Ruminating Out Loud

In the interest of setting up a one-stop reference regarding health-care reform, included here are graphs that highlight the issues of cost, per capita spending, coverage, and etc. Some of these graphs have previously been discussed here and here. More graphs will be be appended as they are discovered.

Heath spending by population: The graph below shows the relative distribution of health spending within the U.S. population. It clearly shows where the cost overruns are concentrated at.

Heath-care cost versus per capita spending: These graphs below clearly shows what is the critical issue at hand regarding reform efforts here in the U.S.; that is, the incommensurate cost to the quality of care being delivered to the population at large. The U.S. simply stands alone spending more than twice the amount while achieving equal or lower levels of life expectancy.

There is a lot that has been said about what the U.S. needs to do or not do to win the over the hearts and minds of locals in either Afghanistan or Iraq. I believe it ultimately boils down to the alignment of ambitions and goals; to get locals to realize that you’re on their side. The following photograph distills the essence of that connection. We just need to replicate the experience shared between this soldier and the Afghan man millions of times over. It can be done!

An Afghan man gives tea to a U.S soliders of 3rd Brigade, 10th Mountain Division patrol during a search operation to hunt members of Taliban in Nerkh district of Wardak province in west of Kabul, Afghanistan, Friday, May 1, 2009.(AP Photo/Rafiq Maqbool)

To those who are worried about China accumulating a significant amount of debt from the U.S., this surely will not come as a good news. In an interview with the Newsweek, Economist Nouriel Roubini (Dr. Realist, as he calls himself), sounds the alarm by stating that China has taken more action (e.g. conducting bilateral trades in yuan) in the past month than the past decade to establish their currency as an internationally accetable one.

Do you worry about China getting tired of holding our bonds?
In the short run, China has no option but to accumulate more reserves and dollar reserves. Why? Because if they stop doing that, their currency would appreciate sharply while their exports are plunging. So in the short run, they are going to keep on accumulating. But I have seen a huge number of new initiatives in the last month that suggest [the Chinese] are pushing for the yuan to become an international currency and a reserve currency. They are doing bilateral deals with countries like Argentina and half a dozen others in yuan, not in dollars.

They are moving away from the dollar?
Yes, slowly they will. First they have to establish their own currency as an international currency. That will take years, but already in a month they have done more than in the last 10 years.

Via BBC, a reporting on the International Space Station. Apparently, the sense of community among astronauts and cosmonauts is fast dissipating.

“A Russian cosmonaut has complained he is no longer allowed to use a US toilet as well as a US exercise bike… The regulations now required US and Russian cosmonauts to eat their own rations.”

Here is an insightful look by Mark Winne at the the issue of poverty and income disparity in the U.S. It underscores the fundamental issue at the heart of the poverty plague stealing the life and destiny out of millions of our people. These choiceless millions are subjected to a vicious cycle of depravity and lack that continues to perpetuate the status-quo. There is a fundamental need for not only the recognition of the fundamental injustice of the system as it is, but also for a commitment to bring about a fairer distribution opportunity and access to wealth and prosperity.

We have in America today a tale of two food systems—one for the poor and one for everyone else. The poor cobble together their week’s groceries from a combination of food stamps, food bank donations, and bus trips to Wal-Mart. If they are lucky, parents won’t be forced to skip meals to feed their children. The rest of us, driven by an ever expanding food consciousness, choose from an unprecedented abundance which increasingly leans toward the organic, local, and expensive end of the food chain. Our toughest choice is whether to pay for our food with Visa or Mastercard.  And as the numbers attest—35 million hungry or food insecure Americans (USDA); 50,000 emergency food sites visited annually by 10 percent of the country’s population (America’s Second Harvest); 26 million people receiving food stamps—we have allowed a significant segment of American society to eat at the lowest end of the food chain. These parallel food systems have become the norm, and like the streets and buildings that surround us, we have come to accept them as just part of our everyday landscape…

Any effort to address poverty, and ultimately hunger, will require a concomitant effort to reduce the vast income disparities that plague this nation. Economic inequality has been increasing in the United States for more than thirty years. According to the New York Times, “The top 0.1 percent of earners—that’s one out of every 1,000 families—made 6.8 percent of the nation’s pretax income in 2004, up from 4.7 percent a decade earlier and about 2 percent in the ’60s and ’70s.”

As the superrich take a greater share of the national wealth, the poor sink deeper into poverty. Of the 37 million poor Americans, 16 million live in severe poverty—incomes less than half of the federal poverty level—which is a thirty-two-year peak. And just in case people think that the severely poor are good-for-nothing, working-age men, one in three is a child, and two in three are women…”

Lessons the U.S. could take from Switzerland and the Netherlands about universal health care coverage:

Both Switzerland and the Netherlands have mixed public-private systems with an individual mandate and insurance market reforms that are similar to the Massachusetts universal coverage law. Both countries’ health systems also feature patient choice, broad access to care, and low rates of disparities in care…

Key policies that the U.S. might learn from include:

• Universal coverage attained through a mandate that every individual purchase a basic insurance plan. Both Switzerland and the Netherlands subsidize premiums for low-income households, with about 40 percent of households receiving premium assistance in both countries.
• National standards for basic coverage for private insurance ensure that benefits are comprehensive for acute care services.
• Tight regulation of basic health insurance markets, with requirements for open enrollment and community rating, lead to relatively low overhead costs. Administrative and profit-margins account for about 5 percent of premiums.
• Risk equalization systems help to reduce incentives for insurers to seek healthier enrollees.

While the U.S. spent 15 percent of GDP and $6,700 per capita on health care in 2006, Switzerland spent 11 percent and the Netherlands 9 percent of GDP on health spending; per capita spending was $4,300 in Switzerland and $2,800 in the Netherlands. Both countries achieve better health outcomes compared to the U.S.: in 2005 life expectancy in the U.S. was 77.8 years, compared with 81.4 years in Switzerland and 79.1 years in the Netherlands.”

You know there is a fundamental need for change in policy and the way care is being delivered to citizens when you see a graph like the one shown below. It shows life expectancy and the per capita spending on health care for a number of countries. In a single plot it crystallizes what is at the root of the health care crisis in the U.S., which is the incommensurate cost to the quality of care being delivered to the population at large. It is astonishing that countries such as the U.K. and Denmark achieve a similar level of life expectancy with approximately half the cost compared to the U.S. And then there is Japan that has 4-5 more years in life expectancy for half the cost of the U.S. as well.

Cost of a long life: Life expectancy and per capita spending on health care for a number of countries.

I failed utterly in my attempt to locate it now. It is hidden in the vast confines of the Null Information. It was an advertisement for the city of Chicago. The narrator in the ad says something to the effect of: most cities like to measure growth in charts and graphs. We like to use something more concrete; like concrete. Then, the ad spans through the multitudes of high rises gracing the sky of Chicago that are, needless to say, made of concrete.

Now, you may ask what does that have to do with wealth itself. Well, the answer is concrete. The essential message of the ad that remained stuck with me is the connection made between prosperity and advancement with a more tangible measure of wealth, like the one made of concrete. Starkly contrasted against this message, suddenly I was reminded of the recent news about the big debacle in the stock market which robbed the populace in wealth amounting to $7 trillion dollars within the past year; a presumed wealth and capital on paper that somehow evaporated into thin air. It is bewildering as to how one year a country could be rich by the tune of trillions of dollars (that is half the GDP of the U.S.!), then lose it the next year. Where did that money ginormous money go? How did it seize to exist?

It is the thought about and answers to those questions that brought flashes of that ad flooding back from memory and the desire for a more substantive look into what is the stock market.I have neither the expertise nor the inclination to write a treatise on the working principles of the stock market. Here, I will just attempt to put down my reflections about it and tie it to the message of that Chicago ad and the big debacle.

Frequently, we hear that the stock market went down by this many percentage points and up by another. In fact, it was reported that since Lehman Brothers filed for bankruptcy in September 2008, “the S.& P. has moved more than 5 percent in either direction on 18 days. There were only 17 such days in the previous 53 years, according to calculations by Howard Silverblatt, an index analyst at S.& P.” Well, that may represent an extreme form of fluctuation in recent past, which by itself is worthy of another exploration and will not be covered here. However, the underlying susceptibility for fluctuation is what I find intriguing. Let alone well informed economists, even the lay (wo)men by now know that the U.S. economy is under significant duress. The structural issues that are causing the recession have been gathering strength over the years and will most likely take years to be corrected. During this time period, all sorts of statistics are released every now and then describing the symptoms of a slowed down economy that is in recession. And there goes the stock market wildly swinging all over the  place as if no body knew that unemployment numbers are going to be grim at best, company profits, if any, are going to be significantly curtailed, and dept and bankruptcies rates are going to be rising. Every time a new piece of information comes out describing the illness in the economy, everyone acts surprised and the stock market takes a nose dive. Then, there are also cases of an up swing out of no where that are based on flimsy developments that have little effect in addressing the fundamental problems with the economy; only to be wiped out again at the next announcement of a bad news. That fluctuation and the inherent capability for the stock market to be swung one way or another are what give me grief about it. As a measure of wealth, it is completely intangible and vaporous. I suspect that is also why such an astounding amount of “wealth” can be wiped out in such a short period of time. That leaves one to wonder as to whether the yardstick for measure of prosperity and wealth is misplaced or not. Is the hope of a better future or a retirement age based one a rosy scenario analysis of long term and sustained growth in the stock market completely misguided? I think it is. One only needs to look at the persons who are nearing or at retirement age now and are in desperate need of using the hard-earned income that they have been pouring into the stock market and are finding that it has evaporated. Is it any way for, let alone individuals, for institutions to be relying on and hope to draw their sustainability from the stock market? I think not.

Part of me yearns for more concrete. The stubborn thing about concrete is that it remains where you left it, barring some unforeseen natural disaster, which by the way can potentially be overcome by employing smart building codes. It is there in the good times and bad. It is there in sickness or health. It does not suddenly evaporate one day and seize to exist. It is indeed as lasting a measure of wealth and prosperity as one can get. The Colosseum in Rome, the obelisks in Axum, the Parthenon in Athens, the pyramids of Giza, and many others are historic truths that have proclaimed and shall remain to tell about the state of advancement of a people. The message of that Chicago ad harkens back and, I think, is in desperate need to be applied not just to Chicago, but the U.S. and the global economy at large. Would it not be nice if we had a more concrete way to measure wealth instead of charts and graphs of the latest ups and downs in the stock market? Would it not be great if only we used more concrete? I would say yes!

Below is a chart from IEEE Spectrum showing where the 1 million industrial robots that are believed to exist around the world currently reside. The numbers indicate the total number of robots per 10,000 manufacturing workers.

A Robot Invasion

Clearly, Japan is by far the most susceptible to a robot invasion. Europe is not that far behind Asia either. The saving grace for the U.S. is that it is further behind most of the industrialized countries.

On a more serious note, I find the implication of such statistics on the extent of industrialization interesting. For all the discussion about how the U.S. economy has been impacted by the “export” of jobs and plants to other countries, it appears that the manufacturing sector is not nearly as modernized as it is in other countries and remains to be among the most labor intensive.  Japan, South Korea, Singapore, and a host of European countries are much more advanced from the stand point of ripping the benefits of increased productivity and lower labor cost that is afforded by industrial robots.

I think this is a rude awakening that is worthy of note. For the U.S. to stay competitive in manufacturing in the 21st century, a lot more capital investment needs to be directed to this sector and the workers, who will be substituted and made redundant by the robot invasion, need to be re-trained to stay relevant and useful in the global economy. The political consequence of such an advancement is also going to be dire. If you are among those who have been voicing concerns about outsourcing, you may have to get ready to be awakened by the robot invasion that is coming soon to a manufacturing facility near you. What would the politicians do in that scenario? Continue to promise that those jobs that are lost and the plants that are closed would be coming back if only they were elected?

A brief summary of the historic presidential election that culminated in the election of Barack Obama to become the 44th president of the United States can be found here. An excerpt from this article, entitle “America’s historic election year,” is shown below:

…As the Republican ticket drew level, then briefly overtook him in the opinion polls, he held his nerve and waited for his opponents to make a mistake.

He did not have to wait long.

On 29 September, John McCain announced that he was suspending his campaign, to try and broker a financial bailout deal in Congress.

It was a fateful decision.

There can have been few presidential election campaigns whose closing stages have seen a real-time political drama in which both candidates were called on to participate.

But the unfolding economic crisis set these two sitting senators just such a test.

John McCain’s grand gesture was meant to be consistent with his “country first” slogan, but his inability to broker a deal with House Republicans made him look impetuous and ineffective.

His assertion that “the fundamentals of the US economy were strong” and his economic advisor Phil Gramm’s comment that America was only experiencing a “mental recession” made him and his team seem out of touch.

The younger man appeared to have the calmer head in a crisis…”

…The President-elect’s subdued, determined speech on election night, coupled with John McCain’s gracious words of concession, were the perfect coda to a truly historic campaign, in which the United States had both surprised and uplifted itself, by electing a young, bi-racial Senator as its 44th commander-in-chief…”

The drastic losses incurred in the financial markets is one of the prime examples of a major collective human experience during the past year. This particular decline in the stock market value amounting to $7,000,000,000,000, which I would call the big debacle, is discussed in a NY Times article. Excerpt from the article:

…In a mere 12 months, the Dow Jones industrial average plunged 4,488.43 points, or 33.8 percent, its most punishing loss since 1931. Blue chips like Bank of America, Citigroup and Alcoa lost more than 65 percent of their value. The broader Standard & Poor’s 500-stock index sank 39.5 percent, almost exactly matching its decline in 1937.

All told, about $7 trillion of shareholders’ wealth — the gains of the last six years — was wiped out in a year of violent market swings.

But what is striking is not just the magnitude of the declines, staggering as they are, but also their breadth. All but two of the 30 Dow industrials, Wal-Mart and McDonald’s, fell by more than 10 percent. Almost no industry was spared as the crisis that first emerged in the subprime mortgage market metastasized and the economy sank into what could be a long recession…

The markets have become incredibly volatile, especially since Lehman Brothers sank into bankruptcy in September. Since then, the S.& P. has moved more than 5 percent in either direction on 18 days. There were only 17 such days in the previous 53 years, according to calculations by Howard Silverblatt, an index analyst at S.& P.”

• Total spending: Noway
• Household goods: Norway. Canada is close second followed by Denmark, England and Germany.
• Clothing: Norway. England is close second followed by the U.S., Denmark, Sweden and Finland.
• Alcohol and Tobacco: Norway. Switzerland is second followed by England, Finland and Denmark.
• Electronics: Norway. England is a close second followed by Denmark, Australia and the U.S.

Who Is Buying What