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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Obtaining a college degree is rapidly approaching the point of greatly diminished return on investment.

I believe two years in a carefully chosen program at a Maine Technical College will guarantee a student an income for his or her working life.

In a piece in the New York Times entitled “The Case for Working With Your Hands” from his upcoming book, Matthew R Crawford, stated something that I have argued for years:

“…there are also systemic changes in the economy, arising from information technology, that have the surprising effect of making the manual trades — plumbing, electrical work, car repair — more attractive as careers. The Princeton economist Alan Blinder argues that the crucial distinction in the emerging labor market is not between those with more or less education, but between those whose services can be delivered over a wire and those who must do their work in person or on site. The latter will find their livelihoods more secure against outsourcing to distant countries. As Blinder puts it, “You can’t hammer a nail over the Internet.” Nor can the Indians fix your car. Because they are in India.”

Maine has seen its share of outsourcing. When Bank of America acquired MBNA, it transferred nearly 350 call center jobs out of Maine.

And as for those college graduates, the fact that a large percentage must move out of state to find gainful employment begs the question as to whether the State’s, and by extension, the tax payers’ return on investment would not be better served simply by shutting down all but one of the University of Maine System’s colleges and universities. The State would then take the massive saving and use a portion to provide full grants to Maine’s high school graduates to attend other colleges and universities.

We need to think bold and outside the box. The University of Maine System of colleges and universities is simply not working effectively for Maine tax payers.

Excluding much employment in Portland and in pockets of Augusta, Lewiston and Bangor, we are largely a state that works with its hands.

For example, tourism is our major industry, and a lot of that can go underground as a cash business. For example, parts of the tourism industry are paid in cash which can be placed off the books; the suppliers of and maintenance work for the tourism industry are sometimes paid in cash, as can be the repair workers, etc.

A relative of mine once derisively asked my wife why seemingly all Mainers had two jobs, perhaps a day job and a side job repairing cars, as a seamstress, as a handyman, roofer, gypsy taxi driver, etc. Although my wife politely explained, my answer today would be, “if you have to ask, then you …”

This is Maine’s underground economy. Sometimes it is just enough to buy a few cords of wood, sometimes it is enough to pay the mortgage on the house or more.

Certainly it is untaxed, but it is allowing Mainers to get through the worst times they have seen since the Great Depression, and perhaps that is why our unemployment rate last month was lower than the national average.

We, and many largely rural states like Maine, have long had striving underground economies that predate the establishment of the modern national income tax in 1913.

Perhaps in a diabolical way, that may be why, on Friday, the State Legislature passed a “revenue neutral” reduction in the State income tax by increasing the sales tax and extending it to previously untaxed services.

Given our Maine’s population of 1.3 million, Maine’s small business tax base, and Maine’s low average income, Maine simply cannot live without its underground economy; it provides those in it with a living standard that they would not have otherwise, a living standard typically gained by doing work that cannot be outsourced.

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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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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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

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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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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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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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Each June 6th, I honor the D-Day landings, and I think of my Father’s dangerous duty on that day nearly 6,000 miles away.

On the five year commemoration of the landings, I glue myself to the television, and I think of the incredible 160,000 Allied troops that landed on the beaches of France that day, and of the 1 million troops that would be landed on the continent by July 1.

Allied casualties on D-Day (killed, wounded and missing in action) are estimated at 10,000: killed were approximately 2,500: 1,465 American, 676 British, and 359 Canadian. The precision of the prior numbers is very misleading in light of the word “approximate.” The missing in action figure for casualties has never been resolved into killed, and exhaustive research by the National D-Day Foundation has documented 2,477 American dead on D-Day. Each few months Allied bones wash up on the Normandy beaches.

Often forgotten is the fact that in the two months leading up to D-Day, the Allies lost 12,000 fliers in air operations which prepared the way for D-Day.

Nearly all of the troops landing that day on the beaches of France had never heard a shot fired in battle.

On that June day, my father was a quarter of a world away doing what he did six days a week, serving as a bombardier in the Army Air Corp. He analyzed sites and worked out difficult, precise mathematical formulas. Then in the air in a massive bomber over Japanese-occupied China, he released bombs at the exact moment miles before the target.

Bombing raids such as these prevented Japan from continuing their drive further into South East Asia and Australia.

My father, of course, knew nothing of what was happening on D-Day until the news started to leak out over shortwave radios. The Army Air Corp withheld the official information for some time so as not to distract the airmen from their missions.

D-Day, and the A-bombs dropped on Japan were certainly the driving forces that made the end of World War II inevitable, but we must never forget that D-Day was one step of many, and that the American deaths on D-Day were but a part of a incredibly large number.

If the Normandy beach landings had failed, it would have taken longer, much, much longer to defeat Hitler, but in the end the Axis powers would have been defeated.

Approximately 416,800 Americans soldiers were killed in World War II.

My father avoided the gun fire from the ground and from Japanese planes that doomed other bombers, and he came home to South Portland.

Three years and one month after D-Day I was born.

Peter B. Hayward

Copyright © 2009 Peter B. Hayward. All Rights Reserved

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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.

Swine Flu was first identified in 1930, and was so named because it was similar to an influenza found in swine.

In 1976 more than 200 at Fort Dix came down with Swine Flu.

The current influenza is a witch’s brew of one strain of human influenza virus, one strain of avian influenza virus, and two separate strains of swine influenza virus. The CDC refers to this version of influenza as swine influenza A (H1N1) or simply H1N1. Thus, as is a assortment of viruses, the Centers for Disease Control (CDC) and the World Health Organization (WHO) state that there is no relationship between the current virus and viruses currently found in pigs.

This flu cannot be caught by eating pork or by being near pigs. Regardless, the Egyptian Government ordered all of the country’s 300,000 pigs be slaughtered.

Each year, more than 36,000 in the US die from the seasonal flu, a number little known by most. A large percentage of those who die are the elderly, the young, and those with compromised immune systems. In order to track the spread of H1N1, the CDC is maintaining a list of laboratory confirmed cases of H1N1 infections in the United States. As of 4 PM May 1, the number stood at 141 with the 3 cases in Maine not yet confirmed by the CDC.

Although much attention has been directed to Mexico, apparently the first documented case of H1N1 was in the United States in Imperial Country, CA on March 28th, and a second on March 30th in San Diego County, CA. (However, the CDC did not confirm the samples from these patients until mid April, after the Mexico outbreaks.) The first Mexican outbreak was reportedly of a 5 year-old on April 2 in La Gloria, Veracruz, Mexico.

The major concern about H1N1 is that the variant is so new that people have no immunity to it. Flu shots given to date have not included the unique witch’s brew of viruses, and so no one has antibodies for this influenza. For this reason, the CDC declared a public health emergency on April 26, and the WHO is worried about a pandemic – an outbreak of the disease which would affect an exceptionally high proportion of the population.

While there no time to develop a vaccine for this variant, H1N1 can be treated or prevented by Tamiflu (olsetamivir) or Relenza (zanamivir), both of which operate by blocking the action of neuraminidase, an enzyme which facilitates the movement of the virus from cell to cell.

More than 50 million courses of these antiviral medicines have been stockpiled by the US government and it is purchasing another 13 million courses (a course is 10 doses). To be effective, the medicine must be taken within two days of the onset of H1N1.

Two major questions regarding H1N1 are: 1) why have so many people died in Mexico and so few have died elsewhere and 2) can the masks being worn in Mexico actually prevent the spread of the disease.?

The first death from H1N1 occurred on April 13, when a woman with diabetes from Oaxaca state in Mexico died from respiratory complications. H1N1 quickly spread to metro Mexico City with its population of 20 million.

When the news started to hit the American media, numbers swirled about regarding the number of Mexican dead from the H1N1. What was missed by the media was that the common number used, 183, may not have been all deaths from H1N1. For example, it is also possible that the higher number of reported Mexican H1N1 deaths has been the result of deaths reported in hospitals which came from causes other than H1N1.

As of April 30, the Mexican government has been able to attribute only 12 deaths to the H1N1. Certainly, the Mexican number will go up as the impact of the H1N1 on Mexico City has been enormous, but the actual number of deaths truly attributable to the H1N1 in Mexico is currently unknown.

On May 1, the Associated Press reported that the Mexican government said that many of the confirmed H1N1 “dead were between the ages of 20 and 40 and that they had an overactive immune system” and that “Mexico City government officials announced that preliminary investigations showed most of the people suspected to have died of swine flu in the capital lived in poor neighborhoods.”

An overactive immune system, which is also known as an Autoimmune disease is one in which an individual’s own immune system is out of control and attacks organs or parts of the body. Lupus, for example, is an Autoimmune disease.

Finally, regarding the ubiquitous masks seen in Mexico City pictures and now in some parts of New York city, public health officials point out that the masks typically seen offer little protection to the healthy as these masks exhibit gaps at the edges near the mouth, especially as the individual speaks.

The masks being worn are typically surgical masks which are intended to prevent the transmission of germs from medical professionals to patients during procedures. The only effective mask, according to the CDC is the N95 respirators masks which can be found in some hardware stores or online. The Wall Street Journal, however, reports that a major manufacturer of N95 respirator mask has the item on backorder.

Peter B. Hayward

Copyright © 2009 Peter B. Hayward. All Rights Reserved

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