Thursday, July 27, 2017

The Three Reasons Healthcare Is So Expensive

Consumers Are Drowning In The Mess Washington Has Made
Washington lawmakers are again debating what to do with a healthcare bill that never should have been passed. The current law whether you call it the Affordable Care Act, the ACA or Obamacare took an irrational path towards achieving its objective. In reality, it is no more than a massive transfer of wealth masked as "healthcare legislation." When it comes to healthcare people face issues of both care and cost, what I see as the crux of the issue is who will be paying these bills. We must look at how we can cut healthcare cost so we get more and better coverage for the money spent. Extending Medicare to give the most "basic coverage" to everyone would require some rationing of service to contain cost, but this is already being done. Expanding Medicare would allow us to discontinue Medicaid while meeting our goal of basic healthcare for all citizens.

Healthcare is ridiculously expensive because many people have convinced themselves of three things: The answers for good health outcomes rest with pills and procedures rather than good diet and exercise. Death at late stages of life is some strange, recent development in human history which justifies and necessitates extreme, exorbitant payouts to delay it for every possible last second.  And last but not least, thinking that mixing all the myriad of "health care" transactions that result from the just mentioned concepts with health insurance as originally conceived to protect a person from unforeseeable, catastrophic events like an accident is a good idea. Remember, just because we can does not mean we should, if we do not prioritize and limit healthcare it grows like a tape worm ever ready and always wanting to grow larger.

Accounting for 16% of the economy, healthcare has become the Achilles heel of American competitiveness making the cost of American produced goods less competitive and adding to our trade deficit. While the money spent on healthcare wrongly feeds the GDP giving the illusion of economic growth it is clearly the wrong kind of growth and actually a tax on society, Americans spend more on healthcare than people in other developed countries, but with very poor results. Our healthcare problems are not for lack of spending,  Our system allows insurance companies to stick their nose into every interaction you have with a health care provider, they get to take a large cut as well. It has become virtually impossible to find a modestly-priced traditional insurance plan that protects a person from unforeseeable catastrophic accidents while letting them own responsibility for the accumulation of their lifestyle choices over time, thus differentiating the healthy 70-something marathon runners from a fat slob suffering from self-induced diabetes.

Government Has Caused College And Healthcare To Soar
We all know what happens to costs when free government money flows into a system, hello college tuition! Surely, there is a legitimate and rational place for government in ensuring access to basic levels of care, but we've lost our bearings about what "basic levels of care" should mean. Indeed, healthcare and hospitals have become a quasi-government entity. After the Supreme Court  decided that Obamacare is here to stay, I heard one supporter say "I think it rather tragic that a five/four Supreme Court decision could have overturned the wishes of  Congress." Another joked, "I guess we could just let people die in the streets but then the conservatives would probably complain about the cost of collecting the corpses." This is the kind of noise that makes it difficult to stay focused on the important issues.

It is not difficult to make a case that Obamacare is a boondoggle to increase the profits of private companies and their owners. The law has proven far more expensive and harder to implement than first thought driving premiums skyward for many Americans. A better alternative would have been to adopt a single-payer system covering "basic healthcare" which is something people already get when they collapse in the street. Many proponents of such a plan argue a single payer program would be more rational, less expensive and achieve many of the goals of the healthcare bill by cutting cost through eliminating wasteful duplication, bureaucracies, and paperwork. A single payer system wouldn't eliminate insurance or pharmaceutical companies, they would continue to sell extensive types of "optional" plans that would extend coverage beyond the basic care government would provide.

Deciding what is better or workable is the job of the legislature and has become a political "hot potato" with no easy answers. We all know that there is no escaping the grim reaper, and little to no way to collect medical bills from those who die with no assets to pay for burial, cremation, etc. We also know that bankruptcy laws exist which allow people with medical bills to cast off the responsibility of paying their debts and to walk away leaving the cost to be spread out across the rest of society. We cannot effectively make or "mandate" people buy burial insurance, eat broccoli, work out, and stop eating junk even though if you are out of shape you increase your chances of getting a major disease and forcing costs on the system. When all is said and done the crux of the issue is how can America cut healthcare cost and get better care for the money spent. It should be noted that it doesn't help that hospitals and caregivers are allowed to charge different or discount prices for various insurers and take other patients to the cleaners, it is not only unfair it is downright corrupt.

Tuesday, July 25, 2017

Traits Jeff Bezos, Elon Musk and Mark Zuckerberg Share

What traits do Jeff Bezos, Elon Musk and Mark Zuckerberg, the founders and CEOs of Amazon.com, Tesla, and Facebook, respectively, share or have in common? To many people, the first thing they recognize is that each of them is very, very rich. Also, words such as iconic, forward thinking come to mind. Each of these men also holds the ability to make and shape public opinion. At any time it is very likely when you check whats happening in the news at least one and possibly all their names will come up.

In our modern world where hype flourishes it is difficult to underestimate the amount of influence each of these individuals wields. Both Bezos and Musk have excelled in grabbing government subsidies to build their empires, these subsidies come in many forms some that exist more under the radar and some blatantly obvious. All three, make a point in weaving the narrative that they are instrumental in moving us towards a brave new world where the masses, (you and I) will benefit greatly from their actions.

One thing that is totally undeniable is that a massive amount of hype surrounds each of these men. None of them come across as shy considering all three are constantly in the news and it seems this is not by accident, in fact, they seem to be publicity hounds hell bent on hyping their brand in any way they can to enhance their fame and wealth. Few people deny each of these individuals by themselves constitute a force to be reckoned with, however, when grouped together they represent something far greater and that is the global elite.

These three men in many ways epitomize the American idea of fame and fortune. Each of them has added an incredible amount of money to their wealth during the last few years. All three have seen their fortunes swell by billions as their companies' stocks have soared. Both Bezos and Zuckerberg have each seen their fortunes swell by more than $20 billion this year according to data from the Bloomberg Billionaires Index. Another thing that has soared is their lobbying efforts and the amount of money they spend in Washington DC to garner special considerations. Below you will find a few facts or links to recent news blips about each of these men.

Washington Post Moves Bezos Into Shaping Opinions
Jeff Bezos----The founder of Amazon.com has indeed had a good 2017 and in the last few weeks also claimed the title of the worlds richest man. Among the goals of this online retail mogul is replacing workers with robots which his company will both build and market plus controlling one of the most influential news media giants in America, the Washington Post. This high-flier is also the head of Blue Origin, a company with big plans to pioneer the frontier of space. Last but far from least as Amazon's CEO Bezos ties this all together with Amazon Web Service or AWS. This is a cloud service which also collects data and has ties with the government. This means they know when you are sleeping, they know when you're awake, they know when you are bad or good or if you are gaining weight. (that last part was my attempt at humor) Below are some links that will tell you more.

     https://www.space.com/37572-jeff-bezos-trillion-people-solar-system.html
     http://www.zdnet.com/article/bezos-move-spurs-20b-of-growth-in-logistics-robotics/
     https://www.theguardian.com/technology/2017/jun/02/jeff-bezos-worlds-richest-man-bill-gates

Elon Musk-----With a real time net worth of only $15.7 billion as of July 24th he trails far behind Bezos and Zuckerberg in the area of wealth but rivals them when it comes to getting media coverage. Elon Musk is one of those iconic figures the world occasionally conjures up to wow and entertain the masses as he tries to redefine transportation on earth and in space. As media generated symbols of success go he ranks up there with the best of them. Much of the aura that surrounds Musk comes from his success at PayPal. Musk co-founded X.com., an online financial service and e-mail payment company. With his youthful looks and forward thinking the media latched on to Musk and propelled him into being viewed as a visionary and wonder-boy that turns everything he touches to gold.

Elon Musk A Man Of Big And Bold Ideas
When talking about the CEO of Tesla Motors, Bloomberg News almost always says "Billionaire Elon Musk", this happens so often that many people probably think his first name is "Billionaire". As to the source of his success, it seems Tesla Motors Inc., SolarCity Corp. and Space Exploration Technologies Corp., known as SpaceX, together have benefited from an estimated $4.9 billion in government support, according to data compiled by The Times. Elon Musk's latest bout of attention occurred a few days ago when he said he has been given “verbal” government approval to build the world’s longest tunnel for an ultra-high-speed train line to connect New York to Washington. What "verbal approval" means and a lack of details combined with many government officials saying they didn't know what he was talking about left many people bewildered. Below are some links that will tell you more.

 http://www.businessinsider.com/why-elon-musk-always-talks-down-the-price-of-tesla-stock
 https://www.inc.com/julian-hayes-ii/elon-musk-and-michael-jordan-can-teach-you-to-be-s.html
https://www.bloomberg.com/news/articles/2017-07-20/musk-claims-u-s-approval-for-world-s-biggest-tunnel
https://www.forbes.com/profile/elon-musk/

Mark Zuckerberg-----While a bit less "flashy" Zuckerberg computer programmer and Internet entrepreneur who co-founded Facebook, seems to rank higher among young people than the other two. Zuckerberg was a billionaire by the age of 23 and has survived several legal battles. His first popular site breached security and violated privacy and he has been accused of intellectual theft, blasphemy, and failure to uphold a contract. His longest-running legal battle was with twins Cameron and Tyler Winklevoss who claimed that Zuckerberg had stolen their idea for Facebook. Currently, the Facebook CEO is traveling throughout the United States to fulfill his 2017 “personal challenge” to “learn about people’s hopes and challenges” this has attracted a great deal of attention and sent rumors flying and created speculation that he might be considering running for President. During his travels we have seen him drive a tractor, meet with recovering heroin addicts, don a hard hat and speak out against the staggering wealth inequality that his personal fortune so clearly represents.

Views Vary As To The True Character Of Zuckerberg
Some people might be happy to stop at being the founder and chief of one of the world’s biggest tech companies while still in their early 30s. Not Zuckerberg, the CEO of Facebook has spent the last couple of years casting himself in various guises. First, global philanthropist: he and his wife last year pledged to invest $3bn over 10 years in order to eradicate global disease, however, some detractors point out this is a very small part of his wealth and this is being done as the cafeteria workers at his company struggle to make ends meet. Zuckerberg recently revised the mission statement for Facebook, at his company's first Communities Summit in Chicago he said Facebook looks to move beyond only connecting individual "friends" in order to bring more groups of people together "to build community."

While Mark Zuckerberg criticizes the state for failing to build adequate infrastructure for Silicon Valley workers it has been pointed out that perhaps the US government, like those elsewhere cannot afford infrastructure because of the huge lengths companies like Facebook, go to in order to avoid paying the taxes that needed to pay for that infrastructure?  Last week from Alaska. Zuckerberg praised the idea of a universal basic income, an unconditional income paid by government to all citizens, regardless of whether or not they’re in work. This brings up the question of whether Zuckerberg has the right to pronounce what the welfare state should look like at the same time Facebook takes very aggressive measures to minimize its tax burden, some people think not, and to those people, the term "hypocrite" quickly springs to mind. Below are some links that will tell you more about Mark Zuckerberg.

http://www.bing.com/news/search?q=Mark+Zuckerberg&qpvt=Mark+Zuckerberg&FORM=EWRE
http://fortune.com/2017/06/22/mark-zuckerberg-facebook-mission-groups/
https://www.theguardian.com/technology/mark-zuckerberg
http://celebritybox.info/10-facts-about-mark-zuckerberg/related/
 http://www.newsweek.com/trump-mark-zuckerberg-2020-election-640288

It should be pointed out that it is not just Facebook other global tech giants such as Amazon and Google are also notorious for exploiting every loophole to get out of paying their fair share of tax. As noted before other companies such as Tesla live on the government tit. I'm not so much jealous or envious of this trio as I am dubious of any claims they might make about how their goal is to give back and better society rather than increase their power and wealth. All of them at times come across as a bit arrogant but more important are the motives behind the messages they constantly put before us.

This article has grown far longer than I originally planned because doing my research I discovered a great deal more "in my face" information than anticipated, simply put, these guys are everywhere with their reach extending far beyond that of any rock-star. I have thrown a great deal of information out that does not paint a flattering picture of these three icons of society but it is up to you to determine their real character. Over the decades a number of high-flyers have come and gone, men like Ted Turner who once appeared ready to conquer the world are now looked back upon as merely another agent of change.   

Saturday, July 22, 2017

This Cannot Be The New Normal

brucewilds.blogspot.hk / By: Bruce Wilds

The Above Chart Is Not A Reflection Of Normal! 
The confusing market action has reached the point many of us are now wondering is this the new normal. Even as the market has forged its way into new territory the new highs have done little to alleviate the concerns of many investors that something is very wrong. More important than how the economy appears to the casual observer is the strength of the foundation on which it's built. This extends to issues such as growing inequality and just where we are headed when it comes to people being able to earn a living in the future. Jobs, jobs, jobs, much of this is about what is produced and how the fruits of our labor are distributed.

The current economic trends are unsustainable and unworthy of our faith. The markets reflect what I consider a total disconnect from the economic reality of sustainability, the numbers going forward simply do not work. I find little reassurance in trends that filter much of society's money and wealth into paper assets and promises rather than what we see as real and solid tangible assets. This has masked inflation by taking newly printed money out of direct competition for tangible goods which would normally drive their prices higher. Instead, it has made many goods downright cheap in comparison to prices people pay for things that are not real and often of questionable value.

A matter that weighs heavy upon both the economy and society, in general, is the productivity debate. Economists trying to explain the apparent structural slowdown in productivity growth have been forced to ask where is the missing increase? No easy answers exist to the questions arising from our evolving economic situation and the encompassing concerns about how we measure structural shifts in the labor market, a dearth of investment opportunities, productivity-diluting technological innovations, technology-driven skills mismatches and growing inequality. Efforts to increase demand and pull productivity forward have failed and resulted in massive debt growth across the world.

As Robots Take Our Jobs What Becomes Of Us?
Whether what we produce is allowed to flow to individuals or is whisked away by government for projects they claim serve the "greater good" or in the end directed in other directions is of great importance. This even translates into the decision to produce guns or butter and should include the fundamental question of, how much productivity growth do we really want or need considering the long-term cost to our planet. It should be pointed out that for many individuals, especially those residing in the wealthier developed countries, the top priority is not simply becoming richer, but developing a richer life. Living in a way that produces a better overall outcome.

Over the long-term what the economy is presenting us with today cannot be called the new normal in that little of we call normal is reflected in this economy. While growing debt and expanding credit have moved demand forward we should not delude ourselves into thinking it will be repaid. Much of it will slip into default exacerbating future problems. It may be time for mankind to take a moment and ponder what the human animal really wants, and the fact is we are still really just an animal and the answer might be something totally different from what we are being told by those we have given the power to shape our future.

Two Very Different Pictures Of The Future
As to whether it is time to rush off and embrace what some see as a "brave new world" the debate continues. We should remember with opportunity often comes risk. One area some people see as the answer to our problems is the development of artificial intelligence also known as AI. Some forward thinkers including Elon Musk have warned of what he called the possibility of "bad utility value" saying mans position on this planet depends on his intelligence and if his intelligence is exceeded by AI it is unlikely we will remain in charge of the planet. Some of these thoughts are echoed in an article by John Havens that start out, "I, for one, do not welcome our new robot overlords"

At this point, the idea of a sustainable and balanced future seems rather elusive and it does not seem that we are on a course towards perpetual bliss. As this is being written the drums of war drown out reason and the threat of war with countries such as Russia, North Korea, or even China are all too real. Over the years as society has become richer we have seen the relative value placed on different parts of our lives shift. Overall those in charge and the elites have failed to create a compelling answer to our woes. It will be most interesting as we progress to see if we can channel our time, income, and creativity towards solving our problems rather than diverting our energy into creating new ones.
 

Footnote; Today we find we are still trapped in the box Ben Bernanke built with no way out, compounding our problems is the fact we never received the promised economic growth promised to flow from his financial remedy. The article below explores this situation.
http://brucewilds.blogspot.com/2017/06/america-is-still-trapped-in-box.html

Thursday, July 20, 2017

Iran And The Reason For Its Deep Distrust Of America

Iran Has Little Reason To Trust Aamerica
 brucewilds.blogspot.hk / By: Bruce Wilds

Much of the problem America has with Iran flows from the perception that we have created over the years by portraying Iran as being a larger than life boogeyman that threatens our very way of life and existence. Remember Iran was elevated to this level when President George W. Bush used the term "Axis Of Evil" in his State of the Union Address in 2002, not only did he include Iran as being a member, but he often repeated it throughout his presidency. A big issue with me is that Washington and the politicians who reside there have lied and misled us so often it is difficult to believe them when it comes to such an important matter as this. I'm dubious of anything coming out of Washington because the government is very attuned and highly geared to serve the agendas of special interest that place lining their pockets above the common good.

When it comes to Iran's official stance towards America anyone saying that Iran has good reason not to trust the American government is making an understatement. America through its foreign policy has reeked havoc upon many countries, but few societies have been affected or suffered from our meddling as much as Iran. A neutral source without an agenda, in this case, would be Wikipedia, and a quick read of the history of Iran post-World War II shows America has constantly interfered in their internal politics. In 1953 the British M16 and the American CIA organized a military coup d'etat to oust the nationalist and democratically elected Prime Minister and form a government that allowed the country to be firmly ruled by Mohammad-Reza Shah Pahlavi, the man we all know as the Shah of Iran, in Persian Shah means king.

Under the idea that America must get along with Iran one way or another it is only fair to call attention to some very damning declassified documents released recently that shed light on the Central Intelligence Agency’s central role in the 1953 coup that brought down Iranian Prime Minister Muhammad Mossadegh. This eventually fueling a surge of nationalism which culminated in the 1979 Iranian Revolution and has poisoned the relationship between the U.S.and Iran. The approximately 1,000 pages of documents reveal for the first time the details of how the CIA attempted to call off the failing coup but it went forward because of an insubordinate spy on the ground.

The documents conflict with the U.S government's long denied involvement in the coup. The State Department first released coup-related documents in 1989 but edited out any reference to CIA involvement. Public outrage coaxed a government promise to release a more complete edition, and some material came out in 2013. Two years later, the full installment of declassified material was scheduled but the release was delayed fearing it might interfere with the Iran nuclear talks that were taking place. Now they have finally been released, it should be noted they are not complete because numerous original CIA telegrams from that period are known to have disappeared or were destroyed long ago.

What is clear and finally brought to light is the CIA plot known as Operation Ajax, was about oil. In early 1951, amid great popular acclaim, Mossadegh nationalized Iran’s oil industry. A fuming Great Britain began conspiring with U.S. intelligence services to overthrow Mossadegh and restore the monarchy under the Shah. While some of the U.S. State Department, the newly-released cables show, blamed British intransigence for the tensions and sought to work with Mossadegh plans were made for a coup. The coup attempt began on August 15th but was swiftly thwarted. Mossadegh made dozens of arrests. General Fazlollah Zahedi, a top conspirator, went into hiding, and the Shah fled the country.

At that point according to a newly declassified cable sent on August 18, 1953, the CIA under the impression the coup had failed decided to end their role. The message read, “Operations against Mossadegh should be discontinued.” Part of the logic to bury this then bury the shovel was obvious when they wrote, “Operation has been tried and failed and we should not participate in any operation against Mossadegh which could be traced back to U.S.”  The cable which Kermit Roosevelt, top CIA officer in Iran, purportedly and famously ignored, according to Malcolm Byrne, who directs the U.S.-Iran Relations Project at the National Security Archive at George Washington University.

Byrne told Foreign Policy, “One guy was in the room with Kermit Roosevelt when he got this cable,” and “[Roosevelt] said no – we’re not done here.” It was already known that Roosevelt had not carried out an order from Langley but the cable itself and its contents were kept secret. What unfolded next is pivotal, on August 19, 1953, with the aid of “rented” crowds widely believed to have been arranged with CIA assistance, the coup succeeded and Iran’s nationalist hero jailed. The monarchy quickly restored under the Western friendly Shah. The existence and extent of Operation Ajax have long been a major point of contention for many Iranians from which the flames of anti-Western sentiment have grown, in 1979 they resulted in the U.S. hostage crisis, the Shah being overthrown and the creation of the Islamic Republic.

Many Iranians Want More Freedom
Our current agreement with Iran was reached as an alternative to the unsavory option of taking military action to halt Iran from developing a nuclear bomb. History shows war to be a pathetic option to bring about positive change, war brings about change but to what degree and for how long. In truth, few Americans know much about Iran or its 78 million inhabitants or have ever visited the country. Many people would have difficulty pinpointing its location on an unmarked map and the chief source of what knowledge they do have is usually from the evening news. The official name of the country is the Islamic Republic of Iran and it is an area that history called Persia with Persian being the official language and the rial is its currency. Iran's unique political system based on its 1979 constitution combines elements of a parliamentary democracy with a theocracy governed by the country's clergy. The country is made up of several ethnic and linguistic groups but most inhabitants are officially Shia.

The Shah maintained a close relationship with America and shared our views towards the Soviet Union its northern neighbor. Iran was a strong ally in efforts to keep the Russians contained during the cold war. While the Shah westernized and modernized Iran he also ruled with a heavy hand. Arbitrary arrests and torture by the Shah's secret police were used to crush all forms of political opposition. Ayatollah Ruhollah Khomeini an active critic of the Shah publicly denounced the government and was arrested and imprisoned for 18 months. After his release when Khomeini publicly criticized the United States government he was sent into exile. When oil prices spiked in 1973 due to an oil embargo declared by OPEC and several other countries a flood of foreign currency into Iran caused double-digit inflation, waste, and corruption that was followed by a recession and social unrest. Protest and strikes spread until they reached a point where the Shah fled the country and Ayatollah Khomeini returned in 1979.

In the spring of 1979 a new government was formed and over the next several years uprisings were subdued in a violent manner as the new government went about purging itself of the non-Islamist political opposition that had joined with them to overthrow the Shah, tens of thousands were eventually executed by the Islamic regime. A part of history that lingers strongly in the minds of many Americans is that in November 1979, a group of Iranian students seized the U.S. embassy taking  52 U.S. citizens and embassy personnel hostage after the U.S. refused to return the former Shah to Iran to face trial and execution. The hostages were finally set free on Jimmy Carter's final day in office, but many Americans continue to view this as a slap in the face. A serious bone of contention among Iranians is what happened next.

America Supported Iraq Which Attacked Iran
On September 22, 1980, the Iraqi army invaded Iranian Khuzestan this signaled the start of the Iran–Iraq War. Although Saddam Hussein's forces made several early advances, by mid-1982 the Iranian forces successfully managed to drive the Iraqi army back into Iraq and Iran made the decision to invade Iraq in a bid to conquer Iraqi territory. The war continued until 1988 when the Iraqi army defeated the Iranian forces inside Iraq and pushed the remaining Iranian troops back across the border. It is clear the United States, alongside regional and international powers, supported Iraq and Saddam Hussein with loans, military equipment, and satellite imagery during Iraqi attacks against Iranian targets. Subsequently, Khomeini accepted a truce mediated by the UN, but the war cost Iran many lives and huge economic damage, half a million Iraqi and Iranian soldiers, with an equivalent number of civilians, are believed to have died, with many more injured. It must be noted that during the conflict America and the international community remained silent as Iraq used chemical weapons of mass destruction against Iran as well as the Kurds in northern Iraq.

Following the war, Iran concentrated on a pragmatic pro-business policy of rebuilding and strengthening the economy without making any dramatic break with the ideology of the revolution. Tensions with the United States dramatically increased after the 2005 presidential election brought the conservative populist candidate, Mahmoud Ahmadinejad, to power. His over the top rhetoric galvanized the feeling Iran had no intention to take a peaceful place in the world community. In 2009 protest erupted in Iran after President Mahmoud Ahmadinejad was reported to have won nearly 60 percent of the vote despite voting irregularities. Despite the relatively peaceful nature of the protests, the police and the Basij (a paramilitary group) crushed the people by using batons, pepper spray, sticks and, in some cases, firearms. Images of Neda Agha-Soltan, who was shot and died were uploaded to mass media and broadcast around the world.

Travel Documentary Shows Little Malice Towards America
It was reported that thousands were arrested and tortured in prisons around the country, with former inmates alleging mass rape of men, women, and children by the Iranian Revolutionary Guards. Relatives of those killed are forced to sign documents claiming they had died of heart attack or meningitis. The world watched and did nothing. On June 15, 2013, the electoral victory of new Iranian President Hassan Rouhani took place and since then Iran has improved relations with other countries. This recall of history is necessary to understand the real nature of the American-Iranian relationship and how we arrived at today. It should be noted that many Iranians have no malice towards America and are far more moderate than the political apparatus with its strong links to the country's clergy. A few years ago Rick Steves produced a documentary that explored Iran in a one-hour, ground-breaking travel special. This is a good place to meet the people of this nation whose government so exasperates our own.

John Kerry a key player in crafting our current agreement with Iran has stressed that if Iran fails to meet the requirements of the current deal, all options remain on the table. Sadly armed conflict tends to be a Pandora's box rather than an easy answer to our problems. We must defend ourselves, but the fact is mothers value their children just as the peasant in a rice patty field values his ox, neither want to see them killed in a war. If we look at every war ever fought we will find that most of the people affected by the violence only wanted to be left alone. It seems the first casualty of war is truth and governments often go to enormous lengths to persuade people to go to war using the tools of patriotic seduction, propaganda, and coercion. Governments convince and mobilize the people by painting a picture of an evil enemy that must be stopped. This means a lack of knowledge does not bode well for society when it comes to our ability to foster intelligent government. The term "need to know" should be revisited and changed to "we all need to know as much as possible".

With this in mind, we should not give the Obama administration too much credit for bringing us a great or even good agreement. Remember that during the Obama years many people considered foreign policy a mess as he flip flopped ignoring even the red lines he boldly drew in the sand. When Kerry talked about offsetting the boatload of money Iran was to receive when the sanctions were lifted by "upping our game in the area" questions arise as to the cost and how Washington intends to pay for this next gambit. Even a part of the one hundred and fifty billion dollars Iran received can go a long way toward funding the many proxy wars being fought in the area. While officials say this international agreement will halt much of Iran’s nuclear program and ratchet back other elements of it several U.S. senators, both Democrat and Republican, have voiced displeasure with the parameters of the agreement, arguing that the U.S. and its partners are offering too much for something short of a full freeze on uranium enrichment.

Those who are skeptical and view this as a weak agreement say Obama backed down again. President Obama noted the qualms of Israel, Saudi Arabia and other Persian Gulf allies of the United States and that they are skeptical of Iran’s intentions. An interesting thought to consider is Iran held more cards than we were told at the time because ISIS was a growing threat. In many ways when the agreement was reached Iran held the fate of Baghdad in their hands. If the Shia militias from Iran that were defending Baghdad wavered both the Iraqi capital and the American Green Zone could have come under fire from ISIS, this would have been very embarrassing for Obama and our government. For the world, the bottom-line remains that if  Iran does not halt and reverse its course any agreement means nothing. Iran can always ramp up its plans to develop a nuclear bomb at off-site locations. The fact is if current trends continue in the future Iran looks to face a defanged and economically weakened America with less power in the region. Regardless the fact remains that one way or the other we must deal with Iran and war is not a great option.



Wednesday, July 19, 2017

Ponzi Scheme 101- When It's Too Good To Be True

 brucewilds.blogspot.hk / By: Bruce Wilds

We often hear the term "Ponzi Scheme" used to describe a financial plan that is destined to fail or appears too good to be true, however, few people know much about the term's origin. What seems familiar to me or even many Americans is not always common knowledge, sometimes we accept and use a term because it has been bantered around time and time again. To those who are unfamiliar with the term Ponzi Scheme or just would like to know more about where it originated and such please read on.
The Ponzi Scheme is a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors and not from profits it earns. The Ponzi scheme usually entices new investors by offering higher returns than other investments. The perpetuation of the high returns requires an ever-increasing flow of money from new investors to keep the scheme going. The system is destined to collapse because the earnings, if any, are less than the payments to investors.  The scheme is named after Charles Ponzi who became notorious for using the technique in 1920. While Ponzi did not invent the scheme that was described in novels as far back as the 1850s his operation took in so much money that it gained massive notoriety. Usually, the scheme is interrupted by legal authorities before it collapses because as more investors become involved,  the likelihood of authorities taking notice increases.

 Born in Italy Charles Ponzi arrived in Boston aboard the S.S. Vancouver, on November 15, 1903, he had $2.51 in his pocket, having gambled away the rest of his life savings during the voyage. "I landed in this country with $2.50 in cash and $1 million in hopes, and those hopes never left me," he later told The New York Times. He quickly learned English and spent the next few years doing odd jobs along the East Coast, eventually taking a job as a dishwasher in a restaurant, where he slept on the floor. He managed to work his way up to the position of waiter but was fired for shortchanging the customers and theft. For the next few months, he worked at a number of businesses, including his father-in-law's grocery, before hitting upon an idea to sell advertising in a large business listing to be sent to various businesses. Ponzi was unable to sell this idea to businesses, and his company failed soon after.

 A few weeks later, Ponzi received a letter from a company in Spain asking about the catalog. Inside the envelope was an international reply coupon (IRC), the purpose of the postal reply coupon was to allow someone in one country to send it to a correspondent in another country, who could use it to pay the postage of a reply. He asked about it and found a weakness in the system which would, in theory, allow him to make money. IRCs were priced at the cost of postage in the country of purchase, but could be exchanged for stamps to cover the cost of postage in the country where redeemed; if these values were different, there was a potential profit. Inflation after World War I had greatly decreased the cost of postage in Italy expressed in U.S. dollars so that an IRC could be bought cheaply in Italy and exchanged for U.S. stamps of higher value, which could then be sold. Ponzi claimed that the net profit on these transactions, after expenses and exchange rates, was in excess of 400%. He would legally profit by buying an asset at a lower price in one market and immediately selling it in a market where the price is higher.

Ponzi borrowed money and sent it back to relatives in Italy with instructions to buy postal coupons and send them to him. However, when he tried to redeem them, he ran into an avalanche of red tape. Undaunted, Ponzi went to several of his friends in Boston and promised a 50% profit within 45 days, or 100% profit within 90 days, by buying discounted postal reply coupons in other countries and redeeming them at face value in the United States. Some people invested and were paid off as promised, receiving $750 interest on initial investments of $1,250. Soon afterward, Ponzi started his own company, the "Securities Exchange Company," to promote the scheme. As word spread, investors came in at an ever-increasing rate. Ponzi was able to hire agents and paid them generous commissions for every dollar they brought in.

By February 1920, Ponzi's total take was US$5,000, (approximately US$54,000 in 2010 dollars). By March, he had made $30,000 ($324,000 in 2010 terms). A frenzy was building, and Ponzi began to hire more agents to take in money from all over New England and New Jersey. At that time, investors were being paid impressive rates, encouraging others to invest. By May 1920, he had made $420,000 ($4.53 million in 2010 terms). He began depositing the money in a small bank, the Hanover Trust Bank of Boston in the hope that once his account was large enough he could impose his will on the bank or even be made its president; he bought a controlling interest in the bank through himself and several friends after depositing $3 million. By July 1920, he had made millions. People were mortgaging their homes and investing their life savings. Most did not take their profits but reinvested.

Ponzi was bringing in cash at a fantastic rate, but the simplest financial analysis would have shown that the operation was running at a large loss. As long as money kept flowing in, existing investors could be paid with the new money. This was the only way Ponzi had to pay off those investors, as he made no effort to generate legitimate profits. Ponzi lived luxuriously: he bought a mansion in Lexington, Massachusetts, with air conditioning and a heated swimming pool. He maintained accounts in several banks across New England besides Hanover Trust. He also brought his mother from Italy in a first-class stateroom on an ocean liner. When a Boston financial writer suggested there was no way Ponzi could legally deliver such high returns in a short period of time, Ponzi sued for libel and won $500,000 in damages. Libel law in those days placed the burden of proof on the writer and the paper, his win neutralized any serious probes into his dealings.

Still, signs of his eventual ruin remained, Joseph Daniels, a Boston furniture dealer who had given Ponzi furniture earlier when he could not afford to pay for it sued Ponzi, it started people asking how Ponzi could have gone from being penniless to being a millionaire in so short a time. On July 24, 1920, the Boston Post printed a favorable article on Ponzi and his scheme that brought in investors faster than ever. At that time, Ponzi was making $250,000 a day. Ponzi's good fortune was increased by the fact that just below this favorable article, which seemed to imply that Ponzi was indeed returning 50% return on investment after only 45 days, was a bank advertisement that stated that the bank was paying 5% returns annually. The next business day after this article was published, Ponzi arrived at his office to find thousands of Bostonians waiting to invest.

On July 26, the Post started a series of articles that asked hard questions about the operation of Ponzi's money machine. The Post contacted Clarence Barron, the financial analyst who published Barron's financial paper, to examine Ponzi's scheme, he then noted that to cover the investments made with the Securities Exchange Company, 160 million postal reply coupons would have to be in circulation. However, only about 27,000 actually were. The United States Post Office stated that postal reply coupons were not being bought in quantity at home or abroad. The gross profit margin in percent on buying and selling each IRC was colossal, but the overhead required to handle the purchase and redemption of these items, which were of extremely low cost and were sold individually, would have exceeded the gross profit.

The stories caused a panic run, Ponzi paid out $2 million in three days to a wild crowd outside his office. He canvassed the crowd, passed out coffee and donuts and cheerfully told them they had nothing to worry about. Many changed their minds and left their money with him. However, this attracted the attention of the United States Attorney for the District of Massachusetts who commissioned Edwin Pride to audit the Securities Exchange Company's books, an effort made difficult by the fact his bookkeeping system consisted merely of index cards with investors' names. In the meantime, Ponzi had hired a publicity agent, William McMasters, he later described Ponzi as a "financial idiot". Finding several highly incriminating documents that indicated Ponzi was merely robbing Peter to pay Paul, he went to his former employer a paper that offered him $5,000 for the story. On August 2, 1920, McMasters wrote an article for the Post declaring Ponzi hopelessly insolvent. It claimed that while Ponzi claimed $7 million in liquid funds, he was actually at least $2 million in debt. With interest factored in, Ponzi was as much as $4.5 million in the red.

The story touched off a massive run on August 11, it all came crashing down for Ponzi. First, the Post came out with a front-page story about his activities in Montreal years earlier, including his forgery conviction and his role at Zarossi's scandal-ridden bank. That afternoon, Bank Commissioner Allen seized Hanover Trust after finding numerous irregularities in its books. This move foiled Ponzi's last-ditch plan to "borrow" funds from the bank vaults after all other efforts to obtain funds failed. With reports that he was due to be arrested, Ponzi surrendered to federal authorities on August 12 and was charged with mail fraud for sending letters to his marks telling them their notes had matured. He was originally released on $25,000 bail, but the bail bondsman withdrew the bail due to concerns he might be a flight risk. 

The news brought down five other banks in addition to Hanover Trust. His investors received less than 30 cents to the dollar. His investors lost about $20 million in 1920 dollars ($225 million in 2011 dollars). As a comparison, Bernie Madoff's similar scheme that collapsed in 2008 cost his investors about $13 billion, 53 times the losses of Ponzi's scheme. Ponzi spent the last years of his life in poverty. His health suffered, a heart attack in 1941 left him considerably weakened, his eyesight began failing, and by 1948, he was almost completely blind. A brain hemorrhage paralyzed his right leg and arm. He died in a charity hospital in Rio de Janeiro, in early 1949. In one last interview to an American reporter, Ponzi said, "Even if they never got anything for it, it was cheap at that price. Without malice aforethought, I had given them the best show that was ever staged in their territory since the landing of the Pilgrims! It was easily worth fifteen million bucks to watch me put the thing over."

So, there it is, a cautionary tail, and a note to be careful out there. I find the story of Charles Ponzi particularly important today because many investment opportunities do not make economic sense and the numbers simply do not add up. Caveat emptor - buyer beware!

Tuesday, July 18, 2017

Venezuela Has Descended Into Chaos

Venezuela has passed the tipping point and descended into chaos. Even though the country sits upon the world's largest proven oil reserves years of mismanagement and oil prices falling in half during the last two years have brought its economy to ruin. Its streets are constantly full of protesters and both violence and crime are out of control. The government is deeply in debt and in financial shambles, this has caused the country to spiral into extreme recession.

Venezuela is running out of just about everything, meaning you can't find food, toothpaste, soap, toilet paper or shampoo. President Nicolas Maduro has even asked women to stop using blow dryers because of a shortage of electricity and instituted rolling blackouts. Sadly, this nightmare has been going on for well over a year and worse. "There's a shortage of everything at some level," says Ricardo Cusanno, vice president of Venezuela's Chamber of Commerce. Cusanno says 85% of companies in Venezuela have halted production to some extent." Millions of Venezuelans have taken to the streets in recent months calling for an end to Maduro's presidency blaming the government for the shortages, a collapsing currency, and soaring inflation.

Over the years we have seen many polls showing the average American lacking in basic knowledge and being oblivious to events occurring around the world. A common example is that many people are unable to name their governor or senators. It is because of this lack of concern about world events and the general inability to recognize the importance of what is happening that I'm writing this post. We should always be aware that a breakdown of society can unfold anywhere and any time institutions and government become dysfunctional. In the case of Venezuela, both the political system and the economy have failed.

Here are a few general facts most people may or may not know about Venezuela. The country is located on the northern coast of South America and is the home of over 31 million people. It is bordered by Colombia on the west, Brazil on the south, Guyana on the east, and the islands of Trinidad and Tobago to the north-east. Venezuela covers about 352,144 sq miles, this makes it about 2.2 times the size of California. The country boasts an extremely high biodiversity and is home to some of South America's most incredible landscapes, including the worlds highest waterfall. As previously mentioned the country also sits on a massive sea of oil. 

 While being blessed in many ways Venezuela also has earned a terrible and well-deserved image problem. Hyperinflation has led to a dramatic drop in living standards and issues with the supply of basic goods as well as personal safety, particularly in the capital city of Caracas. In mid-December 2016, The U.S. Department of State warns U.S. citizens against travel to Venezuela due to violent crime, social unrest, and pervasive food and medicine shortages. Often when we talk about violence in the country we are not talking about low-level crime like purse snatching but rather events such as the killing of Sergio Vicente Goulard when paramilitaries broke into his home and shot him in the head. 

Just a few examples were documented incidents and recently noted in a New York Times article that pointed out Latin America is the most violent part of the world and a place where the victims will most likely be forgotten and the murderers remain free. They include incidents such as Luiz Carlos Barbosa who's body was found on the street in the middle of a favela controlled by two criminal gangs; he had been executed for switching his allegiance. The article recounts that Jorge Luiz Bento’s family found his corpse rotting near a stream in the municipality of Nova IguaƧu, headless and with his hands bound and how Claudeir Francisco had been cycling when he was shot; he was still clinging to his cellphone headphones as his mother wept over his body. Even carjackings result in death, Leandro Alves died in the company of his wife and son after he pulled out a gun during such an attack.

Many of the economic problems the country currently faces flow directly from the politics of the leftist socialist movement led by the late Venezuelan President Hugo Chavez, who ruled from 1999 until his death in 2013. The movement he created known as the Bolivarian Revolution sought to end corruption and the equitable distribution of wealth and revenues to help the poor. Showering the poor with subsidies paid for by oil revenues resulted in creating a great deal of support for Chavez and improving the lives of many Venezuelans. however, it poisoned the economic system. this caused a great deal of capital to flee the country and the reimposition of currency controls that existed long before Chavez took power.

Because of the special challenges Chavez created for business Venezuela's economy has become very dependent on imported goods paid for with dollars they receive from oil exports. Several currency devaluations over the decades have resulted in an inflation rate that surpassed 100% in 2015 and has only grown worse causing poverty to grow. In 2013 with this crisis growing that Nicolas Maduro was elected President. He remains in power after a very close election where the opposition raised charges of fraud. Maduro has declared a state of emergency to retain power and been accused of human rights abuse. Maduro is seeking to create a new super body called a Constituent Assembly to rewrite the constitution and dismiss the current opposition-controlled legislature. This has resulted in protest where hundreds have been killed, thousands injured and thousands to have been "arbitrarily detained" or to have "disappeared".  

In March of 2017, opposition leaders branded Maduro a "dictator" and on June 28 a policeman stole a police helicopter in Caracas to attack government buildings, Maduro denounced the attack as a terrorist attack against the institutions of the country. It seems that upon the death of Chavez the chickens of poor management have come home to roost. Today polarized Venezuela has become the poster child of a failed state and the damage ill-conceived policies can create. This situation shows a government cannot continue in the "business as usual" mode when it can no longer pay its bills. Shortages of food and medical supplies disrupt the day to day lives of its people causing them to join together in the streets to voice their outrage. Venezuela is proof we should not underestimate how the number of violent incidents and lawlessness tends to explode when society deteriorates into chaos, no country is immune to this.

Wednesday, July 12, 2017

Amazon's Engulf And Devour Strategy Problematic

Engulf And Devour Strategy Problematic!
While discussing Amazon with someone concerned about small businesses closing in the area she made the statement that "companies that compete in any way with Amazon would be nuts to buy any product or service from them at any price." Not feeding my enemy has always been a key part of my business strategy, I feel it is never wise to give anything to my adversary that strengthens them. Sadly retail giant Target which sells the Amazon Kindle and Fire in its electronics department and has not learned this valuable lesson. The same might be said about the young clerk at a Macy's store who recently told her customer she buys everything online at Amazon because of their good prices. Consider this proof people who praise and purchase produces from Amazon seem oblivious to the fact they are putting their local brick and mortar stores out of business. These are the stores that pay local taxes and supply jobs to our friends and families.

Almost every day we see articles about how Amazon is buying this or that company or expanding into another business sector. Amazon's recent announcement they were purchasing Whole Foods got me thinking their engulf and devour strategy will eventually max out then come back to haunt them by generating a backlash and scorn. With their constant efforts to extend their reach and to become everything to everybody as a one-stop total fulfillment center, they are stepping on a lot of toes. Any company stupid enough to hire Amazon to act as their agent and paying this competitor to ship their products to customers are adopting a destructive strategy akin to cutting their own throat so they can breathe more efficiently. Amazon is not our friend and of that, we should take note. This brings front and center the fact we should consider and think about what kind of society and world future generations might want to live in.

Fast approaching is an era when robots and automation may take many of our jobs and before it happens it would be wise to recognize the role of the human animal in the overall scheme of things. More and more the subject of business replacing workers with robots is becoming more common place. this should be a big concern because it goes directly to the heart of future job creation. It should be noted that companies such as Amazon are by far the chief beneficiary of such labor saving developments because only large companies and big business have the critical mass and financial resources to quickly adopt. This spells big problems for small business going forward and society in general when it comes to job growth. We should not underestimate the crucial role small business plays is our economy as its the main job creator helping to train and hone the skills of workers.

I deal with small businesses on a day to day basis and will tell you they face many challenges and that they are very important to our communities, society, and the economy. This is why "Small business failures should receive a lot more attention than they do."  Small business is hard, going into business is risky, and many people are not up to the task. Sadly we see a lot of people who start down the path of starting a small business fail and hit the wall. As a property owner that leases space to many start-ups, I have a keen interest and knowledge of the microeconomics that surrounds them and their long and short-term effect on the economy. With most business start-ups having a very short lifespan of just months or around a year, the short-term burst of spending is quickly followed by the longer-term negatives that take a toll on all of us when a small business in our community fails. 

To be blunt social engineering is what mankind and government do. We have developed governments that create the laws and rules that shape and mold how we live. The big challenge is creating something that is sustainable which means planning our future in a way that we do not set ourselves up to crash and burn at some future date. Unfortunately, long-term planning has not been something politicians excel at, motivated to consider, or are even good at, our system is geared at getting politicians re-elected and fulfilling the most pressing needs of today.  Things like profit, greed, and quenching our incessant desire for growth are placed in front of longer term issues and needs. With this in mind, it is time we level the playing field when it comes to e-commerce retail sales and how they are taxed.

While I'm fully aware of the argument that only through creative destruction can we progress and make progress Amazon is subsidized in ways that often go unnoticed. Not only does Amazon often fail to have the best price or service but buying from the company carries the hidden cost of destroying businesses rooted in our communities. While many people have heralded Amazon's disruptive nature and technology as game-changing much of the companies success is based on making little or no profit and lucking into an era where easy money and low interest rates have allowed rapid expansion mask many of its core weaknesses. To some investors, this is why the current valuation of Amazon's stock seems outrageous and brings forth the image of a Ponzi scheme driven by hype and self-promotion.

The question exists as to whether the hype machine we know as Amazon will be able to turn the corner into becoming truly profitable but if so its success should not be on the backs of those brick and mortar stores that serve our communities. We must decide where e-commerce fits into our lives and not grant it special treatment and advantages allowing it to become a destructive force that employs predatory tactics. If directed properly e-commerce can continue to bring efficiency and promote competition especially in specialty and low volume markets. Amazon, however, goes well beyond this even competing against companies it ships and sells for. This means it would be wise to shy away from working with Amazon as it rushes to engage in cross-company promotions to get its foot in the door.