Marketplace Scratch Pad

Morning Reading

Scott Jagow Aug 12, 2009

Quite a bit about health care this morning. It is, after all, the topic around the country. Plus, has the Federal Reserve created another bubble? And one idea for stemming the wave of foreclosures…

Another bubble?

Fortune raises an excellent question. Has the Federal Reserve created a bubble in stocks by pouring so much money into the market?

Recent weeks have brought huge rallies in some of the lowest-quality stocks — including firms such as AIG, Fannie Mae and Freddie Mac that are being propped up by the government and are unlikely to return to health any time soon.

What’s more, this year has brought an 80% surge in emerging market stocks, while the dollar has posted a 10% decline since March. A declining dollar and surging emerging markets were the hallmarks of the credit-fueled bull run earlier this decade.

“We have put the band back together on a lot of this,” said Howard Simons, a strategist at Bianco Research in Chicago. “That couldn’t have happened without liquidity.”

Health Care

Dr. Larry Hunter writes for the Social Security Institute about President Obama’s plan. I have to believe he’s on to something when he accuses the administration of overpromising:

  1. ObamaCare will provide every American top-line medical care
  2. Without raising taxes;
  3. Without blowing a hole in the deficit;
  4. At the same time it reduces overall healthcare spending as a share of national income (GDP);
  5. Without Rationing.

It is like squaring the circle; it can’t be done– HillaryCare couldn’t do it and neither can ObamaCare–not because the ObamaCarrions aren’t smart enough or haven’t tried hard enough but because these five premises are logically inconsistent, and any system constructed upon them will be internally contradictory. It is impossible to satisfy all five at once. Something has to give.

On PBS’s NewsHour, several newspaper columnists had a lively debate about health care. Here’s an exchange about Medicare recipients complaining they don’t want the government in their health care:

NOLAN FINLEY (Detroit News):
I think — I heard Cynthia mention that Medicare and that the people raising these concerns are Medicare recipients. Exactly. They see a program run by the government that is hurtling toward disaster and Congress doing nothing to address the problems with Medicare or Social Security. And now you’re asking people to trust that they can do a better job with the overall health care system?

JEFFREY BROWN (Host): Well, John Diaz, I mean, that sort of puts it on the table here. Are we getting to a point where this is about trust, about whether he’s making promises he can or cannot keep? Is that where we’re heading, rather than to the substance or the component parts of the reform package?

JOHN DIAZ (SF Chronicle): I think it’s very incumbent on the president to get the debate back to the substance and to take on this issue of the public option, because, let’s face it, if you mandate that Americans buy insurance either through their employers or themselves and you don’t have any kind of safety valve, that just may be a giant profit center for the insurance companies.

Meanwhile, at the Wall Street Journal, Whole Foods CEO John Mackey weighs in with eight things that could be done to significantly lower the cost of health care, and then adds a ninth:

Rather than increase government spending and control, we need to address the root causes of poor health. This begins with the realization that every American adult is responsible for his or her own health.

Unfortunately many of our health-care problems are self-inflicted: two-thirds of Americans are now overweight and one-third are obese. Most of the diseases that kill us and account for about 70% of all health-care spending–heart disease, cancer, stroke, diabetes and obesity–are mostly preventable through proper diet, exercise, not smoking, minimal alcohol consumption and other healthy lifestyle choices.

Recent scientific and medical evidence shows that a diet consisting of foods that are plant-based, nutrient dense and low-fat will help prevent and often reverse most degenerative diseases that kill us and are expensive to treat. We should be able to live largely disease-free lives until we are well into our 90s and even past 100 years of age.

Right to rent

Dean Baker, with the Center for Economic and Policy Research, proposes this housing market solution in the LA Times:

The basic idea is simple. In recognition of the extraordinary crisis, Congress would give families that took out mortgages at the peak of the boom and are facing foreclosure the option to remain in their homes as renters for a substantial period of time — five to 10 years — while paying the market-rate rent…

In the markets affected most by the housing bubble bursting, the current rents would be 30% to 50% less than the monthly mortgage payments for homes purchased near the peak of the bubble. This means that many families that cannot afford their mortgage payments would likely be able to afford the market rent…

Further, “right to rent” would enable more families to stay in their homes as owners, by giving banks an extra incentive to pursue mortgage modifications.

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