Hidden Inflation

Because our central bank is pursuing a price stabilization policy, we are not seeing the deflation that we would otherwise. So-called financial experts are saying, "steady as she goes," prices aren't rising, therefore inflation is not a concern. With the current low interest rates and government spending, there is a lot of money flowing into the economy. This is countering the current tendency of people and businesses to be cautious with spending. Lowering price levels is the mechanism by which we get out of a recession. The government is not helping by fighting the flow and intentionally keeping prices fairly level. They are doing this mainly to help the banks, which would continue to lose on real estate if prices fell. (Which would mean more Federal Deposit 'Insurance' payments.)

This is a good example of how government pursues a bad policy to mitigate the results of their past policy of interference. If there were no government deposit insurance, banks would have had to slow down long ago, or else lose deposits. The government could afford to leave them alone if it didn't have to make good the depositor's losses. Now they are just digging a deeper hole. As they say, the first step to getting out of the hole is to stop digging. Loose money leads to business (and local governments) investing in long term capital improvement. That creates the proverbial bridges to nowhere. If the economy can not currently support growth, that investment will not be needed and will be wasted.

The result will probably be a harder landing when we hit bottom. If they shift gears to support the dollar, which they will have to do, interests rates and prices may start to spiral up and BHO and his Fed chief won't be able to do anything about it. If they would have cut taxes and spending a year ago and stuck to it, things would look better by now. At this point, that would still be a good policy. Unfortunately, HBO is still on a spending spree and talking about who to tax to pay for some of it. On top of that, he wants banks to lend more, especially to home buyers. He's like a gambler who wants to keep doubling his bet in the hopes of getting even.

It's time that the Republicans in Congress take every opportunity to say "no more."

Like It or Not, Our Healthcare System is the Result of Market Forces

Producers are guided in their plans by the price of goods and services. They provide that which has, or which they predict will have, a good price. Since taxes and government programs have favored HMO's over the last few decades, producers respond to what the HMO's are willing to pay. As the health care consumer has had more to spend through their HMO's, a lot of expensive procedures were the natural outcome. That is good if it is what people want. In actuality, it has been what the government told us we wanted. Medical insurance has been highly regulated at the state and federal levels. Various terms and coverages have been mandated. Policies that do not meet certain minimums of coverage are forbidden. Expensive diagnostic imaging and other tests have become the standard. Elective surgeries with marginal benefits, such as some orthopedic procedures, have become more common. Of course, in this country, the standard applies to everyone, including welfare and medicare cases. For better or worse, without making a value judgment, it is easy to see how higher medical costs have resulted. Government involvement seems to be giving us more medicine than we want to the point we can hardly afford it. (Now the BHO/Congress plan is to require even more extensive coverage for everyone, which we are told will somehow cost less.)

A beneficial result of our current system is that innovations proliferate and competition brings prices down. Even in our over regulated and distorted medical market this is happening to a surprising degree. The government is trying to tell us how technical breakthroughs will dramatically improve alternative energy technology. This seems like a much better possibility for the near future in the area of medicine than energy. Our task should be to allow the market more freedom to work its wonders. This should involve tinkering with the system we have, not radically remaking it.