Wednesday, April 15, 2009

Letter hits nail on head

Today's issue of the Deseret News (April 15th) had a response to my letter published April 10th that I was surprised, but pleased, to see.

"It's pleasing to note the many reactions to the requisites of freedom, basically between socialism and capitalism. Brent Seely's 'Capitalism is freedom' (Readers' Forum, April 10) hits the nail squarely on the head, stating that an increasing multiplicity of laws arbitrarily enforced, in which policy dictates enforcement, is tyranny. Those who are against capitalism believe someone off in Washington can run your life better than you can." - Jene Kartchner

What did surprise me was the number of dissenting views in the comments section of their web site. I had no idea there were so many people opposed to capitalism and see it as immoral. I think the immorality occurs separate from the economic system.

If there are people who are oppressed in a free society, they can bring their grievances before the court and be treated equally under the law.

We have no government armed with power capable of contending with human passions unbridled by morality and religion. Avarice, ambition, revenge, or gallantry, would break the strongest cords of our Constitution as a whale goes through a net. Our Constitution was made only for a moral and religious people. It is wholly inadequate to the government of any other.

John Adams, Address to the Military, October 11, 1798


Disease Incidence and Vitamin D (25(OH)D) Blood Levels

I have been interested in disease incidence by latitude ever since I read that such a thing existed. Kidney stones, various cancers, irritable bowel disease, atherosclerosis, heart disease, depression, autism, multiple sclerosis, and diabetes are all more prevalent at higher latitudes.
This has long been thought to be due to genetic differences of those who just happen to live in the north. Research has repeatedly shown this to be false. Autism rates among children of those who have immigrated from Uganda to Sweden are around 15%, which is 200 times that of the general population. (Gillberg, C. Et al. Autism in immigrants: children born in Sweden to mothers born in Uganda. J Intellect Disabil Res. 1995;39:141-4.)

After researchers began to suspect, and then perform blood tests, it was found that the incidence of these diseases correlates with Vitamin D blood levels. This is an area of ongoing research, but enough has been done to convince the Canadian Paediatric Society to recommend pregnant and nursing mothers take 2000IU.

The National Institutes of Health Office of Dietary Supplements recommendation for Vitamin D is 200IU, which is the minimum amount required to prevent rickets and maintain bone health. They recommend more for those over 50.

The Food and Nutrition Board has convened a panel to reconsider the issue and come up with a new Recommended Daily Allowance.

This is a complicated issue however, because Vitamin D is a fat soluble vitamin, and also because as most medical students know, Vitamin D is a poison. That, of course, depends on the amount taken. A popular mouse poison, D-Con works by thinning the blood and causing hemorrhaging. It is widely believed by Doctors that the tolerable upper limit is around 2000IU or even less. How can this be if this is the same amount recommended for Canadian mothers?

The popular sentiment has been wrong. Vitamin D deficiency is treated with doses up to 50,000IU. These doses are only administered every few weeks, and daily doses at 1/5th this level have been shown to cause toxicity in some individuals. The upper and lower limits still need to be discovered and set, but these limits vary from person to person. Let's hope the Food and Nutrition Board gets it right.

February was Vitamin D deficiency month in Canada, so there is at least official recognition of the problem of Vitamin D deficiency in some countries.

Supplementing with Vitamin D is hit and miss, and can only be done effectively and safely by monitoring blood levels. Supplementation isn't the only way of getting adequate amounts of Vitamin D. It is also created in your skin, through exposure to sunlight. Spending 15 minutes in the sun at noon can generate an astounding 20,000IU of Vitamin D. This can explain why disease incidence varies with latitude, and why those moving from countries near the equator to those at higher latitudes would experience more diseases.

There is also a racial factor. Those with darker skin generate less Vitamin D, and disproportionally suffer from the listed diseases when they don't get enough through sun exposure, diet, or supplementation.

How can you be sure you're not getting too little, or too much Vitamin D? Visit where you can get a Vitamin D home test kit for $40. GrassrootsHealth is a consortium of scientists, institutions and individuals committed to solving the epidemic Vitamin D deficiency. Through their D*Action program they are hoping to gather data on Vitamin D blood levels, supplementation, and deficiency symptoms. You can find a better description of this program on their web site.

The Vitamin D Council is another good place for more information on this subject. They track news, research, and other publications about Vitamin D.

Monday, April 13, 2009

Derivative Markets

I'm not sure who to attribute this to, but it is too instructive to pass up.

(Alcohol = fair housing, just ask Barney Frank)

Heidi is the proprietor of a bar in Detroit. In order to increase sales, she decides to allow her loyal customers - most of whom are unemployed alcoholics - to drink now but pay later. She keeps track of the drinks consumed on a ledger (thereby granting the customers loans).

Word gets around about Heidi's drink now pay later marketing strategy and as a result, increasing numbers of customers flood into Heidi's bar and soon she has the largest sale volume for any bar in Detroit.

By providing her customers freedom from immediate payment demands, Heidi gets no resistance when she substantially increases her prices for wine and beer, the most consumed beverages. Her sales volume increases massively.

A young and dynamic vice-president at the local bank recognizes these customer debts as valuable future assets and increases Heidi's borrowing limit. He sees no reason for undue concern since he has the debts of the alcoholics as collateral.

At the banks corporate headquarters, expert traders transform these customer loans into DRINKBONDS, ALKIBONDS, and PUKEBONDS.

These securities are then traded on securities markets worldwide. Naive investors don't really understand the securities being sold to them as AAA secured bonds are really the debts of unemployed alcoholics.

Nevertheless, their prices continuously climb, and the securities become the top-selling items for some of the nations leading brokerage houses.

One day, although the bond prices are still climbing, a risk manager at the bank (subsequently fired due his negativity), decides that the time has come to demand payment on the debts incurred by the drinkers at Heidi's bar.

Heidi demands payment from her alcoholic patrons, but being unemployed they cannot pay back their drinking debts. Therefore, Heidi cannot fulfill her loan obligations and claims bankruptcy.

DRINKBOND and ALKIBOND drop in price by 90 %. PUKEBOND performs better, stabilizing in price after dropping by 80 %. The decreased bond asset value destroys the banks liquidity and prevents it from issuing new loans.

The suppliers of Heidi's bar, having granted her generous payment extensions and having invested in the securities are faced with writing off her debt and losing over 80% on her bonds.. Her wine supplier claims bankruptcy, her beer supplier is taken over by a competitor, who immediately closes the local plant and lays off 50 workers.

The bank and brokerage houses are saved by the Government following dramatic round-the-clock negotiations by leaders from both political parties.

The funds required for this bailout are obtained by a tax levied on employed middle-class non-drinkers.

Thursday, April 9, 2009

Capitalism = Freedom

This is a text of a letter I submitted to my local newspaper:

"Those who say capitalism has failed are saying freedom has failed. Capitalism is freedom. Adam Smith instead used the term 'System of natural liberty'. Raw capitalism is tempered by the rule of law. The problem we have now is an increasing multiplicity of laws arbitrarily enforced, in which policy dictates enforcement. This is a form of tyranny. We have not been suffering from a dearth of regulation, and to say otherwise is ignorant or dishonest. Sarbanes Oxley is yet another relatively recent layer of onerous regulation.
Those who are against capitalism believe that someone off in Washington can run your life better than you, that your decisions must be made for you. Socialism is for those who wish to be insulated from consequences, it is for those who want to trade individual responsibility and compassion for state provided responsibility and compassion."

I am not normally so terse. Given more space I could have shown the very roots of our predicament, including Republican progressive taxation of the early 20th century, the New Deal, the Community Reinvestment Act, and the sabotaging of Freddie and Fanny.

Friday, April 3, 2009

Hyperinflation anyone?

The current rally in the stock market is your opportunity to get out. Media pundits opinions change daily in the current environment, and they are unable to fathom the severity or true significance of our predicament. Every recession in living memory has been relatively mild, so unless you have lived in Zimbabwe you think we have seen, or soon will see the bottom.

We have lived in a managed pseudo capitalist economy for a long while. The productivity gains that have come about as a result of advances in computers, science, and engineering are real. The tech bubble was over exuberance, but most of the gains of the 1990s were realized in sectors that gained real value. These gains are helping to slow the descent, as is ignorance of our predicament, but the foundation of our economy has been undermined.

Unsafe loans and the real estate bubble were in such a state last summer, that any downtick in home values, or the economy in general meant defaults and foreclosures. This started a chain reaction that put a stop to the slow managed marching of inflation as prescribed by Alan Greenspan. As the economy shrank, the value of the Dollar started to rise. Interest rates were cut to salvage the paper value. Money was printed to reduce the value of the Dollar.

Our problem for the past 6 months has been deflation. It threatens to bankrupt the country, and so inflation must be spurred. During a deflationary period, anyone holding onto debt is eventually unable to pay that debt. Prices are lower, because there are too few Dollars for the available goods. The opposite is also true, during an inflationary period, the value of our debt goes down relative to our income. At least for those who have jobs.

When the TARP program was announced, the amount it was going to cost was seen as unprecedented, and indeed it was. It dwarfed the cost of the Iraq war, and was seen as reckless. Talk radio hosts bemoaned that we were passing this cost onto our children and grandchildren. This money was never meant to come from the tax payer. In a way it already had. The value that had gone missing from the economy was now going to be printed to make up for it. This would require not Billions, but Trillions.

Politicians in Washington who were briefed on the situation began to see this as an opportunity to pay for programs that normally would never see the light of day. It was Milton Friedman's Helicopter, and President Obama would get to be the pilot. Inflationary spending was the prescription of nearly every economist, Keynesian or not.

Alf Fields spelled out the symptoms of the problem, and predicted the government reaction in January '08, in a very prescient commentary titled Into the Abyss. He followed that up with another commentary in November '08: Crisis Cogitations in which he gave some figures that may help us understand how much inflation we might be in for, and what our money will be worth if they achieve their goal.

In order for the debt to be made manageable, our GDP which is currently $14 Trillion must be somwhere in the area of $70 Trillion. The Dollar would have to be devalued in the coming years by about 80%. For every dollar printed the value of the existing dollars drops... it will stop when each dollar is worth about 20 cents in todays dollars.

How do you prepare for the future when you only have 1/5th of your savings? What will we see happen as we go there? What we will see is increased prices on everything, high interest rates, high unemployment, and even higher taxes.

Once the inflation starts in earnest, then the money tap has to be turned off, and the value of money managed via the interest rate. The stimulus bill (March '08 issue) was heavily tied to new programs. Additional programs are in the budget currently being debated. These new programs are just that. They aren't infrastructure improvements, or one time shots in the arm, but entities which need continued funding. Taxes will have to be raised to sustain these, and also raised to provide relief for the unemployed.

How do you prepare for the future? Buy "Store of value" assets, that is items whose value is going to go up. Buy anything today, while your money is worth more, that you are going to need down the road. I don't recommend anyone go into debt, but if you have debt such as a 30 year mortgage, you will eventually be paying it off with dollars that aren't worth as much as when you borrowed them. It probably wouldn't make sense to refinance to a shorter term, when your cost of living wage increases might be in the double digits.

So what is the little guy to do? Biking to work and learning to grow a vegetable garden come to mind. Try to be as self sufficient as possible. I don't quite anticipate a repeat of the weimar republic, but it is a possibility so I'll prepare for it anyway. I've got some food, clothes, and other goods put away, and should be able to get by for a while if I were to join the ranks of the unemployed. Other than that I'm not sure how to prepare.

This blog is one week old, but when you find it, and if you have any constructive suggestions, feel free to comment because I want to know what I'm missing.