The year ahead is going to be a tumultuous one, challenging in political, economic, and financial terms. Despite this, there are opportunities for those prepared to take advantage of them, because uncertain times mean that market share is up for grabs. And no, it’s not a coincidence that there are 12 trends for 2012. I discarded a bunch more, but it’s such a catchy title I couldn’t resist.

I’m going to approach these 12 trends with three objectives: What is important? Why is it important? And what does it mean to you?

And I’m going to start with the bad news, and end with the silver linings.

1)    Declining American influence – America’s absolute and relative influence in geopolitics, economics, finance, and the military is declining for a host of reasons: the rise of competing powers like China, India, Brazil, and others; the very expensive military adventures in Iraq and Afghanistan, which have sapped America’s willingness to engage in aggressive political and/or military action; the Arab Spring, which eliminated Middle Eastern strongmen like Mubarak who followed America’s political lead, and the continued stalemate over the fate of the Palestinians, means that America’s influence over this critical and unstable region is at or near an all-time low; the Great Recession, which has sapped America’s economic and financial clout; and the dysfunctional stand-off between Republicans and Democrats that has frequently led to policy paralysis.

The implications of this are a less stable, more dangerous world. America may have gone back and forth on whether it wanted to be the world’s policeman, even though it truly was the global cop, and it’s inability to fill that role now means that the world is a more dangerous place.

This sets the stage for sticky situations to emerge, such as the twin nuclear threats from a suddenly even less-stable North Korea, and the only slightly more stable and geopolitically ambitious theocracy in Iran. It also leaves more elbow room for the ever-ambitious China to expand its power and influence, notably in south Asia and the South China Sea. It also leaves critical global issues, like what to do about climate change, without essential leadership.

The implications of this is a world where there are more likely to be more, and more serious, geopolitical, financial, and economic crises, and greater uncertainty in virtually every aspect of life. Others may not always have agreed with American policies, but they will miss America’s steadying influence as it ebbs from their lives.

2)    Ho-hum! Just another financial crisis (European edition) – The daily drumbeat of scary headlines dealing with the financial crises in Europe have gradually deadened everyone’s awareness for how dangerous the situation truly is. In particular, Angela Merkel is juggling hand-grenades, and hoping that she won’t drop any, and that none of them will go off unexpectedly. Germany is the only European country with the potential to stop the rolling crises that are affecting Europe, and then only if Merkel acts in a timely basis. To do this, she must let Greece go bankrupt instead of propping it up, shore up the banks, notably German banks, that have bought far too many dodgy EU bonds in the past, allow the European Central Bank (ECB) to become a lender of last resort, with the ability to stop a run on European bonds, and halt the bond market attacks on other European countries, starting with Portugal and Ireland, but extending to the much bigger countries like Spain, Italy, and even France. But Germany doesn’t want to do these things, and German voters are adamant that they won’t subsidize what they see as the lazy, profligate lifestyles of southern Europeans. But if Germany doesn’t act, and in a timely fashion, it may lose the ability to act at all, and come under attack from the bond markets as well. Indeed, German bonds are no longer being bought with as much enthusiasm as they were even two months ago. If Germany doesn’t act soon, it may lose the ability to do so at all.

Remember what happened in the American financial markets in 2008? If Germany doesn’t act in time, we could see the same kind of thing happen in 2012, this time starting with a run on European government bonds. From there a run could spread to those banks – American as well as European – that hold too many of these bonds. And once such a run started, the most dangerous question of all would emerge: “Who’s next?” Investors, frightened by the panic, would look to sell any and every questionable credit, and their attention might turn to the various U.S. state and local governments, like Illinois, California, and Harrisburg, Pennsylvania, among many others, that are struggling with their finances.

The U.S. Federal Reserve has become the de facto lender of last resort to the entire developed world, and would undoubtedly step in and support the banks and markets with everything they had. But this time, remembering the callous, greedy ingratitude of last rescue of the banking industry, American voters and the American Congress would likely tell the banks to drop dead. It was a hard enough last time to get Congress to bail out the banks; this time I suspect it would be impossible, even though failing banks would take the global economy down with them. Moreover, the Fed doesn’t have anywhere near as many bullets today as they did in 2008, and Fed Chairman Bernanke already has some Republicans, notably Ron Paul, baying for his blood over the quantitative easing from the last crisis.

The danger here is frighteningly real, and even greater than the risks we faced in the panic of 2008. Yet, the steady drip of crisis headlines and last-minute rescues has left many people convinced that nothing will happen. If it does, it will catch people flat-footed, not because they didn’t know there was a crisis, but because they have been hearing about it for over two years now, and have tuned it out. We could muddle through, and probably will – but the risks are far higher than most people realize. It will be important to have thought out a Plan B to deal with the unthinkable, if it happens, one that prepares you and your finances for a bigger repeat of the 2008 panic. Again, it probably won’t happen – but it’s better to have a plan and not need it, than need a plan and not have it.

3)    Yes, China’s influence will continue to rise, but…  Napoleon famously said, “China is a sleeping giant. Let it sleep.” Well, China’s very much awake now, and throwing her weight around – although cautiously. If I were (God forbid) Emperor of China, I would require my minions to tread cautiously, to smile a lot at our trading partners and neighbors, and to make our gains slowly, one salami slice at a time, never appearing too greedy or overreaching. I would practice soft diplomacy, offering aid and comfort where I could do so cheaply, loudly proclaiming our respect for other countries’ internal policies, taking leadership positions in things, like climate change, where I knew I was going to have to make changes anyway, and generally trying to look like a good global citizen. I would act, in short, as if time were on my side, and I was going to be the next Big Thing.

And generally speaking, that is precisely what China is doing – except that every once in a while the mask slips, and the avarice and aggression shows, as with the boundary disputes with other countries, especially as related to the South “China” Sea, which China (the nation) seems to be trying to interpret literally as being a Chinese lake.

But China has an Achilles’ heel – several of them, in fact – and does not have (much) time on its side. Its biggest weakness is that it is aging faster than any other significant country on Earth. Because of its One Child policy, China’s population is expected to peak, and begin declining, sometime around 2020 – within the next 10 years. And its labor force is already in decline, even as the demands for higher wages push its cost structures higher.

Meanwhile, although there is a great deal of pride in China’s new affluence among the Chinese, that affluence is not evenly spread, and there is unrest among those who remain poor. Add to this the widespread corruption of Chinese officials at all levels, which often provokes revolts, like the one in Wukan, which leads to simmering dissatisfaction among many Chinese.

This will further be exacerbated by the fact that China’s factories are automating almost as quickly as those of the developed world, which threatens to slow the rate of job creation, productivity, and affluence markedly over the next 10 years. Yet, China dare not automate; to do so would mean a loss of competitiveness, which would produce even worse results as industries would move elsewhere.
So, with that in mind, what would I, as self-appointed Emperor of China, do? Worry about a future I couldn’t control, and for which I could not see a clear path forward. The next 10 years will mark the beginning of the end of China’s ascension, and if I were Emperor, I’d think about retiring to some warm, cushy haven before the revolution came. Chinese Spring, anyone?

The implications are for China to step up its attempts to increase power and influence, and throw its weight around even more actively before that power starts to wane, but as quietly as possible. Look for China to try to make this the China Decade, especially in finance, trade, and geopolitics, as it attempts to pull in as much as it can while it can.

4)    American Spring? Meanwhile, closer to home, while those on the political right like to dismiss the Occupy movement (e.g., Occupy Wall Street), the fact that the movement happened at all is the most significant part of it. Indeed, Time magazine made protestors its “Person of the Year”, and that’s not restricted to just the Arab countries. The Occupy movement and protests against cut-backs in many developed countries had many of the earmarks of the Arab Spring: protestors saying that their governments serve an elite clique and not the people; lots of people, especially young men, who cannot find work despite months or years of trying; and a belief that the political system is neither representative nor responsive. Just because winter has fallen, and the Occupy settlements have been disbanded does not mean that the dissatisfaction has gone away. And with increasingly dysfunctional government in America, the potential is there for a much stronger protest movement against the System, however that is defined. American Spring, perhaps? It sounds unlikely, but not as unlikely now as it did before, and it won’t be restricted to America for discontent will grow in all developed countries.

This is especially true as the boomers move towards retirement, only to find that their either don’t have the resources to retire and that no one is going to donate them, or that the civil servant pensions that they were promised are unaffordable.

The protest movements have only just begun, and they are going to be acrimonious, disruptive, and at times hijack the political process.

5)    Mixed signals for both weaker – and stronger – economic growth.  Europe and its prospects are dragging the global economy down. The uncertainty in Europe, combined with the painful budget cuts in Greece, Ireland, Portugal, Italy, Spain, and the United Kingdom, mean that Europe is now in recession and a drag on the global economy.

Meanwhile, China, which had been concerned about inflation, and hence was hiking interest rates in a bid to slow it, has now reversed itself, which I can only interpret as concern that growth will slow more than they want. That’s a potential positive, as it will add stimulus to the global economy.

Canada, which has to date seemed to skate above most of the problems of the rest of the developed world, now seems to be experiencing slower growth, with an unexpected jump in the unemployment rate, while its housing market is looking pricey, frothy, dangerous, and much like America’s prior to the collapse in 2008, especially in condo development in its major cities like Toronto, Vancouver, and Calgary. Moreover, its consumer debt levels are exceeding the levels of American consumers in 2007, and no less a figure than Mark Carney, the highly respected Governor of the Bank of Canada, has warned consumers and banks alike to cut back on consumer borrowing. Canada could be arriving late for the financial meltdown of 2008 – but if its consumers don’t mend their ways, they will get there.

And yet, America, which until 2008 was seen as the world’s engine of growth, seems to be picking up for no specific reason. Actually, this was almost inevitable because of the natural dynamism and entrepreneurship of the American economy. What has prevented America from rebounding earlier, or more strongly, has been the housing market, which is still in horrendous shape – but slowly improving.

So how will this balance out through 2012? Assuming that Europe doesn’t crash and burn, and drag everyone else down with it, and that Iran doesn’t precipitate a significant war in the Middle East, then America will continue to recover, its jobless rate will continue to decline (slowly), the world will lick its (economic) wounds, and things will slowly get better.

Accordingly, while I continue to counsel my clients to have a Plan B in their back pocket if things do go bad, my primary advice is the prepare now for better times ahead. There are problems – big problems – ahead, and the American election in 2012 is not going to help, but for 2012 we are likely to see an improving environment, and opportunities re-emerging for those with the courage to grasp them, as I outline in Trend #7 below.

6)    Climate change accelerates – and the consequences will multiply. The most significant and portentous climate news of 2011 was the discovery of methane gas bubbling up in the Arctic Ocean off the north coasts of both Siberia and Alaska. Methane is a far more potent greenhouse gas than carbon dioxide, and the melting of the Arctic ice cap, combined with the rise in the temperature of the Arctic Ocean, has started to release methane from the ocean floor. As well, as temperatures rise in the northern polar regions of Siberia, Alaska, and Canada, the permafrost melts, releasing even more methane into the atmosphere. The amounts of methane that could be released by both sea floor methyl hydrates and permafrost are staggeringly huge, and could dramatically accelerate the rate of climate change. If this trend continues, not only will the debate over climate change be over, but humanity will be forced to race to keep up with the potential changes.

As it happens, the vast majority of climate scientists – something approaching 95% – now agree that climate change is happening, and that humanity is at the very least a significant contributor to it. Since I speak to lots of different kinds of audiences, I can tell you that most groups now accept that climate change is happening, even those that have been among the most vocal doubters. The doubts they now raise are more along the lines of whether humanity is to blame. But from my point of view, it no longer matters: if your house is on fire, you don’t throw gasoline on the fire, regardless of how it started. That’s roughly the position we’re in now.

In 2012, we will get more information about the release of methane, and can only pray for good news. Meanwhile, brace yourself for more strange, and increasingly extreme weather. And because climate is a chaotic system (where chaos theory is a branch of mathematics), it is literally unpredictable. This means we can’t tell whether we will get floods or drought, hurricanes or tornados, or something else unforeseen. But it won’t be business as usual, either.

7)    Innovation as Steve Jobs’ legacy.  Jobs didn’t invent innovation, but he sure popularized it! Innovation has become a corporate religion in recent years, and with good reason: innovation can allow you to disrupt the marketplace, scoop up market share, increase profits, and win friends and influence people, just as Jobs and Apple have done. Yet, innovation is hard, especially because there’s a natural resistance to change and to the real risk-taking that innovation requires.

But if there is a theme for the corporate world in 2012, it is that now is the time to get serious about innovation. As an innovation specialist who runs seminars and workshops for corporate clients, I’m seeing this on a daily basis in genetic and medical research, agriculture, the automotive industry, the insurance industry and finance generally, plus just about every other sector of the economy. And technology itself embodies innovation. Indeed, the idea of a technological company not working hard at innovation seems like recipe for extinction. The world is changing rapidly, and there are lots of new opportunities – and disasters – out there. It’s raining soup, but if you just stand there, looking up in surprise, you’ll drown!

8)    Who dares, wins. Such is the motto of Britain’s fabled SAS – one of the world’s premier commando groups. But their motto applies equally to unsettled times. During such times, it’s easy and very, very tempting to hunker down, conserving cash, and wait for lazy, easy times to return. But study after study shows that companies that continue to market aggressively, and pursue research into new ideas, new products, and better results for their customers make far more inroads with modest expenditures during bad times than spending far more during good times, when everyone else is competing hard. Moreover, loyalty is won when times are bad, both among consumers, and among employees. And best of all, you can often accomplish a great deal with careful planning and foresight rather than lavish expenditures. This is where strategic planning comes to the fore. The time to be thoughtfully aggressive is when your competitors are playing turtle.

9)    The Red Invaders. The emergence of a Chinese middle class not only means upward pressure on food and fuel prices, it also means a vast invasion of Chinese tourists bearing money. For those countries and regions able to attract such tourists, it means a new source of revenue, and a big shot in the arm. And, as with all ethnic groups, it also means serving them the way they want to be served in terms of language, food, and customs. To the winner go the mega-spoils.

10) Haggling returns to North American retailing. Smart retailers are recognizing that it’s no longer enough to post a sign saying “10% off” to attract consumers, but that consumers are more demanding now, and are moving away from the traditional “no haggle” approach to buying. Moreover, haggling offers two additional benefits to consumers: it’s become somewhat of a game where they can enjoy the thrill of the hunt; and it offers bragging rights when talking with their friends. As a result, haggling has been emerging in two different ways, one passive, and the other active.

The passive form of haggling is to wait for sales. You can witness this almost anywhere when consumers see an item they like in a store, and ask if it’s on sale. When they’re told that it’s not, they turn up their noses, and say they’ll wait until it is. This might be described as “temporal haggling”, where the consumer is saying, “I’ll wait until you lower the price before I buy it. And if you don’t lower it enough, I won’t buy it.” Smart stores are responding in creative ways. Some salespeople say, “No, that’s not on sale, but it will be starting next week,” which amounts to a counter-offer. A smart consumer will reply by saying, “Can you put it aside for me until then?”, implicitly offering to buy it if they do. Some salespeople say no, others say “Sure.” The net result is that store and consumer have haggled over the price to agree on a sale/purchase. Yet the smart retailer actually has an advantage in this exchange: they get to name the sale price in temporal haggling.

By comparison, in active, more traditional haggling the consumer takes the initiative, saying something like “What’s your best price on this widget?” If the salesperson replies with the sticker price, the haggle is over and the consumer leaves. If the salesperson names a price, the consumer responds dismissively, and says, “I wouldn’t pay a nickel over $X for that”, and the salesperson can choose to respond or not. This is, as I say, traditional marketplace haggling.

If a retailer wants to capitalize on the re-emergence of haggling into the North American marketplace, they need to anticipate it, and come up with a range of responses. One might be to say, “We can’t discount this item today, but it is going on sale next week. Would you like to put a deposit on it to hold it until then?” The retailer regains the initiative this way, and moves towards a close. Or better still, the retailer should look for a way to add value rather than cut price by making a counter-offer like, “No, I’m sorry, we can’t discount that item. But we can offer you a 50% discount on a matching accessory if you buy it.”

Regardless of approach, though, retailers should be prepared to return to marketplace haggling, and have a range of responses ready to deal with it. Consumers, as always, should decide what they want, and what their bottom line is in getting it.

11) Health care magic blossoms. Putting aside the issue of cost, which concerns everyone, the ability of health care to solve problems is beginning to move at computer speeds, in part because IT is increasingly being used by doctors, nurses, hospitals – and patients – to manage health care, and in part because research is increasingly being done using smart, powerful computer tools to perform research and execute treatments. Among the changes in the immediate future of health care are:

• The rapidly rising ability to repair failing hearts and minds (or at least brains) and other organs with stem cells. Stem cell treatments are starting to move out of the laboratory and into the operating room, and 2012 will see hundreds of people receiving this kind of therapy.
• Similarly, 3D printers, which have been in development for roughly 20 years, are now good enough that they are starting to be used to create replacement organs from a patient’s own tissue. This will gradually move into mainstream medicine, with replacement hearts, livers, and kidneys being at the top of the list.
• Quadriplegics will increasingly be able to interact with the world through prosthetics controlled by thought alone, either through electrodes that interpret brain wave patterns, or implanted chips which interpret specific thought-impulses.
• Retinal implants are starting to emerge that can help blind people discern light, shapes, and some objects. The implication is that we may be able to help aging boomers improve their failing eyesight as they age – one of the biggest complaints of old age!
• Health care is increasingly falling into the hands of the patient – literally. Smartphones, which are fundamentally wearable computers with all the capabilities of what used to be called “supercomputers”, can now work with Bluetooth-enabled sensors to monitor various aspects of health, from the vigor of your workout, to the health of your heart, to the level of your blood sugar. This will lead to a revolution in health management, with consumers sometimes way out in front of practitioner.
• Likewise, as patients become more and more comfortable with researching medical conditions and treatments online; they are demanding an increasing role in their own diagnosis and treatment; becoming active, important advocates for fund-raising and acceptance of treatments; and blunt critics of health care practitioners through social media and word of mouth. Smart practitioners are accepting this trend and rolling with it. Old school practitioners are resisting, but may wind up steamrolled by it.
• Crowdsourcing of tough diagnoses, and novel solutions to the medical and financial problems of health care promise to open yet another front in the health care revolution. This follows on with the success of crowdsourcing in helping leading-edge research scientists in astronomy (galaxyzoo.org) and protein research (Foldit game softwear).
• Sequencing your genome gets cheap. Sequencing the first genome cost billions of dollars and took decades to perform (culminating in the Human Genome Project). Today it costs about $1,000 (although analysis costs significantly more). Within 10 years, it will cost $100, and analysis will cost about $500 more, and will provide you a complete run-down of where your vulnerabilities lie, and what you can do to forestall future health problems. For 2012, we will see incremental advances towards that goal, with major diseases identified, and a short list of things you do – and don’t – want to do or eat prescribed. This is the true beginning of personalized medicine, and it will revolutionize health care.

12) Technology accelerates in 2012. It’s hard to know what to leave out: electronic mind-reading? Glasses that emit sounds and smells to allow you to enhance social media? The proliferating tablets and smartphones with ever-more wondrous abilities? Here’s a partial list of things I think demonstrate trends that will become increasingly important:

• 3D printers – As well as making replacement organs, 3D printers are coming into the price range of consumers, and may mean that you can buy your own desktop factory. Need a replacement screw for a door? Make it yourself. Need to duplicate a key? Ditto. See a nifty device on TV? Download the plans and make it yourself. Of course, who knows what the ink cartridges will cost.
• Near-eye monitors – These look like glasses, but are computer monitors. They’re the lineal descendents of jet fighter heads-up displays, and will revolutionize the way we use computers, particularly smartphones, but have been hampered by high costs. Prices are starting to approach luxury consumer levels, so applications will start to appear in things like immersive gaming, personal entertainment theaters, medical imaging, and augmented reality.
• Augmented reality through your smartphone – Augmented reality is overlaying information on top of the view from your Mark 1 eyeball, much as Google Street View overlays the names of shops on a photo. You’ll be able to hold up your smartphone’s camera and have your phone overlay directions, stores, infrastructure views, or whatever else might be useful to you. This gets better when you can view the results in your near-eye monitors.
• Cloud computing explodes – Owning a computer is so 2010. Cloud computing is rapidly placing the resources of today’s supercomputers in your hands for pennies a minute. One researcher used one of the commercial clouds to try to break his password to a social media website by brute force, just to see if he could do it. Using the cloud and standard code-breaking techniques he did it in minutes, and it cost him 39¢. As the tools to harness this power get more powerful and easier to use, the potential of the cloud will be adapted by more and more users.
• Siri & copycats + babbling to your smartphone – Siri is an application of the iPhone 4S that allows you to speak to your iPhone and get it to do things for you. This might be setting a count-down timer, converting milliliters to fluid ounces, finding an address and directions from your present location, or looking up a phone number (all of which I’ve done). Apple is offering this technology as a beta version now, but every Siri request goes through Apple’s servers. This means the potential exists to assess what people want to do, and come up with solutions, improving the results really quickly, making personal avatars (also called PDAs, butlers, or assistants) much more valuable in short order. And that means everyone will rush into the field. This will lead to lots of really bad copycat applications, but ultimately a revolution in how we use technology.
• Biometric passwords – Our world is becoming so full of passwords that need to be foolproof (meaning our tendency to forget them) that biometric passwords are almost inevitable, and they are beginning to appear. They will be expensive at first, but gradually retina, fingerprint, voiceprint, and other means of making sure you are you will become cheap and commonplace, and then you will become your own password, no memory required.
• Robots – Everyday robots are here, but they are clunky, expensive, or just plain cute. That’s changing very quickly, and 2012 will see more and more of them appearing in more and more places. Typically these will be commercial settings, but health care is one place where robots make sense and will be used. Rosie the Robot won’t be washing your dishes this year, but she’s coming – if you’re willing to pony up the equivalent of the price of a luxury car.

The stock markets have fallen out of bed since President Obama signed the ludicrous debt ceiling deal. I don’t wonder about that; what I wonder is why they took so long. I was expecting stocks to fall two weeks earlier than they did. But now the question becomes: What happens next? This is actually a much deeper question than it seems, because it goes far beyond just the behavior of stock prices and markets. But let’s start with stocks.

When I started work on this blog, the S&P 500 index was at 1,119 which put it almost exactly half way between the October 4th, 2008 high of 1,565 and the March 6th, 2009 low of 667. Specifically, it was 452 points below the high, and 446 above the low, so almost exactly half way. (And if you want to look at that in percentage change terms, it’s 40.4% down from the high and 39.9% up from the low.) That would seem to imply that while there may be more risks yet in holding stocks, we may be getting through the worst, and should start compiling lists of stocks we want to buy. Indeed, since I went to virtually all cash in my personal and corporate investment accounts more than two weeks ago, I am waiting for buying opportunities, and creating just such lists.

But there’s an old stock market cliché for times like this: Never try to catch a falling knife. Don’t buy when markets are in free fall, because you’ll only wish you waited longer. Barton Biggs, a well-respected market analyst and money manager, was interviewed on Bloomberg TV, and said he had a list of great stocks that were now bargains, but that he wished he’d waited longer to buy them – and that was 150 points higher. So, that being said, what are the risks, and how will we know when the worst is over?

Well, first of all, you need to consult a properly licensed investment advisor for specific information, someone who knows your financial position, tax status, age, risk tolerance, cash flow, and all the other pieces of information that go into making a proper assessment of your investment needs. I am not that person, and this is not intended as investment advice. Here endeth the small print.

Risk management

Let’s take a step back and see if we can find some benchmarks. To do so, I want to go back to a concept that I’ve written about repeatedly in this blog, and use regularly with my consulting clients: the ratio of risk managment. What are the possible risks? And what are the potential returns? Once you’re assessed those, you’re in a better position to make decisions, rather than just guessing whether the markets will go up or down.

By my definition, risk is the cost of being wrong. So, if we invest in stocks now, or don’t invest in stocks now, what are the risks either way? Let’s start with the potential positive risks, because, unfortunately, this is a much shorter list.

Could the markets surprise us on the upside? There are three factors that drive stock prices: interest rates, corporate earnings, and investor psychology. I don’t foresee any upward pressure on interest rates unless there’s a true financial panic. Even if there were a panic, there are so many trillions of dollars invested in U.S. Treasury securities that there is nowhere else for them to go. Accordingly, absent an end-of-the-world type scenario, I believe interest rates are a neutral influence at worst, and probably slightly positive.

Next are corporate earnings, which have been surprisingly good of late. Yet, I believe the outlook for the U.S. economy – and all others that are at least partly reliant on it, which is everyone – is worse now than it was before the manufactured debt ceiling crisis. That political stunt by Tea Party fanatics shook people’s faith in the American political system, and raised doubts about the American economy that weren’t there before. As a result, more people are talking about a double-dip recession now than before, and such talk tends to become self-fulfilling. Moreover, falling stock markets tend to make people feel poorer, which makes them spend less, which slows demand, which slows the economy. All told, then, I would have to assess corporate earnings as being neutral at best from here, and possibly negative.

Finally we come to investor sentiment, which is always the hardest to get a handle on. Moreover, if the markets have a couple of high-flying up days, then psychology can change from being deeply fearful to being deeply greedy overnight. But one solid indicator of market sentiment which has been consistently good is market volatility. High volatility times, even when markets are rising, are times when there’s lots of uncertainty, which is why values seem to change overnight. The best environment for bulls is one where markets make a slow, steady advance, not ones where markets zip up, then down, then up again. And a handy index for this is the Chicago Board Options Exchange SPX Volatility Index, or VIX index (VIX:IND). This index recently reached levels unseen since April of 2009. All told, then, I would suggest that market sentiment is unsettled and nervous, which is definitely bad.

So could markets surprise us on by running away from us on the upside? There’s always that possibility, but I think the odds are pretty small that we will lose a lot by staying on the sidelines. If the market recovered to where it was in May, the S&P 500 could go back to 1360, which would mean we might miss a gain of about 22%. And that’s if the market took off so fast we couldn’t respond. So the risk of being left behind by the market is, in my view, relatively limited.

Possible Positives

Another positive development is that falling stock prices have also brought down commodity prices, notably oil. Since high oil prices act like a tax on the economy, lower oil prices clearly benefit economic growth.

And banks are generally in much better financial condition now than they were in 2007 – except those that have loaned too much to weak European sovereign credits.

Beyond these points, what might is likely to happen to the economy? Well before the phony debt crisis, the outlook for the U.S. economy was disappointing at best, with feeble growth, weak employment, and nothing on the horizon promising to change that. Now the outlook is worse, as I said, so at best we could see the economy return to that slightly depressing, feeble outlook. So, again, the potential to be surprised on the upside, or the return half of the equation, seems limited. Now let’s turn to the potential risks. Alas, here the list is much longer and more compelling.

Potential Negatives

I’m going to list the risks, and merely touch on most of them rather than go into exhaustive detail. The prospects are dreary enough without dwelling on them. I’m going to save the worst ones for last. Here are the major risks that I see now:

• Stocks go down because they go down. Markets develop a mind and momentum of their own, and while I don’t believe you should ever rely on momentum investing, it’s also clear that when investors become fearful, and especially when they panic, it’s dangerous to get in their way. In particular, investors, particularly boomers hoping to retire, were deeply shaken by what happened to their investment portfolios in 2008, and are likely to be faster to bail out on markets rather than try to ride them out. This increases volatility, which, as I’ve said, is a bad thing.

• A possible double-dip recession. There is no real reason why the U.S. economy should go back into recession. I had been expecting it to dribble along in a slow growth, jobless recovery that was disappointing. Now, though, the talk about a double-dip is, as I said, likely to become self-fulfilling. There’s no fundamental reason for it, but the phony debt ceiling crisis shook confidence, and ultimately the economy. And the markets run on confidence.

• America’s downgrade from AAA. This doesn’t help, but it is currently a split rating, with only Standard & Poor’s lowering America’s credit rating, and only on long-term debt. If the two other major agencies, being Moody’s and Fitch’s, were to follow suit, that would be an enormous negative, but that doesn’t seem to be in immediate prospect. Neither, though, is America likely to get its AAA rating back anytime soon. Canada was downgraded from AAA in 1992, and then got it back ten years later. But that was during a period of strong economic and productivity growth, and the Government of Canada, under Prime Minister Jean Chrétien and Finance Minister Paul Martin ran 10 years of budget surpluses, paying off big chunks of government indebtedness. The odds of America doing that are vanishingly small. The only reason American debt has performed as well as it has so far is because, in the words of one commentator, “It’s the best looking horse in the glue factory.”

• Weak economic growth compounding American government indebtedness. The Tea Partiers have overlooked the primary fundamental of government finance: that government revenues and expenditures are inexorably tied to economic performance. A weak economy will sap government revenues and force up expenditures, compounding deficits, and piling up debts. Slashing spending in such an environment cuts jobs, lowers economic growth, and increases deficits. This is precisely what happened in the 1930s under President Herbert Hoover. He and his counterparts in Congress kept slashing spending to try to bring the deficit under control, only to find that economic growth fell further, increasing the deficit. In response, they slashed spending even more. It became a vicious cycle, and this is still the textbook example on how a government can turn a recession into a depression. Unfortunately, right-wing politicians in America seems to be embarking on precisely the same policies now.

• Another negative that has ramifications that go far beyond stock prices is the high rates of unemployment for men and young people. We can see the results in the riots in Greece and Portugal, but now in London as well. In America, the official unemployment rate is 9.1%, but the percentage of working age (16 to 64) American men who are employed has fallen from about 85 percent in the early 1950s to under 65 percent now. Some put the actual unemployment rate of men in America at 25%, and that for young people at 45%. These numbers are hard to confirm, because unemployment surveys don’t include people who are so discouraged that they’ve given up even looking for work. Whatever the true numbers are, this is bad news economically, bad news socially, and bad for America’s future.

• The political deadlock in the American Congress. America has become steadily more polarized over the past 20 years. There have been many analyses of why this is, but I think there are two primary reasons. First, the media have discovered that it is more profitable to be biased and outraged than it is to be balanced and thoughtful. Fox News in America, and News of the World in England are or were the exemplars of this trend. And with the splintering of media caused by the Internet, people can now choose to consume only those viewpoints with which they agree. This creates the echo chamber effect, where like-minded people reinforce their own prejudices. The result is rather like being surrounded by yes-men: you become convinced that your point of view is the only valid one. This pushes people with different viewpoints farther apart, and causes them to summarily dismiss any views that don’t coincide with theirs as being obviously, even maliciously wrong.

The other reason is jerrymandering. As I’ve discussed this at length in another blog (found here), I won’t go through the arguments again. But the result is that the extremes in American politics are being over-represented, and the center is being ignored. According to The Economist newsmagazine (14 April 2011), the results are pretty stark: “On average, House Republicans have voted with their party’s majority 91% of the time and Democrats 90% of the time. The picture is very similar in the Senate.” This is making American ungovernable, as was clearly on display during the unnecessary debt crisis, and an America that cannot govern itself becomes a danger to itself and others, geopolitically as well as economically.

• Finally, the greatest immediate risks out there right now relate to the financial crisis in Europe. Greece is functionally bankrupt, and all that is left is to decide how to cope with the financial mess. The other weak members of the EU are being shunned by the credit markets with more or less justification, but the net result is a potential run on European sovereign credits. The results of this could be very much like the run on Bear Sterns or Lehman Brothers in 2008, with the same kind of knock-on consequences. Worse, this financial crisis could lead to the possible collapse of the Euro as a currency, which would endanger the survival of the EU. And that would be a very big economic (and financial) shock indeed, especially as the world’s central banks don’t have as many resources left to battle a global financial crisis.

The Costs of Being Wrong

So the cost of being too pessimistic is the potential to lose a market gain of perhaps 20-25%. The market cost of being too optimistic would be a repeat of the kind of bear market we saw following the 2008 market panic, which could be a further 40% drop. But the greatest risk is that the problems in Europe and America are compounded by policy mistakes, such as those followed by Herbert Hoover in the 1930s, or a market collapse brought about by forces that overwhelm the world’s central banks, such as the collapse of the European Union with the subsequent economic catastrophe. Either of these could produce a market drop similar to that of the 1929 to 1932 period, which was a fall of 89% would take the S&P 500 down to the vicinity of 170 points – an 85% drop from where it was when I started writing this blog. That, and the very dangerous economic fallout that would come with it, are the real risks.

So if you’re only mildly pessimistic, weigh the potential for a 25% gain against a 40% drop. If you’re really scared, weight that 25% upside against an 85% downside. Add in your assessment of the probabilities of each, and place your bets accordingly. As for me, at the moment, I’m staying on the sidelines and watching the carnage, biting my fingernails all the while.

‘America will never be destroyed from the outside. If we falter and lose our freedoms, it will be because we destroyed ourselves.’
– Abraham Lincoln

Unless America and Americans force a drastic change in the country’s direction, the American dream is dead, and America’s place as the leader of the world is over. I find this intensely distressing and worrisome, and have hopes that the situation may yet be retrieved, but the time available is short. Americans have repeatedly overcome fearsome odds throughout their history to survive and thrive, but if there were ever a time when they needed true grit, self-sacrifice, and a willingness to cooperate with other Americans of different backgrounds, politics, and beliefs, it is now.

To put it bluntly, America is hurtling towards bankruptcy. This is not due only to the Obama administration, or the administration of George W. Bush, but to American presidents dating all the way back to FDR, and the Congresses that accompanied them. There are two major reasons for this coming disaster, one short-term, and the other longer-term.

A massive deficit at the worst possible time in history

The short-term cause is the massive federal deficit. George W. Bush inherited the biggest budget surplus in history and turned it into the biggest deficit in history, and at exactly the worst possible time because of the aging of the oversized population of baby boomers. The boomers selfishly expect their governments to give them more than they have contributed, and get downright nasty when told they can’t have what they want. Bush also inherited a trend towards greater deregulation from Bill Clinton, and accelerated that trend, believing, wrongly, that the financial industry, among others, could be trusted to regulate itself. This is like expecting a greedy kid to regulate himself in a candy store. The events of 2007 & 2008 proved this policy to be both stupid and irresponsible. The resulting financial catastrophe could have led to a complete collapse of the global financial system, and only the massive intervention by virtually all central banks, coupled with unprecedented fiscal stimulus, prevented a complete collapse that would have resulted in a new, world-wide, Great Depression.

The Obama administration inherited this unholy mess, and is not responsible for it, but has not dealt with it well either, leaving too much of a leadership role to a Democratic Congress that too often substituted ideology and partisan politics for sound economics. Obama hasn’t been helped by the Republicans in Congress either, who seem to think that the president is their enemy, and anything they can do to harm him is good, regardless of the consequences for the country.

Yet, my point here is not just the deficits themselves; they are unfortunate but necessary in the short term to stave off a much worse economic crisis. My concern is that the stimulus spending has been directed more towards lobbyist-inspired pork than creating a solid underpinning for recovery. This is a self-indulgent luxury America can no longer afford. It is, alas, far too early to restrain spending, no matter what Tea Party enthusiasts may say. There will come a time for this, but it is not yet.

The scale of borrowing threatens both American and global stability

However they occurred, these deficits will require massive borrowing by the federal government: the Obama administration estimates the U.S. government will need to borrow $10 trillion over the next 10 years. Most commentators say that assumes higher levels of economic growth than are likely, and higher tax increases and deeper spending cuts than Congress will accept, and so are unrealistically low. I’ve seen estimates that place the borrowing requirements (which are remarkably difficult to pin down) as high as $9 trillion over the next 5 years. For the moment, let’s assume that the administration’s figure is correct, and place it in perspective.

China is America’s biggest external lender, and holds almost $2 trillion in foreign reserves. Let’s assume, for the sake of simplicity, that all of China’s holdings are in U.S. dollars, and all of those are in U.S. treasury bonds and bills. This isn’t true, but let’s make that assumption anyway. China has already expressed concern over the amount that America has borrowed, and is borrowing, and is diversifying away from U.S. securities; so how willing will they be to buy that much and more in U.S. debt over the next decade? And who else in the world will have enough in investable funds to buy U.S. debt? Financing of this magnitude has never been done before, and there may simply not be enough investment money to do it. And even if there is, there’s very little certainty that lenders will continue to funnel money to an increasingly debt-heavy American government. The federal government already has proportionately more debt than at any time in its history outside of times of war, and Moody’s rating agency has publicly expressed its belief that America in danger of losing it’s AAA credit rating. (This, on its own, may have severe consequences, which I’ll come back to in a later blog.)

If America cannot borrow the money it needs, then it becomes insolvent. The checks it writes will bounce, which could lead to a financial panic even greater than that of 2008, and one that no central bank or group of central banks will be able to stem, leading to an economic nuclear winter. (I’ve dealt with this prospect in an earlier blog, “WILD CARD WARNING”, published June 3rd, 2009.)

The rapidly approaching Social Security disaster

But the longer-term reason is even more dangerous. Both the U.S. Federal Reserve, America’s central banker, and the Government Accounting Office (GAO), America’s financial watchdog, have publicly stated that the unfunded liabilities of the U.S. government for Social Security and all forms of medical insurance, including Medicare, Medicaid, and Veteran’s Administration coverage, amount to approximately $100 trillion and are unsupportable. To see this, America’s total economic output (GDP) is about $14 trillion per year, so this $100 trillion figure amounts to roughly 7 times the nation’s entire annual income – a horrendous and unmanageable amount. Yet, when George W. Bush attempted a modest (if somewhat misguided) reform of Social Security, all he got was nasty complaints from selfish boomers, violent rhetoric from Congress, and reams of bad press. And these ticking time bombs have much shorter fuses than most people realize.

If you look at the Social Security Online Actuarial Publications website, you will see an extraordinary statement in the second paragraph:

“The financial condition of the Social Security and Medicare programs remains challenging. Projected long run program costs are not sustainable under current program parameters. Social Security’s annual surpluses of tax income over expenditures are expected to fall sharply this year and to stay about constant in 2010 because of the economic recession, and to rise only briefly before declining and turning to cash flow deficits beginning in 2016 that grow as the baby boom generation retires. The deficits will be made up by redeeming trust fund assets until reserves are exhausted in 2037, at which point tax income would be sufficient to pay about three fourths of scheduled benefits through 2083.”

As bad as this sounds, it’s actually much worse. The ‘trust fund assets’ that the Social Security Administration is talking about redeeming are bonds and T-bills issued by the federal government. When 2016 rolls around, and Social Security starts ‘redeeming’ these ‘trust funds,’ it will be making demands on the government of the United States. In turn, the federal government can only redeem these securities in one of three ways:

• Raising taxes,


• Cutting spending, or


• Borrowing even more in the public markets.

Given the federal government’s current perilous financial position, any of these three choices will be painful at best, and potentially disastrous at worst.

As an aside, we could, and should, ask the obvious question: What happened to all the surpluses in the Social Security system in the decades that led to the build up of the so-called ‘trust assets’? Answer: Congress spent them and handed the Social Security Administration IOUs in return.

And Medicare is even worse

In the same paragraph, the Social Security Administration goes on to comment on the status of Medicare:

“Medicare’s financial status is much worse. As was true in 2008, Medicare’s Hospital Insurance (HI) Trust Fund is expected to pay out more in hospital benefits and other expenditures this year than it receives in taxes and other dedicated revenues. The difference will be made up by redeeming trust fund assets. Growing annual deficits are projected to exhaust HI reserves in 2017, after which the percentage of scheduled benefits payable from tax income would decline from 81 percent in 2017 to about 50 percent in 2035 and 30 percent in 2080. In addition, the Medicare Supplementary Medical Insurance (SMI) Trust Fund that pays for physician services and the prescription drug benefit will continue to require general revenue financing and charges on beneficiaries that grow substantially faster than the economy and beneficiary incomes over time.”

Translating this into English, Medicare is bankrupt, but keeps operating by soaking up current tax revenues to fund it, increasing the effective size of the deficit that needs to be financed. It also means that the benefits people are expecting will have to be cut drastically – undoubtedly accompanied by much squawking, finger-pointing, and political posturing as president and Congress-critters all try to deflect the huge amount of blame.

Ironically, the new health care bill just signed into law may actually ease the situation slightly, because now government-funded insurance will fund the young and healthy as well as the old, poor, and sickly. That’s how insurance is intended to operate: by spreading the risks. But this change will be well short of what is necessary to avert disaster, and was so botched in the compromises necessary to get it passed that the benefits will be far less than they should be.

Now let’s be clear: the problems with Social Security and Medicare are not the failure of the Obama administration, nor of the Bush administration before it, but of all administrations and Congresses since the 1960s, and even before that. It was always politically easier to ignore the growing problems, and leave them to the next generation of politicians. Now the problems are arriving, and there will be hell to pay. To my mind, the last politician that had the courage to attempt to deal with these issues was New York’s Senator Daniel Patrick Moynihan, who raised the age when boomers could collect Social Security. He is, unfortunately, now dead, and no one else has had the guts to step forward and tackle these problems.

Are these problems too big to solve?

So are these problems solvable? Maybe, but only with immediate, Herculean efforts, unprecedented cooperation between Republicans and Democrats, and a willingness to sacrifice and accept less by the American people. I would think this makes solutions unlikely.

Indeed, I would say that America’s financial problems can only be solved if it solves two other, unrelated problems, one political, and the other societal.

Republicans and Democrats conspire together against democracy

The first problem is the polarization of the American political system because of gerrymandering. (See related blog post.) Gerrymandering is a term we all learned in high school social studies, but which most of us have forgotten. But Congress has not forgotten it. Gerrymandering is the re-drawing of the boundaries of electoral districts to create as many safe seats as possible – that is, where the same party will almost invariably be elected. Republicans and Democrats have connived together to do just this, and the Supreme Court has given them a limited seal of approval. The result is that in normal times, the vast majority of incumbent members of the House of Representatives cannot be defeated in a general election. The Economist newsmagazine once commented that America’s record of re-electing incumbents to the House would do credit to the dictatorship of North Korea.

This means that a Republican in a safe seat cannot be defeated by a Democrat, so his political spectrum goes from the center to the extreme right wing. And a Democrat in a safe seat cannot be defeated by a Republican, so her political spectrum goes from the center to the extreme left wing. This has two unsavory results: First, it means that the majority of voters in the center are not represented at all. And second, it pushes the two parties further and further apart, so that they cannot agree on anything, and gridlock results. That’s where we are today.

What is necessary is for the drawing of electoral district boundaries to be taken away from politicians eager to protect their own seats, and given to non-partisan committees that draw boundaries based on geography and similar needs rather than voting patterns. This has been done successfully in a number of jurisdictions, such as Washington state, and defeated by political machines elsewhere, as in California. But without this kind of non-partisan protection of the American people, the country as a whole is being stage-managed for the benefit and security of the politicians and the political party machines, and not in the best interests of the country. If the Tea Party movement wants a real and important target, this should be it.

The dumbing of America

The second fundamental issue is America’s education system, which has many problems. These include those teachers’ unions that block progress to protect their prerogatives and power (but not necessarily the interests of their members); helicopter parents that verbally and even physically assault and intimidate teachers; students who are more dedicated to fun than learning; violence and drugs, which turn schools into armed camps, forcing students to worry more about their own safety than what they learn; and a culture that now glorifies winning at any cost, including cheating, and elevates sports and entertainment success over academics. Most school systems are such a mess that it’s hard to know where to start to improve them, but the result is that America is producing generations of citizens who neither know nor care about their own history; who believe that America will always be right, and will always be #1 without thought, effort, or sacrifice; and who are uninterested in the common welfare of anyone other than themselves, and have no concept of civic duty. Unfortunately, the odds of a widespread improvement in American education are, if anything, even less likely than a balanced budget, and even if such a miracle were to occur, it would take years to change America’s direction. Yet, even so, if America wants to continue to prosper, it must both improve its education systems, and its citizens must rediscover their dedication to education excellence. Without this, in the long run, nothing else will matter.

Does America still have what it takes?

The financial problems America faces are severe, potentially the worst in its history. To solve them will require higher taxes and cuts to the military to be sponsored by Republicans, and spending cuts and reductions in entitlements to be sponsored by Democrats. It will take the postponement of eligibility for Social Security and Medicare benefits for boomers as well as a reduction in benefits provided, plus the end of ‘gimme-gimme’ pork-barrel politics. It calls, in short, for sacrifice. The alternative is disaster, and the end of America.

America’s problems threaten the stability of the world’s financial system, and the global economy. They also threaten America’s leadership of the world, which has, in the main, been remarkable for its enlightenment and goodness. There are other countries waiting in the wings, notably America’s chief banker, China, who are eager to replace America as the dominant force in the world. If Americans do not immediately begin to grapple with its problems, then both the idea that is America, and the country that is the fact of America will crash with such force and violence that it may lead to the end of America as a coherent society, as well as precipitating a second global depression. The stakes are high. The time is short. And the critical question is: Does America still have the will to be the best?

© Copyright, Richard Worzel, March 2010.

by futurist Richard Worzel, C.F.A.

All developed nations are struggling with health care because of their aging populations. In America, for instance, the Great Debate is on, chock full of noise and nonsense, about providing universal health care. Those opposed say that it is socialized medicine, and therefore a sin, and bad. Those who are for it say health care is a human right, and therefore a virtue, and good. And I can’t (or won’t) resist adding a couple of asides:

First, health care is not a human right. Tommy Jefferson and Co. never murmured a syllable about it, and would, I suspect, have been flabbergasted that someone would even suggest that government should pay for it. Likewise, the canard about socialized medicine is hypocritical nonsense as America has, today, the worst, least effective, most expensive kind of socialized medicine in the world. Medicare and Medicaid cover the two most expensive groups of the population: the old, and the poor, while leaving out the young, the middle class, and the healthy, all of whom would lower the costs per person of health care. And many of those who do not have health care coverage because they fall through the cracks (some 40 million-odd Americans) will go to the local hospital emergency room. Emergency rooms must, by law, treat walk-ins, even when the hospitals know they won’t be paid for such treatment, thereby throwing the burden on those who do pay. Since hospital emergency room care is the most expensive, and least effective, form of continuing health care imaginable, I submit that America has a hybrid system that costs more, and does less than universal health care would cost in its place. (Depending, of course, on how much pork is larded into final legistlation).

On the other side, Canada has universal health care, without a parallel private system – at least in theory – so that people stand in line, and if you die before you get to the front of the line, too bad. (Why this is worse than dying because you can’t pay has never been explained by the American right. Moreover, Canada really does have a parallel, private system: you fly to the America and pay to get treated there. No one wants to acknowledge this officially; it’s Canada’s dirty little health care secret.)

Britain has a hybrid system, with public health care available to all that is frequently dreadful, and occasionally pretty good, but with a parallel private system that anyone can use if they’re willing to pay. Of course, the private system bleeds resources that would otherwise go to make the public system better, so there’s a cost to both the private payers, and to the overall health of the nation. France has an excellent system, where patients co-pay 20% of the cost of treatment, but all patients generally get prompt, top-notch care, including home visits if necessary. The only downside is that this system is threatening to bankrupt the national government of France. And other nations have other systems that work to greater or lesser extents, but no one is interested in cataloging what works and what doesn’t anywhere else, since that would mean putting aside the ideology wars that dominate health care debates. (I’ve only listed the systems of which I have direct knowledge through personal experience with friends and relatives.)

Yet, the world is getting older, and my calculations show, based on such data as I can find, that health care costs in developed countries stay reasonably stable, on average, until around age 55, at which point they start to go up almost exponentially as aging bodies need more and more care. Post–war generations (notably the baby boom in those countries that had one) are now entering their early 60s at the leading edge, which means that the number of people needing ever-rising amounts of health care is going to place enormous strains on the health care systems of all developed nations, regardless of how they decide to pay – or not to pay – for it. Public or private, it doesn’t matter, health care is threatening to break the bank everywhere.

Which leads me to the one question that everyone wants answered, and nobody wants to been seen to ask: How can I get someone else to pay for my health care? Everyone wants the finest possible health care, no matter what it costs, and everyone wants to duck out on the bill. This is particularly true of those who are reaching the Danger Zone of 55 and up – we want to find a way of forcing the rest of the population (which means the young) to pay for the health care we know we will need. Which, by the way, is blatantly unfair and unreasonable of us, especially as we have systematically ducked all responsibility for laying resources aside for that purpose in order to keep our incomes and spending artificially high. Now we want our children and grandchildren to pay for our fun.

So the real, underlying problem of health care in a world of aging people is that everyone wants to shove the costs off on someone else. Since that’s not possible, in aggregate, we get all the creative fairy tales dressed up as politics that are going on, with truly nonsensical arguments used to create enough furor to distract us from the real question.

Avoiding this question is not a win-lose issue; it’s a lose-lose issue, one that will bankrupt our governments and harm us all if we don’t soon start speaking the truth, to ourselves and to each other. As long as we duck this question, we will be dealing in smoke and mirrors, and not grappling with the real issues.

But if we do start truth-telling, then we can start asking other, relevant questions, like: Ignoring ideologies, and based only on empirical evidence, what’s the most cost-effective way to run a health care system? What works best in other jurisdictions, and how can we adopt it here? How do we attract health care workers without spending our entire budget on their services alone? How do we structure an insurance system that spreads the risk within an age group, while not unduly penalizing the young? How do we encourage the development of new drugs without bankrupting payers? What’s a fair share of health care cost per individual, and how should we measure it? Are we going to distort the premiums to benefit politically powerful groups, or use statistics to determine health insurance costs? If the latter, should we give price breaks to those who lead healthy lifestyles and penalize those who are couch potatoes do eat junk food? And how do we deal with the inevitable groups that want to distort the system? For instance, if we decided to penalize those who eat junk food for the (documented) higher costs of their health care, then the entire fast food industry would lobby against the proposal, but quietly, and behind closed doors. So, how do we prevent his from happening?

None of these questions are easy. It would be far easier to duck behind the current smokescreens of public-vs-private care and ideological purity. But if we do that, we will all of us suffer because of it.

I think the time has finally come for honesty, because the consequences of lying to ourselves will be devastating.

© Copyright, IF Research, June 2009.