Blood in the Streets

Kitco reports that gold prices have fallen 4 percent today to 1066, nearing the 1030 mark that Jon Nadler mentioned as a near term support several days ago. Morgan Stanley Smith Barney's ticker says that the Dow is down nearly 200 points and the S&P 500 is about 1074, a 23 point drop. These declines are related to a strengthening dollar.

How far will the Fed allow markets to fall before it prints more money? Like an obsese food addict, the Fed reaches into its candy bag at the slightest impulse. Bernanke and his associates like to see gold fall. But the effects of a stronger dollar and weaker gold include bankruptcies and unemployment. More importantly to the Fed, hedge funds' carry trade and the hundreds of billions loaned to Wall Street each week will be threatened by higher interest rates.

Based on my coin flip test, I am betting $950 gold. Unless the Fed decides to change its philosophy, I doubt the S&P will go below 850. But when inflation kicks in, then the Fed will need to tighten. At that point we could see more dramatic stock market declines. Gold would continue to be fueled by speculation for a while, until raising interest rates mutes the price increase trend. Then gold will fall again.

Confiscation of Pensions Would End the Democratic Party

A number of people are concerned about the nationalization of pensions. Americans will not accept direct confiscation of that sort. The Tea Party suggests that the tension has begun. If the Democrats proceed with health demolition and cap and trade, the public sentiment will be intense. Nationalization of pensions, well, I think we can say that could finally result in a long overdue libertarian revolution. The stripping of the federal government of most of the powers it has accrued since 1930 will be a painful process but one that will repay the American people a thousandfold. I do not think its occurrence is improbable. But I'm not convinced that the Democrats are going ahead with their program. They're first and foremost selfish politicians.

Aristotle on the Limitations of Rationality in Ethics

"Our discussion will be adequate if its clarity matches the subject matter. For we should not seek exactness in all accounts alike...And fine and just actions, which political theory investigates, exhibit difference and fluctuation, so that it seems they exist only by convention, and not by nature. And goods also exhibit a similar sort of fluctuation because they cause harm to many people. For it has happened that some have been destroyed because of their wealth, and others because of their bravery. Thus we must be content, in speaking about and from such things, to indicate the truth roughly and in outline, and we must be content in speaking about things that hold for the most part and in drawing conclusions of the same sort from such things."

---Aristotle, circa 325 BC, Nicomachean Ethics. Translated by N. Sherman in N. Sherman "Making a Necessity of Virtue: Aristotle and Kant on Virtue", p.268.

Solution to Health Coverage Crisis: Free Health Zones

Like many of the issues publicized in the Democratic media, the "health care crisis" is just a government failure, little more. The government has meddled with the health system for over a century. The first regulation of life insurance occurred in New York State when Met Life claimed that a now illegal concept called Tontine Insurance was immoral and therefore should be illegalized and regulated. Met's newly founded competitor, Equitable, invented Tontine Insurance. It was a form of gambling based on survival plus life insurance. There were two elements, life insurance plus a lottery instead of a cash value. The lottery proceeds were paid to the last survivors of a given cohort. So if you entered the Tontine in 1865, probably by 1910 or 1920 the last survivors in your age bracket would be left and if you were one of them you collected a big windfall, like a million bucks or something (today's million bucks was worth $80,000 back then).

Anyway, Met Life didn't like the competition and the popularity of Tontines and so had them illegalized. Thus began regulation of life insurance, of which health insurance is derivative.

Regulation inevitably serves producer interests and insurance is no exception. Health insurance also is influenced by provider lobbies, which are many. So the health coverage crisis is a product of provider and insurance industry influence on the regulation of coverage.

To solve the problem that the pro-regulation Republicans and Democrats create:

1. Eliminate all mandates on coverage
2. Deregulate providers
3. Provide tax credits for purchase of individual health insurance
4. Legalize ultra-high deductible policies, with deductibles as high as $20,000
5. Permit tax credit individual retirement accounts so that individuals can easily save for the difference between the deductible and their losses
6. Legalize free health zones whereby foreign providers can operate in partnership with but free of interference from US providers

With regard to number 6, a large range of elective operations are now being performed overseas for as little as 10 percent of the cost of the same operation in the US. US firms ought to partner with foreign ones in the globalization of health care. Quality standards that exceed US levels can be established by talented providers, much as Japanese auto companies found ways to significantly exceed US quality standards in the automotive field.

Currently, globalized health care depends on travel to a foreign country. If the US establishes free health zones exempt from provider-driven regulation, then low-cost foreign providers can set up shop here, much as Japanese auto companies have.

De regulation and ending of health care socialism, rather than increasing it, will end the government-induced health care coverage crisis.