Opposition to Britain’s National Health Service (NHS) Reform Grows

Posted by PITHOCRATES - February 12th, 2012

Week in Review

Things aren’t looking good for the bill to reform Britain’s National Health Service (NHS).  From within the Cameron cabinet.  From within the Tories.  And from within the opposition (see Ditch the bill! Tory bust-up over health reforms amid claims minister described it as Cameron’s ‘poll tax’ by Tim Shipman posted 2/11/2012 on the Daily Mail).

He is concerned that failure to act will undermine Mr Cameron’s progress in ‘detoxifying’ the Tory brand when it comes to the NHS. He also fears that any problems caused by cuts to the NHS will be blamed on the Bill.

He said: ‘David Cameron’s greatest political achievement as leader of the Opposition was to neutralise health as  an issue.

‘The greatest mistake of his  time as Prime Minister has been to put it back at the centre of political debate.

This is the problem when you give people anything.  Once you do you don’t dare take it away.  Or hint that you might.  That’s why the NHS has become a ‘third-rail’ of politics.  Like Social Security in the United States.  You touch it and it will hurt you politically.  Even if the program is grossly inefficient and providing substandard quality.  You just have to let it.  If you want to keep your elective office.

There are worries that radical measures that would have created a genuine market in healthcare provision, driving down costs, have been stripped out as part of parliamentary horsetrading.

What remains are plans to reform the structure of the NHS that are not seen to have any obvious health benefits for patients…

Labour will this week seek to kill the Bill with a series of wrecking amendments in the House of Lords. Labour leader Ed Miliband last night wrote to every single peer, calling for cross-party support to pass further amendments to the Bill as they scrutinise it.

And, of course, the political opposition will pounce on any reform attempts to make a bad program good because it’s politically expedient.  For they will take any opportunity to hurt the opposition.  Even if it hurts their constituents in the long run.  Because politics trump the wellbeing of the people.  Always.

Will this be the future of Obamacare in the United States?  No.  It won’t be this good.  For the United Kingdom is big but the United States is bigger.  Far bigger.  And Obamacare will cover far, far more people than the NHS covers.  In fact, no one has ever tried national health care on a scale like this before.  And though proponents like to point to the NHS (or even the Canadian system) as examples for the U.S. to copy there will be no comparison.  It will be like taking a recipe to feed 4 and guessing how to increase each ingredient so you can use that recipe to feed 100.  The food prepared for 100 will taste nothing like the food prepared for 4.  The quality will suffer.  As will the quality of health care under Obamacare.  Because covering everyone in the United States will cost so much that Obamacare will have to ration health care services on a scale far greater than the NHS does.  Far, far greater.

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The Greeks give their Answer to the Latest Bailout Package – Violent Protest

Posted by PITHOCRATES - February 12th, 2012

Week in Review

And the saga continues.  The ever elusive solution to the Greek debt crisis grows ever more elusive (see Greece reels after leaders agree to harsh spending cuts by Michael Birnbaum posted 2/10/2012 on The Washington Post).

Greeks clashed on the streets of Athens and in the halls of government Friday, as protesters grew violent and one after another cabinet minister resigned, a day after the nation’s leaders accepted foreign lenders’ demands for tough austerity cuts to try to stave off bankruptcy.

By late evening, six cabinet members had resigned and Prime Minister Lucas Papademos went on state television to threaten members of his shaky coalition government with expulsion if they opposed making sweeping spending cuts in exchange for a bailout that would keep Greece from defaulting on its debts by mid-March. A Greek bankruptcy could shake the euro zone and potentially wreak havoc throughout the global financial system…

But protests over the austerity plans were already paralyzing the capital, as thousands marched during a demonstration led by the country’s two largest unions. The new mandates will reduce the minimum wage to $780 a month from $1,000 a month, slash social entitlements, freeze salaries for years and cut 150,000 workers from government payrolls by the end of 2015. Greek unemployment already stands at 20.9 percent.

Some protesters threw gasoline bombs and stones at riot police, who responded with tear gas, the Associated Press reported. Police said that eight officers and two protesters were injured. The unions called for a 48-hour general strike, the second this week, and much of Athens was shut down…

“Of course we do not want to be outside the E.U., but we can get by without being under the German jackboot,” Karatzaferis [head of a junior partner in Greece’s coalition government] said at a news conference. “I would rather starve.”

This is the problem with the Eurozone.  There’s a currency union.  But no political union.  While the Germans were being responsible (for they have a history of hyperinflation they don’t want to repeat seeing that it gave the world Adolf Hitler) the Greeks were spending beyond their means.  And may have fudged their numbers to join the monetary union.  And now the Greeks are broke.  And they need someone to bail them out.  And guess who is the richest in the Eurozone?  That’s right.  Those responsible Germans.  And what do some Greeks call the only people who can bail them out?  Jackboots.  A not so veiled Nazi slur.  With love like that they’ll never be a political union in the Eurozone.  And perhaps no Eurozone when countries start going bankrupt.  Starting with Greece this March.

The Greeks are well on their way on the Road to Serfdom.  The public sector has grown so large that those left in the private sector can no longer pay for them.  Which gives them a very unfortunate choice.  Either shrink the public sector by slashing costs.  Or kill the private sector entirely.  And make all Greeks serfs in a new state economy of subsistence.  Where everyone will be equal in their suffering.  Except, of course, those in the ruling class.  Who will be more equal than others.  And will be able to enjoy their lives.  Much like in North Korea.  Where Kim Jong il carried a few extra pounds while his people suffered famines.  Of course, before that happens there will be a great exodus as Greeks flee their country.  Which will inundate other countries with refugees.  And cheap labor.  As refugees typically are.  Throwing their economies into turmoil.  Spreading the Greek contagion throughout Europe.

There is no easy way out for Greece.  And it’s going to get worse before it gets better.  This should be a lesson in the growth of state spending.  But will anyone learn?  Let’s hope so.  Because if Germany or the United Kingdom or the United States goes down this Road to Serfdom the Greek problem will pale in comparison.

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China Strengthens the Yuan against the Dollar

Posted by PITHOCRATES - February 12th, 2012

Week in Review

Well, this should please Donald Trump and Mitt Romney.  And others.  Who are hopping mad about China’s currency manipulation making American exports uncompetitive in China.  The Chinese have strengthened the Yuan on the eve of China’s Vice President Xi Jinping’s U.S. visit (see China’s Yuan Rises to 18-Year High Ahead of Xi’s Visit to U.S. by Kyoungwha Kim posted 2/10/2012 on Bloomberg Businessweek).

The yuan traded at 6.2916 per dollar as of 9:42 a.m. in Shanghai, after touching 6.2884, the strongest level since the country unified the official and market exchange rates at the end of 1993. The People’s Bank of China fixed the reference rate at a record 6.2937 per dollar.

Countries like a cheap currency because it makes their exports cheap.  I mean, inexpensive.  And if your economy is driven by exports you definitely want a cheap currency.  Which is why the Chinese have been keeping the Yuan weak.  To boost their exports.  Which they need more than ever what with her export markets wallowing in recessions.  They need to keep those Chinese exports cheap.  I mean, inexpensive.

China is also seeing some price inflation inside their country.  Caused by that cheap Yuan.  And those low interest rates.  So maybe it’s to help battle inflation on the home front.  Or it’s just to shut the Americans up a little on their currency manipulation talk during their state visit.  Whatever the reason, there is now a Yuan stronger than it has ever been in the past 18 years.  The U.S. economy is saved.  Yeah.

Or is it?  Only about 11% of U.S jobs are in manufacturing.  Most of those in aviation.  With Boeing leading the pack in U.S. exports.  So this stronger Yuan will probably do little.  No, it will take more than that to bring back manufacturing to the U.S.  For the U.S. to manufacture all those things the Chinese are manufacturing either the U.S. has to get cheaper labor.  Or China has to get more expensive labor.  Ditto for all that cheap labor in emerging economies around the world.  (Cheap by our standards but rather well-to-do in those emerging economies).  As none of this is likely to happen the stronger Yuan is not going to bring back much manufacturing to the United States. 

Sorry Donald.  Mitt.  And others.

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Sales are Down for Tata Steel so they Conserve Cash instead of Expanding Production

Posted by PITHOCRATES - February 12th, 2012

Week in Review

Here’s a lesson in Economics 101 offered by Tata Steel (see Unexpected loss for India’s Tata Steel posted 2/9/2012 on BBC News Business).

Tata Steel, the largest producer in India, unexpectedly reported a loss for the last three months of 2011, hit by weak demand…

Higher prices for raw materials as well as falling demand and prices in Europe contributed to the decline, Tata said…

The head of Tata’s European operations said he did not expect demand to pick up this year.

“We are accelerating cash conservation in expectation of muted but stable demand in our core markets in 2012,” he said in a statement…

“There hasn’t been a demand uptick that was expected, so prices have come down,” said Ravindra Deshpande from Elara Securities in Mumbai.

With less people buying steel the supply of steel exceeds its demand.  So the price of steel has fallen.  Common in a recession.  But what does Tata do?  Do they borrow more money to expand capacity?  No.  They conserve cash.  To ride out these tough times of low sales.

Making money cheaper to borrow won’t change this.  This is why lowering interest rates rarely works to stimulate an economy out of recession.  It is the painful process of falling prices and reducing capacity to meet actual demand that pulls an economy out of a recession.  Interfering with this process only pushes up prices and capacity further above real demand.  Making the correction more painful.  And prolongs the inevitable recession.  

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The Bank of England to Dabble in Quantitative Easing even though it Failed when the Americans Tried It

Posted by PITHOCRATES - February 12th, 2012

Week in Review

It appears that the Americans aren’t the only Keynesians to never say die when it comes to Keynesian policies.  Even though the American’s quantitative easing proved to be a failure it’s not stopping the British from trying (see Bank Of England Due To Announce More QE posted 2/9/2012 on Sky News).

The Bank of England is expected to unleash another multi-billion round of emergency support for the UK economy today…

Analysts believe it will extend its quantitative easing (QE) programme by another £50bn, taking the total to £325bn, in a bid to stave off a double-dip recession…

But further QE could spell bad news for pensioners.

It can fuel inflation, which would mean more gloom for retirees who have already seen the value of their pension pots eroded by the high cost of living and low interest rates…

“The game changer, however, is the euro. If the eurozone cannot come up with a solution to the debt crisis, the impact on the UK will be significant.”

People with debt love inflation.  People with savings hate it.  Anyone who owes money will find it easier to repay that money back when money depreciates and is worth less.  It’s like getting a discount.  If your money is worth 30% less when you repay your debt you save 30% in purchasing power.  The lender, though, loses 30% in purchasing power.  That’s why banks hate inflation.  And why people who borrow from banks love it.  And where do banks get the money to loan?  From a lot of pensioners.  Who have saved for their retirement.  Only to see the purchasing power of their retirement nest egg reduced during periods of inflation.

This is the dark side of inflation.  It’s like another tax.  A high tax.  And one no one can escape.  Especially those living on fixed incomes.  Because as prices rise their fixed incomes buy less.  But governments still like causing inflation.  Because if any of those pensioners bought any government bonds, it will be a lot easier to redeem those government bonds when they’re worth less.  Making it easier to tax, borrow and spend.  By making those least able to afford it pay for their spendthrift ways.

Worse, this quantitative easing (QE) will all be for naught if the Eurozone debt crisis doesn’t quickly go away without anymore bailouts.  Which means this QE will be for naught.  Because the countries in the Eurozone taxed, borrowed and spent their way into this mess in the first place.  And as can be seen governments are hard-pressed to give up their spendthrift ways.

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China’s actions to Stimulate their Economy may have only Stimulated Inflation

Posted by PITHOCRATES - February 12th, 2012

Week in Review

China is state capitalism at its best.  The government really massages the economy over there.  With wise bureaucrats making wise decisions to steer the economy to endless prosperity.  Embracing Keynesian economics.  Manipulating interest rates to sustain economic growth.  And a small but manageable permanent level of inflation.   Spending money the only way government knows best.  Like the Japanese did in the Eighties just before they collapsed into a deflationary spiral that lasted a decade or two (see Chinese New Year pushes up prices in January posted 2/8/2012 on the BBC News Business).

China’s rate of inflation unexpectedly accelerated in January for the first time since it peaked in July, as consumers raised spending around Chinese New Year.

Consumer prices rose 4.5% from a year earlier, the National Bureau of Statistics said. That compares with 4.1% in December…

Chinese authorities, who were once implementing measures to control high inflation, had recently begun easing monetary policy to spur growth as inflation eased and weak demand from Europe affected exports…

The biggest contributor to the rise was pork prices, which gained 25% compared with 21.3% in December. That drove overall food inflation to rise 10.5%.

Hello, what’s this?  Inflation getting a little out of hand?  Blimey, that’s not supposed to happen.  Not with wise bureaucrats carefully applying Keynesian economic tweaks to the economy.  But it has, hasn’t it?  As it always does.  Because when you use monetary policy to stimulate the economy this is what you do.  You increase the money supply long enough (by keeping interest rates low) you devalue your currency.  And raise prices.

In the West it’s usually wage inflation that’s the killer.  Those sticky wages that can reset quick enough to avoid a recession at the end of an economic boom.  But there is no wage inflation in China.  Because the government sets wages.  And they set them low.  Which is why they can out-manufacture the West.  And to prevent any opposition to these low wages that maintain their manufacturing advantage they outlaw unions.  To keep the peace in their state capitalism.  And their workers obedient.

But none of this will work if no one is buying the things they make.  Which is their problem.  And it’s a big one.  They were keeping rates low to stimulate their economy to produce more when people were already buying less.  High inflation and excess capacity?  Only one way to fix that.  Like the Japanese did in the Nineties.  A deflationary spiral to bring prices and capacity back in line with actual demand.  And if it can happen to the Japanese it can happen to the Chinese.  For let’s not forget that the Japanese were quite the capitalists for a very long time before they had their troubles.  Much longer than the Chinese have been playing with their experiments in capitalism.  A little here and a little there.  But never so much where markets were truly in control.  No, in China, the state never lost their control.  Which may make their inevitable deflationary spiral worse.

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