Congressman Alan Grayson, D-Fla., today introduced a bill (H.R. 4789) which would give the option to buy into Medicare to every citizen of the United States.  The “Public Option Act,” also known as the “Medicare You Can Buy Into Act,” would open up the Medicare network to anyone who can pay for it.

http://grayson.house.gov/News/DocumentSingle.aspx?DocumentID=175363#main

Ding ding ding ding.

If you're going to mandate that everyone have health insurance, then you have to provide a public option.

That is the only way you're going to keep people from being raped.

I still don't think this is Constitutional, by the way, but this much is clear: Medicare's premiums haven't been going up at 20, 30 or 40% a year.

Depending on the premium, I'm interested, and would likely dump my private insurance (which I have to pay for in cash) immediately were this to become law.

If we can't have the sort of four-point plan I've put forward in the past, this is the next best option.

Marco:

Overdoing the interface metaphor: We’re often told that we should design our websites and software to mimic real-life objects. The iPhone strengthened this idiom, and Apple has been driving this home hard for the iPad. But it’s not absolute, and it’s not always the best idea. My favorite counterexample is the typical calculator app.... My preferred calculator, which I will keep blogging about until it’s ubiquitous, wasn’t designed against any physical objects because there’s no physical equivalent to what it does.... Functionally, it’s almost a calculator. But it’s also almost a spreadsheet and almost a list pad. By not constraining its design to that of a common physical object, it’s able to be and do much more than anything in the physical world ever could. It does a much better job of a number of critical features than the Calculator app, such as multipart calculations, parentheses, editing existing values, and dynamic value references. Even trivial operations are so much nicer that Soulver converts rarely even open Calculator (or use one), preferring instead to keep a Soulver window open somewhere as a scratch pad. The interface paradigm of mimicking real-world objects shouldn’t, therefore, be applied universally.

So last week, when good writers (1 2 3 4) started discussing the merits of emulating page-turning, I took notice. Especially since I added pagination to Instapaper Pro 2.2 and had to make some difficult decisions in the process. There was no question in my mind that it was better for reading than scrolling — even better than my semi-automated, low-effort tilt scrolling. But I didn’t implement it because books have pages and lack scrolling. Books aren’t even the right physical-object equivalent for Instapaper. Not all reading happens in books. Instapaper is more like a magazine than anything else, but I’m not about to try to reproduce the soggy, wrinkled covers from being shoved in the mailbox, the perfume samples, the ten-page “continued on” jumps in the middle of articles, or the subscription cards falling out as you’re trying to read.... I implemented pagination because it improves reading, not because a related physical item separates text into pages.... DVD players don’t make fake whirring noises for five minutes before letting you eject a disc to simulate rewinding. Similarly, nobody should need to perform a full-width swipe gesture and wait two seconds for their fake page to turn in their fake book, and nobody should need to click the fake Clear button and start their calculation over because their fake calculator only has a one-line, non-editable fake LCD.

It’s important to find the balance between real-world reproduction and usability progress. Physical objects often do things in certain ways for good reasons, and we should try to preserve them. But much of the time, they’re done in those ways because of physical, technical, economic, or practical limitations that don’t need to apply anymore.

As I wrote last August:

Commonly-accepted wisdom says that we can inflate our way out of our debt crisis.

***

But as I have previously noted, UBS economist Paul Donovan has demonstrated that governments can’t inflate their way out of debt traps, saying:

The problem with the idea of governments inflating their way out of a debt burden is that it does not work. Absent episodes of hyper-inflation, it is a strategy that has never worked.

Megan McArdle points out:

It is a commonplace on the right that we’re going to have enormous inflation, not because Ben Bernanke will make an error in the timing of withdrawing liquidity, but because the government is going to try to print its way out of all this debt.

Joe Weisenthal notes that it doesn’t quite work this way:

As this chart shows, instances of declining debt-to-GDP rarely coincide with periods of inflation. If it did If it did, we’d see more dots in the lower right-hand

The bad news for central bankers is that creating currency isn’t like, say, diluting shareholders in a company. You’re always rolling your debt, and the market’s response to an inflationary strategy is (not surprisingly) higher interest rates. It’s a treadmill, and it’s extremely hard to get ahead.

Inflating your way out of debt works if you’re planning to run a pretty sizeable budget surplus–big enough that you won’t have to roll your debt over. Otherwise, your debt starts to march upward even faster, as old notes come due, and you have to roll them at ruinous interest rates. Hyperinflation might wipe out that debt, but also your tax base.

Financial Week notes:

Analysis shows even a sizable hike in CPI won’t do much for companies or households that owe money.

Analysis released by Leverage World, a publication of debt research firm Garman Research, showed that companies that have issued debt at a coupon rate of 8%, as is typical for non-investment grade issuers, would have to see inflation hit 23% to inflate away the amount of debt they owe in 5.5 years. That’s the average amount of time that investors would have to hold such debt to compensate for the risk of default.

But investors would refuse to do so under such a scenario, Chris Garman, principal in the research firm, noted—not with yields on such debt currently running at 18%.

As Mr. Garman put it in the publication, inflation at that level “would crush the appeal of an 8% coupon.”

And while issuers would have to roll over their debt, they would find it impossible to do so. As he put it in an interview with Financial Week, “They’re staring down the barrel of an 18% coupon.”

Investment grade companies are in better shape. The same can’t be said for other public—or government—borrowers. Indeed, overall debt levels for the private and public sectors now run at roughly 3.5 times nominal GDP. That compares with 1.5 times from 1945 to 1980 and in the early 1920s.

To return to that level, Mr. Garman estimated that inflation would have to rise to around 12% or GDP increase by 75% over the next five years. Either scenario, he said, is hardly likely to materialize.

At a more realistic level of 3% real GDP growth and 2% inflation, Mr. Garman said, it would take 15 years before the overall U.S. debt level fell back under 1.7 times nominal GDP.

“There has been some talk of a rise in inflation as a panacea for distress and default,” he wrote in his report.

His analysis shows that such expectations vastly underestimate what’s required.

Prominent economist Michael Hudson wrote in February:

The United States cannot “inflate its way out of debt,” because this would collapse the dollar and end its dreams of global empire by forcing foreign countries to go their own way. There is too little manufacturing to make the economy more “competitive,” given its high housing costs, transportation, debt and tax overhead. The economy has hit a debt wall and is falling into Negative Equity, where it may remain for as far as the eye can see until there is a debt write-down…

The Obama-Geithner plan to restart the Bubble Economy’s debt growth so as to inflate asset prices by enough to pay off the debt overhang out of new “capital gains” cannot possibly work. But that is the only trick these ponies know…

The global economy is falling into depression, and cannot recover until debts are written down.Instead of taking steps to do this, the government is doing just the opposite. It is proposing to take bad debts onto the public-sector balance sheet, printing new Treasury bonds to give the banks – bonds whose interest charges will have to be paid by taxing labor and industry…

The economy may be dead by the time saner economic understanding penetrates the public consciousness.

In the mean time, bad private-sector debt will be shifted onto the government’s balance sheet. Interest and amortization currently owed to the banks will be replaced by obligations to the U.S. Treasury. It is paying off the gamblers and billionaires by supporting the value of bank loans, investments and derivative gambles, leaving the Treasury in debt. Taxes will be levied to make up the bad debts with which the government now is stuck. The “real” economy will pay Wall Street – and will be paying for decades.

Wolfgang Münchau writes:

What I hear more and more, both from bankers and from economists, is that the only way to end our financial crisis is through inflation. Their argument is that high inflation would reduce the real level of debt, allowing indebted households and banks to deleverage faster and with less pain…

The advocates of such a strategy are not marginal and cranky academics. They include some of the most influential US economists…

The best outcome would be a simple double-dip recession. A two-year period of moderately high inflation might reduce the real value of debt by some 10 per cent. But there is also a downside. The benefit would be reduced, or possibly eliminated, by higher interest rates payable on loans, higher default rates and a further increase in bad debts. I would be very surprised if the balance of those factors were positive.

In any case, this is not the most likely scenario. A policy to raise inflation could, if successful, trigger serious problems in the bond markets. Inflation is a transfer of wealth from creditors to debtors – essentially from China to the US. A rise in US inflation could easily lead to a pull-out of global investors from US bond markets. This would almost certainly trigger a crash in the dollar’s real effective exchange rate, which in turn would add further inflationary pressure…

The central bank would eventually have to raise nominal rates aggressively to bring back stability. It would end up with the very opposite of what the advocates of a high inflation policy hope for. Real interest rates would not be significantly negative, but extremely positive…

Stimulating inflation is another dirty, quick-fix strategy, like so many of the bank rescue packages currently in operation … it would solve no problems and create new ones.

And Mike “Mish” Shedlock argues:

Inflationists make two mistakes when it comes to government debt. The first is in assuming government debt is more important than consumer debt. (It will be after consumer debt is defaulted away, but it’s not right now.) The second is that it’s not so easy to inflate government debt away either…

Inflationists act as if unfunded liability costs and interest on the national debt stay constant. Also ignored is the loss of jobs and rising defaults that will occur while this “inflating away” takes place. Tax receipts will not rise enough to cover rising interest given a state of rampant overcapacity and global wage arbitrage.

Yet in spite of these obvious difficulties, the mantra is repeated day in and day out.

Inflating debt away only stands a chance in an environment where there is a sustainable ability and willingness of consumers and businesses to take on debt, asset prices rise, government spending is controlled, and interest on accumulated debt is not onerous. Those conditions are now severely lacking on every front.

CNN Money sounded a similar theme yesterday:

Some have suggested that the country could just “inflate its way” out of its fiscal ditch.
The idea: Pursue policies that boost prices and wages and erode the value of the currency.

The United States would owe the same amount of actual dollars to its creditors — but the debt becomes easier to pay off because the dollar becomes less valuable.

That’s hardly a good plan, say a bevy of debt experts and economists.

“Many countries have tried this and they’ve all failed,” said Mark Zandi, chief economist at Moody’s Economy.com.

It’s true that inflation could reduce a small portion of U.S. debt. The International Monetary Fund (IMF) estimates that in advanced economies less than a quarter of the anticipated growth in the debt-to-GDP ratio would be reduced by inflation.

But the mother lode of the country’s looming debt burden would remain and the negative effects of inflation could create a whole new set of problems.

For starters, a lot of government spending is tied to inflation. So when inflation rises, so do government obligations, said Donald Marron, a former acting director of the Congressional Budget Office (CBO), in testimony before the Senate Budget Committee.

“[W]e have an enormous number of spending programs, Social Security being the most obvious, that are indexed. If inflation goes up, there’s a one-for-one increase in our spending. And that’s also true in many of the payment rates in Medicare and other programs,” he said.

Inflation would also make future U.S. debt more expensive, because inflation tends to push up interest rates. And the Treasury will have to refinance $5 trillion worth of short-term debt between now and 2015.

“[The debt's] value could go down for a couple of years because of surprise inflation. But then … the market’s going to charge you a premium interest rate and say ‘you fooled us once but this time we’re going to charge you a much higher rate on your three-year bonds,’” Marron said.

The Treasury is increasing the average term of its debt issuance so it can lock in rates for a longer time and reduce the risk of a sudden spike in borrowing costs. But moving that average higher won’t happen overnight. And, in any case, short-term debt will always be part of the mix.

Another potential concern: Treasury inflation-protected securities (TIPS), which have maturities of 5, 10 and 20 years. They make up less than 10% of U.S. debt outstanding currently, but the Government Accountability Office has recommended Treasury offer more TIPS as part of its strategy to lengthen the average maturity on U.S. debt.

The higher inflation goes, of course, the more the Treasury will owe on its TIPS.

Just last week, the CBO noted that interest paid on U.S. debt had risen 39% during the first five months of this fiscal year relative to the same period a year ago. “That increase is largely a result of adjustments for inflation to indexed securities, which were negative early last year,” according to the agency’s monthly budget review.

What’s more, the knock-on effects of inflation are not pretty. A recent report from the IMF outlined some of them: reduced economic growth, increased social and political stress and added strain on the poor — whose incomes aren’t likely to keep pace with the increase in food prices and other basics. That, in turn, could increase pressure on the government to provide aid — aid which would need to keep pace with inflation.

If We Can’t Inflate Our Way Out of the Problem, What CAN We Do?

So if we can’t inflate our way out of this mess, what should we do?

The above-quoted CNN article says:

So where does that leave lawmakers? Facing tough choices.

Deficit hawks and market experts have been calling on lawmakers to come up with a strategy to stabilize the growth in U.S. debt, which would be implemented only after the economy recovers more fully.

The idea is to signal to the markets that the country is serious about getting its longer term debt under control so that the burden of paying it back doesn’t consume an ever-increasing share of the federal budget.

The recommended exit strategies are pretty basic, if unpopular: tax increases and spending cuts.

But why raise taxes and cut essential services when we can stop unnecessary wars and unnecessary interest costs instead?

As I recently pointed out:

Why aren’t our government “leaders” talking about slashing the military-industrial complex, which is ruining our economy with unnecessary imperial adventures?

And why aren’t any of our leaders talking about stopping the permanent bailouts for the financial giants who got us into this mess? And see this.

And why aren’t they taking away the power to create credit from the private banking giants – which is costing our economy trillions of dollars (and is leading to a decrease in loans to the little guy) – and give it back to the states?

If we did these things, we wouldn’t have to raise taxes or cut core services to the American people.

Stopping all wars which are not absolutely essential for the protection of the United States from massive and imminent attack is crucial.

And abolishing the central bank and taking over the money and credit creation functions from the private banks may be an important part of the solution to our debt trap. See this and this.

Auch heute hat es die Aktie geschafft und notiert heute schon wieder 20 USD höher als auf dem ATH im Oktober.

Ich schrieb:

"Wer angesichts der Finanzkrise ab und zu unter Herzproblemen leidet, könnte es irgendwann mit den Produkten von Edwards zu tun bekommen. Das Unternehmen stellt u.a. Herzklappen her.
Die Aktie sorgt eher für einen steigenden Blutdruck:"Mit Aktien wie Edwards partizipiert man an einem Trend der Zukunft, nämlich dem Trend, der da heißt: Das Durchschnittsalter der Bevölkerung in den entwickelten Industrieländern wird weiter steigen und mit ihm die Gewinne der Gesundheitsunternehmen.
Und dass sich China diesem Trend vor dem Hintergrund seiner Ein-Kind-Politik anschließen wird, dürfte kein großer Geheimtip sein.

Für Edwards und Co heißt das Wachstum ohne Ende.

Wann folgen Sie mit mir zusammen den Trends dieser Welt?
und melden sich zu meinem Premium Dienst an?

Der Vorteil, die Trendaktien (wie Edwards) dieser Welt zu kennen, ist von unbezahlbarem Wert. Auch wenn ich niemandem kurzfristige Gewinne versprechen kann und möchte.

Langfristig wird es sich auf alle Fälle auszahlen, Edwards und Co zu kennen.
Denn was der Bauer nicht kennt, das kauft er nicht.

Und wenn er das nicht tut, wird er sich ewig über DAX und Co ärgern.

Anmeldungen zum Premium Dienst sind hier möglich:

www.aktientagebuch.eu/anmeldung.html

oder erst einmal zum kostenlosen Newsletter hier:
http://www.aktientagebuch.eu/kostenloser_newsletter.html

Kommentare

The chart below demonstrates that the price pattern between UNG and UUP are very similar, just in different time frames.

The only conclusion I would draw from this comparison is that if it were to continue, UNG has further down to go in price and more time for it.

As expected, banks begin denying any involvement in Repo 105s. The first one out of the gate - Goldman Sachs. MarketWatch reports just that: "Goldman Sachs Group Inc. said Friday that it has never used a transaction known as Repo 105. Goldman Sachs has never used this transaction," a spokesman for the investment bank said in an email to MarketWatch." We are confident that finding perpetrators will increasingly mean focusing off-shore, especially in Britain (here's looking at your Barclays and RBS). As the Examiner points out, quoting an email from Mike O'Meara, then Lehman's CRO (risk, not restructuring officer - they wouldn't get one of those until a few month later) to Ryan Traversari (Senior VP of External Reporting):

Citigroup and JPMorgan “likely do not do Repo 105 and Repo 108 which are UK?based specific transactions.

It may be time for Barclays to issue a denial as well?

It was not the media or the analyst community that identified the frauds, but the short sellers. In this sad tale of criminality and corruption, the shorts were the heroes. They employed an army of traders, forensic accountants, and non-cheer-leading analysts to kick the tires of the major firms where something smelled funny.

When it came to Lehman Brothers, foremost in the crowd of shorts was David Einhorn. There were many others (me included), but it was Einhorn who most completely critiqued Lehmans balance sheet, and most vocally called out the shenanigans there. he is the hero in this tale.

At the time, the media gave LEH the benefit of the doubt. And for his troubles, Einhorn was often criticized — even trashed — by various people. The most vocal criticism came from usually astute Charlie Gasparino (then at CNBC, now at Fox Business).

But when it came to Fuld, Gasparino was off his usual sharp game. Whether he was too close to Fuld personally, or it was simply another case of access journalism is unknown. As I warned, and Charlie acknowledged on the air, Fuld was using him. (He disagreed).

But the bottom line is Charlie blew this one big time. And as the video (after the jump) makes clear, he did so in way that made the character of the parties’ to the Lehman debate an issue.

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“But you put up Dick Fuld versus Mr. Einhorn? Put up Dick Fuld versus Barry Ritholtz . . . ?

Its impossible to determine who is right and wrong . . . this is so muddy. But at some point, it comes down to the people: Dick Fuld, Einhorn, Dick Fuld, Barry Ritholtz.

Who do you believe?”

>

Well, it turns out that we now know who was right and who was wrong. Thanks to the yeoman’s job done by Anton Valukas, the bankruptcy examiner in the Lehman Estate, we know Lehman management was a fraud, they hid losses and leverage and played their balance sheet like a fiddle.

Not only do we know who was right and wrong, we also know that relying on the sturdy character of Investment Bank CEOs — especially this one  — was not the smartest way to make a bet.

And for that, you owe David Einhorn, myself and others an apology . . .

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