Time for Obama To Go Big and Bold: One Month to Save The Public Option

You don’t incrementally become pregnant, and you don’t incrementally reform health care and health insurance.

Health care reform is a mess now with multiple proposals and distortions, and if you reform it incrementally, it will be an bigger mess later.

Do it once; do it right.

Regardless of what the conservative naysay, it is documented by last count of the US Census (2006), that 47 million citizens were without any form of health insurance.

On the campaign trail, Obama offered many variations of his health insurance plans, but now, apparently, his bold plans have been whittled down to an means to reduce health care premiums for individuals and families, to reduce waste in the medical establishment, and to establish electronic record keeping and sharing. Somewhere in there has been added a Co-op plan that will be owned by Co-op members but actually run by the insurance companies.

Certainly, this President campaigned on reaching across the aisle, but what doesn’t he understand he understand?

He has extended his hand, only to have the fingers chewed off. The opposition is not going to negotiate on this bill; it is far past time for offering the Republicans anything that might make then even interested in a bill. They have said repeatedly that they want Obama to go down on this one.

Friday’s New York Times indicates that Maine’s Senator Olympia Snowe may be the only Republican voted to be had in the Senate, and her vote is wavering for a comprehensive bill. She seems wedded to the watered down bill the grouo of 6 is producing: “It might not be everything everybody wants; it might be too much for some, but it just be might be enough to start a strong foundation.”

In my humble opinion, THIS was Obama’s problem in offering a general outline to Congress and then allowing them to create the final shape of the bills.

Could you imagine if the Pat’s coach, Bill Belichick, suggested how he hoped the offense would play the game, and them sent the offense out on the field to play for the entire game with only that general outline?

Chaos.

It is the end of August and we still don’t know what is in either the House or Senate bills.

But that did not happen with the financial bailout bills in February. Obama and his administration crafted the policy and the bills and ram rodded them through Congress. If he had not, we would still be in the depths of the recession we were in February, and still be without a rescue bill.

When Obama comes back from vacation he has approximately a month to take the lead as he did with the financial bail out.

He needs to do the kind of arm twisting that LBJ did to get Medicare through a recalcitrant Congress; he needs to make deals with the blue dog democrats, but he must also remind them that, after all, they ARE democrats, and their final loyalty is to their party.

Obama right now needs to go big and bold.

He needs to say that extending Medicare with Part D to all those without health insurance and eventually to all Americans by 2014 is the American way of providing universal health care.

Socialism you say?

Tell that to your conservative, Republican father, mother, grandfather, grandmother AND to me.

We hardly think of it as socialism.

We paid in; we are simply getting it back out.

(Sure, there may be an accounting shell game with the pay out, but this shell game goes back to before Christ; one generation has always paid for the one older.)

As a previously overpaid Mainer, I paid in more than I am likely to get back, but I hardly care since part of that goes to another, maybe even another Mainer.

If I paid that into the plate at church for the work of the church, and if part of it went to another family, would that be socialism?

Or if a small part were returned to me when I was unable to work, would that be socialism?

Nope, it would just be the way Mainers take care of each other.

So, show me how Medicare is “socialism.”

And if you can, have your conservative Republican grandmother sit down and tell her that she should refuse her Medicare health insurance (and return her Social Security income payments) because if she doesn’t, she is benefiting from socialism. (BTW, to confuse the issue, 70% of seniors think Medicare is a privately run benefit.)

Oh, and, if your grandmother or great-grandmother lived through the depression, she probably wept when Roosevelt died because he and his policies probably put food on her table and maybe gave a job to her husband or children.

Socialism is in the eye of the beholder.

My rock solid Republican grandmother, Mable Waldron Hayward, wept uncontrollably when Roosevelt died. She owned and lost her female owned Portland feed and grain store in the depression, and the President’s “socialist” programs helped to retrain her husband and her brother.

In fact, Medicare is probably the one US government program besides the Interstate highway system that works the way it should.

Admittedly, now I have a variant of Medicare, a Medicare Advantage Plan which I believe is the Medicare of the future (admittedly, with a sharply reduced pay out to the carrier companies), but vanilla-flavored Medicare worked just fine for me too.

Is there fraud in Medicare? Sure there is, but it is not coming from within the governmental body that administers Medicare. It is coming from the greedy doctors and medical supply houses that overcharge Medicare, and most often, they are caught by computer programs.

There is also fraud in private health insurance, but typically of the very same kind both from within and from without.

Sure, Medicare is currently is under-funded, and that is why doctors and hospitals don’t like it; but if everyone were on Medicare, including the 47 million without any health insurance, (124,000 in Maine in 2006), then there would no longer be any write-offs for unpaid emergency room and hospital visits or doctors visits.

Simply put, doctor’s and hospital’s uncollectible receivables would drop to zero. Additionally, the Government would be able to negotiate reasonable brand name drug prices with the Pharms and we would have the low prices that exist in Canada and Europe.

How many Americans want a national health care system?

How willing are people to have the US Government extend Medicare to all?

A CNN poll in May 2007 found that 64% agreed with the question, “Do you think the government should provide a national health insurance program for all Americans, even if this would require higher taxes.”

A December 2007 Yahoo/Associated Press poll found that 68% of respondents approved a single payer “program like Medicare that is run by the government and financed by taxpayers.”

A January 2009 Grove Insight poll indicated that 60% of Americans prefer expanding Medicare over a private alternative.

And how satisfied are those with Medicare/Medicare compared with those with private insurance or HMOs? From the Grove Insight poll, the favorable/unfavorable ratings are:

Medicaid: 44% favorable, 15% unfavorable
Medicare: 41% favorable, 20% unfavorable
HMOs: 36% favorable, 32% unfavorable
Private insurance: 29% favorable, 38% unfavorable

And why, from a dollars and cents point of view, should Obama push this?

From the LA Times:

“By almost every measure, Medicare is cheaper and more effective than private plans, according to government and academic research. Medicare spends 2% on overhead; private insurers typically spend 25% to 27% for overhead and profit.”

Big and Bold

Obama needs to go Big and Bold on health care. He campaigned on being a compromiser, about reaching across the aisle, but his outreached hand has been bitten too many time with zero votes coming from the Republicans for his financial restructuring plans.

Big and Bold

This must be Obama’s own plan. On return from vacation Obama must take the reigns and clear up the confusion. He must announce assuredly that we already have Medicare, that it works, and that it will be the public option.

Harry and Louise are already calling for health care reform; Obama simply needs to do what he has not do to date and act like a leader.

This time the truth can prevail over fear mongering by the special interest groups.

Big and Bold

Franklin Delano Roosevelt went big and bold in 1935 with the passage of the Social Security legislation.

Lyndon Baines Johnson went big and bold in 1965 when he signed the Medicare legislation.

Obama has one chance to do it, and that chance is NOW.

And when he announces it, we, who have been strangely silent through this disgusting month of August, must loudly make our voices head that this course of action is right, that universal health care is a right of all.

This President was NOT elected on our silence and this program WILL go down if we REMAIN silent.

Shall we be the silent majority that allowed Universal Health Care to die?

Our founding fathers were clever and Big and Bold men.

Our founding fathers did not compromise on Liberty and the Bill of Rights. In my humble opinion, included in those rights if written today would be access to universal health care without the likelihood that by doing so would cause one to go into bankruptcy.

Obama cannot compromise on health care with a public option, even if that means he will be a one term President.

He has one chance to get it right.

Peter B. Hayward

A Maine Armchair Philosopher™

Copyright © 2009 Peter B. Hayward. All Rights Reserved

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The Kindle: Is Amazon Selling Razors or Razor Blades?

Select the technology companies:

Apple, Amazon, Gillette, Microsoft.

Think of Apple and you think of technology: the Apple II, the original boxy Mac, the iBook, the iPod, the iPhone, iTunes, iWork. And yes, of course, the App Store. Billions and billions of downloads of quirky applications we didn’t know we needed at a few dollars a pop. Applications we probably don’t use but we think we will.

Think of Microsoft and you think of technology. Originally DOS (if anyone is young enough to remember that beast), and Windows 95 and each oddly named and quirky OS until, hold your breath, nirvana on a DVD, Windows 7. Then of course, the oft-forgotten Zune.

Think of Gillette, and you think of razor blades, maybe special razor blades, but not in the same category as Apple and Microsoft.

And finally, we usually don’t think of technology when we think of Amazon. If we do think of Amazon at all we think of Jeff Bezos’ dreamy cross-country trip in search of a purpose and the resulting bookstore in a warehouse in Seattle. Books by mail on the web, undercutting your local friendly bookstore. Check it out there and then save money, even with shipping, by buying it from Amazon. Life changed forever for everyone.

Then one day, the Kindle popped up, following in the footsteps of technology’s phenomena: the iPods and the iPhones and we were all talking about the next new thing like the it girl of yore.

Where am I going? Once upon a time Gillette sold only razor blades, but very good razor blades. The problem was that the razor blades fit into every razor that existed.

Then, Gillette decided to sell special razors for which only its razor blades fit its razors. Why? to sell more razor blades. Gillette knew the money was not in selling razors — those things lasted decades — but in selling razor blades that lasted only days.

Make a unique razor that took your own razor blade and you locked your customer into your own blade.

Before the Kindle, Sony already had an e-reader, a means of carrying around 100s or 1000s of books in a device 1/10th the size of a hardback, but Amazon wanted to make a device that would read only its proprietary e-book format.

Force publishers to publish your e-book standard and you corner the market; you set the standard for years to come. Lock the user into your razor blade.

No one thinks of Amazon as a technology company. The Kindle came out, sleek and refined, but pricey, and attracted the New York Times Book Review readers: those who devoured books and who would love to carry a book shelf of books around with them for $400 plus the price of the books.

Next came the Kindle DX, a slightly larger and ungainly, IMHO, Kindle that is an attempt to encourage national newspapers like the Times, USA today, the Wall Street Journal, etc., to bundle the DX with their newspaper subscriptions into a package. The DX is also a nod towards the college text book market, but, I that will be predict a failure there since the DX page, like the original, is in black and white (more on that below).

This fall and winter, new, thinner e-readers, and some perhaps in color will be introduced, some using the Kindle e-book standard, some not.

Amazon has broken the ice, but IMHO, Amazon has simply moved the ball down the field as a non-technology company might.

Its original version did not support PDFs in their native format; the Kindle did not accept other e-book formats; in short, it was like a computer that could only read web sites that had been specifically written for the Kindle.

Would you buy a computer like that?

Amazon will not release its sales figures for the Kindle, for whatever version, but prior to the launch of Kindle 2, Business Week stated that Amazon had sold 500,000 of the earlier version in a year. One doesn’t know how the faltering economy may have effected the sales of the 2 or the more expensive DX.

The Kindle’s typical owner is said to be a well funded professional who also reads the same books in their standard format.

In contrast, Apple has sold an estimated 200 million iPods and 21 million iPhones. iPod users are as young as 5 and as old as old can be. The only other format other than MP3 that iPod listeners are likely to be listening to is probably the radio.

An iPod shuffle can be had for as little as $50 while the two Kindle versions stand at $359 and $489, (imagine justifying to the spouse reading a 75 cent newspaper on a nearly $500 device). The Kindles do not have the intuitive ease of use that the iPod have. A six year old can take an iPod out of a box and have it in use in minutes.

With the Kindle, you must discover a worthy book, download it for $9-24 via a clever system termed Whispernet and read it for hours. You may have hundreds of songs on your iPod and hundreds of books on your Kindle, but you don’t receive the instant distraction of listening to the cut du jour while in class; the Kindle is for serious time with no distractions.

On your iPod you can listen while you are trying to ignore your teacher, your mother, your boss or the traffic; with the Kindle, although you can optionally listen to audio books as you can on the iPod, the main purpose is to read, and that doesn’t quite fit into the instant gratification 3 minute scenario.

Amazon is not a technology company. Amazon is selling razors to sell razor blades. It is attempting to force upon publishers a e-book publishing format — the Kindle format — so Sony and other e-books in the future will have to adopt the Kindle format.

Color is important in an e-reader because there is a huge market for college textbook sales. Textbooks are largely sold directly from the publisher to the college bookstore or the distributor. Textbook are not a big source of Amazon’s revenue. The size of the Kindle DX would suit college textbooks except for the fact that the DX is in black and white and these days, a large percentage of college (and graduate) textbooks have color illustrations.

Without the illustrations, the textbooks on the Kindle are, well, blah.

The Kindle moved the ball along the field.

It took a bookseller of Amazon’s size and pull to introduce an e-reader that could excite the reading elite — but imagine if it had been the goal of Apple to sell the iPod for nearly $400 with a proprietary format for music.

To be popular, an e-reader must be invisible, the e-book must be seen through the device as the music is heard through the iPod.

The music, not the iPod is the star, and so much be the e-book, in color or black and white.

With the leaked details of the Kindle 2 in hand, I wrote in my February 2 blog, Amazon’s Kindle 2 — is this product really necessary?: “Kindle’s early adopters were, in my opinion, revolutionaries whose revolution has been surpassed by the smart device.”

The successful e-reader will read all forms of in black and white and color: documents of any times, audio files of any types, compressed or not, newspapers, glossy magazines, handwritten documents, even web clips.

It will have a slot for additional memory in various formats with no limits, it will sync to different devices now and in the future. It will receive email like a Blackberry and send text email and messages (after all, it is already receiving the Whispernet over the SMS network). Finally, it will have a battery that can be replaced by the user, even if it is supplied by the manufacturer.

The buzzword for technology these days is connectivity, not exclusivity. Once you fence in, you fence out.

And by fencing out, you allow other manufacturers to bring the world — and not just a part of it — to all people.

The ideal e-reader will be as democratic and as limitless as the iPod and the iPhone in their conception.

The Kindle is but a step.

Peter B. Hayward

Social Justice – We need to strive to change what we cannot accept for our all fellow human beings. We do not have the option of silence.

Copyright © 2009 Peter B. Hayward. All Rights Reserved

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Live In Maine? Don’t Buy that $99 iPhone or that New $199 3GS iPhone YET

Yearning for an iPhone?

Mesmerized by those ads that promise to have your iPhone find romantic recipes for your supper by the time you get home or identify the various bugs crawling around in your dainties drawer?

Well, don’t shell out $199 for the two-year contract for the fancy new, high speed 3GS or even $99 for the year-old 8GB 3G iPhone.

First, ask yourself, why do I want the iPhone, and, if it is for the applications and not just for calling, ask: do I travel north of a line drawn between Brunswick and Lewiston?

If you do, you will fall into the AT&T 3G/Edge black hole.

You need to know that the iPhone is two different things.

1) A phone.

2) A computer that can use a high speed network by AT&T called 3G or 3rd Generation.

Apple only makes the iPhone. It is only as good as the network (AT&T) it is on, and while the fast 3G iPhone was introduced (and sold in Maine) last July, the AT&T 3G network to go with it did not come into southern Maine until the middle of November.

Until then, Mainers who were paying for the 3G data plan like everyone else in the US were only getting AT&T’s much slower EDGE network.

IMHO, kind of like paying for DSL and getting dialup. No refund however.

EVEN NOW, AT&T dealers have absolutely no idea when 3G data service will be extended north of Brunswick/Lewiston.

Should you doubt me, do not, repeat, do not take a sales person’s word that it will be by a certain date; ask the AT&T or Apple store manager.

There is absolutely nothing in writing as of the date of this blog as to the time that the fast 3G data network will be extended north.

So, if you stay south of that line, and if that is where you do your bird watching/identifying (a fine app I have found) or if you do your restaurant searching (another bunch of fine apps), you will be hunky dory.

North of that line you will be on the AT&T Edge technology, or on no service at all.

Should you wish to check service north of that line, go to the AT&T coverage map.

Once there select “Data” at top of map to turn the map blue; enter Maine as State; click “view map.”

The resulting map of Maine should be remain blue; the darkest blue around Portland is the 3G network; the egg shell blue is the Edge network, and the hatched blue are Partner networks which pass some data.

Use the elevator to zoom in.

Notice that the Edge service in most cases simply hugs the I-95 corridor.

For example, with Edge you can use (slowly) some of your apps in Oakland but not in Belgrade; in Newport but not in Corina; in Bar Harbor; Southwest and Northeast Harbor but nearly nowhere else on Mount Desert Island.

Oh, and then there is the matter of the dropped calls with the 3G iPhone; but that is the subject for another blog.

Peter B. Hayward

Social Justice – We need to strive to change what we cannot accept for our all fellow human beings. We do not have the option of silence.

Copyright © 2009 Peter B. Hayward. All Rights Reserved

email me

Follow me for daily tweets at twitter.com/pbh444.

To be notified immediately of new tweets from those you follow, you can use a PC program such as Mad Twitter, a Mac program such as Twitterrific, or for the iPhone/iTouch, many apps like Twitterific or a web based client such as Hahlo.

Iran: This week could be the beginning of the end for one side or the other

As I wrote in my blog earlier this week entitled “Iran: Whispers from within the State Department and the Foreign Office,” the word from colleagues in the State Department and the British Foreign Office is that the Supreme Leader, Ayatollah Khamenei, cannot let the demonstrations last much longer.

As Supreme Leader, Khamenei, is superior in governmental matters to Ahmadinejad, and just as the Ayatollah declared the election was decided yesterday, the Ayatollah could declare, after the upcoming 10% recount, that Ahmadinejad had lost.

Of course that is hardly likely.

What is known however, according to my whispering colleagues from State and the BFO, is that the the religious leaders in Iran are seriously split over the demonstrations with approximately 1/3 supporting Ahmadinejad, 1/3 Mousavi, and 1/3 undecided or aloof.

This split is critical because the position of Supreme Leader is an elected one, not by the people, of course, but by the Assembly of Experts. This group of 86 Mujtahids (Islamic scholars), could depose Khamenei, especially if the demonstrations are repressed today or over the next few days in a Tiananmen Square horror.

One important wild card regarding the Assembly of Experts is that it is headed by Akbar Hashemi Rafsanjani, President of Iran from 1989 to 1997, who lost to Ahmadinejad in 2005. Unlike Khamenei, Rafsanjani is a moderate, “support[ing] a centrist position domestically and a moderate position internationally, seeking to avoid conflict with the United States.”

Peter B. Hayward

Social Justice – We need to strive to change what we cannot accept for our all fellow human beings. We do not have the option of silence.

Copyright © 2009 Peter B. Hayward. All Rights Reserved

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A Maine Armchair Philosopher blog

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Iran: Whispers from within the State Department and the Foreign Office

One advantage of passing 60 is that colleagues from your graduate studies in the US and England are often in senior positions in the US or UK government.

I attended two universities from which graduates found access to the ranks of the State Department and the UK Foreign Office. I hear from my friends on an occasional private mailing list, and right now, there is a circle of emails rapidly flowing from the bowels of each county’s foggy bottom about the crisis in Iran.

First, some background. President Mahmoud Ahmadinejad does not have the same powers as does President Obama. That responsibility is held by the Supreme leader, Ayatollah Khamenei.

Khamenei controls the Judiciary, the Police, the National Security Council, and appoints the heads of the Islamic Revolutionary Guards. Khamenei countered Ahmadinejad’s statement that Israel should be “wiped off the map” by saying Iran “will never threaten any country.” Ahmadinejad does not even have the ability to tell the military to bomb Israel.

Khamenei alone has the power to overturn the results of the election or, alternately, to clampdown on the demonstrations in a Tiananmen Square horror.

So the buzz amongst the experts on this mailing list is as follows:

As is well known, Mir Hossein Mousavi, Ahmadinejad’s primary candidate in the multi-candidate election is no rebel or outsider but a member of the establishment. His candidacy, however, was latched onto by democracy starved students and middle classed Iranians who demonstrated their support prior to and after the election in a manner totally unexpected by Khamenei. The Supreme leader, according to the experts, had grown weary of Ahmadinejad’s saber rattling on the international stage which had lead to a marginalization of Iran.

One does not get on the ballot in Iran without Khamenei’s approval, and Khamenei believed that as an establishment figure, Mousavi could placate the West and allow movement towards the development of widespread nuclear power (not weapons), Khamenei’s long held goal, stymied because of Ahmadinejad’s threat to develop nuclear weapons.

What Khamenei did not anticipate, because of the closed nature of Iran, was the development of the incredible support for Mousavi. The students and the middle class knew he came from the establishment, but their hope and belief was that, if elected, Mousavi would move the country towards democracy.

As female diplomat from State wrote in an essay on the list this week: “Mixing democracy and theocracy is even worse than mixing gas and water. Doing the later dilutes the gas making it harder to ignite the gas; mixing democracy and theocracy makes inevitable and the explosion greater .”

Those at State and the FO indicate that as the University and middle class agitation increased prior to the election, Mousavi “saw the light” and sent messages to France, the UK and the US indicating that he would take strong pro-democracy and pro-west stances that might not be evident in his history.

Obviously, the heads of these countries could say nothing of this, as is witnessed by President Obama’s statement today “the difference between Ahmadinejad and Mousavi in terms of their actual policies may not be as great as has been advertised.”

Obama had little choice: to say otherwise, according to the list, would be to endorse Mousavi, and thus cause Khamenei more worry. In diplomacy, as in Obama’s basketball, you feign one way, and with the State department or Foreigh Office, through a backchannel, you go another.

And the list indicates that the backchannels are working overtime.

With pro-democracy, pro-Mousavi demonstrations of well over 100,000 every day in Tehran, the Republican Guard are pressing Khamenei to take action. The buzz from the State Office and the FO is that if it goes into another week, Iran’s theocracy could be greatly weakened.

Today’s mailing circle around the possibility that Thursday MAY be the big day. While TV and newspapers have declared the day to be Friday, the mailing list points out that would be illogical as Friday is Jumma, the day of assembly when men must pray for 2 hours beginning at mid-day. That alone would take the steam out of any demonstrations prior to 3 PM.

Already several Mullahs have broken from Khamenei, and are marching in the demonstrations; a number of women have been seen without head cover in Western coverage of the demonstrations; and one commentator on CNN estimated that half of the demonstrators’ signs were in English.

In the event Thursday is not the day, it is not because my colleagues in Washington or London were wrong, but it is instead that Khamenei and the the forces within Iran, being as Iran is largely an enigmatic State, are still twisting and turning.

Peter B. Hayward

Social Justice – We need to strive to change what we cannot accept for our all fellow human beings. We do not have the option of silence.

Copyright © 2009 Peter B. Hayward. All Rights Reserved

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Why is gas so high? Because it is being manipulated again.

Remember Fall 2007 and Spring 2008 when heating oil was above $4+ a gallon, gas the same, and in July the price of a barrel (bbl) of crude oil hit $147?

Well, unless you are a fact freak like I am, you might not remember the $147 number, but at that time we were projecting $8 gas, thinking about wind turbines on Munjoy hill, about clear cutting the Northern woods of Maine for firewood and pellets, everyone was buying wood and pellet stoves, and the Government worried about people actually freezing to death over the 2008/2009 Winter.

Then something strange happened: the price of crude oil plunged $20 over two weeks to $125, then to below $100 by September 15, and finally on December 21, crude was trading at $33 a bbl.

Why? Did we drill, baby, drill? Did we discover a cheap way to extract oil from shale rock? Did the idea of biodiesel cars running on french fry fat from McDonalds force the oil producing countries to lower the price of crude?

Nope.

Common wisdom is that the slide started when America and much of the world cut back on demand, largely by driving less. However, I contend that the documented 4% – 6% drop in demand experienced in the US could not have caused the spectacular collapse from $147 to $33.

Rather, I believer it is because the speculators were caught, or about to be caught with their feet on the accelerator pedal.

In late June and the first weeks of July, the Congress was laying the ground work for an investigation into speculation of commodities trading in crude futures.

Here is how commodities trading works.

Let’s say I win $50,000 in the Megabucks and want to spin the wheel.

I can buy a futures contract on just about any commodity: wheat, copper, pork bellies (bacon), and yes, crude oil, for a future delivery. Farmers like this trading because they obtain their money even before the seed goes in the ground. However, most traders do not get in at the beginning – buying a contract from the farmer – but at some time later.

As with any trading, I am buying the contract at a price at which I believe I can make a profit at some time down the line. I may hold this contract for a month or for a day based on changes in the weather, the economy, international politics, etc. Anything can drive up (or down) the price of the contract.

Or I might get together with friends who have billions of dollars, and buy so many contracts that supply and demand simply drives up the price. And institutions like pensions and cultural institution endowments might jump into the game with me when they see a chance of a big, easy profit.

During Fall 2007 and Spring 2008, speculators were wildly bidding up the price of crude oil, even though there was no shortage of oil, there had been no oil field failures, the pipelines were flowing on 3/1/2008 at the same rate they were flowing on 7/1/2007. Hedge funds, largely made up of overseas billionaires pooling their money to buy oil futures on margin (ie., with maybe only 30% down) were driving up the price of crude. There was talk that major American cultural institutions were in on the game.

There were no speculation in crude between March 2007 and the end of August 2007. Crude traded between $62 and $74. By November 2nd the price had jumped to $95, by April 11, $116, by May 23, $131, and July 11, $147.

And as I noted, then came the announcement of a planned inquiry, and the price dropped $114 within five months.

So what is happening right now?

On Tuesday, the price of a barrel of oil closed at $70.01 for July delivery.

According to the US government’s Energy Information Administration (EIA), the national average price of gas on June 9 was $2.62, almost 60 cents more than at the end of April, less than six weeks ago. The EIA projects that the average price of a barrel of crude in the second half of 2009 will average $67, up $16 from the first half.

In January, the EIA predicted crude would average $43 for 2009 and $54 for 2010; the average price of gas for 2009 would be $1.87. The EIA projection was accompanied by the statement: “The oil price path going forward will be driven mainly by the depth and duration of the global economic downturn, the pace and timing of the recovery, and actual OPEC production.”

In the first week of May, the EIA projected that gas would average $2.12 for the year. Coincidentally, that is the week that crude began its jump from $50 to $70.

The oil is still coming out of the ground, the American storage tanks are full; the economy is still struggling. From the economic law of the supply and demand we would expect the price of crude gas to go down, but the prices are still going ups.

Why?

The speculators are back in the market, and the Congress has other things to worry about than a 60 cent increase in the cost of gas in less than six weeks.

The speculators are playing because the value of the dollar is falling on the world market as a result of President Obama’s borrowing to fund his spending, and a lower dollar makes futures trading on crude even more attractive. As more come to play and the price up, the speculators make a paper profit on every uptick of the contract. And remember, these the $70/bbl amount quoted before was for July delivery; the wheels are only beginning to turn for contracts with September, October, etc, delivery.

Speculators are also playing because they are anticipating a global economic recovery with increases in oil consumption very, very soon. Why do I say very soon. Because of where the oil is located.

So where is the oil?

It is in tankers, lots of tankers off the coasts in calm waters. That way, it can’t be counted as inventory by any country. On May 10 it was reported that 100 million bbls of crude and 25 million bbls of refined products such as gas were in tankers off Europe, West Africa, the U.S. Gulf and Asian ports.

In that report, the 125 million bbls would represent nearly 3 days of oil demand for the OECD (the 30 major developed nations of the world). On June 4, Reuters reported that the world-wide energy conglomerate, Total, was storing 100 million bbls in land and sea storage. It is highly probable that the oil in floating storage was purchased at late winter contract prices about $40+ bbl.

On Wednesday, the EIA released its weekly report on crude, gas and other petroleum inventories, and largely on the basis of this report, crude jumped $1.32 from Tuesday to close at $72.33. The EIA reported that crude inventory dropped nearly 4.4 million bbls during the week, but noted that the crude inventories are still “above the upper boundaries of the average range for this time of year.” Gas inventories dropped by 1.6 million bbls and and are below the average range.

I paid $2.67/gallon for gas Tuesday before the market closed; it should not be at this level. As I wrote this Tuesday evening, it had already been increased because of crude closed higher. As I update this Wednesday afternoon, it is higher again..

The world is awash in crude. And when the price of crude jumps by a dollar on the commodities market in Chicago, that should not instantly make the gas in the tanks in the gas station across the street be worth more — the crude that made that gas was probably bought in January, but the price still went up this evening.

Last year, we were able to have an impact on the price of gas and oil and the speculators.

1) Congress called for an investigation into the incredible run up in the commodities market.

2) With gas at $4+ a gallon, we drove much much less and our reduced demand resulted in a slow down in consumption and an increase in inventories.

This summer, the inventories are neither in the ground nor in the refinery holding tanks, they are literally at sea. I am told the situation is so bad navigating the Strait of Malacca between Indonesia and Thailand (through which 25% of the world’s oil is moved) that some supertankers that normally use that passage to Japan or China have to take the more dangerous southern route.

To mix metaphors, we at at sea and over a barrel on this one. I do not believe we will see $4 a gallon gas or oil this winter, but unlike the EIA, I think $3.10 is a very real possibility by December 15.

Update: July 6

Yesterday The New York Times, always slow to the mark, ran a article on the volatility and its impact on the recovery, To its credit the NYT accompanied the article with an excellent IMF/Bloomberg chart of the price of crude adjusted for inflation since 1983. Note the price hovering at or below $30 a bbl from 1986 to 2003 until the commodities market manipulation and then the fall back to that level last December.

The chart implies a fact that I poorly referenced in the blog; as the crude market has climbed rapidly since 2000, the crude market was already being manipulated with no really significant demand/supply imbalance to justify the rapid growth in the price.

Peter B. Hayward

Social Justice – We need to strive to change what we cannot accept for our all fellow human beings. We do not have the option of silence.

Copyright © 2009 Peter B. Hayward. All Rights Reserved

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Obama: Make Good to Your Supporters

Since his election, President Obama has tried to create a consensus with the opposition, a party which has given him three votes on one bill and zero votes on another.

He has tried to listen to the Republicans, but now with the opportunity to appoint a Justice to the Supreme Court, President Obama can listen, can consult, but he must be true to his campaign promises and to his statements in his impromto presser of May 1.

The Justice he appoints will impact the Supreme court for a minimum of 10 years and possibly as long as 40 years.

President Obama was a Constitutional scholar and Professor at the University of Chicago; ideally, I am sure, he would like to appoint himself. Since he cannot, he must find and appoint his equal, if not for himself, but for those who listened to him on the campaign trail, listened to his promises and elected him on that basis.

We can have no less.

Our children and grandchildren depend upon it.

New England Governors — Fire The PUCs and FairPoint

The Associated Press reports that the head of the New Hampshire Office of Consumer Affairs “was “astounded” at the size of FairPoint Communication’s work order backlog.

At the beginning of April, FairPoint had a work order backlog of 13,000 across Maine, New Hampshire and Vermont. The Nashua Telegraph reported, “By FairPoint’s own admission, some 1,300 of those people have been waiting more than 30 days.” Some of the customers waiting for service in New Hampshire for telephone service or repair included “elderly people with medical needs.”

The President of FairPoint, Peter Nixon, predicted that the service order backlog and the telephone customer service issues would be resolved by the end of June.

Meredith Hatfield, the Consumer Advocate of New Hampshire countered:

“What is the plan to remedy this immediately?” “There are significant defects even for common retail and wholesale transactions. What about the people who need plain old telephone service? When will these be fixed? June 30 is far too late.”

A lawyer for the New Hampshire commission criticized FairPoint’s plan to rectify the problems: “There is little or nothing in the plan addressing how the systems, processes and people will actually achieve their goals.”

To repeat: “There is little or nothing…addressing how… the systems, processes and people will actually achieve their goals.”

During the Ice Storm of 1998, CMP and Bangor Hydro brought in 1000s of power workers from across the country to bring the State back on line; even then it took nearly two weeks to finish the job. This winter, after a severe ice storm in Southern New Hampshire, crews were again came in from as far away as the midwest.

The electrical workers came because of a mutual aid agreement; in the case of a natural disaster, crews from one part of the country are dispatched to the affected area.

However, FairPoint’s problems are not the result of a natural disaster; rather they are the result of a corporate disaster.

It is a disaster made by a company with just 300,000 customers in 17 states on March 31 2008 which was simply unqualified to take on an additional 1.6 million customers in Northern New England.

From my March 25 2009 blog entitled “FairPoint Communications — Much Too Little to Be So Big”:

“I argue today, as I did a year ago, that it is my humble opinion, that neither “the PUC nor FairPoint has the management, the technical abilities or the horsepower to oversee or to make this transition from Verizon to FairPoint successful. Northern New England is already behind MA, CT and RI technologically, and we don’t need FairPoint’s failures to cause us to fall even further behind.”"

Although the PUCs of Maine, New Hampshire and Vermont hired Liberty Consulting Group of Pennsylvannia to monitor FairPoint’s progress over the last year, somehow both the well paid Liberty Consulting and the Maine, New Hampshire and Vermont PUCs either did not know of FairPoint’s backlog until February or failed to act on warnings they had received.

It is now time to formally admit that FairPoint has failed the states of Maine, New Hampshire and Vermont in every aspect.

FairPoint had a year to plan for the actual transfer of the lines from Verizon, but it was not ready on January 1 2009.

It was not ready for the transfer of the email account transfers from Verizon.

It was not ready for the transfer of billing from Verizon.

In my earlier blog, I called the FairPoint failure a case of a “goldfish attempting to swallow a whale.”

Just two weeks later, I realize I was being too generous.

This goldfish did not make a single serious attempt to swallow the whale; it had a year to prepare and didn’t even nibble.

FairPoint’s failure to serve the citizens of Maine, New Hampshire and Vermont has gone beyond the point where we can give FairPoint until June 30 to admit yet another failure.

The citizens of Maine, New Hampshire and Vermont deserve a working, reliable telecommunication voice and internet system; we need to have phones and internet installed and fixed in a timely basis, and we need to know that our telecommunication company can survive financially.

The Maine, New Hampshire and Vermont PUCs and Liberty Consulting of Pennsylvania bear a great deal of the blame for not seeing this massive failure coming, even from day one when tiny Fairpoint with just 300,000 customers proposed to buy Verizon’s 1.6 million Northern New England voice and internet customers.

Reliable telecommunication is now a necessity.

The Governors of Maine, New Hampshire and Vermont must remove this very serious failure from the purview of the state PUCs.

The PUCs are simply not up to a train wreck of this magnitude.

The Governors must guarantee the citizens of their states that we will have a working telecommication company by June 1, or the Governors must find a telecommunications company or a management company can do what FairPoint cannot.

Update 4/5

After posting this blog, I ran across this April 1 2009 postmortem report from the Liberty Consulting Group on the NH PUC site. It appears to have been prepared in response to the Maine PUC request for a response plan from FairPoint.

While the report is not detailed enough to answer my critical questions — such as how did the work order backlog get to 24,000 without anyone anticipating the backlog — the report concludes with several recommendations including:

“There is currently a lack of unified senior executive leadership at FairPoint to guide the planning and execution of structured, programmatic actions to expedite its return to a normal business operating environment. ….There are a number of ways to rectify this problem, ranging from using outside resources with expertise in similar situations to help FairPoint with the analysis and problem resolution up to and including permanent executive level change.”

The report also indicates how inadequate Liberty’s oversight of FairPoint was: “Liberty has not yet completed a root cause analysis of why the widespread problems are occurring despite FairPoint’s extensive preparations and training.”

Liberty was paid WELL to anticipate and warn the PUCs of the likelihood of these problems arising, not to wonder months later WHY they occurred.

This report alone supports my thesis that Liberty and the PUCs are way over their heads.

It is not time now for Liberty and the PUCs to be diagnosing how and why FairPoint failed.

It is my humble opinion that Liberty and the PUCs cannot muddle along analyzing the past any more; the state Governments, and not the backward looking PUCs and Liberty must chart a path to our telecommunications future.

Peter B. Hayward

Copyright © 2009 Peter B. Hayward. All Rights Reserved

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Forget this N word and get the banks lending again

Let’s start with the words “zombie bank.”

Such a bank is one which has too little capitalization (assets) to operate normally such as making commercial loans, etc, but still exists in the market place.

The term came widespread when, in the 1990s, the Japanese suffered a severe financial crisis and had to pump billions into their banking system, but the banks remained still too weak to stimulate the economy. Resultingly, the Japanese economy was in decay for a decade.

By all measures, Citicorp is a zombie bank. The Federal government has poured $40 billion into Citigroup, but the stock market values Citigroup at less than that. Citigroup is still acting as a retail bank, handing customer deposits, checking accounts, etc, but the bank is not a functional commercial bank. Citigroup has approached the Obama administration for help, suggesting the government pour money in and take in exchange a 40% common stock share with voting rights in the bank.

However, in my humble opinion, a 40% stake in a zombie bank does not give the Federal government the clout it needs to bring liquidity back into the nation’s commercial banking system.

Right now, besides Citigroup, Bank of America and several other giant banks are zombie banks, lacking the assets and/or willingness to make the commercial loans get the commercial markets moving again.

So, let’s start by dropping this N word, “nationalization.”

In pure terms, nationalization means taking over and maintaining ownership of what was a non governmental asset.

Currently being discussed regarding the “zombie banks” is a take over of the banks, a sale or restructuring of the bad assets, a restructuring of the management, and a sale of the good assets into the market.

The same thing happens when a private investment company buys a failing company, pares off the failing units, and runs or sells off the viable parts.

Every Friday, the Government, in the form of the FDIC takes over failed banks, restructures the banks and sells the banks to healthy banks. This is hardly nationalization. It only makes the news when the banks being considered are the Bank of America and Citicorp.

In the 1990s, the Swedish government faced a financial crisis similar to the one we face today: deregulation had led to a real estate buying frenzy fueled by lending by banks with no real oversight of the loans. In 1991 the real estate balloon burst, the banks went into crisis, unemployment tripled.

The two Swedish political parties joined together, underwrote all bank deposits to prevent a run on the banks, told the banks to write down their assets to market value (mark to market), restructured management, and recapitalized the banks.

This cost the Swedish government approximately 4% of GDP which was reduced to 2% when it took its shareholder profit.

It is time we stop using this N word as if it were a swear or dirty word. The FDIC is taking over institutions every Friday to save what are typically small or regional banks.

This crisis and this nation will not start moving again until the banks start loaning.

And the crisis is very, very real. The Federal Open Market Committee (FOMC) of the Federal Reserve stated the following on February 24:

Given the strength of the forces currently weighing on the economy, participants generally expected that the recovery would be unusually gradual and prolonged: All participants anticipated that unemployment would remain substantially above its longer-run sustainable rate at the end of 2011, even absent further economic shocks; a few indicated that more than five to six years would be needed for the economy to converge to a longer-run path characterized by sustainable rates of output growth and unemployment and by an appropriate rate of inflation.

In my opinion, a worry about a movement to socialism is a canard and is meaningless.

The economy needs to have its banking system restored to “normal” as soon as possible, and if that means doing exactly the same as what private investment firms do: buying failing businesses, writing down the bad assets, spinning off the good assets into a new company and selling it off, then that is what the Federal Government must do with the “zombie banks.”

Peter B. Hayward

Copyright © 2009 Peter B. Hayward. All Rights Reserved

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Kindle 2 debut: February 9 — $359

The New York Times reported today that Amazon has called a press conference on February 2nd, not its home town of Seattle, but in the media and financial center of the United States, New York. The NYT further determined that Jeff Bezos will host the event and on that basis, the NYT announced that the Kindle 2 will be unveiled that day. And the price will be the same as the current price for the Kindle 1, $359. I have been told by several sources that they have placed orders for the Kindle at that price “Expected to ship in 4 to 6 weeks.”

On October 3rd the Boy Genius Report had published what were said to be pictures of the new beast. It was then rumored that new Kindle would be released in early November. On October 23, however, Oprah endorsed the Kindle on her program and sales skyrocketed, apparently leaving Amazon with too few Kindle 1s or 2s for the stocking.

The announcement is being held in a location that Steve Jobs would love. The Morgan Library & Museum in New York houses one of the world’s greatest collections of artistic, literary, and musical works, from ancient times to the medieval and Renaissance periods to the present day.

Kind of like what the Kindle might become some day.

Peter B. Hayward

Copyright © 2009 Peter B. Hayward. All Rights Reserved

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