BOOK REVIEW by Joanne Conrad, Where Keynes Went Wrong

Where Keynes Went Wrong
by Hunter Lewis

(Submitted 10/29/09)
Published 12/3/09.

Is it the government’s fault? Are we too ignorant? Are we doomed to ten years or more like The Great Depression? Must we eventually suffer 25% unemployment? Are we emulating Japan’s decades of misery? Are we ‘those who cannot remember the past and are condemned to repeat it’? Where Keynes Went Wrong and Why World Governments Keep Creating Inflation, Bubbles, and Busts by Hunter Lewis examines those probabilities, saying that Keynesian economics are now being replayed just like 1929 in the U.S. and Japan’s lost decades of 1980-2008. John Maynard Keynes was a British economist who advocated government-managed economies and government intervention in times of market distress.

Lewis details Keynes’ proclamations from various sources, including Keynes’ General Theory and other writings. It is an interesting format, as Lewis quotes Keynes, and then comments and/or refutes each quote. He also includes comments from Keynes’ defenders. It is thoroughly readable and does not include too much technical language. He avers that the “Federal Reserve Board is a case study of government by experts run amok.” Keynes had said that “…economic questions will involve intellectual and scientific elements…which must be above the heads of the vast mass of more or less illiterate voters.” That the public is upset about spending doesn’t take rocket science. It is extremely disconcerting that Lewis says, “… each time [Keynesian remedies] have been applied by Roosevelt, the Japanese government, and the second Bush administration…[they] have not produced the hoped-for results, and…that there are very good reasons…that it has caused the problems.” If that’s true, how can governments unwittingly be so cruel to its economically “illiterate” voters, the cruelties being things like high unemployment, high deficits, insolvent government entitlements? If that’s true, why are leaders like Henry Paulson, Ben Bernanke, Tim Geithner, Cynthia Romer, et al being so cruel? Keynes’ followers will probably say the government is not spending enough nor soon enough. What is the truth? It is being reported that the U. S. 3rd quarter 2009 GDP (Gross Domestic Product) suggests that the recession is ending, so is the unemployment a lagging economic indicator and soon we can expect more jobs? And that decimated pension funds will soon recover? That there will be more capital for expansion? That there will be no bailouts? That there will be no national deficit? That Medicare, Social Security, et al will be solvent? That revenues will increase enough to pay government expenses? That happy days will be here again?

Economists will find copious endnotes and citations, but general readers will also find thought-provoking analyses and opinions about the economy and many historic examples. But Keynesians and people who believe big government and big spending will solve economic crises will not like this book.
-30-

BOOK REVIEW by Joanne B. Conrad, Meltdown

Meltdown

by Thomas E. Woods, Jr.

Full version)

Published 9-9-10.

Abolish Fannie Mae and Freddie Mac? Rework the Federal Reserve Board? Stop bailouts? Let them go bankrupt? A plethora of books have been written about the financial crisis, and Meltdown is another one with a different slant subtitled, A Free Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse.

This book disputes deregulation and unfettered free markets as causes. It claims government interference, including Federal Reserve Board actions, caused the calamity. Woods says, "...the very people who devised the policies that produced the mess are now posing as the wise public servants who will show us the way out....more regulation, more government intervention, more spending, more money creation, and more debt."

He points out that "economists of the Austrian school of economic thought...[are] the...people who predicted not only the Great Depression, but also the calamity we are dealing with today." Earlier this year, 200 economists signed a letter disputing recent policies. It appears recent policies are Keynesian, not Austrian. The point is that there are disagreements among economists, and there is no "consensus."

There is now a special White House Commission to investigate the 2008 financial crisis and report by December 2010. It will cost $5-8 million. It is Public Law 111-21, signed on May 20, 2009, by the President, and is officially the Financial Crisis Inquiry Commission (FCIC). It is rather pecular that a White Commission is charged with determining causes while, at the same time, the Administration is proposing new financial regulations. Is the cart getting before the horse?

It seems remarkable that so many ignored warning signs, regardless of differing schools of economic thought. An acquaintance often remarked over the last 10 years that something was wrong because of the burgeoning credit. It seems that he, along with many current protesters, somehow comprehends via some kind of gut reaction that things were, and still are, not right. It is sad that current protesters seem to be denigrated when protesters at other times have been regarded as patrotic or civic minded.

Readers of Meltdown will find a detailed examination of the Federal Reserve Board's and government's actions that caused the recent financial crisis, and, quite, possibly, more warning signs of more problems they may be causing. Woods ends, "...we can follow the...suggestions that prolonged the Great Depression and gave Japan its slump of nearly two decades, or we can try a different approach...." from what we are now experiencing.

-30-

BOOK REVIEW by Joanne B. Conrad, Strength in What Remains

Strength In What Remains
by
Tracy Kidder
(Submitted 9/25/09. Revision submitted 10/12/09.)

Published 10/22/09

Smells of burning flesh, decapitations by machetes, bodies floating in the rivers, swarming flies, and wild dogs carrying human body parts in their teeth would haunt Deogratias forever. This is the gripping ordeal of a 24 year old East Central African’s escape from the Tutsi’s and Hutu’s genocide in Burundi and Rwanda in 1993-94. Various estimates range from 300,000 to 1 million slaughtered, and millions of refugees.

Deogratias, named from the Latin Thanks be to God that his mother had learned in church, grew up in the mountains of Burundi tending cows and farming with his family. So poor that one pair of shorts and one shirt were laundered every night to attend school, he was an eager and gifted student. He wanted to study medicine to help his community overcome numerous diseases. He excelled in school, passing rigorous exams and was offered a scholarship to a Belgian university. (Burundi had previously been a Belgian colony.) He eventually attended medical school in Bujumbura, the capital, where he began to hear about his country’s ethnic antagonism and ethnic wars in both Rwanda and Burundi. But the medical school was paradise compared to his earlier years. While there, he befriended Jean, a wealthy student who later helped his escape to New York City.

One might think that was the happy ending to Deo’s journey, but his first years in New York were almost intolerable. Indeed, the author states, “I would not have survived.” Prior to Jean’s help in getting to New York, Deo’s experiences in Burundi in 1993-4 were horrendous. He was interning at a hospital in northern Burundi, when the President of Burundi (a Hutu) was killed on October 22, 1993. Violence erupted, and for six months Deo was on the run trying to avoid both Hutus and Tutsis who were burning villages and slaughtering each other and had decimated the hospital, its workers, and patients. Deo had hidden under his bed and was able to escape. He finally reached Rwanda then to Bujumbura where Jean’s family gave him money and tickets to the USA. He landed at JFK Airport and a baggage handler offered him help. Sleeping in abandoned tenements, or in Central Park, surviving on just milk, bread, and cookies, he found work delivering groceries from 7 a.m. to 7 p.m. for $15 a day.

Miraculously, one of his deliveries was a church in Manhattan where he became acquainted with one of its workers who helped him find medical care and a decent place to live. His life changed because a generous couple gave him a place to live, encouragement, and financial help. Deo’s “strength in what remains, ” the rest of his story, his return to Burundi, and his new Burundi Village Health Works are truly remarkable.
-30-

BOOK REVIEW by Joanne B. Conrad, Top Ten Myths of Amer.HealthCare

Submitted 9/10/09:


The Top Ten Myths of American Health Care
by
Sally Pipes

The 10 myths are: (1) Government health care is more efficient; (2) We are spending too much on healthcare; (3) Forty-six million Americans cannot get health care; (4) High drug prices drive up health care costs; (5) Importing drugs would reduce health care costs; (6) Universal coverage can be achieved by forcing everyone to buy insurance; (7) Government prevention programs reduce health care costs; (8) We need more government to insure poor Americans; (9) Health information technology is a silver bullet for reducing costs; and (10) Government-run health care systems in other countries are better and cheaper than America’s.

Some supporters of national health care legislation have criticized this 2008 book, but the 301 end notes/references suggest serious research. Some resources are the Census Bureau, Dept. of Health and Human Services, Congressional Budget Office, Centers for Medicare & Medicaid Services, Office of Management and Budget, university studies, the AMA, New England Journal of Medicine, Center for Disease Control, the New York Times, the Wall Street Journal, et al.

Myth #1 is surely apparent when one considers some recent snafus such as the Veterans Administration’s sending 1700-4000 letters to veterans that they have terminal ALS, the Social Security Administration’s sending 10,000 checks to deceased persons or 2200-4000 checks to prison inmates, recent SEC and FINRA errors, and Medicare’s and Medicaid’s waste, fraud, and abuse. A July 30, 2009, Associated Press release details the Medicare Fraud Strike Force’s recovery of $371 million in false Medicare claims in a dozen targeted cities. Perhaps this activity should be expanded before enacting a new government program. If reports that Medicare Part A will be insolvent in 8 years, where will we get $1 trillion (or even $900 billion) over 10 years for a new government program? Should Medicare’s insolvency be fixed first?

Myth #3 says there are 46 million Americans who cannot get health care. The 46 million include about 10 million non-citizens, 18 million who earn over $50,000 a year who refuse to purchase health insurance, and about 14 million who qualify for Medicaid and/or SCHIP for their children and who do not enroll themselves or their children. Some estimates bring down the 46 million Americans to around “8 million…chronically uninsured, and they really do need help.” Should the administration help those instead of enacting an expensive new government program?

Space prevents describing the other 8 myths, but they are all thought-provoking. As Congress doesn’t always read its bills, something like this probably goes unread, too.
-30-

BOOK REVIEW by Joanne B. Conrad, The Post-American World

Submitted 9-1-09:


The Post-American World
by
Fareed Zakaria

This is not a new book (copyright 2008), but a picture of the President carrying it is circulating on the Internet, and its title is worrisome. Some think it is about the world after America’s existence. The author’s first sentence is it’s “not about the decline of America but rather about the rise of everyone else.”

A better title might have been more accurate, because it is a treatise describing the world’s developing nations’ economic growth and developing influences.
There is both admiration and criticism of the U. S. and its policies, but the bulk of the book is about China, India, and other developing economies and their increasing power on the world stage and how this affects America.

The author was born in India and emigrated to the U. S. in 1982. Another book of his, The Future of Freedom, may be more revealing, but this book does not denigrate capitalism or market-based economies. Indeed, he says: “Looking at dozens of countries over decades of development,… one finds that the pattern is strong—a market-based economy that achieves middle-income status tends, over the long run, toward liberal democracy. It may be,… the single most important and well-documented generalization in political science.” Maybe this vindicates the growing public worry about the increasing government control of our economy. Zakaria says America needs to focus on its economic decline by solving economic dysfunctions…[which] are the consequences of government policies….reforms could be enacted…to trim wasteful spending and subsidies, increase savings, expand science and technology training, secure pensions, create a workable immigration process, and achieve efficient energy use,” but our dysfunctional politics prevent it. He thinks these would be easier fixed than health care, but that we are too partisan, and averse to pain and compromise.

The last chapter contains his six guidelines for America’s role: 1. Choose priorities wisely; 2. Build broad rules, not narrow interests; 3. Be Bismarck not Britain; 4. Order a la carte; 5. Think asymmetrically; and 6. Legitimacy is power, and get rid of fear and loathing at home and abroad.
-30-

BOOK REVIEW by Joanne B. Conrad, Global Economics

Submitted 8/26/09:

Global Economics
by
Craig Hovey and Gregory Rehmke

The full title is The Complete Idiot’s Guide to Global Economics, and it is a useful book for those curious about outsourcing, tariffs, quotas, international trade, income inequality, money supply, GDP (Gross Domestic Product), and the like.
The President’s $787 billion American Recovery and Reinvestment Act, passed last February, includes a section requiring iron and steel used on infrastructure projects be “Made in America.” This upset Canada, one of our largest trading partners, and it was on the North American Summit agenda recently. Not much about this has been covered by the media. However, the authors believe free trade is better for all countries’ economies and employees. They state: “…things would not improve a lot for unskilled Americans if we sealed the borders and kept all foreign workers and foreign products out….Despite all the worries about jobs and industries being lost to foreign competitors, …advances in technology—especially in the United States—have a much bigger impact on the economic landscape.”
Another important concept is “economic freedom,” composed of 10 categories, that claims “…in the 7 economically free countries, citizens enjoy twice the average income of countries less economically free.” The 2009 Index of Economic Freedom ranges from $40,253 per capita GDP in economically free countries to $3926 in less economically free. (Browse online for “Index of Economic Freedom.”)
It is also entertaining, as the authors insert humor and interesting tidbits, e.g. Amtrak’s Acela trains are made in Canada . Hovey has been a professor of international economics at Nazareth College in Rochester, and Rehmke has directed economic education programs for 25 years.
This paperback might be a useful textbook for high school economics classes or a home reference for explanations of economic terms, such as GATT (General Agreement on Tariffs and Trade), WTO (World Trade Organization), IMF (International Monetary Fund), etc., that one might hear or read in the news.
-30-

BOOK REVIEW by Joanne B. Conrad, The End of Wall St As We Know It

Published 9/3/09, The Livingston County News, Geneseo, NY 14454.

The End of Wall Street as We Know It
by
Dave Kansas

This little 196 page paperback is jam-packed with easy-to-understand economic information about the 2008 financial crisis—what we need to know and how to survive it. It is a Wall Street Journal Guide by one of its former editors.
It includes 26 sidebars explaining things like derivatives, rating agencies, bank runs, Federal Reserve, Libor, past crises, Fannie Mae and Freddie Mac, FDIC, holding companies vs. investment companies, and regulation history. Also included are profiles of Alan Greenspan, Robert Schiller, Henry Paulson, Tim Geithner, Ben Bernanke, and Warren Buffett.

Eight short chapters explain “risks” many entities took; the “financial wizardry” of derivatives that aren’t regulated; the warning signs (He calls them “canaries,” like those miners have used to warn about poisonous fumes.); the “tsunami” of 2008; the “new world order” needed for the unregulated portion of the financial world; what is now “safe” or not; “debt and destruction;” and “investment strategy” now for young earners, middle-aged, and those near or at retirement.

One wonders why the U.S. is spending so much when the crisis seems to have been caused by profligate spending of Americans, corporations, and the financial sector. Can government spend with immunity?

For those worried about foreign governments’ financing our borrowing, Kansas believes that China, for example, will continue financing us so we will continue purchasing their goods. Is it not paradoxical that 2/3 of our economy depends upon consumption by Americans, but over-spending and over-consumption contributed to the problems?

Kansas urges prudence and planning and very careful analysis of any new regulation. This writer wonders who is going to watch or regulate the regulators, like a Greek question: Who will guard the guardians?

The chapters on “safety” and “investment strategy” seem very worthwhile. The lack of an index, however, makes finding specific topics difficult.
-30-

BOOK REVIEW by Joanne B. Conrad, House of Cards

Published 8/6/09, Livingston County News, Geneseo, NY 14454.

House of Cards
by
William D. Cohan

Sub-titled “A Tale of Hubris and Wretched Excess on Wall Street,” Cohan, a former Wall Street investment banker, chronicles in detail the history of Bear Stearns, founded in 1923 by Joseph Bear, Robert Stearns, and Harold Mayer, which was the first financial entity in the “house of cards” to fall.
Its ending words say it all: “We all [messed] up. Government. Rating agencies. Wall Street. Commercial banks. Regulators. Investors. Everybody,” reflected Alan Schwartz, Bear Stearns CEO.

Esoteric in content, the best chapter is probably the Epilogue, titled “The Deluge,” which entails events after Bear Stearns was gone and Lehman Brothers filed bankruptcy. [It] “…unleashed a global deluge of economic misery: the $125 billion bailout of insurer AIG; Merrill Lynch sale to Bank of America; Washington Mutual failure; near failures of Wachovia and National City Bank and at least 19 other financial institutions nationwide; conversion of Goldman Sachs, Morgan Stanley and American Express into bank holding companies to stave off their demise; and Citigroup’s near incapacitation, once the world’s biggest, most valuable, and most powerful global financial services firm.”

On November 20, 2008, former Treasury Secretary Henry Paulson said, “Credit markets froze and banks reduced interbank lending,” which led to the famous (or infamous) $700 billion TARP (Troubled Asset Relief Program) legislation last fall.

The machinations and personalities that Cohan explains are sometimes difficult to follow, and the lack of specific dates adds to reading difficulty, but, overall, the book is an interesting expose’ of Wall Street people and activities, rating agencies, financial regulators, and the government’s roles.
-30-

BOOK REVIEW by Joanne B. Conrad, The Foreclosure of America

Published 6/18/09, Livingston County News, Geneseo, NY 14454.

The Foreclosure of America
By Adam Michaelson

It’s a scary title, and it’s not for the faint of heart. Its subtitle, however, is The Inside Story of the Rise and Fall of Countrywide Home Loans, the Mortgage Crisis, and the Default of the American Dream.

Written by the former senior vice president of marketing for Countrywide Financial, the author chronicles his role in generating more and more mortgages for the firm and its eventual demise. He also includes his opinions and suggestions for the causes of foreclosures and possible solutions to avoid another economic housing tsunami.

There is no elaboration about the bundled collateralized mortgage obligations that contributed to banking and financial toxic assets and other complicated issues. He, rather, explains how people were lured into McMansions, Adjustable Rate Mortgages (ARMs,) and other exotic financial obligations. He also analyzes Americans’ materialism and the analogous corporate need for profits for companies and their shareholders.

The author portrays some lending activities as “small financial nuclear weapons, …with detonators set on varying times, which would eventually cause a cascading implosion of the worldwide economy.” Indeed, he says “fasten your seatbelts” for 2009, 2010, and 2011 when hundreds of billions of adjustable rate mortgages (ARMs) come due for resetting monthly mortgage payments."

There is also a fascinating courtroom scenario to establish “blame,” with a prosecuting attorney and a defense attorney arguing their respective positions, and the reader as the final judge.

Finally, the author includes 10 “What We Should Do Now” suggestions, the last one comprising a “Financial Responsibility” curriculum in schools. Perhaps, that should be Number 1 for all Americans.

-30-

COMMENTARY: "Health care reformers should get facts straight." by Joanne B. Conrad

Newspaper Commentary, published 8/27/09, Livingston County News, Geneseo, NY 14454.

Response to Judith Hunter, Geneseo: http://thelcn.com/2009/08/hunter-rebuttal/

Perhaps Ms. Hunter, who writes that Congressman Lee’s data are suspect, might also be susceptible to FUD (fear, uncertainty, and doubt).

First, the Lewin Group not only proclaims its independence from Ingenix, its owner, which is a subsidiary of United Health Group, in which, incidentally, TIAA-CREF (a SUNY pension plan) invests, it has also rebutted Congressman Pete Stark’s (D-CA) disputes of its numbers. (See “Lewin vs. Stark: How Many Americans will end up on the public plan,” posted 7/22/09 in “Health Care.”) It is further purported that "Neither Ingenix nor United Health Group or its subsidiaries review the work products of The Lewin Group. [It] operates with editorial independence and provides its clients with the very best expert and impartial health care and human services policy research and consulting services." In addition, the Wall Street Journal, 6/26/07, quoted Senators Ron Wyden (D-OR) and Bob Bennett (R-UT) as saying "The Lewin Group [is] the gold standard of independent health-care analysis." According to Ms. Hunter, I suppose this is wrong.

Second, 6% of the people in the 26th congressional district who don’t have health insurance may well include some of those who can afford it but elect not to purchase it or decline to enroll in things like NYSCHIP, etc.

Third, I do not begrudge that my premiums may help pay for the uninsured.

Fourth, cannot the donut hole problems be fixed without a new program?

Fifth, tax credits for small businesses (or anyone) are deducted from taxes owed; I presume these tax savings might be used to purchase employee health insurance, so Section 313 of H.R. 3200 requires an 8% tax on businesses who don’t purchase the insurance for their employees. Their payroll taxes will then be the employer’s share of Social Security, Medicare, AND another 8%, not to mention the mandatory disability, workers’ compensation, and unemployment insurance costs, the latter being TOTALLY paid by the employer. I would be interested in knowing what amount the “tax credits” are and how much they would offset actual health insurance costs. 8% of a $30000 annual salary is $2400; is that adequate for a health insurance policy?

Sixth, how can H. R. 3200 be fully funded from Medicare and Medicaid savings and a tax on the wealthy? I have heard about $500 million cuts in Medicare, but no details about what such cuts include. There is also a proposal to cut $150 billion from the Medicare Advantage program, yet the President declared on 7/28/09 that it is a “misperception” that Capitol Hill is discussing reducing Medicare benefits. What are the facts? What is the truth? It seems astounding that CBO estimates of the costs are so much different from House and/or Senate committees’ projections.

Seventh, taxing the wealthy means less investment, much of which gets invested in the economy as job creation. Are we shooting ourselves in the feet? In addition, NYS is suffering from lower revenues that used to come from the wealthy’s tax payments.

Eighth, why aren’t we amenable to solving Medicare’s and Medicaid’s problems before we embark on “Medicare For All,” or any of the other 4 or 5 pending national health care proposals?

My FUD stems from government control of 1/6 of our economy. At least insurance representatives are sometimes flexible whereas government fiats are inexorable. I have personally experienced insurance refusals that have been reversed.

Let government fix things like portability, caps, refusals, tort reform, purchasing across state lines, et al, but why should government control all of our health care? It seems like putting bandaids on an aneurysm (Medicare and Medicaid) that’s about to rupture, and the bandaids are all controlled by myriad NEW federal agencies, boards, advisory councils, commissions, etc. I have heard a rumor that H. R. 3200 creates up to 53 +/- new departments. How can that be very cost effective, provide quality control, or even be fair? Indeed, who will be guarding the guardians?

I would recommend visiting http://myheritage.org/, then clicking on “Fact-checking the White House on health care,” and then watching the 4 videos. However, the Heritage Foundation is a conservative think tank, and they are probably regarded similarly to the Lewin Group. I simply wonder who is really telling the truth.

It’s no wonder that claims and counterclaims are causing confusion and are probably contributing to new polls showing more Americans opposed to health care and insurance reform. Whom are we to believe? Maybe more transparency and accountability would help?