Saturday, August 27, 2011

Uncle Charley on Self-Inflicted Wounds

"How did Bobby Joe get himself so whacked up?" Charley asked as we left the hospital.

"He lost control of his motorcycle out on Highway 9. He wasn't going all that fast, he said, just hit a sandy patch. Good thing he's got insurance," I said.

Charley looked thoughtful for a while. Then he said "I have some problems with medical insurance".

"Don't we all."

"Nah, I'm not thinking about costs and stuff, at least not directly. Now with Bobby Joe, I'm glad he's got medical coverage. But he wasn't doing anything wrong. That accident was just something that can happen when you ride a two-wheeler. I sure wouldn't feel the same way about his situation if he'd have been drunk."

"Hmm." I said. "You thinking that if he'd been drunk he shouldn't be covered by his medical insurance?"

"That's exactly right!" Charley said with some emotion. "Why should we all have to chip in on his medical bills when he done it to himself? Because that's all insurance is, you know, just us chippin' in in advance".

"So maybe it should say on the medical policy that you're not covered if you weren't being reasonably cautious?"

"More than that," Charley answered. "Why should we pay for somethin' stupid you do, like drinking and driving? Or if you get lung cancer after smoking 2 packs a day for 50 years? You want to take the risk, that's ok with me, but why should I pay extra because you don't take care of yourself?"

"You got a point," I said. "Maybe if people knew they weren't going to get covered for stuff like that, they wouldn't do it in the first place."

"Right. I'm thinking about other stuff too. For instance, if you have an accident driving your motorcycle without a helmet, the costs should be on you, not on the rest of us."

"I think that some Harley drivers have a saying 'No Helmets On Harleys'. That's kinda macho but they have a right to ride the way they want. But I don't want my rates to be higher because they want to ride without helmets."

Charley thought for a while. "How about all the motorcycle riders who don't want to wear helmets have their own insurance program? That'd solve that problem."

I laughed. "Sounds good. The principle being that other people don't pay for your risky behavior. And how about people that eat themselves into being so fat their knees and hips won't handle the stress? They should have to pay for their risks and replacement joints too."

Charley smiled. "I can see it now. They got their own insurance program. Call it Health Care For The Obese. I like it. Heart attacks wouldn't be covered, or diabetes, or atherosclerosis. We don't want to limit their freedom, we just want to limit our costs."

"How about people that attempt suicide and don't quite make it?" I asked. "And what about smokers?"

"I guess people that started smoking after the Surgeon General posted those warnings knew what they were doing. So, no medical treatment for lung cancer or COPD for them, unless they have their own insurance group. Plus they gotta pay higher rates to cover family members that got hit with second-hand smoke."

"So our motto is 'Pay For Your Own Risks Or Don't Take Them'. They need Tobacco Users Insurance."

"Sounds great to me," Charley said. "Insurance companies need to limit their costs, and so do we".

Saturday, August 06, 2011

Uncle Charley Versus The Stock Market

I was standing in the shade of a sycamore tree near where Charley was repairing his fence. My job was limited to handing him tools, which was fine with me. It was hot, even hotter than usual for an Oklahoma summer, and there was almost no wind at all, which was certainly not usual for an Oklahoma anything.

"You read the paper this morning?" Charley asked, looking up from his work.

"Sure. What got your attention?"

"Been readin' about the stock market goin' up and down. Why does it do that, you think? Them companies don't change their value that much, but the stocks with their name on them sure go up and down like an elevator."

"No mystery to it, Charley," I said. "Stock prices go up when the buyers think they're going up, and stock prices drop when the buyers think they're going to drop."

"So accordin' to you them prices are all based on guess-work?"

"Yes, that's about how I see it."

"Well," Charley said, "that makes it just a form of gamblin', like Las Vegas with branch offices everywhere. Hold that post straight for me."

"I suppose that's true. When a new company starts up and needs money to get started, they can sell stock. The company gets to use the money, and the stockholders get to share in the profits, if there are any, and if he company fails, they lose their money. So that's a gamble, I guess, but it gives a company a chance, and without that, lots of good things wouldn't make it to the market."

Charley looked puzzled. "But after that, people just sell the stock back and forth to each other. That don't do anything for the startup company. That's just speculation."

"You got it," I said.

"All them people, actin' like they're doing something important, doing real business, they ain't doing anything but gamblin'. They don't make anything or produce anything themselves. They just want to bet on whether company stocks will go up or down. What do we need them for, anyway?"

"I don't think we do need them. They don't benefit anybody but each other, as far as I can see. Now, the start-up investors are doing something useful, because they give money to the company to help it succeed, and in return they hope for the company to succeed and pay them a share of the profits. But all the ones on Wall Street, the speculators, they're basically just parasites trying to make money without having a product or service."

"Tell you what, Harry," Charley said. "If I was Emperor I'd just shut 'em down. It's just gamblin' and pretending it's a serious business."

"Then they'd have to get jobs where they actually did something. Most of them don't know anything except gambling."

"Let 'em do it in Vegas and stop pretending that all them stock prices and the stock market are of any importance at all."

"OK with me," I laughed. "I figured out a long time ago that the only reliable way to make money is to work for it."

"Now that's a real unpopular idea, and I don't think it will ever catch on."

"It hasn't so far, that's for sure", I answered.

Charley and Paying Down the Debt

We passed the bank on our way to the donut shop. A large sign on the front urged us to take out a loan for low interest rates.

"You owe any money to the bank?" Charley asked.

"No. Got everything paid."

"Wish our government did. All that debt.... We've borrowed trillions from China and spent it on government projects."

"I guess they're like the international bank," I said. "They keep us going".

"We're spending more than we're making, and we're borrowing from China and places like that to stay afloat. That seem right to you?"

"No, of course not. If I did that, the bank people would call me in and ask me how I planned to pay off my loans."

"Guess it would be nice if you didn't have to put up any collateral. The US don't have to put up collateral."

"That's right".

A pause followed. I could almost hear the little wheels in Charley's head going round.

"What would happen," Charley asked, stopping on the sidewalk outside the donut shop, "if the Chinese government called a meeting with the President and asked us how we're gonna repay our loans?"

"What a thought!" I said, laughing.

"Ain't no joke, really. They got a right to know what we're gonna do. There's no collateral they can collect, they got no protection for that loan. They could call the loan and force some kinda payment, but we'd collapse and they'd never get their money. I guess we could print a lot of worthless money and pay 'em with that, but that would cause the worst inflation since Germany in the 20's."

"Good point," I said. "They can't afford to collapse us. What would a bank do in that situation?"

"Well, they could demand a payment schedule where we pay the interest as we go and some on the principle. Give us a certain number of years, like 20 years. Like a mortgage. But there'd have to be a condition, that the payments would be tied to inflation, so if the government printed a lot of money to pay 'em with, it wouldn't get us out of debt."

"Where would the money to pay the Chinese come from, in this scheme of yours?"

"We could have a new income tax added to the old one. It would be a graduated tax, high at the top income levels and high for corporations, low for the poor. I read somewhere we would have to come up with almost $40,000 each. That's a lot, but spread over 20 years like a mortgage, we could maybe handle it."

"With money going out of our economy and into theirs, we'd get a lot poorer. There would be a depression, I suppose."

Charley nodded. "That's what happens when you spend your way into debt and don't have enough income to pay your bills. It'd be hard on the American people, but we've let this happen, and there really ain't no easy way out, 'cept to buckle your belt tighter, work harder, get another part-time job or something. And quit spending what we don't got!"