Friday, November 26, 2010

Black Thoughts on Friday

I spent the morning working on Black Friday Ads. This month I've had sales from Vann's Electronic in Missoula, and Love Lettering in Logan.

If sales go well, I might hit the road after the holidays in search of a free market group interested in health care reform.

My poll on the Medical Savings and Loan ended. I had two votes expressing interest in the idea.

I had been thinking about self-publishing the work. Publishing a printed work would cost $400 to $1000. If I had a product to sell, I might have more success getting heard.

My real hang up in publishing a book is that I strongly believe in the process of peer review. Writing a book before I have sufficient input is wrong.

Unfortunately, it is nigh impossible to get pier review when one has been driven from the local community as a pariah. Of course, this is what the progressive professors at the University of Utah intended when they falsified my test scores to keep me from obtaining the degrees of my choice.

I flunked three class one quarter for including the line "Workers of the world untie" in a criticism of Marx.

Anyway, Although I derived the Medical Savings and Loan by studying actuarial data, I don't have that information on hand anymore. I feel the work is too theoretic. I want more hard data. For example, I would like data showing the exact figures people pay out in health care to compare to premiums. This would prove that people can pay for the same care if they were allowed to keep their health care dollars.

The book includes too many unverified suppositions.

For example, I state that, for an insurance company to remain solvent, premiums must be greater than claims. But even an intuitive statement such as P > C must be backed up by data.

I need data to show that insurance companies that spent more than they took in went bankrupt!

IMHO, there is value in stating a theory, then testing it. This how the scientific method works. A person develops a theory, then tests it.

(I should say, this is how it used to work. Progressives control the University, and are busily working to change scientific theory more to their liking.)

This type of experiment is what I want to do. I want to prove that if a person put the $500,000 that they will spend on insurance over their life time into a savings account, that the person could buy a half million dollars in medical care.

I want to prove that if one put money in a grant program (as opposed to reinsurance) that the money could be spent on medical care in a more cost effective manner.

I don't like writing without data to back up wild claims like P > C, but an imperfect self published work stating the theory could be followed up by peer reviewed works with substance.

Anyway, I've been working on ads today. Even a tiny bit of cash would open up opportunities.

Thursday, November 25, 2010

The Medium is the Message

The other day, I came across an ad for a company that claimed to have the answered for the uninsured. The answer was a program that promised to deliver health care over the interet (for a modest subscription fee).
Subscription fees don't work for medical care. The reason is that people have different needs and will consume different resources.
A subscription service will need a large number of underserved chumps for each properly served patient.

The idea is absurd.

Medical care must take place in direct person to person contact.

For that matter, the idea that health care is about people directly helping other people was the founding principle of the Medical Savings and Loan.

I have no intension of creating a computer program that will deliver health care. I am seeking a way that empowers people to maximize their personal resources so that they get the most of their care.

Reading the web site intro for this internet scam drove the point of why I am failing to get out the message about the medical savings and loan.

People see web posts and articles, but they end up confusing the medium with the message.

The reality is that the Medical Savings and Loan is an organic method to help people self-fund health care.

As it is an organic approach to funding health care, the interface is not a computer. The interface of the system is human beings.

Yes, the program deconstructs an insurance company. However, the program did not start with the math. The program started by an examination of the claims adjusters.

For the most part, claims adjusters are wonderful people who really want to help people get the best care. The structure of insurance puts claims adjusters in an adversarial role to both the patient and doctor.

This adversarial role exists because the adjuster's job is to defend the insurance pool. If one changed the orientation of the system so that the people owned their own resources, then the adjuster's job is to defend the assets of the patient. The adjuster becomes an advocate for the patient.

Simply changing the orientation of health care funding solved a large number of problems.

Pretty much all of the major complaints about insurance and socialized medicine fall away when we change the orientation of the system from group funding to self funding.

Anyway, it was with the health care advocate in mind that I developed the medical savings and loan.

It was with this health care advocate in mind that I developed the rest of the medical savings and loan.

The math is compelling. If one deconstructs health care pools into individual accounts, one creates a structure that better serves the people needing care.

Any attempts to implement a program depends entirely on the people. The interface of the system is face to face contact.

Unlike insurance, the Medical Savings and Loan doesn't hold the money. People will have their own savings account in the financial institution of their choice. So, it is not an accounting program. It is the concept of structured savings to self-finance care.
The medical savings and loan is not a computer program. It is not a book, nor is it an accounting system. The medical savings and loan is about people working together face to face in a concerted effort to optimize their health care resources.

Anyway, I am stuck in a rut. As people tend to confuse the medium with the message, I fear that the only way to convey the program is within the same medium as the message ... face to face contact.

Face to face contact is very hard to pull off in a community where one is driven off as a pariah. Every day I eye the road and think about a direction to drive.

It is warm in Arizona, but I don't know anyone in Arizona.

Regardless, I am thinking of hitting the road after the holidays.

As for right now, I am adding internet coupons on an ecommerce site. Maybe, I could get some road money.

Tuesday, November 23, 2010

Self Excluded by the System

David Horowitz likes to write on ways in which conservatives are systematically excluded from the teaching profession.

A response to Mr. Horowitz provided a very interesting insight into the fascist mindset of progressives. In support of ideological litmus tests in schools hippiepooter said: "it is you who excludes yourself from the employment."

Progressives are such ugly people. They will design a system in ways to exclude people, then cast dispersions at the people they exclude. "It's your fault that I am doing this horrible thing to you."

Sadly, progressives are so full of their own self-righteousness that they can pull these things off without rebuke.

Monday, November 22, 2010

Summary of Reforms

Our financial institutions were designed to the desires of the central bankers--Not for the needs of the investing public.

Because of this our financial institutions artificially concentrate power in the hands of bankers while undermining the wealth creation process within the community.

The solution to this problem is to redesign financial products around the needs of the investing public.

We need actions. Not just complaints.

In this blog, I've made four very concrete proposals for financial reform. The common thread in these four reforms is that they replace financial tools geared to the needs of banks with tools geared toward the need of the investing public.

The reforms are:

  • The Medical Savings and Loan: This reform replaces insurance with a system of structured savings and supplemental grants to secure medical coverage.
  • Shared Equity Financing: This reform replaces mortgages with direct investment in housing.
  • The Real Time Open Source Exchange is a product that replaces black box stock exchanges with an open source program that executes trades in real time. Executing the trades in real time eliminates naked short selling.
  • The Object Oriented Tax. The object oriented tax is an interesting program that taxes an object between income and spending.

The first two proposals are concrete ideas that could be implemented by small companies.

The OSRTX is more theoretical. It could be implemented by a collection of companies or investors seeking to share ownership in equities. The primary goal of this project is to demonstrate the short selling is the creation of anti-market regulations.

The Object Oriented Tax is a political solution. This program taxes an object between income and consumption. It combines the best of a progressive income tax with a consumption tax. Essentially, everyone will have two accounts: An Investment and Spending Account. The system charges a progressive tax when people transfer money from the investment to the spending account.

With the OOT, people can make their investment decisions without having to calculate the effect of taxes. People would have to pay a progressive tax on what they spend. The system empowers individuals in saving and investing. The system eliminates the capital gains tax, but taxes capital gains spend on consumption at a progressive income tax rate.

Empowering the Investor

Each of these reforms arises from the same thought process which seeks ways to empower the individual in our economic system.

Even if I find no backers for thes programs, I believe a vigorous discussion of the reforms directly address the underlying problems with our current financial structure.

For example, the programs fit well in discussions about the difference between the free market and capitalism.

In the free market, the free mind of the individual is supreme. The theory of capitalism overemphasizes the role of paper money.

Implementing the Reforms

It would be easy for small organizations to implement the first two reforms. I designed the Medical Savings and Loan as a method for reverse engineering an insurance company. A company seeking to reduce the cost of health care benefits could implement the Medical Savings and Loan.

An investment firm could offer SEF-Liens as an alternative to mortgages. (A SEF-Lien is pegged to the local realty market. One would never see a house financially "underwater" because the lien would automatically drop in value if housing prices dropped.

Yes, it is true that businesses implementing either the Medical Savings and Loan or Share Equity Financing will make less profit per client than insurance or mortgages; however, people in need of financial services are likely to choose the products that offer best security.

I believe that, if the programs were implemented, they would be a hit in the market as they provide a better service to the public.


To restore the American experiment, tea party patriots simply must start engaging in a positive discussion of the ways that the free market and limited government can solve the problems created by our over centralized banks.

The structures discussed in this blog could be part of such an effort.

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Sunday, November 21, 2010

Shorting our Way Into Debt

We all know that America has a debt crisis. This crisis is not simply the result of borrowers. The debt crisis is the result of a financial system that floods capital markets with easy money.

Notably, the fractional reserve lending system of the Federal Reserve multiplies the amount of debt. Banks lend out multiple dollars for each dollar saved. The Fed works like a lens systematically magnifying debt.

Perhaps the most pernicious effect of short selling is that it contributes to this debt crisis.

A short sell is a similar source of easy money. Short selling is not an investment in production, but a financial tool derivative of other's productivity. It is a paradox-ridden kin to a margin play.

When a person shorts a stock, they borrow a stock then sell it at market prices. The person who lent the stock for the short sale no longer has an investment a company. The investor has a loan that tracks the price of the stock.

These loans often take place without the knowledge of the investor. So, you might think you have 100 shares of GM, when really you have a loan to a third party that tracks GM's price.

When a short seller sells a stock, the short seller gets money. This easy money floods into other investments. Short sellers often hold the money in tools like government bonds or mortgage backed securities ... creating an artificial demand for these financial products.

(Short selling feeds the beast that crashed our economy)

The amount of easy money created by short selling is phenomenal. It is second only to the amount of easy money created by the Fed.

Hedge Funds use a formula for shorting. For example, some hedge funds with have $30 in shorts for ever $70 in investments. The amount of money being shorted is massive.

Following the short interest on stocks, I find it common for the short interest to be 20%, 30% or even 40% of the float for long durations.

For a trillion dollars in investments, one might see short sellers generate $200 billion in easy money through shorting.

Free-marketeers should be irrate about short selling. This is not wealth created by the re-investment of surplus production (as was described by Adam Smith). It is vast quantities of easy money created by the financial regulations that allow short selling.

Short selling (selling stock that does not belong to you) is a direct violation of the principles of property rights. The system has numerous perverse effects that muck up the process of generating real wealth.

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Saturday, November 20, 2010

Short Selling and Liquidity

Proponents of short selling repeat the theme that short selling improves liquidity.

All of my experience shows that the exact opposite happens. Short selling decreases liquidity.

Wikipedia (drawn 11/20/2010) defines "Market Liquidity" as "an asset's ability to be sold without causing a significant movement in the price and with minimum loss of value."

My experience is that when a short seller has a large block on the ask line, it is difficult to sell the stock without accepting a steep loss. I've often seen the case where a piece of bad news hits a stock. The short interest in the stock will explode and the price will tank. This reduces the ability of the common share owners to liquidate their stock.

I have noticed that short interest tends to jump just before planned sales of stocks. For example, when employee stock options vest, there is generally a jump in short interest prior to the vesting date dramatically dropping the price during the window when employees are allowed to exercise their options with planned sales.

Short interest increases whenever a company plans a secondary offering. The short sales are decreasing the liquidity of the stock.

Short sellers are like other investors. They want to sell high and buy low. As such short selling generally increase during market dips.

There was a massive increase in short selling during the liquity crisis of 2008. The prime time to short stock is when people are panicking or otherwise being forced to sell.

Yes, back in the 1800s when it took several days to execute a transaction, short selling helped improve the liquidity of stocks.

But when one has a system where transactions can take place in real time, there are few cases when short selling actually improves liquidity.

The most active short selling occurs when there is a distressed seller. In these cases short selling dramatically decreases the ability of the distressed seller from selling their stock.

Mortgage Backed Insecurity

Patrick Byrne of Deep Capture repeats an interesting rumor. The rumor is that a sizeable portion of the loans in the toxic mortgage-backed-securities bundles that crashed in 2008 were actually fraudulent loans. The "paperwork errors" holding up foreclosures are tiny things like houses that don't exist or mortgages that don't have liens on titles.

Possibly some of the bad loans aren't just loans made to people who can't repay, but were fraudulent loans from the start.

The convolutions of mortgage backed securities, CDOs and credit default swaps make my eyes curl up in their sockets.

However, this much I know.

These bizarre derivatives all came from the insurance industry.

The idea behind a mortgage backed security is that centralized banks can manage risk by bundling large number of mortgages into packages that are then traded on the market.

Freddie Mac and Fannie Mae are GSEs (Government Sponsored Enterprises) that bundled, insured and served as an exchange.

The exchanges created a convoluted complex of derivatives such as CDOs and credit default swaps to facilitate the trade of the securities and promised the ability manage risk.

The exchange system for mortgages failed miserably.

I repeat that. The exchange system for mortgages failed.

The exchange system for mortgages failed.

The exchange system for mortgages failed.

The exchange system for mortgages failed.

The heart of ObamaCare, and other current approaches to health care reform replicate the failed centralized exchange system of the mortgage industry.

The system where traders sit in towers and speculate on the risks of others will simply replicate the failed mortgage system. It will be rife with fraud while those needing care will be spun off onto the public coffers.

The better approach to health care reform is to march in the opposite direction. Rather than created convoluted group pools in which the elite control health care, we should develop a system where people self-funded their care (with supplemental grants and loans).

Hmmm, I wonder if anyone has come up with such a thing.

I've watched the news, read the papers, hit the tea party web sites.

I haven't found any.

Hmmm. If only some would work on such a system, it would be great.


Friday, November 19, 2010

No One Can Listen

Harry Markopolis is an option trader who figured out that Bernie Madoff's hedge fund was a fraud decades before Madoff's ponzi scheme crashed in multibillion dollar financial scandal. This last year Markopolis penned a financial thriller titled: "No One Would Listen" (buy at which details his frustrations as he tried to convey his discovery to the financial community.

He talks about how he brought his information to the SEC, the press and others, but no-one would listen.

I've had similar problems throughout my career where I have very clear ideas to communicate, and I am simply unable to communicate the idea.

I've come to the conclusion that it's not a simple case that no-one will listen, but that our leaders have dinked around with the language to such an extent that no-one can listen.

The modern era has been full of intellectuals who sought to manipulate discourse at a foundational level. For example, Hegel, Marx and modern progressives love the term "sublate." This is a process in which a term gets turned into its opposite.

The process is ever so clever; however, as progressives grub power through a systematic undermining of our language, we lose the ability to communicate with each other.

So, the power of the Aristotelian tradition was not so much that Aristotle created a superior method of reasoning, but that he created a relatively clean method for people to communicate their reasons.

Whenever there is a society where the Aristotelian method clicks, people are able to communicate with each other and accomplish great things. When intellectuals resort to manipulating the language to gain power, the ability to communicate dissipates and the society diminishes.

What is Capital?

This post is a reply to a tweet.

Before engaging in high level debates, it is useful to think about the terms used in the debate.

For example, we often use the term "capital." But what exactly does one mean by "capital"?

Wikipedia we find the term capital referring to different things. In classical economics it referred to a real physical thing ... a factor of production.

In Marxian economics capital refers to an abstract entity called "money."

It is possible to create or destroy money without actually producing any physical benefits. This is what the Federal Reserve does.

In common discourse, people tend to use a muddled definition where it refers to both the physical factor of production and the money used in investment, but in actually trying figure out how things work, one finds that different definitions of capital work differently.

Things become even more convoluted with the absurd convention of using the term "capitalism" to refer to the free market economic system favored in the United States.

Definition of Middle Class

I believe that the distribution of wealth is far more important than the distribution of income.

Income refers to the amount of money that a person receives in a year. Individual wealth refers to the resources that one owns over a life time.

In the scheme of things, one's income is derivative of ones wealth. Income is simply a slice of one's life long wealth.

I contend that if a society has a healthy distribution of wealth, it will naturally have a health distribution of income.

Conversely, a society with a healthy distribution of wealth might have an uneven distribution of income as people make different amount during different years of their life.

My last post spoke about the changing definition of the Middle Class.

The original definition of middle class was based on the distribution of wealth.

One could split the ancient regime into three primary classes. There was a small ruling class, a very large working class of peasants and workers and a middle class between the two.

The ruling class derived its wealth and power from the state. The working class sold its labor for subsistance.

The middle class learned to re-invest the proceeds of the labor to improve their productivity. This middle class of merchants and manufacturers re-invested the profit from their endeavors to build capital.

Note, both the ruling class and working class were largely dependent on the state. As the middle class built capital, it gained a certain amount of independence from the state.

Intellectuals despised this middle class with its independence.

Because this despised middle class was very good at creating wealth, it systematically pulled millions of people out of poverty and the ranks of the capital owning middle class swelled.

In this traditional paradigm, the term middle class (bourgeoisie) was based on the distribution of wealth. The distinguishing feature of the middle class was that it owned and controlled capital.

Progressives hate this property owning middle class with a deep abiding passion.

Progressives took a tool developed by Hegel and perfected by Marx called sublation. Sublate is a process which one can use to turn a term into its opposite.

The defining characteristic of the middle class was the ownership of capital (its wealth). Progressives simply made income, not wealth, the defining characteristic of wealth.

Income, like most statistical phenomena, falls into a simple bell curve. Progressives took to calling the middle section of the bell curve of income "The Middle Class."

For a variety of economic reasons, the reported incomes of the ruling class, middle class and upper segment of the working class will fall in the middle of the bell curve of income. The really successful business owners fall in the upper section of the bell curve, unsuccessful workers make up the bottom of the bell curve.

By changing the focus of the middle class from wealth to its derivative income, progressives successfully sublated the term "middle class."

Middle class no longer refers to the productive business owners who built up the wealth of the nation. It now includes the parasitic ruling class and some of the higher paid workers.

The term "middle class" now means its opposite. The group of capital owners who sat between the rulers and working class is now in a separate vilified class, while the proletariat is lionized as the middle class.

Of course the progressive definition of middle class is absurd. By simple economic laws, most people will fall in the middle of the distribution of income.

It is the distribution of capital that matters! With a centralized economy, control of the wealth of the nation falls into an increasingly small number of very corrupt hands.

While progressives pound the sublated definition of "middle class" the real middle class that gave us our prosperity is being systematically destroyed.

Thursday, November 18, 2010

The Middle Class is the New Proletariat

Progressivism is a system of rule by manipulation. Long ago, the left learned that it can affect change subliminally by changing the language (aka sublation or the German aufheben).

One curious example of manipulating terms happens with the term: "Middle Class."

Traditionally the term "middle class" referred to the social class between the ruling class and the working class (The Third Estate). The ruling class referred to those who derived their income from ruling. This would be the kings, feudal lords and massive bureaucratic structure of the state.

The middle class referred to business owners who were making money independent of the state. A primary characteristic of this class was ownership of capital. The middle class would re-invest their capital and improve their lot. Note, the middle included trained professionals who invested as heavily in their careers as merchants and manufacturers invest in their businesses.

The working class and underclasses made up the vast bulk of the people.

Back in the days when Marx spewed his venom, he used the bizarre terms "bourgeoisie" and "proletariat." The French term "bourgeoisie" meant a person who [gasp] owned a business in town. [The Horror] [The Horror] The English translation of bourgeoisie is "The Middle Class." [The Horror] [The Horror]

During the Industrial Revolution, the Middle Class gained influence and the traditional ruling class waned.

The Middle Class was an open society. The markets created by the bourgeoisie pulled hundreds of millions of people out of poverty and into the maligned middle class.

Intellectuals loathed the people benefiting from the new found wealth with a deep passion.

So, an intellectual named Marx sought to unite the ruling class and working class (the proletariat) in a revolution against the horrible Middle Class (the bourgeoisie).

Marx succeeded in igniting a revolution and hundreds of millions of people died in agonizing ways.

History proved Marx a rogue. The bourgeoisie he loathed brought wealth to millions, while his revolution brought death and hardship.

If we were a people who learned from history, we would have rejected Marxism and adopted the ideals of the bourgeoisie.

Unfortunately, there is a group of low lives called progressives who continue to craved the totalitarian power promised by Marx.

Progressives seek the same goals as Marx. But they realized that, if they captured the university and media, they could accomplish the goal of a totalitarian state simply by manipulating the language. One can simply use the process of sublation to turn words into their opposite.

Transitioning the term "Middle Class" into its opposite was rather easy.

So, traditionally, the middle class referred to a relatively small class of business owners who sat on the social scale between the ruling class and the workers.

To change the definition, one simply de-emphasizes the source of the wealth and claim the distinguishing characteristic of the source of the middle class as income. The new definition of middle class labels all the people in the middle of the bell curve as "The Middle Class."

Since the bulk of the massive state bureaucracy (the new ruling class) have incomes that fall in the center of the bell curve, progressives have created a new paradigm where the ruling class is embedded in the definition of the middle class.

So, by clever manipulation of terms, we've arrived at a situation where the left is able to use the "Middle Class" in place of "proletariat."

This is problematic for our nation because it turns out that the source of the wealth does matter.

See, the source of the wealth of the traditional middle class was the re-investment of capital. This traditional middle class had the knack of creating new wealth and increasing the wealth of the nation.

The current middle class gains its wealth largely through redistribution. The modern American middle class consumes more than it produces and created a negative system in which our nation declines.

Since conservatives are too stupid to actually look at the roots of today's problems, I guess there is little to do but applaud progressives for their manipulative ways and lament the decline of our nation.

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Sunday, November 14, 2010

Utah's Immigration Law

Utah is considering an Arizona style immigration law.

Personally, I think this is silly as Utah is not a border state. I think it is wiser to wait a year or two to see how the Arizona law plays through before taking action.

I suspect that the 2012 election will produce a president who is eager to work with states on immigration, negating the need for the law. Passing a law with a 2 year horizon is foolish.

What is interesting about the Utah immigration debate is that the LDS Church is putting it's iron boot down on the throat of the subject.

Latin America is a growth area for the LDS Church, and this powerful entity wants to avoid any issue that might adversely affect that growth. It is in the interest of the LDS Church to stop the Utah immigration debate. Not surprisingly, the LDS Church issued a statement.

One particular section of the statement caught my attention: It reads: "Elected officials have the primary responsibility to find solutions in the best interests of all whose lives will be impacted by their actions."

This statement is counter to the ideals of a representative democracy.

The primary responsibility of a representative is the people being represented.

It is when government leaders start seeing themselves as the conduit of a higher good that tyranny sets in.

The world works best when different groups focus on different responsibilities. In this world we find one's family is the primary concern of most people. Businesses are concerned with the financial health of their property. Elected officials have a responsibility to the voters. Schools have a primary interest in educating their students. Churches and pundits might focus on higher concerns, etc.

When different groups focus on different aspects of our problems, we end up with better solutions.

Most problems are multi-dimensional and require multi-dimensional solutions.

The LDS Church is a powerful entity with an important and influential view in Utah. Because the group is so powerful, any statement will influence the views of the Utah electorate. Consequently, it will influence the decision of Utah Representatives.

Sadly, the Church chose to state its position in a way that was counter to the American tradition of representative democracy.

This saddens me.

Would they have made the same high sounding moral statement if it was not in their interest?

I agree with the desire to avert a local immigration debate, but disagree with the statement.

Anyway, some people have asked why I have no interest in starting a Medical Savings and Loan in Utah. This program is an alternative to insurance. It takes the bulk of the money from insurance and puts it back into the pockets of the people who earned the money.

The second actuaries run the numbers and see the amount of money that will flow from the ruling elite and back into the pockets of the people who earned the money, the institutions of the ruling elite will come back in full force against it.

The LDS Church has a substantial amount of money in insurance.

I would be messing with their money.

I have experienced the iron boot of the LDS Church in the past. I have no idea how to counter it. To make the system work, I need to find a different area.

As for immigration, I hope Utah State chooses to avoid the issue in this up coming legislative session. It is an issue best left for the 2012 election.

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Friday, November 12, 2010

Federal Power and the Dream Act

The Dream Act is a tool that grants citizenship to families for joining the military or taking on other select government jobs.

The relative size of the Federal Government has been the most contentious issue of in the United States since its founding.

An act that grants citizenship for getting a government job weighs the body politics to those who want more power in the hands of the government. A government agency that wants expanding authority will hire new citizen/employees who will vote for expanded government power.

This fluffy sounding bill is one of the most manipulative bills ever put before Congress. In order to gain more power, the government simply grants a few million people who will support their power grab.

An act that allows the government to change the make up of the nation in favor of bigger government creates a dangerous feedback loop. This power grab is an attack at the very foundation of Democracy.

The founding principle of the Dream Act is "If you don't like the will of the people, change the people."

That said, I will now sit back and be labeled a racist by small minded progressives.

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Wednesday, November 10, 2010

An Elaboration for a Twitter Post

In a twitter conversation I was first instructed to "wake up" then to "elaborate." It's hard to elaborate in 140 characters.

In recent years "conservatives" have been waking up to tricks of the "progressives."

I put the words in quotes because I've discovered that terms have more than one meaning.

For that matter, I've learned that many of the tricks occur at a root level. People have been manipulating Americans for well over a century.

For example, progressives pulled the study of logic out of the curriculum over a century ago.

Progressives favor a system in which the elite manipulate the evolution of society through changes in language and style. Marx named his style of manipulation "Material Dialectics." His work was based largely on observations of the French Revolution. The idea of Hegel and Marx is that society evolves through a system of thesis/anti-thesis conflicts. Conflicts resolve in a catharsis then move on to the next conflict.

One of the fundamental believes of this "modern" style of thought is that every civilization lays the seeds of its own destruction.

This dialectical model is different from the logical (analytical) model of the Founders. The founders believed there was a truth and esteemed logic. They believed in a process where civilization built upon itself and improved with time.

The foundational thought system of the US Founders was never fully developed. The founders failed to see the entrenched party system. The Left/Right split that dominates modern politics came out of the French Revolution.

While American conservatives admire the American Revolution and disdain the French Revolution, the name for the "conservative" movement comes from the French Revolution.

Like American Conservatives, I admire the US Founders and believe the US Founders were on the right track.

A major problem of Conservatism is that self-described conservatives are often drawn into the culture war with the Progressives. When drawn into the culture wars, one runs the risk of assuming the underlying rational style of this modern dialectical process.

A great example can be found with the definition of "capitalism."

Marx wrote a big long book called "Das Kapital." He believed that society evolved through a scientifically predictable series of conflicts. Marx claimed that the modern period was dominated by a conflict between groups he called the bourgeoisie and proletariat. Marx predicted that the intelligentsia would unite with the proletariat in a revolution against the bourgeoisie. The catharsis would be a new thing called "Communism."

Marx wrote in German. Translated into English, the bourgeoisie became "capitalist" and proletariat translated to "worker."

The term "capitalism" and "capitalist" were rarely used before this period.

The US Founders were trying to establish a free society. They admired "The Wealth of Nations" which was published by Adam Smith in 1776. Many of the founders disliked the way the Europeans manipulated the financial system (a different, longer story). The US Founders did not use the term "capitalism" to describe their free market.

I really wish Conservatives would look at the terms they use, and use them with caution.

Marx hated the free market. He wanted it overthrown. He believed society evolved through conflict. Marx wrote a really long book called "Das Kapital" which highlighted and magnified every fault of the financial system. He then wrote a second short book called "The Manifesto" which showed revolutionaries how to use the false image he projected on the market to raise people in revolution. In the Manifesto, Marx promised that, after the revolution, a wondrous new world order called "Communism" will evolve.

Don’t you see the irony?

Marx never defined Communism beyond the vaguest of terms. What Marx did was to describe a perversion of the free market in minute detail. This perversion of the market is called "capitalism."

The term "Capitalism" was essentially defined by the enemies of capitalism. A central part of Marx's trick was that he over-emphasized the role of money, and de-emphasized the role of freedom in his description of the market.

The free market of Adam Smith was a description of how free people optimizing their individual resources tend to optimize the resources of the community at large.

Marx's perversion of the free market was a description about how a corrupt ruling class uses money (the financial system) to dominate society. Marx's goal in defining capitalism was to lay the seeds that would destroy the free market!

Apparently Marx was compelling to our intellectuals because it drew everyone into the conversation.

Today, we find ourselves in a strange situation where a group called "conservatives" defends a thing called "capitalism." The problem is that the etymology of terms undermines the cause.

Many conservatives use the term "capitalism" to describe the free market described by Adam Smith. The term also can refer to a perversion of the market in which a ruling class creates a corrupt financial system which empowers an elite.

As for the word "conservative," this word emerged as one side in the left/right split.

Patriotic conservatives in the United States are trying to preserve the thought system of the US founders. The problem is that their ideas are being defined as part of this dialectical split.

For example, the fact that the term "conservative" rose to describe a "left/right" split has the effect of making the split the center of discourse, rather than the underlying structure of society.

The enemies of the American experiment have laid before us a terrible series of traps. To restore the American system, we have to be wary of the origin of terms. When discussing ideas, we need to be wary of what people mean by "conservative," "capitalism," etc..

This post is getting too long. I wanted to give an example of how our terms are used against us.

A good example is ObamaCare. This system creates a centralized health exchange. An exchange could be described as "capitalism" because it uses the flow of capital through the health care system to control the behavior of people and to empower a ruling elite.

Health Care and Diabetes

This just in The Number of Type Two Diabetes Cases is Soaring.

The primary cause of type two diabetes is Americans are failing to draw the connection between their diet and long term health cause.

A primary reason for our failure to draw this connection is that our health care system shields people from the consequences of their actions.

Type Two Diabetes is the one disease that the Medical Savings and Loan could really can really help reduce. This system asks that its policy holders self-fund their health care.

The system confronts policy holders on a regular basis with the consequences of lifestyle choices.

I have not been playing up the central character in the Medical Savings and Loan. The program creates a new position called the Health Care Advocate. The primary charge of the advocate is to educate participants on expected health care expenses.

It is a financial position, not a medical position, the advocate will use the language of money to explain basic things like if you get this preventive care, your health expenses will be like x. If you don't get preventive care, your expenses will look like y ... and you can't afford y.

I repeat, the HCA is a financial position, not a medical position.

The goal of the program is to engage participants in a multi-dimensional discussion of their health.

Insurance and these crazy health care exchanges treat people as if they live one dimensional lives (with speculators trading individual risks on the exchange).

The Medical Savings and Loan sees advantage of people owning their own risk as it forces people to take a multi-dimensional view of their health.

Here is an example of the type of financial questions I find beneficial. Share-A-Sale has a new advertiser called 360 Cooking. This company makes expensive stainless steel pots designed for a waterless cooking technique. These expensive pots have a multi-layered construction to evenly distribute heat. Their claim is that their design lets people cook with no oil and less water.

This increases the nutritional content of food and improves taste. They claim waterless cooking reduces energy consumption.

The company's claims may prove bogus. The pots are way outside my price range, and I am sure I could do "waterless" cooking with other pots.

However, I found that the expensives pots started an interesting line of inquiry. Could waterless cooking reduce my consumption of fat? Would it increase my consumption of veggies? What impact would such a decision have on my long term health?

Consulting a doctor about buying a pot would be ludicrous.

However, if we developed a system where people owned their own health care risk, then we would see people engaging in this type of decision making on a regular basis. It is through the repetition of this type of conversation that leads to quality life style choices.

By creating a system where people own their own risks and are directly confronted by these risks in a conversation with a health care advocate would create a paradigm where people engage in this type of discussion.

A system where traders speculate on people's health risk in a centralized exchange will result in conversations, but not conversations that help people.

Tuesday, November 09, 2010

Debt Per Taxpayer

The Debt Clock tells me the national debt per citizen is over $44,000. It is over $126,000,000 per taxpayer. Total debt per citizen is about four times that. It is $176,000. Current unfunded liabilities are over a million dollars per person.

Our savings are a scant $9,703 per citizen. This is barely twice the interest we pay on the debt which is about $4,600 per person.

A devaluation of the dollar and higher interest rates could easily throw our economy into a tail spin.

This sad situation is not the result of a moral default of the American people, but is a result of the stupid way we've structured our financial world.

In efforts to buy power, our political and business leaders structured our economic system so that we use pay-as-you go schemes supplemented by debt financing for necessities that should be financed through savings.

What I want to do with the Medical Savings and Loan is to take the massive premiums we are paying for pay-go insurance and place it into a structured savings program.

The current savings to debt ratio is $9K/$176K.

Insurance premiums are over $10,000 per year. A student coming out of college is likely to pay over a half million in insurance premiums and deductibles over a working career. The structured savings program would put over half of that money in the savings accounts with the other half going to grants and loan defaults.

As people tend to be healthy when they are younger and require medical attention when they are older, one would see a phenomena where a large number of people had a large amount of money in their medical savings account. If the system worked the average policy holder would have about $20K in savings with some people having upward to $100K in savings.

Were the entire US to switch to a Medical Savings and Loan paradigm (something which I am not demanding), we would see savings balloon and a more reasonable savings to debt ratio of $30K/$176K would emerge.

The Medical Savings and Loan is not totalitarian. It is not like silly health care exchange systems that must force everyone into a complex scheme for some perceived benefit. The Medical Savings and Loan simply provides financial tools that allows people who wish to self fund their care take a stab at the challenge.

People who switched to the MS&L for self-funding their care would increase their savings and decrease their personal contribution to the debt problem.


Zarephath Health Center


This is what I am looking for!

Zarephath Health Center is a faith based effort to provide health care to the poor and uninsured.

These are the people who would thrive with the Medical Savings and Loan.

I discovered the center through an article on Freedom Blogging. Doctor Alita Eck sees the Health Care Exchanges for corrupt fluff that they are. She gets right to bare knuckles of providing health care and explains that the best health care is a system with the doctors and administration focused directly on the patient.

This is what happens with the medical savings and loan!

If I could get the equations for the Medical Savings and Loan in front a pair of astute eyes like this; the system would pop.

The MS&L essentially takes the money that goes into insurance. It splits this money into a Savings and Loan component. This component empowers the people who can self-fund their care to self-fund their care. The system carves off a big chunk of cash to be distributed as grants. Anyone who takes a grant must agree to take part in the savings plan.

The people who self fund their care will spend their money on the care that best suits their needs.

When people cannot, the group administering the grants would be spending their resources in the best possible way.

(As mentioned earlier, a Medical Savings and loan with 10,000 policy holders would probably have about $800,000,000.00 for direct self-funded health care and $200,000,000.000 in grants over a ten year period. 10,000 * 10,000 * 10 = 1,000,000,000.)

I have more faith in a group Zarephath Health Center with a few hundred million bucks in grants than the Utah PAC with a totalitarian exchange and the unconstrained political power the Political Action Committe desires.

Unfortunately, the Zarephath Health Center is in New Jersey.

That's too far to travel.

What I need to start a Medical savings and Loan is a group of people who want to save the health care freedom (while cutting costs) and a network of faith based groups like Zarephath.

It would be so easy to start. The business model is ready. All I need is some victims people to launch the plan.

Sunday, November 07, 2010

Formula for Disaster

Anyone watching the Debt Clock knows that our nation is in a perilous state. I looked today. The National Debt is at $13 trillion, personal debt is at $16 trillion. Unfunded liabilities stand at $111 Trillion.

The reason for this sad state of affairs is the stupid way we fund things.

We do several stupid things: The first is that we adopted a fractional reserve banking system. Banks lend out multiple dollars for each dollar saved. Anyone familiar with math knows that fractions show up as multiples when looked at from a reciprocal perspective.

A fractional reserve banking system effectively multiplies the debt of the people.

Oddly, the fractional reserve devalues savings. It is the bank that gets to multiply savings, not the saver. The dollar I put in the bank is equal to all of the other dollars on the market. It has to compete with the dollars created when the bank uses it as a base for multiple loans.

The history of fractional reserve lending is bleak. Historically banks that create their own fractional reserve scheme have failed. They get rich and implode in a panic when investors realize the bank has inadequate reserves to pay investors.

A fractional reserve banking system depends on constant regulation to stave off panics.

One can argue that, by increasing debt, fractional reserve banking creates systemic risk. One can also argue that fractional reserve banking is counter to the free market. In the market described by Adam Smith, people re-invested the profit of real capital. Fractional reserve banking creates a multitude of paper money for each real dollar increase in capital.

A well regulated bad idea is simply a study in stupidity.

A second stupid mistake that we made was to move from save-and-pay systems for health care and retirement to ill conceived pay-go schemes.

The idea behind both Social Security and Insurance is that people can fund basic human needs through a stable Ponzi Scheme. A Ponzi Scheme is an investment scam where a con artist builds market credibility by paying higher than average returns from the investments from other schmucks in the system.

Ponzi schemes tend to implode when investors discover their investments are at excessive risks. Small insurance companies tend to fail because they develop inadequate reserves for their promised benefits.

Bernie Madoff had a Ponzi scheme that ran for several decades before investors realized their billions of dollars of savings were fluff.

Through the years, a large number of people have been hurt by insurance schemes that failed to maintain adequate reserves.

To maintain stability, insurance requires substantial regulation.

The need to regulate insurance is interesting in that the promise made by insurance is that insurance would help people regulate their health care expenses by placing their health care money in a pool.

The deregulation that took place in the Clinton years failed because we removed the political regulation away from financial schemes that were dependent on regulation. Bush failed because he did not figure out basic laws of finance.

Many people would like to transition away from the Federal Reserve and fractional reserve banking.

To do so requires a concurrent effort to increase savings.

Wouldn't it be wonderful if someone happened to have a plan to replace insurance with a system of structured savings?

Golly, if only there was someone who's been talking about the need to move from insurance to structured savings for the last several decades. Such a person might even have a ready made product that allowed companies to replace their insurance benefit with some sort of Medical Savings and Loan.

For progressive minds driven by wealth envy. I should point out that it's the fractional reserve system that created the disparity of income between the rich Wall Street bankers and middle class. Transitioning back to save and pay would have the reverse effect and decrease the gap between rich and poor.

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Thursday, November 04, 2010

Not A Compelling Business Model

I present the Medical Savings and Loan as a business model. The primary reason for this is that I want people to see how they would interact with the system.

The system, however, is not as compelling a business model as insurance.

A group of 10,000 people paying $10,000 a year in health premiums for ten years would pipe a billion dollars through the system.

Insurance has people paying this money into a group pool that the insurance company controls. This is a compelling business model as it gives people controlling the insurance pool enormous power.

The Medical Savings and Loan has people putting their money into investments that they control.

Suddenly, this enormous wealth that the insurance company gets to control is controlled by the policy holders. The business owners of the Medical Savings and Loan reduces the rich financiers to middle class stooges.

Yes, the people doing business with the Medical Savings and Loan are better off. The people running the shop are no longer enormously rich and powerful.

Investors, Wall Street Bankers, and power brokers and the country club all dispise the idea.

My decision to present the Medical Savings and Loan as a business has the problem that progressives seeking government ownership of healthcare can frame the program as some sort of evil capitalist contraption.

The fact that the system can be attacked from left and right might be a sign that the system is on the right track.

Afterall, the long term determination of the quality of a business model is not the amount of wealth it consolidates in the hands of the few, but how well the business model serves the society as a whole.

Wednesday, November 03, 2010

Should I Do Any Thing With the Medical Savings and Loan?

I started a poll: "Should I do anything with the Medical Savings and Loan?"

The goal of the project was to show that it is possible to fund health care in other ways than pooled insurance.

The Medical Savings and Loan simply breaks apart a group insurance pool into individual savings and lending accounts. Sam Granato said his insurance costs were $18,000 per employee per year. The MS&L would put half this amount in a savings account. A quarter in a loan reserve and the rest in a grant program. The loan reserve would go into the savings accounts if unused.

The system simply takes the money that goes into an insurance pool and gives the bulk of the money directly to the policy holder with the rest going into a combination of loan reserve and grant programs.

This mathematical model lets people directly contrast the merits of individual and pooled funding of health care.

People could take this model apply it directly to real world data and ask the question: Are people better off with pooled financing of health care or individual financing of health care?

My goal during the last two years was simply to find a group to discuss the model.

I failed to achieve my goal. Hundreds of letters, blog posts and tweets have received nothing but cold shoulders.

The Medical Savings and Loan is a real model. It is very easy to implement. I believe in the scientific method. It would be very easy to put together a Medical Savings and Loan program.

Health care financing is an interesting business because a program can underwrite itself. Lets say you had a group of 3000 policy holders paying $10,000 a year in premiums. Well, you have a starting point of $30,000,000.00 of yearly income.

The ideal experiment would have 10,000 victims policy holders. That would give a yearly base of $100,000,000.00. Over a ten year period, one would process a billion dollars through the program.

The administrative cost of the Medical Savings and Loan is significantly lower than insurance. Insurance companies have to have a big claims approval process, expensive actuaries and massive legal departments.

The Medical Savings and Loan puts the savings accounts in a local bank. Policy holders pay their medical expenses directly from their accounts. This eliminates the costly claims approval process.

Legal costs would be lower as well. Insurance companies have lawyers who sue doctors and defend against lawsuits from policy holders. The Medical Savings and Loan steps out of legal picture. Patients would still need to sue doctors, employers, etc.. The Medical Savings and Loan, itself, simply moves money between accounts.

The administrative cost of a Medical Savings and Loan would probably come out to around 1% of the premium. An experiment with 10,000 people over ten years would have about $10,000,000.00 to pay for the work of a half dozen middle class employee/owners. (The best corporate structure for the Medical Savings and Loan is the buyer's co-op with employee ownership).

Did anyone hear that? Administrative costs for The Medical Savings and Loan might be as low as one percent.

Assuming that people are more careful with their money than they are with other people's money, the Medical Savings and Loan could realize up to a twenty percent decrease in health care expenses than insurance.

It is unlikely that the medical savings and loan would cost more than insurance. So, it would be a good experiment for a company wanting to control its health care expenses.

Although my goal of the last two years was simply to find a group to simply discuss the idea ... a group that experimented with the idea just might find giving people direct control over their health care dollars is a fun experiment.

The Medical Savings and Loan would be a great paradigm for discussing health care. One can also use it as an experiment to compare pool funded health care with individually funded health care.

I have tried for two years to get anyone*, anywhere to discuss the idea. I have enough money to drive as far as Arizona, Colorado, Nevada, Idaho, or even Texas.

(*By anyone, I mean a group committed to sound rational thinking. It would be a waste time to discuss an idea with a group seeking to project false images on the idea.)


Tuesday, November 02, 2010

Lime Slurpee

President Obama, who's visited all 57 states, is a keen observer of human nature. One of his most profound observation is that Republicans drink Slurpees.

Republicans like to hang around a work site like union laborers on break--sipping slurpees--while Democrats toil away like small business owners trying to pay the bills.

While I watch the election returns. I thought I would impart my favorite frozen drink recipe.

I am a bit lazy. I like to start with a can of frozen sweeten limeade. I add only two cups of water then squeeze in a fresh lime and the lime zest along with a jigger of Triple Sec.

This serves as the base.

To make the drink, I add the base, ice and shot of tequila into the blender to crush the ice.

Some people like to salt the rim of the glass and serve with a slice of lime and one of those funky cocktail umbrellas. Me I am happy with a plain cocktail glass.

Anyway, I thought I would share my "lime slurpee" recipe as I sit like a union worker on break and watch the election returns.

Dialectics and the Center

Most people want to be part of the reasonable center.

Marx's uses this desire. His theory is called Dialectical Materialism. In dialectics the philosopher defines two contradictory positions. As the philosopher argues the contradictory points people begin to imagine a position as the rational center.

Now, here's the deal: By choosing the extremes, one can make any position on any issue appear to be the center by defining the extremes.

Marx never explained how a communist utopia would work. All he did was to create a left/right dichotomy in an effort to create a new center.

In progressivism, the radical left will define a new extreme. The reactionary right will react in defense of the status quo. The dialectical argument will form a new status quo. After which the radical left will choose another radical position leaving reactionary conservatives defending the new status quo.

When one studies the history of our financial mess, one finds that the financial tools at the center of the mess were created by progressives of yesteryear. Insurance, Credit Default Swaps, Mortgage Backed Securities, Hedge Funds, CDOs, short selling, etc., were all created by progressives. Yet the elite is able to project ownership of this toxic mix of derivatives onto Conservatives.

The funky derivatives that crashed the market were created with the idea that they would regulate the market. Rather than excepting that they don't regulate the market, progressives are able to use the failure of their creations to justify a new layer of regulation.

Go figure?

With dialectics progressives change society through illusion.

Many of the things we consider the rational center today were considered dangerous extremes in the past. Conversely, we see the rational center of yesteryear as a dangerous extreme.

Have you ever noticed how the elite spend so much time trying to define the position of their opposition? They do this to make their radical position appear the rational center.

In this last election we saw everything from racism and teabagging to excessive slurpee drinking projected on the tea party.

[slurp, slurp, slurp]

The arguments put forward by members of the movement were systematically ignored.

With this free floating system, the ruling elite can yank the people about by their nose rings.

Unfortunately, this method of gaining power by shifting the center has the long term effect of eroding the foundations of a nation and eventually reducing the people to poverty.

The founders were living in a day when the elite under King George was trying to centralize power by changing the foundations of the colonies. They saw the dangers of these tactics. Their solution was to set the center with a Constitution.

Today we find that the Fundamental Change of FDR and Obama has created a dangerous world where the Constitution of our founders is seen as a dangerous extreme.

I hold with the tea party that the Constitution was a good thing, and that this game of trying to move the center through dialectics is an inherently bad thing.

Through 2009 and 2010, the tea party worked heavily on the Republicans and convinced many in the party to return to their forgotten principles of this great nation. I hope that Republicans do well in the midterm.

Altough I am currently rooting for the Republicans, I don't see this as a Republican thing.

It's a Constitution thing. For this reason, I am rooting for the independent Tancredo in Colorado because he is an independent with a chance of winning.

The worst thing that can happen to this country would be to develop a two party system where the minority Republican Party favors the Constitution and the majority Democratic Party wants a socialist utopia and the center is simply societal decay.

My biggest hope is that the tea party stays independent and that we see a number of tea party candidates on the Democratic side in the 2012 election.

Monday, November 01, 2010

Production v. Manipulation

There are two sources of income: production and manipulation.

When the income of the rich comes from production, we shouldn't tax it heavily for we all benefit from the production.

When the income is from manipulation, our attempts to tax and redistribute the income tend to fail because the people good at manipulation will find ways to game the system.

Every economy includes both production and manipulation.

Attempts to achieve social justice through taxation and redistribution usually results in a society that places onerous taxes on production while increasing the amount of manipulation.

The fact that it is difficult to achieve income redistribution does not mean that we should not worry about income inequality. It means that we have to think about the problem differently.

If we find our society that generates great fortunes without producing wealth for the society at large, then we clearly have a society where the forces of manipulation have taken root.

Correcting this society is not a matter of taxing the wealth but a matter of examining the sources of the wealth.

If we find sources of wealth which are primarily manipulative, then we need to eliminate the source of the manipulation.

Most of the sources of manipulation are intrinsically anti-market. Hedge funds were created to protect the ruling elite from changes in the market (hence the name hedge fund). Short selling is a violation of property rights. Government backed re-insurance is a scheme to protect insiders from changes in the market.

As these tools are inherently anti-market, removing them would be pro-market. N'est-ce-pas?

Sadly, rather than looking at the roots of the matter, our political class has an unfortunate history creating additional manipulative tools to overcome the manipulative tools of the last generation.

The call for onerous new tax policies to redistribute the incomes made from market manipulation is but the latest of such fallacious thinking. The new tax burden will fall heaviest on the productive segment of the market and concentrate even more power in the hands of the manipulators.