The Binary Circumstance

VisualEconomics.com has an interesting, though oversimplified, diagram that illustrates some of the problems with the Federal Reserve.

They also have a number of quotes about the Fed including this one from Thomas Jefferson:

If the American people ever allow private banks to control the issuance of their currency, first by inflation then by deflation, the banks and corporations that will grow up around them will deprive the people of all of their property until their children will wake up homeless on the continent their fathers conquered.

Think about that in light of the number of homeless people there were before the housing bubble and how many additional people lost their homes and property when the housing bubble–created by the banks and government–popped.

Seattle’s Group Health Cooperative has been around for 60 years and offers many of the features that have been proposed as necessary for health care reform.

The Seattle Times reports on the cooperative and wonders if it could be a model for America’s health care in the future.

Yet even some of Group Health’s most ardent admirers warn that replicating the co-op would be difficult — and replicating it quickly practically impossible. Sixty-two years after its founding, Group Health remains one of just two major health cooperatives in the nation. The other is HealthPartners of Bloomington, Minn.

Creating health co-ops, after all, could involve building or assembling new organizations from scratch, including management, medical staff, clinics and customers.

And that “just doesn’t happen overnight,” Kreidler said. “Group Health has had 60 years” to gain 600,000 members.

What’s more, though Group Health is well-regarded for delivering cost-effective, quality care, it hasn’t avoided such problems as ever-rising premiums and periodic financial losses.

Still, even critics of the co-op option under discussion by Congress and the administration agree that Group Health’s approach to health care is worth emulating.

It hasn’t always been that way.

Founded in 1947 by maverick-minded physicians and supporters, Group Health was the first organization in the nation to offer both insurance coverage and comprehensive medical care. The integrated approach was so radical at the time that the King County Medical Society — derisively referring to the co-op as “Group Death” — denied membership to its physicians and blacklisted its patients.

Doctors have a history of trying to block alternative ways of delivering health care just as they did with chiropractors.

It will be important for any health care reform to insure that doctors have much more competition. A free market is the best way to achieve that.

I learned something today that I’ve never heard before on Nature @ PBS.org:

While still in their mother’s uterus, sand tiger shark embryos develop teeth–and an appetite. The largest of the babies in each of the sharks’ two uteruses attacks and eats its smaller siblings, leaving just two pups to be born.

It’s a particularly gruesome and extreme example of siblicide, the killing of one’s siblings, and the a rare form of cannibalism within the womb. And yet the practice of cannibalism itself, once thought to be an aberrant behavior, actually isn’t as rare in nature as we might like to believe.

[...]

Among small mammals like hamsters, mice, and rats, mothers often do the eating; after delivering a litter of pups, a new mom may realize that food and water are scarce, and will kill and eat her litter for self-preservation. Cannibalism can also occur to cull a an overly large litter, or when the animals are stressed. In many animal species including snakes, stillborn or deformed babies are often immediately consumed by their mother, which lets her get back at least some of the energy investment she put into her pregnancy (while also protecting any viable babies from being exposed to diseases from sick or decaying offspring).

But don’t tell anyone working on health care reform. They might get ideas.

Economist Robert Shiller sees the possibility of another housing bubble.

With home affordability at a 40-year high, there is “absolutley” a possibility that the housing market will face another bubble in the next five years, said Shiller, an economics professor at Yale, co-founder of MacroMarkets and co-developer of the monthly Case-Shiller home price index.

“The low interest rates, the affordability is leaning that way and the ratios are back down,” Shiller said in a live interview. “I get glimmers of excitement among some people, but we still have a high inventory of unsold homes, and we still have a lot of weariness because of the recent experience.”

The New York Times in an excellent article reports that thanks to the Home Valuation Code of Conduct pushed by New York Attorney General Andrew Cuomo and adopted by Fannie Mae and Freddie Mac, banks are now in charge of the appraisal process. The purpose was to keep real estate agents and mortgage brokers from pressuring appraisers into coming up with inflated appraisals.

The problem is that banks make more money when they loan more money. They also have little risk from artificially inflated housing values because they all sell their loans to Frannie Mae and Freddie Mac, who buy loans up to 125% of a home’s value.
Recent history has taught us that when banks and Fannie and Freddie get into trouble, the taxpayers are forced to bail them out. So where’s the risk to keep the market in line?

I thought that high unemployment and the growing number of foreclosures would keep housing prices down for a number of years. But it seems that forces are already in place that could re-inflate the bubble.

I’ve said before I think the government’s stimulus will ultimately result in inflation. That’s another force that could get people very interested in buying housing again.