Tuesday, March 18, 2014

Obamacare's real horror story

The real horror story is long term just like pretty much every large scale government program. Most of those who go through Obamacare will opt for Medicaid. However, at the same time, physicians are increasingly opting out of accepting Medicaid as they find they can't afford the government's repayment formula and delays. We're going to learn the hard way that health insurance doesn't equal health care.
In addition, people are taking high deductible health care plans. Just like subprime loans, this sounds great until people can't afford the payments. As the baby boomers retire en masse, this will build up in numbers affecting a large number of people at once.
There are still going to be many people who will choose not to buy insurance nor are they going to pay the penalty no matter how many bills the government sends. We have yet to see what happens with that. Are we going to criminalize not having health insurance?
These are just the tip of the unintentional consequences of Obamacare. The usual long run consequence of massive federal programs is to build up towards a large scale economic drop because the government is a very poor allocator of resources especially in the long run, it works in broad strokes often ignoring the needs of individuals, and it is too slow to micromanage such programs to adjust to changing environments.

Sunday, March 9, 2014

Great Depression II

The US government targets a straight line NGDP rate of growth always heading up though massive debt spending and loose monetary policies since the 1980s at least:


Unfortunately, the rate of sustainable economic growth, this would the NGDP that would occur naturally without any short term dips or rises, has been flattening since the 1970s as the cost of energy sustains nominal rises primarily due to the rise in price of fossil fuels with no alternative being able to be as cheap as fossil fuels nominally were before the 1970s.

What this means is that there has been an increasing divergence between the two rates, and it is the reason why the Great Recession, which was basically an economic correction to bring the two rates closer together, was so large in amplitude. Because the government's reaction through its massive spending and continuing of loose monetary policies, we are basically put back where we were and set up for an even bigger economic correction in the future that will be bigger than the Great Recession and most likely will be bigger than the Great Depression in every way.

In order to prevent this Great Depression II, there are two basic paths. The first, and unfortunately not feasible, is to find an energy source that is at least as nominally cheap as fossil fuels were before the 1970s. All alternative and renewable sources of energy can only wait until fossil fuel prices rises to breakeven with them rather than being able to become cheaper. The second is for the government to target a flatter rate of NGDP growth by gradually pulling back on debt spending and tightening loose monetary policies so that the targeted NGDP rate growth is closer to the rate of sustainable economic growth. This is going to be unbelievably painful medicine because of how overleveraged we are. But it actually would be preferable to a Great Depression II.