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Sunday, June 17, 2012

Poorer Nations Push for Universal Health Coverage as U.S. Squabbles

Published on Sunday, June 17, 2012 by the Bangor Daily News (Maine)

Poorer Nations Push for Universal Health Coverage as U.S. Squabbles

by Philip Caper

A few weeks ago, an article by Noam Levey of the Los Angeles Times caught my eye. It was titled “Global Push to Guarantee Health Coverage Leaves U.S. Behind” and it described how “even as Americans debate whether to scrap President Obama’s health care law and its promise of guaranteed health coverage, many far less affluent nations are moving in the opposite direction — to provide medical insurance to all citizens.”

"Our market-driven health care system is disintegrating," writes Philip Caper. (photo: Sunset Parkerpix)

Among those other countries are China, Thailand, Mexico, Rwanda and Ghana. The article went on to explain that, “Two decades ago, many former communist countries in Eastern Europe and elsewhere dismantled their universal health care systems amid a drive to set up free-market economies. But popular demand for insurance protection has fueled an effort in nearly all of these countries to rebuild their systems. Similar pressure is coming from the citizens of fast-growing nations in Asia and Latin America, where rising living standards have raised expectations for better services.”

Many other countries are moving full speed ahead to guarantee health care for all their citizens, not only because it is morally and ethically right but because it is a powerful economic development tool that will ensure these countries have healthy populations and an efficient and effective health care system.
Meanwhile, the U.S. seems stuck in a state of political paralysis and may soon move full speed astern. What explains this striking and unfortunate example of American exceptionalism?

I attribute it to motivators often used to explain the behavior of Wall Street: fear and greed.

I would also add a third: ignorance. There are those who still believe (or claim to), despite all the evidence to the contrary, that the U.S. has the best health care system in the world. This belief is demonstrably contradicted, both by the facts and everyday experience. We have the most expensive health care system in the world and some of the fanciest technology, but our arrangement for getting health services to our people ranks far down the scale, behind about 40 other countries.

Fear is a major factor in the political stalemate we are now witnessing surrounding health care reform. About 50 million people in the U.S. are uninsured and increasing numbers are badly underinsured. Bankruptcies and other financial hardships due to medical costs are becoming more and more common.

Despite this, we are treated almost daily to distracting arguments, many unfounded and ridiculous, about “death panels,” “government tyranny,” “rationing” and other largely mythical or irrelevant threats to our well-being. Some of the critics responsible for these fear tactics are simply misinformed, but others are dissembling to pursue obstructionist political agendas.

Much of the fear-mongering around the health care reform debate is induced by the second motivator: greed. Health care in the U.S. is almost a $3 trillion industry. It is credibly estimated that about a third of our spending does not contribute to the health of our people in any meaningful way. The proof is that other wealthy nations provide health care to their people for about half of what we spend yet get better results.

Elimination (or more accurately redirection) of some of that money would mean moving funds away from a few people and toward the rest of us, thereby reducing the income of influential industries such as large pharmaceutical and medical supply companies and corporate providers of health care services. Many of these companies are enjoying windfall profits thanks to American public policy. Greed and the political muscle that goes with money are a major source of resistance to changes that would benefit the vast majority of Americans.

Our market-driven health care system is disintegrating. Many are being harmed in the process. How can people of good conscience allow this to continue? We need to change the ways we finance, pay for and deliver health care.
Our for-profit insurance and delivery systems must be transformed (not just reformed) into nonprofit ones, like most other countries. Coverage must be expanded to include everybody. Firm, fair and effective cost controls need to be put in place. In order for widespread support for such a system to be sustained, everyone must be in the same system.

In other words, we must replace our existing system sustained by fear, greed and ignorance with one that is fair, inclusive, efficient, effective and mission-driven. Such transformation has occurred elsewhere. Given the political will, we in the U.S., including Maine, could do it too. We’d all be much better off.

Physician Philip Caper of Brooklin is a founding board member of Maine AllCare, a nonpartisan, nonprofit group committed to making health care in Maine universal, accessible and affordable for all, and a member of Physicians for a National Health Program.

Saturday, June 16, 2012

The Truth About Religion in America: The Founders Loathed Superstition and We Were Never a Christian Nation

AlterNet.org

BELIEF

Free Inquiry / By Kerry Walters

The Truth About Religion in America: The Founders Loathed Superstition and We Were Never a Christian Nation

The claim that America was founded as a Christian nation -- a favorite of Right-wing Christians -- is just not true.

June 15, 2012 |

Once they begin to circulate, falsehoods—like counterfeit currency—are surprisingly tenacious. It doesn’t matter that there’s no backing for them. The only thing that counts is that people believe they have backing. Then, like bad coins, they turn up again and again.
One counterfeit idea that circulates with frustrating stubbornness is the claim that America was founded as a Christian nation. It’s one of the Christian Right’s mantras and a favorite talking point for televangelists, religious bloggers, born-again authors and lobbyists, and pulpit preachers. Take, for example, the Reverend Peter Marshall. Before his death in 2010, he strove mightily (and loudly) to “restore America to its traditional moral and spiritual foundations,” as his still-active website says, by telling the truth about “America’s Christian heritage.” Or consider WallBuilders, a “national pro-family organization” founded by David Barton, whose mission is “educating the nation concerning the Godly foundation of our country.” Called “America’s historian” by his admirers, Barton is a prolific writer of popular books that spin his Christian version of American history. And then there’s Cynthia Dunbar, an attorney and one-time professor at Liberty University School of Law. She’s another big pusher of the Christian America currency. Her 2008 polemic One Nation Under God proclaims that the Christian “foundational truths” on which the nation rests are being “eroded” by a “socialistic, secularistic, humanistic mindset” from which Christians need to take back the country.

Unlike some of the wackier positions taken by evangelicals—think Rapture—the claim that America was founded as a Christian nation has gone relatively mainstream. This is the case largely because the media-savvy Christian Right is good at getting across its message. A 2007 First Amendment Center poll revealed that 65 percent of Americans believe the founders intended the United States “to be a Christian nation”; over half of us think that this intention is actually spelled out somewhere in the Constitution. Conservative politicians sensitive to the way the wind blows are careful to echo the sentiment, or at least not to dispute it, even if they’re not particularly religious themselves. Recent GOP presidential aspirants Sarah Palin, Michele Bachmann, Newt Gingrich, and Rick Perry championed the claim with gusto. Even John McCain, who usually left the Bible-thumping to his Alaskan running mate, jumped on the bandwagon in his failed 2008 bid for the presidency by assuring a Beliefnet interviewer that “this nation was founded primarily on Christian principles” and that he personally would be disturbed if a non-Christian were elected to the highest office in the land.

So the notion that America was founded as a Christian nation is widespread. In the currency of ideas, it’s the ubiquitous penny. But like an actual penny, it doesn’t have a lot of value. That so many people think it does is largely because they don’t stop to consider what “founded as a Christian nation” might signify. Presumably the intended meaning is something like this: Christian principles are the bedrock of both our political system and founding documents because our founders were themselves Christians. Although wordier, this reformulation is just as perplexing because it’s not clear what’s meant by the term founders. Just who are we talking about here?

There are three primary candidate groups, and each is regularly invoked by the Christian Right. Some say that the founders of the nation were the Puritans, the “original settlers” of the New World. (Never mind that they’re not the original English settlers; that honor goes to the ragtag and much less prudish Jamestown lot.) Others contend that the real founders of the country were the people who actually lived in the colonies at the time of the revolution. But the most widely recognized candidates are the men at the center of the struggle for independence and the subsequent formation of the republic who have since been enshrined as the “Founding Fathers.”

Puritans as Founders

Cynthia Dunbar is among those who believe that the Puritans who began migrating to New England in the first half of the seventeenth century are our nation’s founders. In her One Nation Under God, she applies John Winthrop’s famous 1630 city-on-a-hill rhetoric about the Massachusetts Bay Colony’s destiny to the United States. “We as a nation were intended by God,” she writes, “to be a light set on a hill to serve as a beacon of hope and Christian charity to a lost and dying world.” To clinch her argument, Dunbar appeals to the Mayflower Compact, a covenant signed by slightly fewer than half of the original Mayflower Pilgrims in 1620. Quoting the part of the Compact that reads, “Having undertaken for the glory of God and advancement of the Christian faith ... a voyage to plant the first colony,” Dunbar comments that “this is undeniably our past, and it clearly delineates us as a nation intended to be emphatically Christian.”
No less an authority than Alexis de Tocqueville shares her sentiment, although in a less heavy-handed way. In his Democracy in America(1835 and 1840), he argued that the basic principles upon which the American experiment is based—equality and democracy—were inspired by Puritan covenants such as the Mayflower Compact. They established communities in which local independence, the “mainspring and lifeblood of American freedom,” could flourish, thus preparing the way for a “completely democratic and republican” form of national government.

This sounds good on a first run-through. But the problem is that both Dunbar and de Tocqueville miss important points. The Mayflower Compact that Dunbar thinks establishes the nation on a Christian footing is clearly more political than religious. She quotes from the document’s preamble, which in fact does contain conventional references to God, but ignores the purely secular meat of the document. Signatories bind themselves “into a civil body politic” for the sake of enacting “just and equal laws, ordinances, acts, constitutions, and offices, from time to time, as shall be thought most meet and convenient for the general good of the colony”—period. The Mayflower Compact may ceremonially invoke God, but its substance is religiously neutral. And even in its opening reference to God, there’s not a breath of anything specifically Christian.

De Tocqueville gets it right when he claims that the Puritans established self-regulating local communities. But he overplays his hand when he says that these are prototypes of democratic and republican forms of government, because the sorry truth is that the Massachusetts Bay Colony was more theocratic than democratic. Repression of religious dissent—including the public execution of Quakers and harsh restrictions on dress, behavior, and “secular” forms of entertainment—are representative of the oppressive bigotry that characterized Puritan settlements. It’s difficult to see any common denominator between Puritan polity and the principles of the early Republic except the bare fact that both advocated “just and equal laws.” But the salient point of comparison is not, of course, the mere advocacy but rather the contentof those laws, and the theocratic drift of the Puritan ones obviously clashes with the republic’s careful separation of church and state. The conclusion is obvious: the Puritans may have founded the Massachusetts Bay Colony, which historically preceded the United States, but they didn’t found the United States. To claim otherwise is to fall victim to one of the oldest fallacies on the books, post hoc ergo propter hoc, the hasty assumption that because A precedes B, A causes B.

Christian Majority as Founders

So much for the Puritans. What about the second candidate group, the people who actually lived in the colonies when the United States was born and consented to its creation? Weren’t they by and large Christian? And if so, wouldn’t the general will have been that the new nation reflect prevailing Christian beliefs and values? (Televangelist D. James Kennedy once threw his weight behind this assertion by bizarrely arguing that because the colonial Jewish population was so small, the Christian population had to have been overwhelmingly large.)

This is a reasonable question. But the answer isn’t as apparent as some members of the Christian Right believe, because the issue is more complicated than they allow. (The tendency to oversimplify is one of the movement’s defining characteristics.) It’s not obvious that most late-colonial residents were “Christian” in the narrow sense meant by present-day evangelicals. In the final quarter of the eighteenth century, American religious sensibilities were in flux. Because membership in religious denominations was voluntary—a welcome reaction to the earlier Puritanical repression of religious choice—inherited membership and denominational allegiance were weak. Laypeople hopped from one sect to another in such numbers and with such frequency that Richard Hofstadter calculated in his 1974 Anti-Intellectualism in American Lifethat upwards of 90 percent of Americans were unchurched during the revolutionary and early republic years. Historian James MacGregor Burns agreed, noting in his 1983 The Vineyard of Liberty that the years immediately following the Revolution were a “wintry season” for Christianity in America.

What this suggests is that it is misleading to speak of Christian belief from that period as a uniform, monolithic set of principles and doctrines (just as it’s misleading to so characterize modern-day Christian belief, by the way), because people either migrated from denomination to denomination or rejected affiliation altogether. Adding to the confusion was the plurality of Christian interpretations that they had to choose from. There were Quaker, Dunker, Baptist, Moravian, Methodist, Lutheran, Shaker, German Reformed, Anglican, Congregationalist, and Roman Catholic beliefs. Moreover, there was a spectrum of theological opinion within each of these denominations, ranging from the extremely conservative to the extremely liberal. Quakers, Moravians, Baptists, Shakers, and Dunkers were explicitly leery of attempts to marry religion and politics, but even those denominations that accepted in principle a connection disagreed on its specific parameters. In short, Christians’ attitudes about the role their faith should play in the governance of the new nation were all over the map.

To illustrate just how ambiguous the label “Christian” could be, consider the example of James Madison, who was consecrated Episcopal bishop of Virginia in 1790. (No, not that Madison. The bishop shared a name with his cousin, the fourth president of the United States.) Even though he shepherded one of the most populous Episcopal dioceses in the country, Madison was criticized even during his lifetime for being something of a freethinking Deist. Clearly influenced by the Enlightenment era’s emphasis on natural science—he taught the subject for years at the College of William and Mary—Madison, as one of his fellow bishops delicately put it, was thought to “philosophize too much on the subject of religion” to be entirely orthodox. Despite his Church of England connection, Madison was also a patriot during the revolution, ardently championing political equality and democracy. But it’s difficult to tell whether his reasons for doing so are attributable to Christian conviction or his study of political theorists such as John Locke. Both influences are intermingled in his writings and sermons.
Madison was by no means unique. Many of his formally Christian contemporaries held similarly heterodox views that would be quite unacceptable to today’s Christian Right. As I argued in my 1998Benjamin Franklin and His Gods, Americans in the late colonial and early republic years were often caught in a worldview clash between Christianity on the one hand and the Enlightenment on the other. Some reacted by clinging to their Christian faith and blasting Enlightenment “infidelity” with jeremiads, while others, as Jonathan Edwards grumbled in 1773, “wholly cast off the Christian religion and are professed infidels.” College students at Yale, Princeton, Harvard, King’s (present day Columbia), William and Mary, and Dartmouth gleefully embraced, at least for a while, the Enlightenment’s anti-biblical religion of Deism. In the 1790s, thanks largely to the efforts of Deist crusader Elihu Palmer, militant Deism—which rejected miracles, revelation, the authority of Scripture, and the divinity of Jesus—enjoyed a spurt of rather astounding popularity. But many people who lived at the founding of the nation tried to steer a middle course that combined, even if awkwardly at times, elements from both Christian and Enlightenment worldviews. This made for any number of nuanced possibilities when it came to Christian commitment, all of them much more complex than the Christian Right would prefer to acknowledge.

Christian Founding Fathers

Since colonial and early republic Christians were no more uniform in belief than today’s Christians are, we can dismiss the claim that the United States was intended to be Christian because the general population at the time of independence was Christian. But what about the position that the leaders in the struggle for independence—names that every American kid immediately recognizes—were Christian and intended the republic to reflect their religious convictions? This is the argument to which the Christian Right most commonly appeals. Marshall, Barton, and Dunbar champion it with gusto, as do dozens of other evangelical authors such as John Eidsmore (Christianity and the Constitution: The Faith of Our Founding Fathers, 1995); Tim LaHaye of apocalyptic Left Behind series fame (Faith of Our Founding Fathers, 1994); and Gary DeMar (America’s Christian Heritage, 2003). As we’ve seen, it’s also received wisdom for a majority of Americans.

The problem, as scholar after scholar has pointed out—how often must it be repeated before the reality breaks through the myth?—is that it simply isn’t true. The Founding Fathers weren’t all Christian. Some, of course, were: Patrick Henry (Episcopalian), John Hancock (Congregationalist), John Jay (Episcopalian), and Sam Adams (Congregationalist), for example, were all devout and pretty conventional Christians. But the big players in the founding of the United States—such men as Benjamin Franklin, Thomas Paine, George Washington, Thomas Jefferson, James Madison, John Adams, and probably Alexander Hamilton—weren’t. Each of them was much more comfortable with a deistic understanding of God than a Christian one. For them, the deity was an impersonal First Cause who created a rationally patterned natural order and who was best worshiped through the exercise of reason and virtue. Most of them may have admired the ethical teachings of Jesus (although Paine conspicuously did not), but all of them loathed and rejected the priestcraft and superstition they associated with Christianity.

Despite this, the Christian Right insists on adopting these men (aside from Paine) as Christian founders. The usual justification is that each of them (again, except Paine) belonged to an established Christian denomination. But as we’ve already seen, formal membership by itself wasn’t then (or now) a fail-safe measure of an individual’s religious beliefs. As David Holmes compellingly argues in his 2006 Faiths of the Founding Fathers, other factors—such as the way in which the founders referred to God, opinions they expressed in personal correspondence, and their involvement in church life—must be considered as well. None of the founders, for example, used conventional Christian language when writing or speaking about God. Instead, the terms they favored—Supreme Architect, Author of Nature, First Cause, Nature’s God, Superattending Power—were unmistakably deistic. (One of the Christian Right’s most telling blind spots is its failure to pick up on the founders’ obviously non-Christian nomenclature.) Another indicator of their lack of conventional Christian commitment is the fact that while all of them had been baptized as infants, an initiation that of course made them nominally Christian, none who were members of denominations that offered the sacrament of Confirmation sought it as adults. Moreover, they generally did not take Communion when it was offered, nor did they typically involve themselves in church activities. Even when they did, it was no clear signal that they were orthodox Christians. George Washington, for example, served on the vestry in several Episcopalian parishes. But he avoided Confirmation and Communion, never used give-away Christian terms such as Lord or Redeemer, and rarely even referred to Jesus by name. Finally, none of them gave the slightest hint in their personal letters or diaries that they considered themselves committed Christians.

The obvious conclusion is that it’s a stretch to call the leading founders “Christians,” particularly of the evangelical sort. Most of them may not have been contemptuously anti-Christian (although Paine certainly was, with Jefferson a close second), but neither did they have much use for Christianity. They had so little regard for its central tenets, in fact, that they couldn’t square it with their consciences to salt their public statements with even an occasional Christian phrase. In this way they displayed an integrity that few vote-hungry politicians in our day feel moved to emulate. Revealingly, only a handful of their contemporaries seemed particularly bothered by their obvious indifference to Christianity, and those who made a big deal of it generally did so more for political reasons—as when Federalists attacked the “infidel” Jefferson in the presidential elections of 1800 and 1804—than from any sense of outraged orthodoxy. Then as now, what pretended to be a religious battle was often a political one.

Perhaps the most obvious way in which the founders intentionally used non-Christian language is in their drafting of the nation’s two defining documents, the Declaration of Independence and the U.S. Constitution. In the Constitution, no mention whatsoever of God is made except in the document’s date (“Done ... in the year of our Lord ...”), an inexplicable oversight if its framers intended it to lay the foundation for a Christian nation. The Declaration of Independence does use religious language, but the religion is obviously Deism rather than Christianity. God is referred to as “Nature’s God,” the “Creator” of the physical “Laws of Nature” in addition to the “unalienable [moral] Rights” to life, liberty, and the pursuit of happiness. To interpret the document as even suggestively Christian is sheer fantasy or worse. On the contrary, both it and the Constitution clearly serve as precedents for the famous passage in the 1797 Treaty of Tripoli—one which the Christian Right loves to hate—which affirms that “the Government of the United States of America is not, in any sense, founded on the Christian religion.” The treaty, which sealed a routine diplomatic agreement between the U.S. and the Muslim state of Tripolitania, was unanimously ratified by the Senate and publicly endorsed and signed by President John Adams. That it was passed without debate or dissent attests to the fact that neither the president nor senators found its denial of a Christian foundation to the nation objectionable.

The claim that America was founded as a Christian nation, therefore, just doesn’t ring historically true. But as with all counterfeit coins, there’s enough genuine metal mixed in with the paste to fool unsuspecting consumers. To deny the obviously false claim that the founders of the United States intended it to be Christian doesn’t imply that certain sentiments and values held by Christians played no role in the nation’s founding. As we’ve seen, the Puritans endorsed equality and self-government. Baptists and Quakers, probably because of their sometimes savage persecution by Puritans, championed the separation of church and state. Deistic nominal Christians, such as Bishop James Madison, embraced the political ideals of tolerance and republicanism. But none of these beliefs are uniquely Christian, and in fact they’re much more obviously at home in Enlightenment liberal thought than eighteenth-century orthodox Christian theology. One could have held them as a Christian, but holding them didn’t necessarily mean one was a Christian. Such beliefs could just as well have been held by a Deist or even a thoroughgoing secularist. Nonetheless, to the extent that some Christians held them, it is undeniable that Christian-owned principles were part of the convergence of beliefs that defined the new nation. This is, however, a far cry from saying that the nation was explicitly built upon Christian principles.

But let’s concede, just for the sake of the argument, what is patently false: that the nation in fact was founded on Christian principles and intended by its founders to be Christian. The obvious perplexity that then arises is why the Christian Right is so convinced that a “socialistic, secularistic, and humanistic mindset” has jerked the nation up by its Christian roots. The founding documents framed by our “Christian” forebears are still venerated today. The same protection of religious liberty endorsed by our “Christian” founders is still fiercely championed by political leaders and the courts. So what’s been uprooted? What’s been lost that our “Christian” founders put in place?

The answer, of course, is that nothing has been lost, and the Christian Right knows it. What evangelicals really want is something that never was, and that’s an explicitly sectarian statement of commitment to Christ worked into the warp and woof of national law and public policy. What they want is the Christian theocracy that the founders explicitly rejected. For all their political thundering against the intrusive ways of “big government,” what evangelicals yearn for is strict legal codification of their version of Christian values. What never occurs to the Christian Right is that if the founders in fact had been Christians intending to create a commonwealth faithful to Jesus’s teachings, the United States today would be a nation quite different from what evangelicals think it should be. There would be no standing army, no divide between rich and poor, no ethnic hatred or closed borders, no persecution of religious dissent, no national chauvinism, a lot less holier-than-thou finger-pointing, and a lot more forgiveness and compassion.

Now, that would be a shining city built on a hill.

Kerry Walters, William Bittinger Professor of Philosophy at Gettysburg College, Pennsylvania, is the author or editor of twenty-five books, including Revolutionary Deists: Early America’s Rational Deists, a 2011 Choice Outstanding Book; a critical edition of Thomas Paine’s Age of Reason (Broadview, 2011); and Atheism: A Guide for the Perplexed (Continuum, 2010).

Researchers Release Genetically Engineered Mosquitoes

Published by MIT

Researchers Release Genetically Engineered Mosquitoes

The insects were created with the aim of controlling dengue fever, but opponents worry that not enough testing has been done to warrant release into the wild.

Emily Singer

Tuesday, November 1, 2011

The Aedes aegypti mosquito is the sole transmitter of the virus behind dengue fever. Credit: Derric Nimmo/Oxitec Ltd

The first open field tests of genetically engineered mosquitoes, carried out in the Cayman Islands, show that the insects can successfully compete with their wild counterparts for mates. The mosquitoes are designed to help combat dengue fever, a potentially fatal infection that afflicts 50 to 100 million people per year, mostly in tropical countries. No drugs or vaccines exist to treat or prevent the disease, so prevention efforts are focused on eradicating the carriers, a single species of mosquito.
The mosquitoes, created by a U.K. based start-up called Oxitec, are engineered to carry a mutation that makes them die if not fed a specific chemical. Larval insects can survive in the lab with special food; but once the males are released in the wild and mate, subsequent generations die, reducing the population as a whole.
According to unpublished research from Oxitec, releasing 3.3 million engineered mosquitoes in Grand Cayman Island reduced population by 80 percent. The findings follow a smaller study carried out in 2009, whose results were published Sunday in the journal Nature Biotechnology.
Previous insect control efforts have included sterilizing male animals and releasing them to the wild, where they mate but produce no offspring. Sterile male Mediterranean fruit flies, for example, are used worldwide to protect fruit and vegetable crops. But this does not work for mosquitoes, because the technique used to sterilize the insects also weakens them, meaning they cannot compete for mates.
The lethal gene strategy, which theoretically stops genetically engineered organisms from spreading, is somewhat similar to that used in the fictional Jurassic Park; like the dinosaurs in the movie, the mosquitoes are engineered to require a certain substance to survive. But just as in Jurassic Park, experts say it isn't foolproof.
"The progeny of crosses between [genetically engineered] males and wild females in the laboratory survived at the disturbingly high rate of 3.5%," writes Todd Shelly, a researcher at the US Department of Agriculture-Animal and Plant Health Inspection, Waimanalo, Hawaii, in a commentary accompanying the publication in Nature Biotech.
A second concern is that the engineered lethality gene could somehow be transferred to other environmentally-important insects, such as those vital for pollination.

Larvae engineered to require a certain chemical to survive are marked with red or green fluorescent proteins. Credit: Derric Nimmo/Oxitec Ltd The Aedes aegypti mosquito is the sole transmitter of the virus behind dengue fever. Credit: Derric Nimmo/Oxitec Ltd

Florida is already considering trying the new mosquitoes. According to an article in the New York Times,

Authorities in the Florida Keys, which in 2009 experienced its first cases of dengue fever in decades, hope to conduct an open-air test of the modified mosquitoes as early as December, pending approval from the Agriculture Department.
...The Agriculture Department, meanwhile, is looking at using genetic engineering to help control farm pests like the Mediterranean fruit fly, or medfly, and the cotton-munching pink bollworm, according to an environmental impact statement it published in 2008. Millions of genetically engineered bollworms have been released over cotton fields in Yuma County, Ariz.

GE mosquito release “remains on indefinite hold” -- but for how long?

Friends of the Earth

GE mosquito release “remains on indefinite hold” -- but for how long?

Posted May. 11, 2012 / Posted by: Eric hoffman

The Keynoter newspaper in the Florida Keys reported that plans to release genetically engineered mosquitoes in Key West “remain on indefinite hold.” This came after an announcement by the Florida Keys Mosquito Control District that this controversial experiment “will only take place once all necessary regulatory and ethical approvals have been obtained, from regulatory agencies at both federal and state level, based on the results of independent, rigorous, scientific review.”

FKMCD and its director, Michael Doyle, should be applauded for not rushing ahead with this experiment before receiving federal and state approval, or before these genetically engineered mosquitoes and their possible risks are independently and properly assessed.

The debate over which federal and state agencies would oversee the release of genetically engineered mosquitoes in the U.S. has been filled with confusion but is starting to become a bit clearer. Ever since the USDA stated back in November 2011 that it will not regulate the release of genetically engineered mosquitoes in the Florida Keys, as originally expected, FKMCD and Oxitec (the creators of the GE mosquito) have been scrambling to find a federal agency that will take the lead. It appeared the federal agencies were playing a game of regulatory “hot potato,” each one passing on taking the leading role.
But just last week, Oxitec stated in a Bloomberg article that it has “opened an investigational new animal drug file with the Food and Drug Administration.” While this might sound wonky and bureaucratic, it is actually a telling move on the part of Oxitec -- one that starts to clarify if – and how - these genetically engineered mosquitoes will be regulated in the U.S.

In January 2009 the FDA came out with Guidance 187 which stated that the agency would regulate genetically engineered animals as “new animal drugs.” This idea originated in the Reagan administration and its’ Coordinated Framework for the Regulation of Biotechnology, which stated that the U.S. didn’t need any new laws to regulate biotechnologies or their products --instead old laws could be interpreted in order to accommodate new technologies.
And so the FDA decided to use laws originally written to approve new animal drugs (think: vaccines for cattle, antibiotics added to chicken feed) to regulate the use of genetically engineered animals, and now insects. The FDA’s twisted logic reads like this: drugs change the composition and function of an animal; the genes inserted into an animal also change their composition and function; so ipso facto GE animals are new animal drugs. If this sounds like something out of a Kurt Vonnegut novel to you, you are not alone.

We have been fighting this wacky interpretation of how GE animals should be regulated for years. The FDA is also trying to approve a genetically engineered salmon, which would be the first-ever GE food animal, as a “new animal drug” as well. Yes, a fish we are supposed to eat is being approved as a new animal drug. And this classification makes even less sense for GE mosquitoes.
There are two overarching problems with using new animal drug laws to approve genetically engineered mosquitoes. First, classifying a genetically engineered mosquito as a ‘drug’ is the regulatory equivalent of trying to fit a square peg into a round hole. These GE mosquitoes aren’t the same thing as, say, a new animal feed additive; an additive can’t reproduce in the wild, bite humans and spread disease, or fly to another part of town. Therefore the questions regulators would need to ask regarding risks are entirely different. So while the FDA might be able to determine the risks of an animal feed additive, that doesn’t mean it can do the same for GE mosquitoes. The FDA does not have the necessary expertise to judge the mosquitoes’ environmental effects and has a poor track record of collaborating with other agencies that could provide scientific and technical analysis. This is not the fault of the FDA, necessarily, since we can’t expect veterinary medicine experts to understand insect ecology. But it does mean our regulatory system has failed to keep up with new technologies and the current system is broken.

The second broad problem is the lack of transparency around new animal drug applications. As we have unfortunately learned through the FDA’s process for approving the GE salmon under these same laws, the public has little knowledge or input into the agency’s decisions; the FDA had the GE salmon application for over 10 years before it even announced the existence of the application and when it did, it was only because the application was close to final approval. The public only received information that the GE salmon company and the FDA deemed was not “confidential business information.”

With the current process, the FDA could approve these GE mosquitoes for release as an “investigational new animal drug” and the public would not know, nor would it have any data, until the decision has already been made. “Independent, rigorous, scientific review” cannot happen in secret, behind closed doors. That would be bad science, bad policy, and would set a bad precedent for how GE insects are regulated.

The indefinite delay of genetically engineered mosquitoes in the Florida Keys is a victory for the grassroots organizations in the Keys, but unfortunately it may only be temporary. Now that we know Oxitec has a file open with the FDA to approve its mosquitoes as an investigational new animal drug, approval could come at any time and the public would have no warning or input.

Using antiquated laws that are ill-equipped to deal with novel risks posed by GE insects would set a dangerous precedent here in the U.S. and abroad and should not be allowed to continue. The time has come to actually write laws that address the novel risks posed by genetically engineered animals and insects, and to develop proper risk assessment models to measure the dangers.

The only way to stop this experiment outright is for the Florida Keys Mosquito Control District to announce it has cancelled its plans to release genetically engineered mosquitoes or for the FDA to stand up for the Keys residents and reject this application. If not, don’t expect this issue to disappear any time soon.

Saturday, June 9, 2012

Greece: A Dysfunctional Nation

A Dysfunctional Nation

By John Mauldin | June 9, 2012

dysfunctional [dɪsˈfʌŋkʃən^əl] adj

1. (Medicine) Med (of an organ or part) not functioning normally

2. (especially of a family) characterized by a breakdown of normal or beneficial relationships between members of the group

European leaders launched the euro project in the last century as an experiment to see whether political hope could become economic reality. What they have done is create one of the most dysfunctional economic systems in history. And the distortions inherent in that system are now playing out in an increasingly dysfunctional social order. Today we look at some rather disturbing recent events and wonder about the actual costs of that experiment. What type of "therapy" will be needed to treat the dysfunctional family that Europe has become? And maybe I'll throw in a "fun" item to finish with, so let's get started.

A Dysfunctional Nation

Michael Lewis has documented quite tellingly in Boomerang the dysfunctional country that is Greece – how citizens avoid taxes, how over 600 categories of workers can retire at the age of 50 with full pensions, and how fraud and corruption are endemic. Other stories have surfaced about how few doctors report more than 10,000 euros of income and how few professionals pay their property taxes.
Recently, when the current Greek government committed to actually collect some taxes in order to get more loans, a bureaucrat decided that a great way to collect property taxes would be to include them in people's electricity bills, a move that caused an uproar. Lawsuits followed, as the national power company tried to cut off electricity for nonpayment. In a country where it can take a decade for a legal matter to get on a court docket, a court rather quickly took up the case and ruled it illegal for the power company to cut off service for non-payment. This ruling led to a massive financial loss by the power company as people simply stopped paying their electric bills.
The government had to step in with a rather large chunk of cash to keep the power on. As of May 1, the power company announced, it would no longer collect property taxes. The natural gas company threatened to cut off supplies to the electric utility for nonpayment, and emergency meetings are being held to"… avert the collapse of the natural gas and electricity system."
The credit system in Greece is in a shambles, and there has been an open bank run this year. Reports that hospitals cannot get necessary life-saving medicines abound, as there is no more credit to be had from most manufacturers. Unemployment is at 22%, and youth unemployment is over 50%. "A collapse in the country's economy has forced many Greeks to turn to black market barter economies and has left millions financially devastated, with no hope of finding an income stream for the foreseeable future." ( infowars.com)
The last election resulted in no possibility of a governing coalition, and new elections are scheduled for next weekend (June 17) – except that the employees who run the elections are threatening to strike if they are not given more pay. The head of the government workers union said Thursday that the union will hold a two-day strike on June 16-17. He also said municipal employees will refuse to do any election-related work until then. We will now see whether the courts will declare such a strike illegal and whether the members will honor a court decision. ( http://www.washingtonpost.com/business/greek-municipal-workers-call-electoral-strike-threatening-to-derail-crucial-june-17-vote/2012/06/07/gJQAlhOjLV_story.html)
Greece was already in enough turmoil, with no clear winner emerging in the last polls that were taken this week. (Note: It is against Greek law to publish the results of a poll less than two weeks before an election.) And then there was the "debate."
I assume that by now you have seen the video of the televised debate among representatives of the seven Greek parties. In a bit of poor planning, the very nationalistic Golden Dawn party head, a rather solid-looking young body builder, was seated next to the Communist Party leader, who is a lady. A few insults were exchanged, some water was thrown in the face of a rather pleasant-looking young lady (a representative of a leftist party) across the table from the Golden Dawn guy, there was a slap on his arm with a folder by the Communist Party leader; and then they were on their feet and Mr. Golden Dawn was repeatedly slapping and then punching Ms. Communist Party.
If for some reason you have not viewed this short but exciting clip, here is a link: http://www.rt.com/news/greek-politician-slaps-rival-278/ . Or you can Google "golden dawn greek slap" and get a link to a report in your language of choice. If you choose the German version from Der Spiegel, you can hear the word neo-Nazi repeated several times by the German reporter.
This exchange provokes a few thoughts. First, incidents of violence and vigilantism in Greece are rising, along with the lawful public demonstrations. Whatever veneer of civility that was left was ripped away by the boorish behavior of the Golden Dawn representative.
Second, this fracas will now dominate the national conversation. Rather than focusing on what they should do about remaining in the eurozone, accepting or rejecting austerity, and putting together some sort of coalition that can govern the country, they will be focused on this event. Nine days before an election in which no party seemed to have a clear lead or a path to a ruling coalition, the results are now even more in question. Golden Dawn had some 6% of the Greek vote. Will it maintain that percentage? If not, where will its votes go? Will this help or hurt the mainstream conservative or left-of-center parties?
Whether it be families or nations, such a level of dysfunctionality almost always ends in tears. The "slap" is just one more telling incident in a country that is on the brink of self-destruction. It is very possible that the winner of the election will be a party that wants to reject austerity but believes that the rest of Europe will give them the money they need to continue to pay their public employees, maintain services, and keep the government functioning. The reasoning seems to be that Europe will do that because they need the Greeks to continue to pretend that they will pay off their national debt to the European governments and ECB.
Why are we still fixated on Greece? Even though Greece is small, it matters; because if Greece leaves the euro then the markets will immediately ask, "Who's next?" And while a year ago everyone thought the answer was Portugal, the market is now looking hard at Spain, which is on the same path to insolvency that Greece was only a few years ago.
Spanish government leaders are now beginning to admit they must have help, as it appears they will soon be frozen out of the bond market, if that has not happened already. As I have written, it will take a massive commitment of European (read German) money to save Spain, and it's not a one-time commitment. It is not just 100 billion euros to re-fund Spain's banks. If Spain gets frozen out of the market, adding another €100 billion in debt will not make things better, when there is a nearly 10% fiscal deficit, unemployment as bad as Greece's, and an economy that is in freefall.
Europe is going to have to buy all Spanish debt for years. And not just new debt but all the old debt that is coming due and must be refinanced. We are talking hundreds of billions of euros. And if there is a bank run on the order of Greece's? The number just keeps getting bigger. To think it will be anything like the €46 billion being talked about by the IMF today is to simply ignore economic reality.
That money will have to come from somewhere. Either the ECB will have to monetize it directly (possible but not likely) or a pan-European entity like the ESM will have to be allowed to become a bank and then apply to the ECB for loans and a capital infusion in order to then bail out Spanish (and other) banks.
It is obvious, at least to your humble analyst, that if the eurozone is to survive several things must happen. First, there must be something created on the order of a European FDIC. Banking guarantees and regulation must become a European responsibility, not a country responsibility. How would it have worked if the rest of the US had decided that New York should bail out its own banks, when they had their crisis in 2008?
Second, if the ESM is allowed to become a bank, then what will those guarantees look like? Because the original agreement of member countries to back a specific and limited amount of debt will now be increased ten-fold. And that will mean something in the neighborhood of €4-5 trillion.
How could they need that much? The answer is, because it will not be just Spain. Can Italy be far behind, given the unfolding European recession? And the French banks? France itself, given the new policy direction of its government and its own massive unfunded liabilities?
Assume it is just €4 trillion, spread over a few years. Germany will be responsible for at least 25% of that amount, or about 40% of their GDP. And that assumes that Spain, Greece, Ireland, et al. will be good for their portions.
Will Germany want to take on such a massive new debt? The periphery countries already owe the German Bundesbank over €1 trillion. German debt-to-GDP is already at 80%. German credit default swaps are rising in cost.
If Germany takes that first step, it must be prepared to keep marching, because to stop at any point will mean even more pain, since they will still be responsible for their share of any debt created after that first step. As they say at the poker table, "In for a dime, in for a dollar."
Certainly, if they are to take on such a debt, there must be guarantees of fiscal control by the nations who need help.
And that means a tighter fiscal union. When the euro was created, European leaders thought that a common currency would naturally lead to a fiscal union. Monetary unions without fiscal union always become dysfunctional.
Or there will have to be direct monetization of the debt by the ECB, which goes against the policy that Germany thinks it agreed to.
Either way, it is a very large change in position for Germany.
There are three problems that Europe must solve. They have a sovereign debt problem and a resulting banking debt problem. Both of these are evident and there might be some solution, given time and money.
But the third problem is the more difficult one. That is the trade imbalance between Germany and the peripheral countries and the differing levels of productivity of their workers. Trade deficits must be brought into line. The usual way to do this is through currency devaluation by the country with the trade deficit. That is not possible for the countries in the eurozone. So, the only other way is for the workers of an uncompetitive country to accept lower wages. Since no one thinks they are underpaid, that will happen slowly and painfully and mean a protracted recession or depression.
Which leads to voter frustration and frayed nerves that spill over into dysfunctional actions. It also leads to political changes.
Let's hold that thought for a moment. In the weekend Financial Times, my friends Niall Ferguson and Nouriel Roubini have written an op-ed calling for a European banking authority and tighter fiscal union, if the eurozone is to survive. http://www.ft.com/intl/cms/s/0/c49b69d8-b187-11e1-bbf9-00144feabdc0.html#axzz1xHuDXIr4
Let's look at a few paragraphs from the op-ed, with its leading question:

One Minute to Midnight?

"Is it one minute to midnight in Europe?
"We fear that the German government's policy of doing 'too little too late' risks a repeat of precisely the crisis of the mid-20th century that European integration was designed to avoid.
"We find it extraordinary that it should be Germany, of all countries, that is failing to learn from history. Fixated on the nonthreat of inflation, today's Germans appear to attach more importance to 1923 (the year of hyperinflation) than to 1933 (the year democracy died). They would do well to remember how a European banking crisis two years before 1933 contributed directly to the breakdown of democracy not just in their own country but right across the European continent….

"But now the public is finally losing faith and the silent run may spread to smaller insured deposits. Indeed, if Greece were to leave the eurozone, a deposit freeze would occur and euro deposits would be converted into new drachmas: so a euro in a Greek bank really is not equivalent to a euro in a German bank. Greeks have withdrawn more than €700m from their banks in the past month.
"More worryingly, there was also a surge in withdrawals from some Spanish banks last month. The government's bungled bailout of Bankia has only heightened public anxiety. On a recent visit to Barcelona, one of us was repeatedly asked if it was safe to leave money in a Spanish bank. This kind of process is potentially explosive….
"Until recently, the German position has been relentlessly negative on all such proposals. We understand German concerns about moral hazard. Putting German taxpayers' money on the line will be hard to justify if meaningful reforms do not materialise on the periphery. But such reforms are bound to take time. Structural reform of the German labour market was hardly an overnight success. By contrast, the European banking crisis is a real hazard that could escalate in days.
"Germans must understand that bank recapitalisation, European deposit insurance and debt mutualisation are not optional; they are essential to avoid an irreversible disintegration of Europe's monetary union. If they are still not convinced, they must understand that the costs of a eurozone breakup would be astronomically high – for themselves as much as anyone.
"After all, Germany's prosperity is in large measure a consequence of monetary union. The euro has given German exporters a far more competitive exchange rate than the old Deutschmark would have. And the rest of the eurozone remains the destination for 42 percent of German exports. Plunging half of that market into a new Depression can hardly be good for Germany.
"Ultimately, as Angela Merkel, the German chancellor, herself acknowledged last week, monetary union always implied further integration into a fiscal and political union. But before Europe gets anywhere near taking this historical step, it must first of all show it has learnt the lessons of the past. The EU was created to avoid repeating the disasters of the 1930s. It is time Europe's leaders – and especially Germany's – understood how perilously close they are to doing just that."

The Triumph of Hope

When the Eurozone was created it was the triumph of hope over the reality of political and economic discord. Somehow, countries that had different languages, customs and national characteristics; that had fought each other for centuries; and that all had different views of themselves in relation to the rest of their fellow Europeans, were supposed to come together into a fiscal union, because they now shopped with the same money.
Rather than simply creating a free-trade zone and allowing for a common understanding and economic integration to develop over time, the European leaders wanted to jump-start the process. And they had numerous critics. Many of the best and brightest in the economics world pointed out the problems.
The reality is that the euro has never been a real currency. It is still an experiment. If it is even around in five years, it will be a true currency, as it will have endured its first real crisis. The peripheral countries used the low interest rates of the euro to borrow heavily (both privately and publicly) and got in trouble, and now the true costs of the euro project are being revealed.
A break-up will cost multiple trillions of euros. Keeping the eurozone together will cost multiple trillions of euros. But keeping the eurozone together will also cost countries a substantial loss of sovereign independence. When voters all over Europe signed on for the euro project, they did not think they were giving up their national independence and the right to control their own budgets.
Will Spain or Italy or Germany be willing to allow a European institution to set their budget priorities and limits? To set their retirement policies and health care? To tax them independently? That is what is meant when one talks fiscal integration. Germany is now a minority on the ECB and is beginning to realize it has lost control. Will its voters want to give up political control and become a minority in a "United States of Europe"?
That is the true problem. When real economic difficulties arise, as in Greece or Spain, voters tend to get rather touchy. Tensions rise. And the center does not hold.
George Soros said this week that Europe has three months to resolve its problems. Nobel Laureate Joseph Stiglitz said Soros was being optimistic. A decision is going to have to be made quite soon about Spain, and likely before it becomes clear whether Greece will stay in or leave the euro. And that makes it difficult to give Spain aid that is not offered on equal terms to those Greece got. Monetizing Spanish debt (however you want to do it or whatever you want to call it) when Spain is running an almost 10% deficit, when it had agreed to a little over 5% only a few months ago, will not sit well with Greece.
But it now seems that Europe is unlikely to get the time it needs, absent some rabbit pulled out of its monetary hat to allow Spain to borrow money at rates that it can afford. The Endgame approaches. It will be a long summer.
I get asked all the time if the euro will break up. The honest answer is, we really don't know. I think the economically rational thing to do in the very long term is for some countries to figure out how to leave the euro, but that is more a political question than an economic one. And if you can tell me what politicians and voters will do in a political crisis and deepening recession, then your crystal ball is less foggy than mine.
I think it is 50-50. The drive to hold the euro together will go head to head with national self-interest. Right now, it depends on whom you ask as to what answer you get. But I do not think we will be asking the question much longer. Soon enough, we will know.
To be clear, Europe has no good choices, only a choice among very distressing and expensive options. This will not be good for them or for the world. I think we are already seeing a global slowdown, in great part due to Europe. Let us hope they get the answer right, whatever it is.

A Quadrillion Here, A Quadrillion There

Everett Dirksen was a Republican Senator from Illinois back in the '50s and '60s. He is credited with saying "A billion here, a billion there, and pretty soon you are talking about real money." It seems that thorough research does not turn him up actually saying that line, although researchers do note that one reporter said he had asked Dirksen about it and received the reply, "Oh, I never said that. A newspaper fella misquoted me once, and I thought it sounded so good that I never bothered to deny it."
But that quote has slipped into the US national memory, and whether or not he said it, it does make a real point. And that was back in the early '60s, when a billion dollars was not just a rounding error in the national budget.
Today we have become rather casual in our use of the word trillion. "A trillion dollars" slips so easily off the tongue, but it is too big a number for most of us to even fathom. Estimates of the total stars in our galaxy run between 100 and 400 billion. A trillion barrels of oil would fuel the world for over 30 years. One trillion seconds is almost 32,000 years. The mind boggles. Yet today we think almost nothing of adding a trillion dollars every year to the already bloated US debt! In fact, economists like Paul Krugman fume that we are not adding more trillions to the debt each year, as if debt brought no consequences. By this thinking, Greece should not be made to have to suffer austerity because it has taken on too much debt. Rather, other nations should be taxed to give Greece the money to go even deeper into debt that it cannot and most likely will not repay.
So, I must admit that when I came across this next item, it gave me pause. We turn now to a report published by Bloomberg and authored by my friend Dr. Gary Shilling, talking about the massive debt that has been accumulated by Japan. Gary argues that Japan is reaching a critical point where its debt cannot be financed except by extreme monetization by its central bank, because turning to world markets to sell the debt will drive up interest rates to unsustainable levels. I have made similar arguments, but that is a topic for another letter. Today, I want to quote just one paragraph. ( http://www.bloomberg.com/news/2012-06-07/strong-yen-won-t-survive-japan-s-fiscal-cliff.html)
"As Japan's government debt of 1,085 trillion yen matures over time, it will be subject to any higher refinancing rates. The average maturity of Japanese government debt is six years and 11 months. Yet 17 percent of that debt matures this year, 52 percent in the next five years and 76 percent in the next decade. Markets anticipate, so Japanese bonds throughout the spectrum will probably plummet in price and leap in yield at the first sign of a current-account deficit, maybe even before."
One thousand trillion yen. 32,000,000 years' worth of seconds. Yes, I know a yen has a few extra zeros in relation to the dollar, but we are talking about one quadrillion yen.
Are we really ready for the word quadrillion to enter the lexicon in what is supposed to be the developed world? In the case of Japan, we are apparently there. A hundred years ago, a deficit of US$1 billion would have been unthinkable. We actually had balanced budgets for most of our first 200 years, except during wars and economic crashes. And now we talk trillions, albeit in the wake of inflation that has made the word trillion less than it was 100 years ago. Will our grandchildren in the latter half of this century talk quadrillions? Or quintillions? Is that even thinkable? Let's just hope the word quadrillion doesn't come into common parlance any time soon.

New York, Chicago, Italy, and Singapore

I leave for New York Monday afternoon, arriving in time to have dinner with Art Cashin, Barry Ritholtz, Barry Habib, Rich Yamarone, and a few other friends, before I spend the following day speaking at a few private events with my partners from Altegris. I am back in Dallas Wednesday and home till the middle of next week, when I make a quick trip to Chicago for the Morningstar National Investment Conference, again with Altegris.
Then Friday evening I leave for Tuscany (with a night in Madrid) for two weeks. I will be writing from there and catching up on my reading, but a vacation for me is staying in the same place for two weeks. I will have some friends in, as well as some family, with a few side trips here and there, but I'm hoping to relax some.
I expect to be writing this letter as usual from Tuscany, although right now Ed Easterling and I are talking about revisiting some work we did in 2002 on secular bull and bear markets. We both believe we are still in a secular bear, but the question now is, when will it end? The original work was published in this letter and in Bull's Eye Investing and is the core of that book.
Wiley recently released an edited, smaller version of the book, called The Little Book of Bull's Eye Investing, which updates the main points. Given that the single most important thing for an equity investor is to know what long-term secular cycle we are in, the material is most topical. (And if you are asking what a secular cycle is, then you REALLY need to read the book). I like the way the book turned out. You can order a copy at http://www.amazon.com/Little Book.
I think it will take us at least two weeks to cover the topic, but it is important and will help us all think about something besides Europe, even if I am sitting right there in the middle of it.
On a personal note, many of you know that I quit drinking alcohol about ten months ago, for health reasons. It has helped. One of the side benefits, I thought, was that I could expand my diet somewhat, since I was no longer consuming all those calories in wine and scotch. I added bread and desserts and a lot of red meat. Then this week I got the results of my latest blood tests. It seems I now have a cholesterol problem. Nothing that changing my diet can't fix, but I have to admit, I was enjoying indulging myself and not really gaining any weight. Oh well. A little moderation is good for the soul, or so they tell me.
Oh, and we're getting really close to the launch of Mauldin Economics, with a brand-new website and an investment newsletter that will turn some heads. Stay tuned!
It really is time to hit the send button. The sun is coming up and I need to get some sleep. (I procrastinated much too long tonight.) My grandson (Henry's son) has a birthday this weekend, so the family will gather on Sunday for brunch and a party. It will be good times. But I see chicken, not steak, on my menu. Have a great week.
Your needing to eat more fish analyst,
John Mauldin
John@FrontlineThoughts.com
Copyright 2012 John Mauldin. All Rights Reserved.

A Quadrillion Here, A Quadrillion There

Everett Dirksen was a Republican Senator from Illinois back in the '50s and '60s. He is credited with saying "A billion here, a billion there, and pretty soon you are talking about real money." It seems that thorough research does not turn him up actually saying that line, although researchers do note that one reporter said he had asked Dirksen about it and received the reply, "Oh, I never said that. A newspaper fella misquoted me once, and I thought it sounded so good that I never bothered to deny it."
But that quote has slipped into the US national memory, and whether or not he said it, it does make a real point. And that was back in the early '60s, when a billion dollars was not just a rounding error in the national budget.
Today we have become rather casual in our use of the word trillion. "A trillion dollars" slips so easily off the tongue, but it is too big a number for most of us to even fathom. Estimates of the total stars in our galaxy run between 100 and 400 billion. A trillion barrels of oil would fuel the world for over 30 years. One trillion seconds is almost 32,000 years. The mind boggles. Yet today we think almost nothing of adding a trillion dollars every year to the already bloated US debt! In fact, economists like Paul Krugman fume that we are not adding more trillions to the debt each year, as if debt brought no consequences. By this thinking, Greece should not be made to have to suffer austerity because it has taken on too much debt. Rather, other nations should be taxed to give Greece the money to go even deeper into debt that it cannot and most likely will not repay.
So, I must admit that when I came across this next item, it gave me pause. We turn now to a report published by Bloomberg and authored by my friend Dr. Gary Shilling, talking about the massive debt that has been accumulated by Japan. Gary argues that Japan is reaching a critical point where its debt cannot be financed except by extreme monetization by its central bank, because turning to world markets to sell the debt will drive up interest rates to unsustainable levels. I have made similar arguments, but that is a topic for another letter. Today, I want to quote just one paragraph. (http://www.bloomberg.com/news/2012-06-07/strong-yen-won-t-survive-japan-s-fiscal-cliff.html)
"As Japan's government debt of 1,085 trillion yen matures over time, it will be subject to any higher refinancing rates. The average maturity of Japanese government debt is six years and 11 months. Yet 17 percent of that debt matures this year, 52 percent in the next five years and 76 percent in the next decade. Markets anticipate, so Japanese bonds throughout the spectrum will probably plummet in price and leap in yield at the first sign of a current-account deficit, maybe even before."
One thousand trillion yen. 32,000,000 years' worth of seconds. Yes, I know a yen has a few extra zeros in relation to the dollar, but we are talking about one quadrillion yen.
Are we really ready for the word quadrillion to enter the lexicon in what is supposed to be the developed world? In the case of Japan, we are apparently there. A hundred years ago, a deficit of US$1 billion would have been unthinkable. We actually had balanced budgets for most of our first 200 years, except during wars and economic crashes. And now we talk trillions, albeit in the wake of inflation that has made the word trillion less than it was 100 years ago. Will our grandchildren in the latter half of this century talk quadrillions? Or quintillions? Is that even thinkable? Let's just hope the word quadrillion doesn't come into common parlance any time soon.

New York, Chicago, Italy, and Singapore

John Mauldin

John@FrontlineThoughts.com

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Tuesday, May 22, 2012

Cory Booker: The Pathology of False Equivalence

Et Tu, Cory Booker? The Pathology of False Equivalence

Ilyse Hogue on May 21, 2012 - 8:58 AM ET

Newark Mayor Cory Booker. (AP Photo/Charles Sykes)

There is a disease spreading across our political punditry, and the beloved mayor of Newark, Cory Booker, seems to have contracted it. On Sunday’s Meet The Press, Booker disavowed the new ad campaign attacking Mitt Romney’s tenure at Bain Capital, and in doing so, compared the Obama team’s decision to air the ads to the right-wing invocation of Reverend Wright to take down the president. Booker released a retraction video hours later, but the incident indicates just how advanced the sickness of false equivalence is in our national dialogue. The plague has now infected a normally sharp public official unlikely to confuse a thinly veiled racist play against the first African-American president with an examination of the economic track record of his challenger.

I’m as much a Cory Booker fan as the next populist progressive. I’ve watched with bemusement as his social media presence has made him a superhero, able to plow driveways in biblical snow storms and tweeting as he goes door to door during hurricanes to protect his constituents. His larger-than-life persona went stratospheric last month when he rushed into a burning building to save a woman trapped by the flames. But Cory, while you had me at your first hashtag, you lost me yesterday when you uttered these words:

“This kind of stuff is nauseating to me on both sides,” [Booker] said on Meet the Press. “It’s nauseating to the American public. Enough is enough. Stop attacking private equity. Stop attacking Jeremiah Wright. This stuff has got to stop.”

In an effort to appear objective in a political climate anything but, talking heads now feel the need to utter a Democratic offense in the same breath as a Republican offense. But I’ve got news for them: when the offenses don’t line up—as they often don’t these days—these folks don’t sound objective, they sound like lunatics.

Mitt Romney is running as CEO-in-chief of a country starved for jobs. His economic record is central to his candidacy by his own design. The ads in question feature workers from factories destroyed by Bain Capital challenging Romney’s model for job creation. In an election where the economy and jobs lead voters’ concerns by double digits, a candidate’s history as an industrial titan is not only germane but crucial to decision-making. Obama’s team are hardly the first people to think so; Winning Our Future, the Sheldon Adelson–backed Super PAC, launched the mini-documentary King of Bain, widely credited with helping win the South Carolina primary for Gingrich.

This line of inquisition simply does not equate to using a preacher’s old inflammatory statements as an attack on the president’s patriotism. Even the previous Republican challenger understood the immorality of stoking racism as a path to the Oval Office.

But unchallenged false equivalence in our media and from our politicians is at epidemic proportions. A few cases in point:

Game Change

Politico

Washington Post

The problem of false equivalence is so rife in our country that the president dedicated a chunk of his speech at the Associated Press luncheon in April to the issue. While it doesn’t rank explicitly on the list of voter concerns, this habit contributes to the high rates of American distrust in the news media. The American people are smart enough to know when a commentator or anchor holds an opinion and forgiving when this is made apparent. Attempts to cover up personal bias with false equivalence does not make one objective, but it does make one complicit in obscuring the dynamics of that lead to political gridlock and an unresponsive democracy. I’d expect Cory Booker, who’s built his entire political career on being responsive, to be immune to such an affliction.

Saturday, May 19, 2012

Facebook Said to Put Off IPO Until 2012 to Buy Time for Growth?

Bloomberg

Facebook Said to Put Off IPO Until 2012 to Buy Time for Growth

By Brian Womack, Ari Levy and Douglas MacMillan - Jul 30, 2010 2:38 PM ET

Facebook Inc. will probably put off its initial public offering until 2012, giving Chief Executive Officer Mark Zuckerberg more time to gain users and boost sales, three people familiar with the matter said.

Facebook would benefit from another year of growth absent the added scrutiny that comes with a public listing, instead of holding an IPO in 2011 as investors speculated, said the people, who asked not to be identified because Facebook doesn’t discuss share-sale plans. Still, Zuckerberg, who holds board control, could push for a stock sale at any time, they said.

Mark Zuckerberg, chief executive officer of Facebook Inc., could push for a stock sale at any time. Photographer: Antoine Antoniol/Bloomberg

Bloomberg's MacMillan Interview on Facebook IPO Outlook

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July 30 (Bloomberg) -- Bloomberg's Douglas MacMillan talks about the likelihood Facebook Inc. will put of its initial public offering until 2012 and the business strategy of the owner of the world's largest social network. MacMillan speaks with Deidre Bolton on Bloomberg Television's "InsideTrack." (Source: Bloomberg)

The Facebook homepage. Photographer: Andrew Harrer/Bloomberg

Waiting lets Zuckerberg, 26, hone the skills needed to steer a company that issues quarterly results while facing criticism on such matters as user privacy. Facebook, valued at $24.9 billion, would use the time to propel its user base beyond the 500 million mark reached this month and add to sales that two of the people said may double to at least $1.4 billion in 2010 from $700 million to $800 million last year.

“The burden of being public has never been greater,” said Kevin Landis, who manages about $260 million at Firsthand Funds in San Jose, California, and has invested in the technology industry for 16 years. “Zuckerberg doesn’t have to put his name at the bottom of four 10-Q statements every year and attest that everything in there is true or else he’s responsible. The minute it’s public, he does.” Landis doesn’t have direct knowledge of Facebook’s IPO plans.
Jonathan Thaw, a spokesman for Facebook, owner of the world’s largest social network, declined to comment. Zuckerberg, in a television interview this month, said Facebook will go public “when it makes sense,” without elaborating.

Pressure Allayed

Some investors had speculated a share sale might happen in 2011 after venture capitalist Jim Breyer, a member of Facebook’s board, said in January that the Palo Alto, California-based company isn’t focused on a 2010 sale. Instead, Facebook’s management is trying to woo more users and developers, Breyer said at the time.

Startups are often urged to sell shares by employees and investors eager for a return on their equity. In Facebook’s case, some of that pressure has been allayed by private sales, often facilitated by such exchanges as SecondMarket Inc. and SharesPost Inc., which help find buyers for startup shares.
SharesPost values Facebook at $24.9 billion, more than double its value in March.

Zuckerberg’s Challenges

Zuckerberg faces a range of challenges, including management of a rapidly growing workforce and rising competition from companies including Twitter Inc., the blogging service that has amassed more than 190 million monthly visitors.

Facebook is also contending with heightened regulatory scrutiny over how it handles users’ personal data. And it’s up against a lawsuit that contests company ownership. A New York man, Paul Ceglia, claimed in state court in June that he owns an 84 percent stake, based on an April 2003 contract. Facebook has said the lawsuit is “frivolous, if not outright fraudulent.”

“If they have other sources of capital, the company would probably be better off deferring an IPO until Zuckerberg had more experience under his belt,” said Ray Valdes, a San Jose, California-based analyst at Gartner Inc.

Facebook’s timetable may disappoint technology investors who speculated an IPO would encourage other startups to wade into the public markets. Venture-backed IPOs dwindled in the past 2 1/2 years as the financial crisis wiped out investment banks such as Lehman Brothers Holdings Inc. and Bear Stearns Cos. and forced many hedge funds to close.

IPO Dearth

This year, 40 companies put off or have withdrawn IPOs in the U.S., according to Bloomberg data.

“The companies that went public in the second quarter had to have readjusted price expectations on average,” said Hans Swildens, founder of Industry Ventures LLC, a San Francisco-based investing firm that owns a Facebook stake. “The capital markets are swinging week by week. It’s a very hard time.”

Facebook, founded in 2004, now has about 1,400 employees. Investors include Accel Partners, Microsoft Corp. and Elevation Partners LP, the private-equity firm among whose founders are Bono and Roger McNamee. Besides Zuckerberg and Breyer, board members are Internet entrepreneur Marc Andreessen, money manager Peter Thiel of Founders Fund and Donald Graham, CEO of The Washington Post Co.

Zuckerberg holds board control, according to “The Facebook Effect,” a chronicle of the social network’s origins by David Kirkpatrick.

Silicon Valley ‘Watershed’

Elevation Partners has bought Facebook shares in private transactions that total $210 million, a person familiar with the matter said in June. Digital Sky Technologies, a Russian investor, has accumulated a stake of almost 10 percent, people familiar with the matter said in May.

Mutual fund managers and individual investors want their own chance to invest in Facebook’s growth, said Ted Hollifield, a partner at law firm Dorsey & Whitney LLP in Palo Alto.

“There’s definitely the market demand and appetite for a very successful IPO,” said Hollifield, who works with venture capital firms and startups. “Facebook’s IPO is going to be a huge watershed for the whole Valley.”

To contact the reporters on this story: Brian Womack in San Francisco at bwomack1@bloomberg.net; Ari Levy in San Francisco at alevy3@bloomberg.net; Douglas MacMillan in New York at dmacmillan3@bloomberg.net.

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By Brian Womack, Ari Levy and Douglas MacMillan - Jul 30, 2010 2:38 PM ET

Pressure Allayed

Zuckerberg’s Challenges

IPO Dearth

Silicon Valley ‘Watershed’