Inflation is a Problem and it is Here Now

Ben Bernanke says that we do not have to worry about inflation. He says that we are currently in a "low-inflation" environment and that the decline of the dollar is the least of our worries. When answering questions from Congress, he says that rising prices are the results of increased demand from developing nations and famines in Russia and China. I say this is nonsense.

The first and most obvious argument is that if these developing countries are growing, why is the US still not growing along with them? Why is this country still stuck in a rut yet apparently their economies are booming? There are a few factors at play here, and Bernanke's explanation is sorely lacking. Sure, developing nations could be using more oil, but enough so to cause this great a rise in prices? And speculators can anticipate this, so again it should not be rising so quickly. The real issue and the best explanation is monetary inflation.

However, talking about oil prices alone is not convincing. The precipitous rise in food prices is shocking. The price of wheat and other foodstuffs is growing tremendously. Bernanke blames a Russian drought, but in this analysis Bernanke shows his severe ignorance about economics. Droughts can be predicted. They are the result of bad farming policies and weather conditions that can be determined to an extent well ahead of time. With speculation, prices would still rise, to be sure, but the rise in prices would be gradual. What has happened instead is that prices skyrocketed suddenly and now are slowly being seen in consumer prices. Blaming a drought does not make much economic sense. What does make more sense is monetary inflation.

But is monetary inflation really a problem? This graph should tell the whole story.

To combat the recession the Federal Reserve engaged in quantitative easing in order to stimulate aggregate demand. Of course, their economic ideas are built upon faulty reasoning and false premises, but this is irrelevant. This graph shows how the monetary base greatly rose in a short amount of time. Inflation, by its very nature, is great in the very short term, but eventually prices will rise as those bills make their way into the economy. We are past the short term, and those bills are now beginning to circulate into the economy. The following links are commodity prices in the past year. The trend is alarming, to say the least.

Petroleum
Wheat
Corn
Rubber
Cotton

Bernanke, anyone can point to other excuses to explain away a problem that they have created. Can you point to your own data and say that what your institution has done is not at fault?

Hospitals and the Cost of Healthcare

For-profit entities usually are the height of efficiency and optimization. They want to make as much money as possible, and the best way to do this is by spending as little money as they can while still giving their customers a good product. Not only that, but they increase their production when supply starts to dwindle because they can make more profit this way. This is true for manufacturers of any good, and it is true for hospitals. Where is the incentive for non-profits to expand production? Why should they care? They will be making the same amount of money either way. And their drive to increase efficiency will not be as great because doing so would not make them any richer. Furthermore, non-profits generally get tax breaks from the government and so get a little leeway to be inefficient. For-profits do not get this break and must rely solely on pleasing their customers rather than petitioning the government.

Why is this important? Around the turn of the century in the United States, about 60% of the hospitals were for-profits. By 1968, that fell to 11%. This was due - as you can easily expect - to government favors: subsidies, exemptions from many taxes, charitable contributions that were a tax write-off, and zoning laws. For-profits were driven out of the market to the demise of us all. Gone was the motivation to become efficient, to lower costs, and to provide excellent service. Now, hospitals were merely local offices that produced a product solely from the good-will of the community. This may sound very nice and heart-warming, but from an economic standpoint it is doomed to failure. Without incentives, there is no reason to provide services cheaper and to offer good service. Sure, there is good will, but this is limited.

Efficiency is not the only problem with profits versus non-profits. Because the latter receives government favors it also means that they are more prone to government manipulation. With this change, government could find an ally in their quest to increase medical training, no matter how unnecessary it was. And this manipulation continues to this day. Any and all new requirements that the government has are easily accepted because they control the distribution of the resource.

This is another example of something that sounds good being terrible. Profit is used as a buzz word these days and is connotated with greed and evil. However, profit is our motivation to do a better job and to make our customers happier. Take away profit, and we rely on the goodwill of men. If we relied on the goodwill of men, then we would not need locks to our homes and cars.

Why Wisconsin is the Future of Labor Unions in the United States

The simple answer is inevitability. States are running out of money and taxpayers are at a boiling point. Deficit spending is no longer an option, as financiers have figured out that bonds are not a great investment. California has already seen its rating go down the drain and many states are going down the same path if they are not there already.

But it's not fair, how can a person live on a shrinking salary like that? I hear this question and the simple response is another question. How do workers in the private sector expect to live when many of them are losing their jobs and have not seen pay increases for years now? Yet public sector unions have comparatively been living the sweet life. Automatic pay increases, pensions, health care, etc. Conveniently for these unions, these figures are not included in official salary estimates. So let's not let these people get away with this; they are not going to die in the streets because the states want to start decreasing benefits. They'll have to cut back, to be sure, but who hasn't?

There are only two possible outcomes. Either the states win and public sector unions diminish in power, or the unions win and the states go bankrupt. Either way, unions have to lose. There is no money to pay these people; this is their reality and they have to accept it. All of this protesting will just cause them to lose popularity (as though they have not lost enough with the way they have put states into this mess). The only way for them to save face is to compromise on this issue and realize that their great salaries are simply not sustainable.

Reality bites, and it bites us all.

Midterms Really Eat a Lot of Time

I realize I haven't posted anything for about a while now, and I mean to change that. I've had midterms the past few weeks, and with science, a lot of studying just is not enough. So I have a small respite in between midterms and finals, and I mean to get this blog started up again.

I have been using some of this time also to get some reading done. I recently borrowed Ulysses by James Joyce from the UCLA library. Let me tell you, it is a beast of a book. Imagine writing everything down that you think directly into a book and there you have Ulysses, a hodgepodge of random thoughts and observations into a 700 page epic. It is rough, but interesting also.

I've also been working on Amazon's Mechanical Turk to try to get some money. It does not pay all that well, but hey, anything is better than nothing. Eventually I hope to get a steady stream of money, and maybe this blog would help, but that will not happen for a while (if it ever happens).

So a lot of things going on, as you can see, and I have not even mentioned the fact that I will be graduating soon. But I hope to get back to posting, especially that health care series that I have not finished yet. Anyway, hopefully these self-centered posts will be very limited in prevalence, I don't like to use the word "I" all too often. Have a good day everyone.

Samuel Adams Winter Lager

I had the pleasure of drinking this beer the other day at a party. Unfortunately, I had the displeasure of drinking it warm, but also cold. Obviously the cold beer was better, and all in all it was not a bad beer. It is not my favorite, but I would never turn it down.

The first thing you see is the bottle. It's a dark brown color, which I hear is a good thing for the taste of the beer since apparently light does bad things to the beer (I'm not sure of the actual chemical reason for this other than maybe light providing some activation energy for some oxidation reactions, but that's besides the point). So I guess beer fans would really love this just for that (as opposed to the green Heineken and Rolling Rock bottles and the clear Newcastle bottles).

But the taste is nice. It was definitely bitter, but not nearly as much as the Piranha Pale Lager at BJ's or Sierra Nevada. If you've just had a relatively non-bitter beer like a Newcastle, though, you'll definitely taste the difference. Still, though, it's not a bad taste. It's a quality beer and has a very clean taste.

I would talk about the pour, but as I was drinking straight out of the bottle I couldn't really tell you. I am interested to know if there is any difference in drinking a beer out of the bottle as opposed to drinking from a glass, but I'll defer to any experts on that. I did get to smell it though, and it was nice. It's not sour like Heineken, but it's not sweet like Hefeweizen. This smells like a real beer.

Finally, this is a nice, strong taste. I know Samuel Adams always prides themselves on the amount of hops they use, and this is no exception. This is a full, robust flavor unlike the weak, watered-down taste of the big American breweries.

It's a solid beer, I'd definitely approve it. It isn't my favorite, but a good beer nonetheless.