Archive for August, 2009

Government Health Insurance? What About Public Auto Insurance

August 13th, 2009 Comments off

Having lived in both the United States and Canada, I have been watching the ongoing debate over a public health option in America with amazement at the level of disinformation that is freely flowing. For one thing, there are claims that Canada has a vast national bureaucracy running the health system.

As a consumer of Canadian medical care, I can say that based on my firsthand experience that these claims are contradicted by the facts. There is no big medical bureaucracy in Canada, in fact there is no “Canadian” universal health plan. In reality, each province has its own unique public healthcare system. While it is true that every Canadian is covered by some form of universal medical insurance, there are variations in the level of medical services made available without charge, based on how much tax revenue the citizens of each province are prepared to allocate for healthcare. However, even the least wealthy provinces ensure that all basic and essential medical services are covered by their plans. In my experience, the quality of Canadian doctors and nurses is in no way inferior to what I encountered in the United States. Also, contrary to what is being argued by the opponents of a public healthcare system in the United States, at no time has any government bureaucrat, or for that matter private insurance company bureaucrat, stood between me and my doctor while living in Canada. Independent studies on the relative costs of medical care in both the U.S. and Canada clearly demonstrate that far less money is spent by Canadians on administration and bureaucracy in the delivery of medical services.

It seems that the core argument offered by the opponents of a public health option in the United States is based on the premise that government is inherently inefficient and costly, while the private sector is always frugal and efficient. I offer an alternative perspective on this claim, based not on healthcare, but automobile insurance. Let us look at the experience of a western Canadian province, Manitoba.

At one time Manitoba had the highest rate of auto theft  in the country. Not surprisingly, this led to onerous car insurance premiums, which were unaffordable for many motorists. When the New Democrat Party  took control of the provincial government, they made it a priority to resolve the problem of excessive car insurance premiums. Their solution was a novel and radical one; the NDP government abolished all private auto insurance  companies, and replaced them with what in Canada is referred to as a crown corporation,  Manitoba Public Insurance, wholly owned by the provincial government.

I am sure many Americans would react to what I have just written by assuming that this was another government boondoggle, and that the only way Manitoba could reduce auto insurance premiums through a public company would be with subsidies from the taxpayers, essentially robbing Peter to pay Paul. And they would be wrong.

This is what actually happened  in Manitoba. The public insurance company was set up as an exceptionally well managed enterprise. Because it was part of the provincial government, it could work directly with law enforcement and the criminal justice system to confront the problem of auto theft. One of the  measures adopted by Manitoba Public Insurance was to provide free installation of immobilizers for high risk autos, resulting in a dramatic drop in payments for stolen cars. In fact, Manitoba Public Insurance is so efficient, it now probably has the lowest rate of auto insurance premiums in North America. Rather than being subsidized by the taxpayers, MPI is a cash cow, and even  frequently provides annual rebates on already low premiums to its policyholders.

What is also impressive with MPI is its partnership with small entrepreneurs, namely insurance agents. The crown corporation maintains no vast bureaucracy. A motorist simply purchases his  public auto insurance policy from the same insurance agent where he or she buys the household insurance. Furthermore, the government recognized that it could save a lot of money by having the same insurance brokers also take over the role of issuing drivers permits and auto license plates. Rather than stand in line at a DMV facility as I often did in the United States, you simply drop by your  insurance agent’s office once a year, pay your annual  insurance premium, and simultaneously take care of your car registration and licence renewal in one quick visit, with no hassles or long lines to suffer through. If you need your photo ID updated, the provincial government has furnished  your neighbourhood  insurance agency with a digital camera, for just that purpose.

The Manitoba Public Insurance concept is a triumph of reason over ideology. In effect, an expensive large company monopoly has been replaced by a partnership involving both the provincial government and  small business, the result being the provision of an essential public service with substantially lower costs and higher efficiency. This program has had important economic benefits, especially at a time of global financial and economic crisis. Low auto insurance rates contribute to an overall lower cost of living. Cost competitiveness has enabled Manitoba’s economy to function well, with relatively low unemployment, even in the wake of the global economic crisis.

Looking towards the United States, such a creative alliance of government and small business would never be considered as an alternative to the expensive  corporate insurance model that currently exists.  It is a tragedy for the American people that ideology and propaganda  will squash any consideration of a well-executed public insurance option, no matter how compelling the case may be.



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China’s Exports Plunge

August 12th, 2009 Comments off

The world’s third largest economy is sending worrying signals to those whose best hopes for an end to the Global Economic Crisis reside with China. Though Chinese growth projections seems spectacular in a recessionary world, with estimates ranging from 8% to above 9%, there is both more and less to these numbers than meets the eye.

The superstructure underlying China’s impressive growth rate over the past decade and more has been exports, especially to the American consumer, with facilitation from credit flows emanating from Beijing. In a situation where the central government is priming the stimulus pump, growth is being artificially created to a large extent, since domestic demand cannot compensate for China’s ravaged export markets. Factories may still be manufacturing export goods, however, the inventories are surging while shipments abroad are contracting. That appears to be the message revealed in new figures on China’s economic performance.

According to China’s  customs bureau, exports in July declined a staggering  23% from a year ago. This number is apocalyptic, yet on paper China’s GDP keeps soaring. How can an export driven mega-economy experience significant growth simultaneously with its core export sector undergoing a free fall contraction? By flooding the economy with liquidity through  monetary easing, it would appear. However, this is not a recipe for long-term, sustained growth. This policy will only succeed if there is a rapid turnaround in China’s export trade. That is a dim prospect, in light of the continuing decline in employment numbers in most of China’s key export markets, especially the United States and the Eurozone.

Another  revealing statistic to emerge from Beijing involves lending. The first 6 months of 2009 involved a floodtide of easy credit saturating  the Chinese economy. However, in July new loans declined by a massive three quarters from the prior month. It seems policymakers in China are getting more concerned about  the prospect that overly-loose credit will fuel an asset bubble in Chinese equities and real estate, while leading to an increase in loan defaults in the future.

Taken together, we see China engaged in a a series of massive interventions and policy actions in response to the Global Economic Crisis that are not dissimilar from other major economies. These steps are predicated on the hope that massive pump priming will keep the economy from imploding until there is a global recovery, enabling China’s export trade to resume its upward trajectory.

In my view, despite the rosy growth projections, the underlying fundamentals of China’s economy are based on fragile assumptions. If demand for China’s export goods from overseas consumers remains far under peak demand levels for a sustained period, Beijing will confront this reality: the nation’s massive export manufacturing infrastructure cannot indefinitely employ workers who fabricate products that pile up on the docks of China’s major ports. That is the nightmare scenario China’s leadership circles pray never unfolds.


For More Information on “Global Economic Forecast 2010-2015” please go to the homepage of our website, 



How To Shrink the Unemployment Rate Through More Job Losses

August 9th, 2009 Comments off

When President Obama trumpeted the first “decline” in the national unemployment rate in more than a year, I thought for a moment that the 44th U.S. president was residing in an alternative universe. How can you lose a quarter of a million jobs in a month, and simultaneously witness the unemployment rate actually post a  decline from 9.5% to “only” 9.4%? However, on reflection, it is I who reside in an  alternative universe. For if you decide to remove a whole chunk of discouraged workers, those whose long-term unemployment is deemed more or less permanent, from the official workforce count, then you can  absolutely post a reduction in the national unemployment rate while still shredding jobs, courtesy of the statistical wizards at the Department of Labor. Easy as toast.

So it is I who must apologize to President  Barack Obama for having committed the heresy of screwing up with logic my understanding of official statistics on employment in America . Of course, it makes perfect sense. Now, let’s just go ahead and save a whole lot of stimulus money by deducting everybody who is unemployed for more than a month from the official national workforce number.

If this pearl of economic policymaking is indeed valid, why not go the next step, and completely solve the problem of our national debt. Even with rising yearly deficits, we can actually reduce the total national debt by just removing a whole category of IOUs that no one seems to be worrying about at the moment. That way, Treasury Secretary Timothy Geithner can withdraw his request before Congress to increase the national debt ceiling to above $12 trillion, or nearly triple the total it was back in 2000. A brilliant solution to the nation’s fiscal imbalance, so it would appear.

But wait a moment. It seems we already are doing that. According to David M. Walker, who served as the Comptroller-General of the United States from 1998 to 2008, if the U.S. were following general accounting rules that are applicable to businesses in the private sector, it would be posting a far higher figure for the national debt. How much higher? According to Walker, there are more than $50 trillion in unfunded liabilities the U.S. government has incurred regarding future Medicare and Social Security obligations.


For More Information on “Global Economic Forecast 2010-2015” please go to the homepage of our website, 



Fortunately, a high official with the Federal Reserve disagrees with David Walker. Unfortunately, that official, Richard W. Fisher, President of the Dallas Federal Reserve, revealed in a speech delivered in May that the actual national debt of the United States, accurately tabulating all the nation’s obligations, is a cool $100 trillion.

Now maybe all this statistical manipulation being conducted by our government officials is meant to serve some useful purpose, such as to artificially boost investor confidence and create a new stock market bubble. Perhaps Obama and his Wall Street coterie of advisors really do know what they are doing, and sceptics such as myself are just panicky doomsayers. However, I really do hope America’s foreign creditors are blissfully ignorant as to the true state of the U.S. economy and its fiscal reality. Heaven help us if they stop believing Washington’s math.

Will Sharon Stone’s Boobs Destroy American Civilization?

August 8th, 2009 Comments off

The year might be 2009, but it might as well be 1984 in America, with an Orwellian paradox defining its perception of virtue. Thus, wife cheating Republican politicos are the defenders of marriage, corrupt judges who send innocent children to privately run prisons for a bribe are held up as the scions of law and order (until they are caught) and our self-righteous mainstream media peddles violence without restriction but will cringe at the mere peek at a mature woman’s breasts.

The esteemed French magazine, Paris Match, featured a bare breasted Sharon Stone on its cover, celebrating the magnificent beauty of a fifty year old woman’s glorious body.  This is not a girlie magazine for men we are talking about, but one of the most prestigious publications in the world, with a well-earned reputation for journalistic excellence. As would be expected with a revealing magazine cover image of a celebrity, the Paris Match  profile of Sharon Stone has been replicated throughout the world. However, when the front cover image of Ms. Stone migrates across the Atlantic, an inexplicable metamorphosis occurs.  The Internet’s version of yellow tape migrates across the French magazine’s cover, intersecting Sharon Stone’s breasts at the nipple line, lest we be offended.

Lest we be offended? Americans can view scenes of appalling brutality through the lens of American mass media, with barely a whisper from the morality police. But heaven forbid that the bare breasts of a proud American woman, tastefully photographed and artfully presented in a publication as distinguished as Paris Match, should  be revealed in their shining glory. It seems there is a fear that such an uncensored visual  experience would hasten the decline and fall of American culture and civilization.

Perhaps my perception on this issues is distorted, due to my passionate interest in fine art photography of the female nude. I have photographed numerous bare breasted women, and have yet to sense that my level of culture and civility is eroding. The sight of a woman’s nipple does not transform me into a barbarian. What fine art nude photography does for me is heighten my appreciation for the mystique of feminine beauty, much as the uncensored Paris Match  cover portrayal of Sharon Stone  is an artful salutation to her middle-age grace and sensuality. However, with the yellow tape over her bosom, she is transformed into a caricature, stripped of her feminine essence.

In its discomfort in presenting the female body as proud and unclothed in any setting outside the realm of pornography and “men’s magazines,” the mass media in the United States is far more aligned with Iran than Europe. In fact, in both Europe and Canada, tasteful nudity is freely presented on mainstream media. It is the USA that  holds to  a puritan ethic that reaches the level of the absurd when  censoring the cover of one of the  world’s outstanding magazines.

Those clinging the strongest to a regime of censorship that is primeval in comparison with other countries with more enlightened media policies are often counted in the ranks of those who also support the Iraq war and Bush administration’s  trampling of the U.S. constitution.  I for one hope one day  a magazine cover as beautiful as the Paris Match tribute to Sharon Stone and her  wondrous femininity will be liberated from  such ethical hypocrisy, but until that day arrives, I will continue to photograph the beautiful bodies of exceptional women. For those not afraid that such fine art  imagery may lead to their moral destruction and spiritual doom, I extend an invitation to view my gallery at, But be warned, the yellow tape is off.


For More Information on “Global Economic Forecast 2010-2015” please go to the homepage of our website, 



“Cash For Clunkers” is Really Economics For Dummies

August 5th, 2009 Comments off

In confronting a  crisis of epic proportions, one can do the heavy work of crafting a well conceived, comprehensive strategy. But why bother, when short-term gimmicky is politically more feasible. Thus we have this absurd counter-cyclical gimmick, the so-called “cash for clunkers” boondoggle, being offered by the Washington establishment as their “answer” to the  massive problems confronting the automobile industry, not only in America but globally as well.

Throughout the world, a vast car manufacturing infrastructure has been constructed at great expense and high leverage, designed for global demand of almost one hundred million cars per year. However, the Global Economic Crisis has unleashed massive demand destruction in many key categories of consumer durables. In the case of autos, worldwide demand is currently just above fifty million units per annum, rendering it almost impossible for most automobile manufacturers to generate a profit, whether they are located in Detroit, Tokyo or Stuttgart. The challenge is massive, global and complex. Yet, the geniuses in Washington have come up with a solution that is small, local and simplistic beyond all measure.

The concept of the “cash for clunkers” program is very simple and superficially enticing, as are most gimmicks. Trade in the old jalopy that was on the verge of being junked anyways, since it had no trade-in value on the open market. The federal government will fund  a $4,500 credit that will go towards the purchase of a shiny new automobile, thus stimulating the economy. As to be expected, the response from those with dilapidated vehicles on the verge of being dropped off at the local scrap yard has been  substantial, in the process depleting the original one billion dollar appropriation for the program. Also not a surprise, the politicians rushed to provide another  $2 billion for the program, to the delight of car dealerships across the land.

While on the surface  the program may be seen as an economic stimulus initiative at work, no one should be fooled into believing that this is a carefully designed, long-term strategic answer to the worst economic contraction to occur in the United States since the Great Depression. And most notably, the supposedly strong response to the program actually betrays its supercilious essence. For one thing, four of the the five most popular cars being purchased under “cash for clunkers” are foreign brands, meaning the impact on the domestic auto industry is minor at best.

Beyond the fact that  domestic car manufacturers are only partially benefiting from the program, it must  also be remembered that every dollar of credit being distributed under the program’s auspices is from U.S. taxpayers, at a time of massive, multi-trillion dollar deficits. Using borrowed money to subsidize the purchase of foreign made automobiles, along with domestic models, does not make much economic sense. However, there is another aspect to this program that has thus far escaped scrutiny.

A major driver of the Global Economic Crisis was the stampede of consumers who were enticed into buying new homes they could not afford, due to the Federal Reserve lowering interest rates beyond prudent levels. This created a real estate bubble, and we all know the consequences of that. Now, with “cash for clunkers,” it just may be possible that many of the consumers taking advantage of the credit largesse from Washington are those with incomes that were inadequate for  a new car purchase, but have been persuaded by their own government to take the plunge on a new automobile loan, courtesy of this deficit-financed program. What happens if many of these new car owners end up defaulting on their auto loans, as the recession deepens?  This is by no means a small possibility, given the current dynamics of the nation’s most severe economic contraction since the 1930s. In effect, the American taxpayer may be financing a new wave of consumer loan defaults down the line, further exacerbating what some are now calling the Great Recession.

“Cash for Clunkers” is really a showroom lemon, masquerading as brilliant economic policy. The politicians may think it is ingenious; my own view is that it is symptomatic of the intellectual bankruptcy that has come to dominate Washington’s response to the nation’s descent into financial and economic doom.


For More Information on “Global Economic Forecast 2010-2015” please go to the homepage of our website, 



Are the U.S. Government’s Statistics on the Economy to be Trusted?

August 1st, 2009 Comments off



There is an old adage which says there exist three types of lies; lies, damn lies and statistics. With that caveat in mind, how should one approach the government’s claim that the U.S. economy contracted by “only” 1% last quarter? The question is of great importance, since this statistical marker underpins the claims being made by legions of politicians and financial analysts that the greatest global recession since the Great Depression is nearing its end, with recovery just around the corner.
Karl Denninger, a frequent guest on CNBC and commentator for a website with a sceptical take on the economy, Market Ticker, has offered a convincing rebuttal to those who stand by the official claim that Q2 witnessed a decline of a mere one percent in the U.S. economy’s GDP. Here are the salient points of Denninger’s critique of the numbers that came out of the Commerce Department’s Bureau of Economic Analysis.

According to the Commerce Department, Q1 was actually significantly worse than the originally reported -5.5%; the actual decline was -6.4%. Due to the different benchmark, the .9% differential needs to be added to the decline in Q2, taking the actual figure to -1.9%. In addition, because the government reduced its spending in Q1 by 4.3%, and comprises approximately 30% of the total economy, its share of Q1 contraction is 1.3%. Here we come to the heart of Denninger’s mathematical analysis. He believes that it is consumer activity that points to the strength or weakness of the American economy, not government spending. Accordingly, he argues that reductions or increases in spending by Washington should be subtracted from quarterly GDP measurements in order to ascertain the actual temperature of the real economy. With that in mind, he backs out the reduction in government spending in Q1, which reduces that quarter’s contraction to just above -5%. 

In Q2, Denninger points out, the government’s spending grew by 10.9%, contributing to a positive movement of 3.3% in the second quarter’s reported GDP. Remove that 3.3% from the equation, and the actual Q2 data for the consumer economy witnessed an overall contraction of -5.2%, a figure substantially worse that the official government Q2 report.

The statistical argument raised by Karl Denninger warrants careful consideration by all those who are seeking an accurate gauge of what is actually transpiring in the real economy. Furthermore, the track record of both the Commerce Department and Labor Department has not been exactly stellar with regard to its statistical accuracy in measuring the impact of the Global Economic Crisis on the American economy. Simultaneously with the release of reassuring Q2 numbers, the Commerce Department also admitted it had gotten its evaluation of the recession’s affect on the U.S. economy’s GDP from its onset in Q4 of 2007 through the latter part of 2008 stupendously wrong, now conceding that the actual contraction was -1.9 percent instead of -0.8%, as previously reported.

One other point made by Denninger is especially disturbing. He reminds us that an individual who borrows money from a bank or his/her credit cards would never be able to claim that loaned credit as earned income. Certainly the IRS doesn’t consider credit to be income, or else it would tax us on all our debts. However, in the case of the U.S. government measuring GDP, the opposite logic applies. The increase in government spending in Q2 was predicated entirely on borrowed money, particularly as tax receipts declined significantly even as spending grew in spades. Should money that Washington borrows from its China credit card really be considered part of the GDP`s “growth,” as is now the case?

There is only one flaw with Karl Denninger`s analysis; it is based on logic, a principal that seems irrelevant to any measurement of the economy derived from official government sources.

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