CONVERSION FROM INDEX TO REALITY

Obama’s call for “TRUTH” is a simplified statement that calls into question the manner in which information is collected, the way it is presented and the manner in which it is disseminated to the public. 

Underlying this simple call for integrity is his assessment that information flow is fundamentally flawed and that a much needed correction will result in smarter policies that people will give credence to and lend their active support; and that the self-fulfilling negative prophecy we are all living can be turned into a positive climb in quality of life. If you already believe this and understand it, there is no need for you to read this article. If you think his statement is mere lofty rhetoric, you might want to consider my presentation here. For those who want further information, look for books by Von MIses and Rothbard.

The tools of power are all based in information. If the information seems reliable, then the policies foisted on us seem reasonable and even “right.” The basic tool in use today is the statistical index. There is something about an index that when published gains the credulity of the public and even those who know better. It is like a self-fulfilling prophecy.

American political and economic history can be viewed from many perspectives and themes. One of them is the ebb and flow of our collective perception of people, regarded sometimes as labor, sometimes as capital and sometimes not at all. 

The current business, economic and political environment has failed to advance or evolve very much for most of the people of the United States, even though women received the right to vote some 80 years ago, and blacks received the right to vote some 40 years ago. 

The tendency of certain people to accumulate great wealth and power in any society of any nature inevitably produces an inequality not only of results, but of opportunity. American voters, deprived of the education and information they need to know to make informed decisions, are easily manipulated into voting against their own interests.  An educated voter is a nightmare to any power broker, economic cartel, or political cartel.

When adults cannot find states, cities or even continents on a map displaying all the information with proper labeling, it is not hard to see how such people can be easily deceived. And those with power and wealth are eager to deceive them, gaming the electoral process into a utility to maintain and expand their wealth and their power.

The tools of power are all based in information. If the information seems reliable, then the policies foisted on us seem reasonable and even “right.” The basic tool in use today is the statistical index. There is something about an index that when published gains the credulity of the public and even those who know better. It is like a self-fulfilling prophecy. 

Whether it is Libor, the inter-bank lending rate index, the CPI, which supposedly measures inflation for consumers, or the indexes used to measure market dominance, we have drawn artificial lines in the sand which allow those in power to continue on their merry way while the rest of us wonder what hit us. 

• The reality is that Libor, bond ratings, measurements of consumer prices, measurements of those employed, measurements of those unemployed, measurements of those underemployed, productivity, and unfair trade practices are all at substantial variance with reality. Thus the mortgage meltdown, the recession, and another opening of Walmart that kills thousands of jobs, hundreds of companies, thousands of opportunities for innovation, and diminishes our choices to dangerous or inferior products with virtually no service inside the store and no assurances of fair treatment once a sale has been completed. 
• Walmart is able to achieve this feat and become one of the largest companies in the world by converting labor back into capital despite the 13th Amendment. As with all companies of great wealth they were able to purchase the rights to make their activities legal. In reality, those of us who live in the world created by this cash carry government policy making, we see that there is complete 100% market dominance by Walmart in each town it hits. 
• But statisticians for Walmart just like the statisticians for the drug companies, look for a sampling that gives them the arguable position that what we see right in front of us, just isn’t there. We are deceived, or so they say. We are not looking at the “big picture.” True, nor should we look at THEIR big picture if we want OUR lives improved. There should be a healthy competition between accumulation of wealth and quality of life. In truth, we are at the bottom of the barrel on the level of that all-important competitive “index.”
• By expanding and contracting the area “affected” by a Walmart store one can present a plausible argument that there is no significant effect on competition. We know different but there it is right there in black and white, by the numbers. 
• By contracting the sampling on a drug study to a specific period of time where nothing adverse happened to patients taking the experimental drug, the drug is pronounced safe and then tens of thousands of people die because it wasn’t safe, as the REST of the data clearly showed. Management of disinformation is the way we are manipulated into voting against ourselves. Political slogans emanate from false statements from apparently reliable sources. And we are all deceived.
• By hiring all graduates of regulatory agencies when they retire, a retailer or drug or oil company guarantees that the regulators will not look too deeply into the manner in which such an index is presented. Plausible deniability is the name of the game. The result is you and I get screwed. That is the story of antitrust, the FDA, and dozens of other agencies serving the business sector  to the nearly complete exclusion of the safety and welfare of the taxpayers in whose name they operate. It is the equivalent of a hostile takeover of government where the cash and carry system of legislation perpetuates not merely inequality but threats to the safety and welfare of our citizens.

“Inequality” (regardless of how you define the word “equal”) does and will exist in the most despotic regimes following ideology from Marx to Plato’s progeny producing the likes of John Locke and the scholars of the American Revolution. No regime can provide or assure a specific outcome for the life of one or any of its citizens. This article takes no issue with the inevitability of inequality.

Yet we have an innate sense of right and wrong even when we do wrong. We know that “all men are created equal” has a meaning even if we can’t all agree precisely what that means. We know that the U.S. Constitution was written to provide a framework for liberty and freedom but not for women, native Americans and slaves. Women and native Americans counted as zero and black slaves pulled slightly ahead of women at 3/5 of a person, as stated in our constitution. 

When the American Slaves were freed about 160 years ago it was, in an economic sense, a conversion of capital into labor. 

Slaves had been purchased and traded like bales of cotton or rice or tobacco; they were property, they were allowed no education, no free will, and of course no bargaining power. How would anyone go about “educating” a bale of cotton? It makes no sense. While mystics ascribe a soul to everything, whether we think it is alive or not not, most of us are quite tolerant at denying rights to a bale of cotton, even if it is burned, torn apart are thrown under a bus. In a word, if the cotton “feels” anything, we don’t care and it isn’t likely that we will care anytime soon or that we should. Something in most of us “knows” that the cotton is not worthy of our sympathy, nor do we sense any obligation to it.

The system made perfect economic sense: the cost of production was reduced to the absolute minimum, repairs of equipment and “other capital” (like slaves) were repaired until they were of no further use at which point they were discarded. And unlike other forms of capital, slaves reproduced, thus continually expanding the potential for production without further capital expenditures. 

Society organized around this system in such a way that no actual person worked, without being regarded as disgraced. Plantations were worked by slaves, managed by slaves and the wealth generated went exclusively to the Plantation owner. The threat of removing this system, depriving the owners of their possession of slave capital was a threat to the entire way of life that had evolved over 200 years. 

It makes sense only if you look at some data and not look at other information. The slave capital system was missing a key ingredient — a prospering rising middle class. The non-slave states had it and they did far better in the long run than any of the slave states many of which are still, 160 years alter, at the bottom of the barrel economically and in quality of life. Their resistance to allowing education to a significant population of former slaves was the equivalent of shooting themselves in the head.  It was an all or nothing mentality. Either the slaves would provide free production or we won’t help them do anything. 

The “information” Southerners were working with was that blacks were less than human. They thus deprived themselves of the single greatest resource they had to compete in a national economy and eventually internationally. Politicians looking for power found it easy pickings to tease voters into anger and resentment about the Civil War, about slavery, and about Jim Crow segregation. The politicians objectives were simple: maintain power. The rest of the people be damned. (which at the risk of political incorrectness, makes the Reverend Wright’s comment plausible, even if ill-constructed. He wasn’t wrong in what he said. Yet he missed an important point: 40-160 years ago he would have been tortured and hung for making a statement that passed only as a news story now).

The importing of tens of millions of Mexican laborers who had “illegal” status is an inevitable result of big business’ realization that the lock on the poor white and poor black populations was loosening. The grip of fear of discovery gave the leverage needed to convert these workers from labor to something as close to slave capital as would be tolerated in our society.

The mortgaging of America’s future, with all the inevitable taxes that implies, the culture of debt rather than savings, and the withholding and diminishment of education through all walks of life in America is the policy behind the tools of our re-enslavement. The risk now is higher and more widespread than in the 1790’s when women, slaves and native Americans were already discounted capital. Now the government and the business sector have us all targeted as potential “capital” instead of unhappy black men caught like animals and transported like capital with acceptable losses at 1/3 of the cargo. 

And the only thing that can stop them is a reversal of the institutionalization of ignorance. We have accepted too long the notion that we don’t know anything but that’s OK nobody else does either. We should all know more than we do, We should all treat life as an opportunity to educate, train and better ourselves. If we do, then everyone wins, including the business sector which needs the rising prosperous middle class to do business, whether it is here or abroad. Why don’t they know that? Because like you, they are just people trying to get the most they can right now. That’s human nature. That is the American way.

Treat every index with suspicion. Test all information against your own anecdotal experience. And don’t let anyone tell you they know more about your life than you do.

That confidence in the U.S. dollar is at an all-time low is no surprise. But when countries start propping up currencies that are barely on the radar, you know that central bankers are thinking that the U.S. government is not doing enough to shore up the fundamentals of its economy. This translates to a lack of confidence that the dollar will recover. Like the price of oil headed inexorably toward $200 per barrel, the dollar is seen headed inexorably downward. This kind of thinking leads to self-fulfilling prophecy, so it needs to be taken seriously. 

The plain fact is that we have $500 trillion in derivative securities that are treated, for the most part, as cash equivalents. In the face of a half-gig behemoth of private sector money supply, central bankers understand that their impact on monetary policy, money supply, credit, and economic growth is virtually out of reach. Like it or not, economic policy is in the hands of the private sector now.

More pretense of regulation from a corrupt government will produce less rather than more instability in the financial sector. Government is providing cover for wrongdoers rather than relief for everyone. 

The dangers are obvious. The inevitable conclusion of this paradigm shift can already be seen: a massive shift in the distribution of wealth, with its attendant death grip on government policy and action.

The role of government — to be the referee in assuring a fair playing field — has been subverted beyond recognition.

The tangible results are that millions of homes are being foreclosed, tens of millions of people are being hit with economic losses, and despite even the calls of the conservative Economist magazine for a U.S. “Federal effort to streamline the states’ convoluted foreclosure laws” nothing has emerged thus far.

We are aware and I have assisted in the writing of emergency rules of civil procedure for foreclosures from initiation of proceedings through mediation and judgment. These rules have been submitted to Nevada, Florida and Arizona thus far. The Courts are warming to the idea, but it is likely that a uniform approach will not be adopted, leaving the country in a morass of hoops to jump through before borrowers and lenders and investors can be brought to the table to put a stop to the downward slide. 

Under normal conditions, we would be the first to scream for better regulation, more enforcement and criminal prosecution arising from the massive fraud that killed the residential housing market, and severely damaged the rest of the credit markets worldwide. But we are of the opinion that this is an emergency that transcends normal government response. It is akin to the emergency of war where we are fighting for our very survival. Amnesty for every participant on the investor-lender side and on the borrower loan origination side is essential even if it gives a break to “speculators” and criminal minds that irresponsibly launched this plan to nowhere.

Only then will we demonstrate to central bankers around the world that we are serious about this crisis. Only then will they lose momentum is distancing themselves from the dollar.

LONDON (MarketWatch) - It’s official — overseas central banks stepped in Friday to prop up a beleaguered currency that’s been weighed down by an out-of-control financial sector and an economy on the rocks.

Sounds like the U.S. dollar, but actually, it’s the Iceland krona. See related story.

The central banks of Norway, Sweden and Denmark will each provide up to 500 million euros that the Central Bank of Iceland can swap for krona.

Of course, any central bank intervention to prop up the dollar would have to be done on a far larger scale than chucking in a bit more than $2 billion.

So understandably, the Bank of Japan and the European Central Bank reportedly have kept their ammunition so far to words and arm twisting. See related story.

And U.S. interest rates are just a touch lower than what’s on offer in Iceland — 2.25% compared to 15.5%.

But it’s worth noting that the intervention has worked, on the day at least - the currency is up over 4% against the euro.

If nothing else, the move by the Scandinavian central banks is a game plan that can be dusted off if the dollar really goes into meltdown mode.

– Steve Goldstein 

There are lots of things we do as human beings that are counterproductive in the sense of preventing ourselves from getting what we want. One of them is racism. Whether you harbor some small or large negative feeling toward one race or another consider this:

Negative red lining: In order to carry off the largest economic scam in history, bankers and Wall Street had to find a population that was deprived of sufficient education to know about the world, to know how to conduct their affairs legally, and to be able to reason things so they could make an informed decision. 

It was obvious where they were going to find this demographic: (1) people who spoke no English and (2) black people, especially from the deep South. They were perfect targets and it all went “swimmingly” with everybody touting their new equity in their modest homes as though they were watching the ticker on the New York Stock Exchange.

People refinanced to take more money out of their house like an ATM machine, and they spent the money. But the value wasn’t really there, and neither is the income for original targets and then the secondary “refi” targets who got caught up in the whole frenzy. And now millions of lives are being uprooted, millions of jobs are being lost, and millions of people are stuck in retirement with insufficient income because of failed investments by their pension funds, their mutual funds et al..

You see, it is the poor in our country who are exposed, who are vulnerable. They are the ones that predators attack with tactics they could never get away with elsewhere. But the effects, if the predators succeed on a large scale, are felt by everyone. And they are felt deeply.

And the income isn’t there either for all the individuals, institutions, banks, government entities, corporations and other invetors who bought mortgage backed securities that were, for the most part, not worth the paper they were written on.

And the income isn’t there for people who earn a living wage but now find that it isn’t a living anymore because the value of the dollars they earn is also not worth the paper it is written on.

And so when these poor people protest that they were treated unfairly, the racist in us tends to turn a less sympathetic ear to them than to someone “like us.” That is where racism costs us.

By waiting for the shoe to drop on us instead of protecting those who could not protect themselves, by depriving people of the education they need to be able to avoid these predators, we have now created the worst possible outcome: nobody in the entire world trusts the United States policy on money and finance. And we lost our moral high ground to influence the policies of other nations. 

And the benefits that we have long expected from our dominance of world finance is fast vanishing as the dollars we issued have turned into vast sweeping IOU’s to countries we could not imagine would have such power over us — China, S. Korea etc.

That Obama has come this far is amazing, even astonishing. Especially in view of the secrets we harbor, the driftwood of hundreds of years of shameful history and rationalization of that history. Notwithstanding all we have learned there are many among us who do not understand that we are wasting precious time and human resources when we withhold empathy, when we withhold funding for education, when we flee from those who are different.

How much money has been lost in home equity due to white flight? It was whites that lost the equity!

How much time and productivity did the South lose because they refused to allow blacks to participate in their economy or in education — even right after the civil war when it was ONLY the blacks that knew how to run the farms and plantations. 

How much innovation did we lose by red lining employment opportunities in the North?

How many Einsteins have we completely missed amongst the black and Latin populations?

Racist Incidents Give Some Obama Campaigners Pause
By Kevin Merida
Washington Post Staff Writer
Tuesday, May 13, 2008; A01

Danielle Ross was alone in an empty room at the Obama campaign headquarters in Kokomo, Ind., a cellphone in one hand, a voter call list in the other. She was stretched out on the carpeted floor wearing laceless sky-blue Converses, stories from the trail on her mind. It was the day before Indiana’s primary, and she had just been chased by dogs while canvassing in a Kokomo suburb. But that was not the worst thing to occur since she postponed her sophomore year atMiddle Tennessee State University, in part to hopscotch America stumping for Barack Obama.

Here’s the worst: In Muncie, a factory town in the east-central part of Indiana, Ross and her cohorts were soliciting support for Obama at malls, on street corners and in a Wal-Mart parking lot, and they ran into “a horrible response,” as Ross put it, a level of anti-black sentiment that none of them had anticipated.

“The first person I encountered was like, ‘I’ll never vote for a black person,’ ” recalled Ross, who is white and just turned 20. “People just weren’t receptive.”

For all the hope and excitement Obama’s candidacy is generating, some of his field workers, phone-bank volunteers and campaign surrogates are encountering a raw racism and hostility that have gone largely unnoticed — and unreported — this election season. Doors have been slammed in their faces. They’ve been called racially derogatory names (including the white volunteers). And they’ve endured malicious rants and ugly stereotyping from people who can’t fathom that the senator from Illinois could become the first African American president.

The contrast between the large, adoring crowds Obama draws at public events and the gritty street-level work to win votes is stark. The candidate is largely insulated from the mean-spiritedness that some of his foot soldiers deal with away from the media spotlight.

Victoria Switzer, a retired social studies teacher, was on phone-bank duty one night during the Pennsylvania primary campaign. One night was all she could take: “It wasn’t pretty.” She made 60 calls to prospective voters in Susquehanna County, her home county, which is 98 percent white. The responses were dispiriting. One caller, Switzer remembers, said he couldn’t possibly vote for Obama and concluded: “Hang that darky from a tree!”

Documentary filmmaker Rory Kennedy, the daughter of the late Robert F. Kennedy, said she, too, came across “a lot of racism” when campaigning for Obama in Pennsylvania. One Pittsburgh union organizer told her he would not vote for Obama because he is black, and a white voter, she said, offered this frank reason for not backing Obama: “White people look out for white people, and black people look out for black people.”

Obama campaign officials say such incidents are isolated, that the experience of most volunteers and staffers has been overwhelmingly positive.

The campaign released this statement in response to questions about encounters with racism: “After campaigning for 15 months in nearly all 50 states, Barack Obama and our entire campaign have been nothing but impressed and encouraged by the core decency, kindness, and generosity of Americans from all walks of life. The last year has only reinforced Senator Obama’s view that this country is not as divided as our politics suggest.”

Campaign field work can be an exercise in confronting the fears, anxieties and prejudices of voters. Veterans of the civil rights movement know what this feels like, as do those who have been involved in battles over busing, immigration or abortion. But through the Obama campaign, some young people are having their first experience joining a cause and meeting cruel reaction.

On Election Day in Kokomo, a group of black high school students were holding up Obama signs along U.S. 31, a major thoroughfare. As drivers cruised by, a number of them rolled down their windows and yelled out a common racial slur for African Americans, according to Obama campaign staffers.

Frederick Murrell, a black Kokomo High School senior, was not there but heard what happened. He was more disappointed than surprised. During his own canvassing for Obama, Murrell said, he had “a lot of doors slammed” in his face. But taunting teenagers on a busy commercial strip in broad daylight? “I was very shocked at first,” Murrell said. “Then again, I wasn’t, because we have a lot of racism here.”

The bigotry has gone beyond words. In Vincennes, the Obama campaign office was vandalized at 2 a.m. on the eve of the primary, according to police. A large plate-glass window was smashed, an American flag stolen. Other windows were spray-painted with references to Obama’s controversial former pastor, the Rev. Jeremiah Wright, and other political messages: “Hamas votes BHO” and “We don’t cling to guns or religion. Goddamn Wright.”

Ray McCormick was notified of the incident at about 2:45 a.m. A farmer and conservationist, McCormick had erected a giant billboard on a major highway on behalf of Farmers for Obama. He also was housing the Obama campaign worker manning the office. When McCormick arrived at the office, about two hours before he was due out of bed to plant corn, he grabbed his camera and wanted to alert the media. “I thought, this is a big deal.” But he was told Obama campaign officials didn’t want to make a big deal of the incident. McCormick took photos anyway and distributed some.

“The pictures represent what we are breaking through and overcoming,” he said. As McCormick, who is white, sees it, Obama is succeeding despite these incidents. Later, there would be bomb threats to three Obama campaign offices in Indiana, including the one in Vincennes, according to campaign sources.

Obama has not spoken much about racism during this campaign. He has sought to emphasize connections among Americans rather than divisions. He shrugged off safety concerns that led to early Secret Service protection and has told black senior citizens who worry that racists will do him harm: Don’t fret. Earlier in the campaign, a 68-year-old woman in Carson City, Nev., voiced concern that the country was not ready to elect an African American president.

“Will there be some folks who probably won’t vote for me because I am black? Of course,” Obama said, “just like there may be somebody who won’t vote for Hillary because she’s a woman or wouldn’t vote for John Edwards because they don’t like his accent. But the question is, ‘Can we get a majority of the American people to give us a fair hearing?’ “

Obama has won 30 of 50 Democratic contests so far, the kind of nationwide electoral triumph no black candidate has ever realized. That he is on the brink of capturing the Democratic nomination, some say, is a testament to how far the country has progressed in overcoming racism and evidence of Obama’s skill at bridging divides.

Obama has won five of 12 primaries in which black voters made up less than 10 percent of the electorate, and caucuses in states such as Idaho and Wyoming that are overwhelmingly white. But exit polls show he has struggled to attract white voters who didn’t attend college and earn less than $50,000 a year. Today, he and Hillary Clinton square off in West Virginia, a state where she is favored and where the votes of working-class whites will again be closely watched.

For the most part, Obama campaign workers say, the 2008 election cycle has been exhilarating. On the ground, the Obama campaign is being driven by youngsters, many of whom are imbued with an optimism undeterred by racial intolerance. “We’ve grown up in a different world,” says Danielle Ross. Field offices are staffed by 20-somethings who hold positions — state director, regional field director, field organizer — that are typically off limits to newcomers to presidential politics.

Gillian Bergeron, 23, was in charge of a five-county regional operation in northeastern Pennsylvania. The oldest member of her team was 27. At Scranton’s annual Saint Patrick’s Day parade, some of the green Obama signs distributed by staffers were burned along the parade route. That was the first signal that this wasn’t exactly Obama country. There would be others.

In a letter to the editor published in a local paper, Tunkhannock Borough Mayor Norm Ball explained his support of Hillary Clinton this way: “Barack Hussein Obama and all of his talk will do nothing for our country. There is so much that people don’t know about his upbringing in the Muslim world. His stepfather was a radical Muslim and the ranting of his minister against the white America, you can’t convince me that some of that didn’t rub off on him.

“No, I want a president that will salute our flag, and put their hand on the Bible when they take the oath of office.”

Obama’s campaign workers have grown wearily accustomed to the lies about the candidate’s supposed radical Muslim ties and lack of patriotism. But they are sometimes astonished when public officials such as Ball or others representing the campaign of their opponent traffic in these falsehoods.

Karen Seifert, a volunteer from New York, was outside of the largest polling location in Lackawanna County, Pa., on primary day when she was pressed by a Clinton volunteer to explain her backing of Obama. “I trust him,” Seifert replied. According to Seifert, the woman pointed to Obama’s face on Seifert’s T-shirt and said: “He’s a half-breed and he’s a Muslim. How can you trust that?”

* * *

Pollsters have found it difficult to accurately measure racial attitudes, as some voters are unwilling to acknowledge the role that race plays in their thinking. But some are not. Susan Dzimian, a Clinton supporter who owns residential properties, said outside a polling location in Kokomo that race was a factor in how she viewed Obama. “I think if it was somebody other than him, I’d accept it,” she said of a black candidate. “If Colin Powell had run, I would be willing to accept him.”

The previous evening, Dondra Ewing was driving the neighborhoods of Kokomo, looking to turn around voters like Dzimian. Ewing, 47, is a chain-smoking middle school guidance counselor, a black single mother of two and one of the most fiercely vigilant Obama volunteers in Kokomo, which was once a Ku Klux Klan stronghold. On July 4, 1923, Kokomo hosted the largest Klan gathering in history — an estimated 200,000 followers flocked to a local park. But these are not the 1920s, and Ewing believes she can persuade anybody to back Obama. Her mother, after all, was the first African American elected at-large to the school board in a community that is 10 percent black.

Kokomo, population 46,000, is another hard-hit Midwestern industrial town stung by layoffs. Longtimers wistfully remember the glory years of Continental Steel and speak mournfully about the jobs shipped overseas. Kokomo Sanitary Pottery, which made bathroom sinks and toilets, shut down a couple of months ago and took with it 150 jobs.

Aaron Roe, 23, was mowing lawns at a local cemetery recently, lamenting his $8-an-hour job with no benefits. He had earned a community college degree as an industrial electrician, but learned there was no electrical work to be found for someone with his experience, which is to say none. Politics wasn’t on his mind; frustration was. If he were to vote, it would not be for Obama, he said. “I just got a funny feeling about him,” Roe said, a feeling he couldn’t specify, except to say race wasn’t a part of it. “Race ain’t nothing,” said Roe, who is white. “It’s how they’re going to help the country.”

The Aaron Roes are exactly who Dondra Ewing was after: people with funny feelings.

At the Bradford Run Apartments, she found Robert Cox, a retiree who spent 30 years working for an electronics manufacturer making computer chips. He was in his suspenders, grilling shish kebab, which he had never eaten. “Something new,” Cox said, recommended by his son who was visiting from Colorado.

Ewing was selling him hard on Obama. “There are more than two families that can run the United States of America,” she said, “and their names aren’t Bush and Clinton.”

“Yeah, I know, I know,” Cox said, remaining noncommittal.

He opened the grill and peeked at the kebabs. “It’s not his race, because I got real good friends and all that,” Cox continued. “If anything would keep him from getting elected, it would be his name. It might turn off some older people.”

Like him?

“No, older than me,” said Cox, 66.

Ewing kept talking, until finally Cox said, “Probably Obama,” when asked directly how he would vote.

As she walked away, Ewing said: “I think we got him.”

But truthfully, she wasn’t feeling so sure.

Staff writer Peter Slevin and polling analyst Jennifer Agiesta contributed to this report.

Another casualty of the Mortgage Meltdown induced paranoia that is sweeping the credit and money markets: Banks no longer trust the indexes which they have relied upon for decades. In other words, they don’t trust each other. And they don’t trust the people who report on what is happening out in the financial marketplace. The simple fact is that they do NOT know how much they are paying or how much they are going to pay, or the actual trend lines in inter-bank lending. This basically slips the rug out of the entire credit infrastructure. 

What this means to the average Joe or Jane is that it adds uncertainty to an already chaotic marketplace. Uncertainty produces fear and fear produces increased risk aversion. Bottom Line: Interest rates are going up no matter what the central banks do. Loans will be harder to get. Asset values will decline because of the difficulty in obtaining financing that is usually associated with the purchase of those assets — like housing and mortgages. 

In terms of policy, it means that decision-makers in government and the private sector need to be honest and straightforward in their reporting of data.

Making lemons appear to be lemonade is going to further erode trust and confidence in the financial systems.

THOSE WHO COUNSEL CAUTION IN GIVING THE PUBLIC THE REAL FACTS ARE PROLONGING THE AGONY. HISTORY SHOWS THAT WHEN THE BAD NEWS IS OUT AND THE PUBLIC BELIEVES THAT IT IS ALL OUT, THE PROCESS OF HEALING AND REJUVENATION BEGINS. Until then, we are headed at best for a limping economy, with declining prospects. 

Pointing out sectors that have upticks does nothing to restore confidence in the overall system. Everyone understands that the failure here was systemic, not economic. Failure to address that issue will simply produce declining confidence in the markets until people start believing what they are told. They won’t believe it unless they can confirm it. And we all have access now to information that will confirm or deny the spin or reports that government and private sector leaders publish.

Time to fess up boys!!!!

SAN FRANCISCO (MarketWatch) — A New York-based measure of how much it costs banks to borrow money will try to circumvent problems dogging Libor, the London benchmark that sets rates for everything from adjustable-rate mortgages to interest rate futures.

Successful avoidance of some pitfalls that have undermined bankers’ trust in Libor, however, is unlikely to prevent ICAP Plc’s New York Funding Rate from mimicking at least one of its London counterparts’ key traits. That is, a gap with other interest rates that suggests borrowing conditions for the world’s largest banks are still quite stressed.

“At this point, the U.S. index won’t make much difference, but it may be a good idea six months from now,” said Brendan Brown, head of research at Mitsubishi (UFJ) Securities International, in London.

Bankers point to a raft of other indicators, from currency forward rates to swap spreads, to show that bank borrowing costs are still high even while other measures of credit risk have fallen. That discrepancy has been a source of nagging worry for investors and economists looking for proof that the worse of the credit crisis has truly passed.

In fact, an interest rate that side-steps some of the problems that have recently undermined investors’ trust in Libor may even show banks are paying higher rates than shows up in Libor.

A month ago, Libor made its steepest five-day advance since August after concerns emerged that some banks had been underreporting their rates, out of fear they would be penalized if outsiders knew how much they were paying for funding.

Icap (UK:IAP: news, chart, profile) , a London-based inter-dealer broker that specializes in handling over-the-counter transactions like currencies and interest rates, is trying to discourage banks from fibbing about their borrowing costs by making its survey of 40 global banks anonymous.

Plus, rather than ask banks for the rate at which they can borrow short-term, unsecured loans — as the British Bankers Association does — ICAP will ask banks for their estimates of what the going rate is for the average bank.

There’s some urgency among banks, borrowers and the Federal Reserve to know just how costly it is for banks to tap the money market for their borrowings.

These funds are one of the main ways U.S. and overseas banks get capital for their own lending activities. If their costs are running high, they are likely to lend less, a headache for consumers and businesses that rely on flush conditions at banks to fund new mortgages, new auto loans, student loans, acquisitions and expansions.

And if the new measure does show Libor has been printing lower than the true cost of interbank borrowings, a lot of consumers and businesses with loans tied to Libor could get a nasty shock. It’s been estimated that loans and derivative contracts totaling roughly $150 trillion (more than $20,000 for every person on earth) are indexed or tied to Libor in some way.

In fact, the universe of financial instruments tied to Libor is so huge that some bankers are nervous that any efforts to tweak the way Libor is collected could make a bigger mess.

Libor “is extremely important,” said Terry Belton, head of fixed income strategy at J.P. Morgan Chase. “We would probably create more problems by changing it in a material way than we would solve,” he said.

Libor rises…

ICAP’s efforts to publish a new bank lending rate follows an unusual period where Libor as well as other bank lending rates have frequently topped central bank policy rates, meaning banks are paying more to borrow because of heightened credit and liquidity risk

The difference, or spread, between the three-month U.S.-dollar Libor and the effective federal funds rate rose to more than 80 basis points on Wednesday. Usually, dollar-denominated Libor tracks closely with the fed funds rate. See earlier story on Libor’s rise.

By other measures, costs for banks’ borrowing needs have also been rising. The spread between three-month Libor and overnight index swaps has been climbing since February. What’s known among credit analysts as the BOR-OIS spread gives a view of Libor that strips out expectations that central banks will raise or lower rates.

These spreads “are all signs that there is stress in the market,” said Eoin O’Callaghan, market economist for BNP Paribas in London.

Such signs of stress are worrisome for the Fed, which has $462 billion in special lending programs to financial institutions as it tries to get money flowing in frozen pockets of the credit market.

Notwithstanding efforts by the Fed and other central banks to “meet panic demands for liquidity” by making more funds available to financial institutions, still “many markets are not functioning normally,” noted Thomas Hoenig, president of the Federal Reserve Bank of Kansas City, in a speech Tuesday.

In contrast to rates that reflecting bank costs, indexes that track perceived credit risk and rates paid by corporations have been tumbling. Markit’s index of high-grade, North American credit default swaps has fallen about 27% since late-March. The spread between safe-haven 10-yield Treasury notes and bonds issued by companies with Baa ratings, which indicate riskier but still investment-grade companies, has also narrowed since mid-March.

… But not by enough?

Amid these concerns, other measures of short-term borrowing, such as the over-the-counter market to buy currencies like euros or sterling for future delivery, also suggest Libor just may not be high enough.

The British Bankers Association gets the Libor “fix” by polling global banks including Citigroup’s Citibank (C

) and Lloyds TSB Group (UK:LLOY: news, chart, profile) every day on what they are paying for funds.

The group says it doubts its Libor panel banks are contributing to deliberate distortions of the rate. Still, it has brought forward a review of how the rate gets calculated. See related story. And banks may be paying more for their loans than Libor suggests for purely innocent reasons.

It’s just not that liquid a market, bankers note.

Plus, the massive and surprise losses resulting from the U.S. housing market collapse have created a lot of variation among financial institutions when they try to borrow money. Banks that are light on funding or carry poor credit are likely to pay a far higher rate in the forward currency market, for instance, than the Libor panel would reflect.

“This is a problem that is temporary in nature and reflects the dislocation in the financing market,” J.P. Morgan Chase’s Belton said. He predicts that as central banks inject more money into the financial system “and as things there improve, we’ll move back to a world where all banks in panel have similar financing rates.”

Banks are likely paying more to borrow money, whether that’s reflected in Libor or another indicator, simply because supply has dried up. Banks, mutual funds and corporations that lend in the bank borrowing market are keeping more cash to themselves.

“Confidence in and between banks has been dented significantly after the Bear Stearns Cos. (BSC

) episode. Investors and banks are reluctant to lend cash to banks, effectively wondering who the next casualty will be,” said economists at Societe Generale in a report.

In mid-March, Bear Stearns came close to collapse, causing fears of a run on Wall Street.

“Also, money market funds, which are liquidity providers, continue to fear redemptions and invest at very low maturities,” they noted.

New York fixing

Since the NYFR will be based on a survey, rather than actual transactions, there still will be no way of telling if banks are giving an honest assessment of borrowing costs.

“There’s not really an ultimate check on whether the rates banks are reporting are the right rates,” said Brown of Mitsubishi Securities.

One thing that will change, however, is the time zone.

The British Bankers Association gets the so-called fixing of rates at 11 a.m. London time, or about 6 a.m. New York time. That’s about three hours before banks in the United States can start borrowing money in U.S. dollars, so may not accurately reflect the price of costs facing banks trying to tap these dollar markets.

ICAP’s planned NYFR rate instead will query banks at 9:30 a.m. New York time.

ICAP’s planned rate will also attempt to give a better view of what’s going on in the market for dollar-based bank borrowing than one of its current measures, eurodollar deposits. It gets this data from bid-ask spreads ICAP users provide for these deposits and supplies it to the Fed, which publishes the bid rate daily on its H. 15 statistical release. Go to the Fed’s Web site.

As the financial markets have convulsed, those eurodollar deposit rates have increasingly reflected a wider bid-ask spread, perhaps skewing the published rate.

“Since August, and especially since Bear Stearns, our desk has been setting that range very wide to reflect that trading is a lot messier,” said Lou Crandall, chief economist at Wrightson ICAP, the New York research arm of ICAP.

“It made us look for a more objective way to say where rates are trading,” he said.

NYFR is designed to give a clearer snapshot of bank borrowing costs. But it’s not designed to become the next Libor, which is the benchmark for so many loans and derivatives, Crandall stressed.

“This is designed to supplement Libor, not replace it,” Crandall said. “The series we had been publishing was no longer adequate for that purpose.” 

Laura Mandaro is a reporter for MarketWatch in San Francisco.

THE PROBLEM WITH AMERICAN HEALTHCARE

AN UNAVOIDABLE TRUTH — IT DOESN’T WORK

When Marianne Falacienski’s husband started a new job, the family could not afford the health plan. Ms. Falacienski, 32, found individual coverage only for him and their daughter, Gabrielle.

WHY OBAMA HAS THE RIGHT APPROACH:

INCREMENTAL STEPS TO ELIMINATING MIDDLEMEN WHO ADD COST BUT NO VALUE

THE REASON WHY HEALTHCARE COSTS ARE SO HIGH: We let it get that way because we thought we were not paying for it. We were lulled into this fraudulent situation by the presence of “insurance” which was just a hidden tax which we call “PRIVATE TAXATION.” This opened the door for the profit motive to dominate healthcare.  The inevitable result was cutting costs by delivering less care, increasing revenues by increasing premiums, and avoiding delivery by small print. 

THE EFFECT ON AMERICAN HEALTH: Americans are dying younger, with higher infant mortality than 40 other countries, and living lives of quiet desperation and stress locked in by a system that requires us to choose between life and death, between quality of life or suffering, and between being overmedicated into virtual stupor or becoming our own physicians and deciding what medications we need.

WHO CONTROLS OUR OPTIONS: The presence of insurance along with government complicity has interfered with the normal market forces found in every other country on the planet. Examples abound where the cost of a medication is $120 per month here whereas it could be as little as 5 cents elsewhere. 

The pharmaceutical industry dictates medical protocol: the profit motive requires them to present protocols that require long-term constant daily medications which now average 8-10 pills per day for many people. 

The pharmaceutical industry controls the FDA (virtually all FDA employees have worked for Pharma, are working for Pharma or will work for Pharma and Pharma literally pays most of the budget of the FDA). 

Any protocol that is preventative is opposed by Pharma and opposed by the insurance companies because revenues would decline, costs would decline and thus the need for expensive insurance premiums would also decline. 

Any intervention protocol is likewise not covered by insurance and declared “placebo” or “experimental” unless it is accompanied by a protocol of 53 pills per day for life as in the case of a lung transplant. 

The inescapable conclusion is that the insertion of insurance into our lives has increased our effective rate of taxation without us realizing it was a tax, it has reduced the level, quantity, availability and quality of care, and is responsible for half of all bankruptcies filed.

Obama’s plan, while it continues to include the insurance infrastructure, loosens the death grip of the insurance-Pharma cartel. It can lead to continued enhancements of the system and eventually to a single payer system which is what everyone else in the world has. 

Mandatory insurance is a sell-out for continuation of the current system regardless of what sound bites are attached to it. Obama is once again taking the courageous position of recognizing the nuance and complexity oft he situation and taking hits for not “mandating” insurance for everyone. The Clinton-Edwards “mandatory” plan is good politics, bad economics and unworkable.

Mandatory health insurance is a tax pure and simple. Except by inserting private insurance companies into the mix it adds between 100% to 500% to the costs of healthcare. Mandatory insurance is a wealth transfer system and anyone who promotes it is either purposefully or inadvertently playing into the hands of the few people who benefit financially from this corrupt system while the rest of us continue our lives of quiet desperation and stress.

May 4, 2008

Even the Insured Feel the Strain of Health Costs

By REED ABELSON and MILT FREUDENHEIM

The economic slowdown has swelled the ranks of people without health insurance. But now it is also threatening millions of people who have insurance but find that the coverage is too limited or that they cannot afford their own share of medical costs.

Many of the 158 million people covered by employer health insurance are struggling to meet medical expenses that are much higher than they used to be — often because of some combination of higher premiums, less extensive coverage, and bigger out-of-pocket deductibles and co-payments.

With medical costs soaring, the coverage many people have may not adequately protect them from the financial shock of an emergency room visit or a major surgery. For some, even routine doctor visits might now take a back seat to basic expenses like food and gasoline.

“It just keeps eating into people’s income,” said James Corbin, a former union official who works for the local utility in Tucson.

Mr. Corbin said that under their employer’s health plan, he and his co-workers are now obliged to pay up to $4,000 of their families’ annual medical bills, on top of about $1,600 a year in premiums. Five years ago, they paid no premiums and were responsible for only about $2,000 of their families’ medical bills.

“That’s a big jump,” Mr. Corbin said. “You’ve just lost a month’s pay.”

Already, many doctors say, the soft economy is making some insured people hesitant to get care they need, reluctant to spend a $50 co-payment for an office visit. Parents “are waiting longer to bring in their children,” said Dr. Richard Lander, a pediatrician in Livingston, N.J. “They say, ‘The kid isn’t that sick; her temperature is only 102.’ ”

The problem of affording health care is most acute for people with no insurance, a group expected to soon exceed 48 million, but those with insurance say they too are feeling the pain.

Since the recession of 2001, the employee’s average cost of an annual health care premium for family coverage has nearly doubled — to $3,300, up from $1,800 — while incomes have come nowhere close to keeping up. Factor in other out-of-pocket medical costs, and the portion of the average American household’s income that goes toward health care has risen about 12 percent, according to the consulting and accounting firm Deloitte, and is now approaching one-fifth of the average household’s spending.

In a recent survey by Deloitte’s health research center, only 7 percent of people said they felt financially prepared for their future health care needs.

Shirley Giarde of Walla Walla, Wash., was not prepared when her husband, Raymond, suddenly developed congestive heart failure last year and needed a pacemaker and defibrillator. Because his job did not provide health benefits, she has covered them both through a policy for the self-employed, which she obtained as the proprietor of a bridal and formal-wear store, the Purple Parasol.

But when Raymond had his medical problems, Ms. Giarde discovered that her insurance would cover only $22,000, leaving them with about $100,000 in unpaid hospital bills.

Even though the hospital agreed to reduce that debt to about $50,000, Ms. Giarde is still struggling to pay it — in part because the poor economy has meant slumping sales at the Purple Parasol. Her husband, now disabled and unable to work, will not qualify for Medicare for another year, and she cannot afford the $758 a month it would cost to enroll him in a state-run insurance plan for individuals who cannot find private insurance.

She recently refinanced her car, a 2002 Toyota Highlander, to help pay for her husband’s heart medicines, which cost some $400 a month.

Experts say that too often for the underinsured, coverage can seem like health insurance in name only — adequate only as long as they have no medical problems.

“There’s a real shift in the burden of health care to people who happen to be sick,” said Paul B. Ginsburg, the president of the Center for Studying Health System Change, a research group in Washington.

Companies and policy makers have yet to focus on what the faltering economy means for employees’ medical care, said Helen Darling, president of the National Business Group on Health, a Washington association of about 200 large employers.

“It’s a bad-news situation when an individual or household has to pay out-of-pocket three, four or five times as much for their health plan as they would have at the time of the last recession,” she said. “Americans have been giving their pay raise to the health care system.”

Sage Holben, a 62-year-old library technician with diabetes who is active in her local union in St. Paul, says that in 2003 union members agreed to a two-year freeze on wages to protect their health care coverage. But for the union, which will begin talks on the next contract this fall, it may be difficult to continue that trade-off, Ms. Holben said. “It’s at the point where we’re losing, anyway,” she said.

“I live paycheck to paycheck,” said Ms. Holben, who makes close to $40,000 a year at Metropolitan State University.

When she took the job in 1999, she says, the health benefits required no co-payments for doctor visits. Now, her out-of-pocket cost per visit is $25, and she pays $38 a month for her diabetes medicine. She has not been to the eye doctor in two years, even though eye exams are crucial for people with diabetes and she knows she needs new glasses. Nor does she monitor her blood sugar as regularly as she should because of the cost of the supplies.

“It’s not an extravagant expense,” she said. “It just adds up.” And it comes atop the increasing cost of utilities, gasoline and food — and the few hundred dollars of repairs her 1994 Chevrolet Cavalier needs.

Many employers do recognize that their workers are struggling financially even as they are asking them to pick up more of their health-care bills.

“It makes the work we have to do even more challenging,” said Anne Silverman, the vice president in charge of benefits in North America for the publishing company Reed Elsevier. “Employees are being stretched in terms of their disposable income.”

Even so, more companies may see themselves as having little choice but to require employees to pay even more of their health expenses, said Ted Nussbaum, a benefits consultant at the firm Watson Wyatt Worldwide. And when a weak economy undermines job security, he said, workers may simply have to accept reduced benefits.

While Mr. Nussbaum and other consultants say it is unlikely that significant numbers of employers will simply drop coverage for their workers, the weak economy could prompt more of them to push for so-called consumer-driven plans. Such plans tend to offset lower premiums with higher annual deductibles.

And while these plans often allow employees to put pre-tax savings into special health care accounts, they typically end up forcing the worker to assume a bigger share of overall medical costs. About six million people are now enrolled in these medical plans.

Among employers, the hardest pressed may be small businesses. Their insurance premiums tend to be proportionately higher than ones paid by large employers, because small companies have little bargaining clout with insurers.

Health costs are “burying small business,” said Mike Roach, who owns a small clothing store in Portland, Ore. He recently testified on health coverage at a Senate hearing led by Ron Wyden, Democrat of Oregon.

Last year, Mr. Roach paid about $27,000 in health premiums for his eight employees. “It’s a huge chunk of change,” he said, noting that he was forced to raise his employees’ yearly deductible by 50 percent, to $750.

Around the nation, some workers are simply priced out of their employee health plans.

After Brian Falacienski of Milton, Fla., was laid off last year from his job as a surveyor for a construction company, he found another position. But the cost of his new health plan — $800 a month for coverage with a $1,000 annual deductible — was beyond the means of Mr. Falacienski, 38, who is married and has a 2-year-old daughter.

His wife, Marianne, started researching individual insurance policies and was able to find policies for her husband and daughter offering basic, if minimal, coverage, costing $161 a month for father and daughter. But Ms. Falacienski, 32, who has arthritis and the severe digestive disorder Crohn’s disease, is now uninsured. Because of her conditions, she said, four major insurers rejected her.

“I even applied for Medicaid,” she said, “but I wasn’t low-income enough.”

For all the talk about how similar they are, the differences have largely been overlooked. The main difference I see is that Obama has a broader understanding of macroeconomics — which means that he understands that if you push here then something else pops up there. He understands nuance and complexity in a highly ambiguous world.

Once you get past sound bites and continuous loop feeds of irrelevant chatter, and then do some research you find two things: Bill Clinton’s policy advisors agree with Obama, not Hillary. And virtually 100% of all economic advisers score Obama’s proposals as having economic merit vs. Hillary’s proposals which contain solely political appeal. 

The inescapable irony is that if you want the “good ole days” of Clinton economics and prosperity, vote for Obama. If you want narrow carefully orchestrated proposals that will fail for lack of support (like healthcare in 1993), then go ahead and vote for Hillary. 

For Democrats, Instincts Differ on Economics