Vikings were not ‘green’ – recycling was an economic necessity

Posted by Bob Weber on Jan 29th, 2010 in Economics, Environment | 0 comments

An article entitled Turning Swords into Battleaxes: Recycled Vikings! just came across the twitter feed. It’s premise, that Vikings ‘recycled’ because they took broken weapons to their local blacksmith and had them made into new ones. While this is a nice story, and it’s point is somewhat relevant, let’s not delude ourselves. The Vikings weren’t ‘green’. The Vikings weren’t reusing the metal in their weapons to get carbon credits and offset all the villages they burnt to the ground. The Vikings ‘recycled’ because they had to. Metal was hard to acquire and it was much more economically viable to use metal that they already had than it was to go mine more.

In fact, if the point of this article is to encourage modern man to recycle, it kind of misses the point. The steel industry has been recycling for 150 years. Since WWII the recycling rate for steel has exceeded 50%. Why is this? Again, economics. It is cheaper to recycle steel than it is to mine new iron and process it into steel. Raw materials are saved and 75% less energy is used annually by steel manufacturers, so of course they recycle.

There is one good point that the article illustrates, and that is that waste is a phenomenon of our modern wealthy society. Many primitive cultures are renowned for for their efficiency. I remember back in school hearing so many stories about how the Native Americans would use very part of a buffalo. Why? Because it was the only resource they had. They didn’t have cotton blankets, steel sewing needles or pleather jackets. They had to use the skin and bone of the animal as well as the meat. In our modern world resources are still plentiful and it’s more cost effective to use those resources than it is to be green, conserve and recycle. Until that changes I fear there is little hope to stop the rampant waste that our society is built upon.

Jeff Rubin – The Business of Climate Change

Posted by Bob Weber on Jan 22nd, 2010 in Economics, Environment | 0 comments

Too many environmentally minded people ignore the economic realities that impact our use of oil. In this video economist Jeff Rubin discusses the future of our economy and the impact rising oil prices will have on global markets. It’s an interesting perspective.

The real problem with US Health Care

Posted by Bob Weber on Oct 16th, 2009 in Economics, Politics | 1 comment

As of this writing the new Health Care Reform Bill has just passed the Senate Finance Committee. As is typical of legislation in the modern era, this bill is long, complicated and contains everything but the kitchen sink. For this article, I will include a summary

This is the House Democrats’ big health care reform bill. Broadly, it seeks to expand health care coverage to the approximately 40 million Americans who are currently uninsured by lowering the cost of health care and making the system more efficient. To that end, it includes a new government-run insurance plan (a.k.a. a public option) to compete with the private companies, a requirement that all Americans have health insurance, a prohibition on denying coverage because of pre-existing conditions and, to pay for it all, a surtax on households with an income above $350,000.

The bill focuses on ‘insurance’ for everyone, but this avoids the whole issue. The real problem with health care in this country doesn’t revolve around insurance, it revolves around cost. I know this for a fact due to a recent experience of mine.

Two weeks ago I awoke on a Saturday morning with an abdominal pain in the lower right quadrant (the area where the appendix is). By Sunday evening it hadn’t subsided, and appendicitis can cause an appendix to burst after 48 hours, so my family and I decided I should go to the hospital.

We arrived at 8:30. I saw a nurse and a doctor. The doctor examined me, didn’t think it was the appendix, but sent me for a CT scan just in case. The CT technician came and got me and took ‘two short pictures’. The whole scan took about 10 minutes.

After the scan I waited for it to be ‘read’ and the doctor reading it to fax his results (indicating he wasn’t even on site). The results came back, and the problem was not appendicitis. There was a ‘finger of fat’ that got wrapped around something internally, coincidentally right where the appendix is. It wasn’t dangerous and should go away in another day. The doctor (who I must say had a great bedside manner) offered pain medication, but I refused. I was then released. During checkout I notified the staff that I didn’t have any insurance. I was then presented with a form that said if I didn’t have insurance and made less than $125,000/year the hospital would automatically deduct 50% from my bill. 50%? Of course, I signed this and went on my merry way. It was 11:30, I had spent 3 hours in the hospital.

Yesterday I received the bill for this little check. $4200. I was billed $4200 for a 3 hour visit in which the determined that there was nothing wrong with my appendix. The average American household income is $50,000, which translates into a takehome wage of around $2700 a month. It would cost the average American almost two months salary just to find out there was nothing wrong with him. I shudder to think what the bill would have been if they had to remove my appendix.

If this wasn’t bad enough, the hospital would have charged the insurance company twice this, over $8000. Everyone accuses the insurers of being greedy, but premiums have to be high just to cover expenses like this.

Interestingly, CT scans aren’t this expensive everywhere in the world as illustrated by this excerpt from an article entitled Why does a CT scan cost so much in the USA?

A basic MDCT scanner (6 or 8 detector rows) costs about 2 to 2.5 crore rupees here in India (INR 20 to 25 million = US $ 500,000 to 630,000). I learnt from a source in the industry that the cost of the scanner is about 40% subsidized for the Indian market (compared to its cost in the North American & European markets). So the same basic multislice CT scanner would cost about $ 900,000 in the US.

We have a basic four-slice MDCT scanner in our hospital. A patient would be charged Rs. 3500 ($ 90, yes ninety dollars) for a plain CT scan or Rs. 4500 ($ 115) for a contrast CT scan of the whole abdomen. Ours is a small city. The charges are likely to be as high as Rs. 8000 or Rs. 9000 ($ 200 to 230) in the bigger metros like Chennai, Mumbai or Delhi.

Why is there such a discrepancy in the prices between the US and India? Honestly, a patient could FLY to India to get the scan cheaper than having it done here. Experts will point to a variety of reasons for these outrageous charges, malpractice insurance, coverage for patients that don’t pay for ER visits, the high cost of purchasing and maintaining CT machines, etc…

The real question in my mind is why are congress and the Obama administration ignoring the real problem here. US health care costs are increasing annually by 5.6%, but no one seems concerned about that. Instead of finding the reasons for these outrageous costs and working to control them, some members of Congress are trying to spend $829 billion over the next 10 years just to provide insurance coverage to those who don’t have it.

President Obama is about change, so let’s have some change. Rather than one massive bill that just tries to provide coverage for all uninsured Americans with an $8 billion/year price tag, lets break this down and pass bills like the
Health Insurance Industry Antitrust Enforcement Act of 2009 that most of us agree will help the whole situation.

Update 11/04/2009 The hospital’s financial assistance program scheduled and appointment and met with me. First off, I was incorrect about the bill. The original $4,200 bill was not discounted by 1/2, that was the full bill, I was only liable for about $2,500. Second, I did qualify for some state assistance due to my current income level, so this bill isn’t quite as devastating as I originally feared. In spite of both of these, I still believe the underlying problem with healthcare has more to do with the costs than the availability of insurance.

Obama Stimulus package in historical terms

Posted by Bob Weber on Feb 14th, 2009 in Economics, Government Waste, Our Changing World, Politics | 0 comments

The stimulus package that just passed both legislative houses of the government is set at $789bn. This cost, along with previous stimulus packages and the guarantees the government has made to back some financial institutions could bring the total costs of this bailout, in a worst case scenario, to over 9 trillion dollars.

Just to put things in perspective, here is an analysis by Jim Bianco of Bianco Research of what the largest historical US government projects cost in today’s dollars.

• Marshall Plan: Cost: $12.7 billion, Inflation Adjusted Cost: $115.3 billion
• Louisiana Purchase: Cost: $15 million, Inflation Adjusted Cost: $217 billion
• Race to the Moon: Cost: $36.4 billion, Inflation Adjusted Cost: $237 billion
• S&L Crisis: Cost: $153 billion, Inflation Adjusted Cost: $256 billion
• Korean War: Cost: $54 billion, Inflation Adjusted Cost: $454 billion
• The New Deal: Cost: $32 billion (Est), Inflation Adjusted Cost: $500 billion (Est)
• Invasion of Iraq: Cost: $551b, Inflation Adjusted Cost: $597 billion
• Vietnam War: Cost: $111 billion, Inflation Adjusted Cost: $698 billion
• NASA: Cost: $416.7 billion, Inflation Adjusted Cost: $851.2 billion

TOTAL: $3.92 trillion

The New Deal, which was created to get us out of the worst depression this country has experienced and which included the construction of numerous parks, roads, buildings, dams, power plants, airports and other projects which are still in use today would ONLY cost $500 billion today. That’s less than 2/3 of the plan President Obama has managed to push through congress this week, and only a drop in the bucket compared to all the guarantees the government has made.

We can only hope that this money doesn’t go to bonuses, office remodels for CEOs and other perks for the upper class like the last round of bailout money did.

Mortgage bailout keeps getting worse

Posted by Bob Weber on Oct 8th, 2008 in Economics, Politics | 0 comments

During yesterday’s debate, John McCain announced he plans on using $300 billion to buy mortgages for individual homeowners. The government would pay the mortgage and then refinance the property at it’s new value to the homeowner.

This is a BAD plan on so many levels, I’ll just highlight a few

• No Accountability The only reason ANY kind of bailout of the mortgage crisis is acceptable at all is because it is impacting everyone. Failures of Lehman Brothers, AIG, Wachovia, Washington Mutual, etc.. impact anyone who is doing business with them. When these companies fail, everyone is hurt. Individual homeowners, for the most part, are directly responsible for their own mortgage crisis. Why should all taxpayers help a homeowner out just because they bought more home than they could afford, or took a HELOC out so they could take an Alaskan cruise. These people gambled, and they should have to pay.
• Fraud If a plan like this goes into effect, everyone who owns a home will start looking for ways to get in on it. It’s going to be much easier to minimize fraud when dealing with a handful of large corporations than it is when dealing with 10s of 1000s of homeowners.
• It won’t work This crisis isn’t as much about the foreclosure rate as it is about the property values. Right now, if a loan goes into default, the lender stands to loose thousands of dollars. That means the only way something like this will work is if the government bails out everyone that owes more on their home than it appraises for. Buying up these mortgages and refinancing individuals homes isn’t magically going to increase property values. It’s hard to know without a lot of implementation details, but it’s quite possible that it will supress prices even more.
• It’s not necessary Some references are made to the depression when the government purchased some mortgages. In the 1930s, much of this country was agricultrual, and many farmers lost their homes due to the dust bowl, which coincided with the depression. In those days, many people’s homes (like the farms) were also their place of business, and many of these homes had been in the family for decades. This is not currently the case. Most of the people who are involved in this mortgage crisis have only lived in their home for a few years. They never had any equity in their home and didn’t put any money down, so the only real consequence here is that they are going to have to move from a home they are paying a mortgage on to a home they are paying rent on.

This idea is just another example of politicians playing fast and loose with taxpayer dollars – and just so you don’t just pin this on McCain, Obama has proposed a similar idea. The bottom line is this money our country just DOESN”T HAVE. This is going to become part of the national debt, impact the value of the dollar and ultimately result in increased taxes on us, our children and maybe even our grandchildren. Our government should do what they can to make sure we don’t end up in a worldwide depression, but the must be responsible and feel good election promises like this are a bad idea.