features of free markets.  Where state power to intervene in economic activity does not exist, neither does cronyism.

Meyer discusses this in specific areas: antitrust, licensing, protectionism, economic management, picking winners, green energy, consumer protection, employee protection and Obamacare.  Please follow the link to Forbes and read the full piece.

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A Skyscraper Boom may be an Early Recession Indicator

Posted by PITHOCRATES - January 14th, 2012

Week in Review

It takes a long time to build buildings.  Especially tall ones.  It takes large sums of money.  Environmental impact studies.  Lots of time to design it and produce contract documents.  Then there’s the bidding process.  Contracts.  All of this before they even break ground.  So it’s a very long process.  Then the building starts.  Which can take years.  So that’s a lot of years between financing commitments and occupancy.  This is why the construction industry is typically the last industry to enter a recession.  And the last to emerge from a recession.  So knowing this what can we learn from a skyscraper boom (see Skyscrapers ‘linked with impending financial crashes’ posted 1/10/2012 on BBC News Business)?

There is an “unhealthy correlation” between the building of skyscrapers and subsequent financial crashes, according to Barclays Capital…

“Often the world’s tallest buildings are simply the edifice of a broader skyscraper building boom, reflecting a widespread misallocation of capital and an impending economic correction,” Barclays Capital analysts said…

Investors should be most concerned about China, which is currently building 53% of all the tall buildings in the world, the bank said.

A lending boom following the global financial crisis in 2008 pushed prices higher in the world’s second largest economy.

In a separate report, JPMorgan Chase said that the Chinese property market could drop by as much as 20% in value in the country’s major cities within the next 12 to 18 months.

We get skyscraper booms during good economic times.  When interest rates are low.  And real estate bubbles are beginning to grow.  Cheap money gives us housing booms and high housing prices.  Then the inflation kicks in.  Inflating those real estate bubbles.  As inflation fears build they increase interest rates.  This increases the cost of buying those new homes.  Which, of course, leaves a lot of those new homes unsold.  With more homes for sale that there are buyers looking to buy only one thing can happen.  Prices fall.  Bubbles burst.  And recession sets in to correct prices.

While the economy collapses into recession those skyscrapers limp along.  Too late to stop.  And too costly to cancel.  Instead they’ll complete them.  On the exterior, at least.  And there they’ll stand as monuments to the folly of cheap money.  With thousands of square feet of empty office space.  Or rents slashed to get enough people into them to at least pay for the maintenance of these great buildings.

China has some problems.  Some big ones.  They have a shrinking trade surplus thanks to the weak demand in Europe and America.  Some inflation fears.  And now what looks like a real estate bubble being primed to burst.  Which may very well bring a recession China.  And it will be an economic crash heard round the world.

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China’s Mighty Export Juggernaut declined for Third Year in a Row

Posted by PITHOCRATES - January 14th, 2012

Week in Review

Once upon a time there were those in the United States who said we should do what the Japanese were doing during the Eighties.  The government was partnering with business.  Interfering with market forces.  To keep the economic good times rolling.  If you remember this time this was when the Japanese were buying up U.S. assets.  And it was joked that soon America would be a wholly owned subsidiary of Japan Inc.  But, alas, the good times did not continue to roll.

All that government interference into market forces created asset bubbles.  Artificially high prices for artificially high demand.  But then the bubble popped.  And the market corrected those prices.  To match them to real demand.  And Japan Inc. went into a deflationary spiral that lasted a decade or more.  Which we call Japan’s Lost Decade.  The Nineties.  A long deflation is a painful thing to go through.  This was the lesson of Japan Inc.  Apparently a lesson few learned.  Especially in China (see Export growth in China declines posted 1/10/2012 on BBC News Business).

Growth in China’s exports slowed in December because of sluggish demand from the US and Europe…

The latest figures could fuel worries that the world’s second largest economy is losing steam…

…the trade surplus for 2011 as a whole narrowed to $155.1bn, compared with $183bn in 2010, said customs officials.

This means the trade surplus, which is politically sensitive and has caused tension between China and the US, shrank for the third straight year.

China partnered with business.  Created an economic boom the likes few have ever seen.  Manufacturing output took off to the stratosphere.  Thanks to what once appeared as an inexhaustible supply of cheap labor.  And government policies that favored Chinese exports and hindered foreign imports.  They flooded the world with inexpensive goods.  But that cheap labor may be more exhaustible than they once thought.  And it’s looking like that this increasing amount of inexpensive exports simply can’t be absorbed by countries with struggling economies.  You put all of this together and the Chinese have got themselves a bit of a problem.

To attract labor to their growing manufacturing plants they had to increase their minimum wage.  So their workers are earning more.  Which has increased local prices.  Higher labor costs means higher costs for businesses.  Which they recover through higher prices.  All supported by that growing export market.  Which is starting to shrink.  So they have been increasing supply to meet an artificial demand that is in reality a falling demand.  Which has created a surplus of highly priced goods that won’t be selling any time soon.  There is another name for this.  An asset bubble.  Kind of like what Japan Inc. had on their hands.  And the chances are this bubble will pop like Japan Inc.’s bubble popped.  Sending the Chinese into a deflationary spiral that could lose them a decade.  Like the Japanese lost.

The market will always adjust prices so supply meets real demand.  Sooner or later.  The sooner it does the less painful the correction.  The later it does the more painful the correction.  And China’s mighty export juggernaut has been going on for a long time.  So their inevitable correction will probably be a painful one.

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Apple Suspends Retail Sales of their iPhone 4S in China due to Crushing Mobs at Retail Stores

Posted by PITHOCRATES - January 14th, 2012

Week in Review

Here is a economics lesson in supply and demand and the role of prices as people in China try to buy the new Apple iPhone 4S (see Apple to halt sales of latest iPhone in China retail stores by Terril Yue Jones and Lucy Hornby posted 1/13/2012 on Reuters).

“We’re suffering from cold and hunger,” a man in his 20s shouted to Reuters Television. “They said they’re not going to sell to us. Why? Why?”

“I got in line around 11 p.m., and beyond the line, the plaza was chock full with people,” said Huang Xiantong, 26, from northeastern Liaoning province.

“Around 5 a.m. the crowds in the plaza broke through and the line disappeared entirely. Everyone was fighting, several people were hurt. The police just started hitting people. They were just brawling.”

Clearly Apple created something that people want.  Which has often been the case with Apple.  Building things people have to have.  Even before the people knew what these things were or that they would one day have to have them.  This is supply-side economics.  This economic activity was generated by supply.  Apple’s new product.  Created by creative human capital and the entrepreneurial spirit.  This is what businesses do.  If we let them.  And not burden them with excessive taxes and regulations.

Of course a Keynesian will point out that Apple did exactly that.  Created their products despite excessive taxes and regulations.  True.  They did that.  But Apple is a giant now.  They can hire lawyers and tax accountants to navigate these excessive taxes and regulations.  The new entrepreneur can’t.  Like other Steve Jobs trying to start out now by creating something new that the people will discover that they must have.  Many of who will not get past the excessive taxes and regulations to get where Steve Jobs did.  Falling along the wayside of ingenuity and possibility because of those excessive taxes and regulations.

Of course, others will point out that if it wasn’t for those excessive taxes and regulations corporations would just put profits before people and charge whatever prices they want.  Selling whatever inferior quality they want.  Well, regarding the quality I refer you to the Reuters article about iPhones going on sale in China.  As regard to prices…

Apple’s latest iPhone, with features including responding to commands with its own voice, was introduced in China and 21 other countries on Friday. Prices ranged from 4,988 to 6,788 yuan ($792 to $1,077).

Apple, in a statement, said its other stores had sold out.

Are prices ranging from $792 to $1,077 fair?  Based on the long lines and stores selling out, I believe the people have spoken.  And they say, yes, these prices are fair.  Perhaps even too fair.  If they were a little more expensive those who truly wanted one and were willing to pay a higher price probably would have been able to buy one before the stores sold out.

This is an example of Say’s law.  Supply creates demand.  These ingenious smartphones were not created in response to demand.  Apple created them and explained why people must have them.  Which they did.  This is how you stimulate economic activity.  Supply-side economics.  You make it as easy as possible for people to bring ingenious things to market.  Not the Keynesian way.  Giving more money to people through tax and spend policies.  Which only allows people to buy what’s on the market now.  It doesn’t stimulate the creativity of entrepreneurs.  Who bring the next great things to market.

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