Peter Schiff On The Debt Ceiling Delusions

The popular take on the current debt ceiling stand-off is that the Tea Party wing of the Republican Party has a delusional belief that it can hit the brakes on new debt creation without bringing on an economic catastrophe. While Republicans are indeed kidding themselves if they believe that their actions will not unleash deep economic turmoil, there are much deeper and more significant delusions on the other side of the aisle. Democrats, and the President in particular, believe that continually taking on more debt to pay existing debt is a more responsible course of action. Even worse, they appear to believe that debt accumulation is the equivalent of economic growth.
If Republicans were to inexplicably prevail, and the federal government were to cut spending so that its expenditures matched its tax revenues (a truly radical idea) the country's financial mess would be laid bare. The government would have to weigh the relative costs and benefits of making interest payments on Treasury debt (primarily to foreign creditors) or to trim entitlements promised to U.S. citizens. But those are choices we will have to make sooner or later anyway. In fact we should have dealt with these issues years ago. But generations of mechanistic debt ceiling increases have allowed us to perpetually kick the can down the road. What could possibly be gained by doing it again, particularly if it is done with no commitment to change course?
The Democrats' argument that America needs to pay its bills is just hollow rhetoric. Paying off one's Visa bill with a new and bigger MasterCard bill can't be considered a legitimate payment of debt. At best it is a transfer. But in the government's case, it doesn't even qualify as that. Treasury debt is primarily bought by the Fed, foreign central banks, and major financial institutions. None of that will change with a debt ceiling increase. We will just go to the same people for greater quantities. So it's like paying off your Visa card with a bigger Visa card.
According to modern economists, an elimination of deficit spending will immediately cause a dollar for dollar decrease in GDP. For example, if the government stopped sending food stamp payments to poor people, then grocery stores would lose business, employees would be laid off, and the economy would contract. But this one dimensional view fails to appreciate that the purchasing power of the food stamps had to come from somewhere. The government can't create something from nothing. Taxation transfers purchasing power from people living in the present to other people living in the present. In contrast, borrowing transfers purchasing power from people living in the future to people living in the present. The good news for politicians is that future people don't vote in current elections (and current voters don't seem to appreciate the cost to their future selves of current policy).
The Obama Administration has congratulated itself for turning around the contracting economy that it inherited from President Bush. But even if you take the obscenely low official inflation statistics at face value, we only grew at an anemic 1.075% annual pace from 2009 to 2012 (far below the between 3% and 4% that the U.S. averaged post World War II). Sadly, this growth pales in comparison to the accumulation of new debt that we are borrowing from the future.
U.S. GDP is measured at roughly $15 trillion per year. 2% growth means that each year the GDP is approximately $300 billion larger than the prior year. But in the less than five years since Obama took office, the federal government has added, on average, about $1.3 trillion per year in new debt, a pace that is four times higher than the growth. If the deficit were subtracted from GDP, America would be shown to be stuck in a severe recession that Washington can't acknowledge. But such a reality is more consistent with the dismal job prospects and stagnant incomes experienced by most Americans.
The belief that deficits add to the economy, and that debt can be dealt with in an imaginary future (that never seems to arrive) is the foundation upon which the President can chastise the Republicans as irresponsible suicide bombers. Using this logic, he can argue (with a straight face) that borrowing is the equivalent of paying. That the President can make this delusional argument is not so surprising (no lie too great for the typical politician to attempt). What is alarming is that the media and the public have swallowed it so willingly. As they call for limitless increases in borrowing, Democrats have offered no plan to reduce the current debt and they are unwilling to negotiate with Republicans on that topic. Yet somehow they have been perceived as the party of fiscal responsibility.
While the Republicans have a dismal track record of their own when it comes to budgetary management, it can't be disputed that the minor dip in that rate of increase in spending that resulted from the recent Sequester, happened only because they dug in on the issue. Without the 2011 debt ceiling drama, there is no chance that any spending would have been touched.
Democrats had warned that the $85 billion in sequestration cuts slated for fiscal year 2013 (about 2% of the Federal budget) would be sufficient to bring on economic Armageddon. But guess what? We survived. Recently, Senate Majority Leader Harry Reid continued with such rhetoric by declaring that there are no more cuts to be found anywhere in the $3.8 Trillion dollar federal budget. (Apparently he missed last week's 60 Minutes piece on the spreading epidemic of federal disability fraud.)
We have to acknowledge what even the Republicans haven't fully grasped. We are in such a deep debt hole that there is no solution that does not involve serious economic pain. Tea Party Republicans rightly believe that government spending is a drag on economic growth. As a result, they conclude that immediate spending cuts will help with the "recovery". But they are confusing real economic growth with the delusional expansion created by deficit spending (which is actually damaging the real economy). If they cut the deficit, this phony economy may likely implode and cause widespread distress.
So even though a reduction in government borrowing and spending does help the economy, it won't feel very helpful tomorrow. The more we borrow and spend today, the more we will suffer tomorrow when the bills come due. Ironically, cutting government spending now helps the economy by allowing the economic adjustment to happen sooner rather than later. But this type of long-term thinking is very difficult for politicians to consider.
Unfortunately our debts don't leave us much in the way of choices. We can choose to pay now or try to pay later. But the longer we wait the steeper the bill.

http://www.zerohedge.com/print/480080

Republicans Should Fight or Give Up

October 11, 2013 1:31 PM

The findings of the newly released NBC News/Wall Street Journal poll are simply brutal for congressional Republicans. Not only are they getting the lion's share of the blame for the government shutdown, but President Obama's numbers have actually improved. Worse, Obamacare's numbers are improving, as well.

That poll caused quite a sensation on Twitter last night, and while it is worse for Republicans than recent readings from the Associated Press's poll, NBC News/Wall Street Journal has a long track record of solid readings. This is not a result to be taken lightly.

Moreover, it makes empirical sense considering the message coming from congressional Republicans in the last week—or perhaps better put the lack of a message. Marc Thiessen of the Washington Post aptly labeled this the "Seinfeld Shutdown," a shutdown about nothing. That is not how it was supposed to be, of course. It was supposed to be a shutdown about Obamacare, but Republican leaders were quickly sidetracked by low-hanging fruit like the closure of the National Mall, Harry Reid's gaffes, and Obama's refusal to negotiate. Tactically, this might have made sense, but strategically it was a terrible move. If the shutdown was supposed to be about Obamacare, then that should have been the only topic Republicans discussed.

Moreover, insofar as Republican leaders have discussed Obamacare, they have done so ineptly, and have repeated Mitt Romney's grievous mistakes from 2012. Looking at the topline numbers on Obamacare, we can see it is very unpopular, but dig a little deeper and only about 30 to 40 percent of people believe that the law will make them worse off. This is a significant failure in political communication by the Republican party. Government agencies like the Congressional Budget Office and the Centers for Medicare and Medicaid Services have warned since 2010—in their dry, technocratic rhetoric—that Obamacare was going to harm middle class families. For weeks now stories have been trickling out about people receiving letters from their insurers notifying them that their rates are being doubled. For over a year we have similarly heard stories about hiring freezes or hours being cut because of Obamacare. And yet despite all this hard data, the public still has not connected the dots. 

The blame belongs not to the Tea Party, not to the Republican grassroots, not to the back-benchers in the House, but to the party's leaders, the ones who have the microphones stuck in their faces every day. They, and only they, have the power to make the case to the American people that Obamacare is such a danger to them that it needs to be gotten rid of as soon as possible. Mitt Romney should have, but did not, get on the television in late October 2012 to warn people that a vote for Obama was a vote to double their premiums, make it harder for grandma to get hospital care, and make it harder for you to make your ends meet because of job cutbacks. Similarly, Republicans should have, but did not, acknowledge that while the shutdown was harming certain sectors of the country, it was far less damaging then the havoc Obamacare is set to wreak on the people.

And so it is that people would rather have the government reopened (largely a symbolic gesture as this shutdown has left vast swaths of the country unaffected) than have Obamacare dismantled (something that will prevent material harm done to millions of middle class people).

Obamacare is not going to defeat itself. If it is going to be taken down, it is up to the Republican party to formulate a coalition of people who have been or will be made worse off because of it. Those people are out there, but Republicans have failed to unite and mobilize them under the party's banner. So long as they continue to fail on this front, Obamacare will remain on the books. It has the benefit of our system's status quo bias, and Democrats have an 80-year track record of capturing interests through the distribution of benefits, transforming them into party clients, and delivering them at the ballot box. 

Republican leaders tend to come from one of two camps. The first is the go-along-to-get-along camp that is happy merely to manage the never-ending growth of government. The second wants to cut back on the size of government, but couches their rhetoric in the hazy, forgotten past of the country's founding; their arguments against the growth of government are always framed in terms of the Constitution, the rights of man, or other abstract concepts that have little impact on the lives of average American.

Ronald Reagan was the only political leader since the New Deal to argue effectively that government should be reduced because it is bad for people in a concrete sense. Yes, he talked about the Founding, and yes he was willing to compromise where it counted. But in his Inaugural Address he said, "Government is not the solution to our problem; government is the problem." For the next quarter century, American liberalism was on the run, so effective was Reagan's framing of the debate.

Republicans who wonder why they have generally failed to win national electoral victories since Reagan should ponder his statement, and how they have failed to expand upon it. Poll after poll indicates that today it is a popular position. People think government is harming them. If Republicans want to win, not just electoral victories, but policy victories, they need to follow the Gipper and explain in real terms how government is harming average Americans and how they will fix those harms. They have failed to do that in general over the last decade, and they have failed to do that in particular with Obamacare. It is a big reason why they only control the House and why Obamacare is still on the books.

And if congressional Republicans are not prepared to begin making that case loud and clear right now, the sooner they capitulate the better. Their only hope of victory in this fight is to convince the public that keeping Obamacare is worse than shutting down the government. If they are not prepared to make that case, then they have no hope of winning.

http://www.weeklystandard.com/print/blogs/republicans-should-fight-or-give_762423.html

US And European Regulators Probing FX Market Rigging

10 weeks ago we warned that the persistent "banging the close" action [7] in FX markets warranted an investigation into market rigging and manipulation. It seems the US, Swiss, UK, and EU regulators have finally woken up:

• *U.S. SAID TO OPEN CRIMINAL PROBE OF CURRENCY MARKET RIGGING
• *SWISS, UK REGULATORS REVIEWING ALLEGED CURRENCY MARKET RIGGING
• *EU ANTITRUST REGULATORS SAID THEY ARE PROBING CURRENCY MARKET

Of course, gold and silver remain highly efficient and "clean" markets...

As we noted 2 months ago... [7]
"Banging the close," is hardly a new 'event' but the ubiquity with which it is occurring around 4pm GMT (when major FX market benchmarks known as 'WM/Reuters rates' are set) is prompting authorities to investigate potential abuse of these benchmarks by the major banks. From Libor to ISDAFix and from base-and-precious metals to energy markets, adding the largest markets in the world - foreign exchange - to the banks' pernicious manipulations does not seem like a stretch. Critically, benchmark providers base daily valuations of indexes spanning different currencies on the 4 p.m. WM/Reuters rates (which in turn drives derivative settlements and triggers).
[8]
Stunningly, the same pattern - a sudden surge minutes before 4pm in London on the last trading day of the month, followed by a quick reversal - occurred 31% of the time across 14 FX pairs over 2 years, according to data compiled by Bloomberg [9]. For the most frequently traded pairs, such as EURUSD, it happened about half the time! U.S. regulators have sanctioned firms for banging the close in other markets; we await the results of the current probe...

Via Bloomberg,
The U.S. Justice Department has opened a criminal investigation of possible manipulation of the $5.3 trillion-a-day foreign exchange market, a person familiar with the matter said. The Federal Bureau of Investigation, which is also looking into alleged rigging of interest rates associated with the London interbank offered rate, or Libor, is in the early stages of its currency market probe, said the person, who asked not to be identified because the inquiry is confidential.
...
The U.S. investigation comes as the U.K. Financial Conduct Authority said in June it was reviewing potential manipulation of exchange rates. That month, allegations that dealers at banks pooled information through instant messages and used client orders to move benchmark currency rates were reported by Bloomberg News. Regulators are probing the alleged abuse of financial benchmarks used in markets from oil to interest rate swaps by the firms that play a central role in setting them.
...
European Union antitrust regulators are examining the possible manipulation of currency rates, following a Swiss probe into whether banks colluded to manipulate the $5.3 trillion-a-day foreign exchange market. Joaquin Almunia, the EU’s competition commissioner, said he learned in the last few days of activities that “could mean violation of competition rules around the possible manipulation of types of exchange rates,” according to a live chat on the EU’s website Oct. 7. ?

http://www.zerohedge.com/print/480057

Is red state America seceding?

In the last decade of the 20th century, as the Soviet Empire disintegrated, so, too, did that prison house of nations, the USSR.
Out of the decomposing carcass came Russia, Belarus, Ukraine, Lithuania, Latvia, Estonia and Moldova, all in Europe; Georgia, Armenia and Azerbaijan in the Caucasus; and Tajikistan, Uzbekistan, Turkmenistan, Kyrgyzstan and Kazakhstan in Central Asia.
Transnistria then broke free of Moldova, and Abkhazia and South Ossetia fought free of Georgia.
Yugoslavia dissolved far more violently into the nations of Serbia, Slovenia, Croatia, Bosnia, Montenegro, Macedonia and Kosovo.
The Slovaks seceded from Czechoslovakia. Yet a Europe that plunged straight to war after the last breakup of Czechoslovakia in 1938 and 1939 this time only yawned. Let them go, all agreed.
The spirit of secession, the desire of peoples to sever ties to nations to which they have belonged for generations, sometimes for centuries, and to seek out their own kind, is a spreading phenomenon.
Scotland is moving toward a referendum on independence from England, three centuries after the Acts of Union. Catalonia pushes to be free of Madrid. Milanese and Venetians see themselves as a European people apart from Sicilians, Neapolitans and Romans.
Dutch-speaking Flanders wants to cut loose of French-speaking Wallonia in Belgium. Francophone Quebec, with immigrants from Asia and the Third World tilting the balance in favor of union, appears to have lost its historic moment to secede from Canada.
What are the forces pulling nations apart? Ethnicity, culture, history and language – but now also economics. And separatist and secessionist movements are cropping up here in the United States.
While many red state Americans are moving away from blue state America, seeking kindred souls among whom to live, those who love where they live but not those who rule them are seeking to secede.
The five counties of western Maryland – Garrett, Allegany, Washington, Frederick and Carroll, which have more in common with West Virginia and wish to be rid of Baltimore and free of Annapolis, are talking secession.
The issues driving secession in Maryland are gun control, high taxes, energy policy, homosexual marriage and immigration.
Order Pat Buchanan’s brilliant and prescient books at WND’s Superstore.
Scott Strzelczyk, who lives in the town of Windsor in Carroll County and leads the Western Maryland Initiative, argues: “If you have a long list of grievances, and it’s been going on for decades, and you can’t get it resolved, ultimately [secession] is what you have to do.”
And there is precedent. Four of our 50 states – Maine, Vermont, Kentucky, West Virginia – were born out of other states.
Ten northern counties of Colorado are this November holding non-binding referenda to prepare a future secession from Denver and the creation of America’s 51st state.
Nine of the 10 Colorado counties talking secession and a new state, writes Reid Wilson of the Washington Post – Cheyenne, Kit Carson, Logan, Morgan, Phillips, Sedgwick, Washington, Weld and Yuma – all gave more than 62 percent of their votes to Mitt Romney. Five of these 10 counties gave Romney more than 75 percent of their vote.
Their issues with the Denver legislature: A new gun control law that triggered a voter recall of two Democratic state senators, state restrictions on oil exploration and the Colorado legislature’s party-line vote in support of gay marriage.

http://www.wnd.com/2013/10/is-red-state-america-seceding/print/

China and ECB sign $57bn currency swap deal

China and the European Central Bank have signed a currency swap agreement worth 350bn yuan ($57bn; £36bn), state-owned Xinhua news agency has said.

Such agreements mean the central banks can exchange currencies and firms can settle trade in local currencies rather than in US dollars.
The deal is one of the largest for China as it looks to build a more international role for the yuan.
It will last for three years and can be extended if both parties agree.
China's currency, the yuan, is also referred to as renminbi.

Ensuring stability
Foreign exchange swaps such as these mean two countries agree to swap, or borrow, each other's currency at an agreed rate.
In doing so, the parties involved avoid swings in exchange rates. They can also be less reliant on the US dollar for bilateral trade and some business deals.
China's central bank has now signed currency swap deals amounting to some 2.2 trillion yuan with 22 countries and regions, according to Xinhua.
"The new arrangement will provide more liquidity to the renminbi market in the euro area, promote overseas use of the yuan, and help facilitate trade and investment," Xinhua reported China's central bank as saying in a statement.
The European Central Bank said: "The swap arrangement has been established in the context of rapidly growing bilateral trade and investment between the euro area and China, as well as the need to ensure the stability of financial markets."
Europe's central bank also said the deal would reassure eurozone banks of the continuous provision of Chinese yuan.

http://www.bbc.co.uk/news/business-24486685

The Biggest Banking Disconnect Since Lehman Hits A New Record

As regular readers know, the biggest (and most important) disconnect in the US banking system [10]is the divergence between commercial bank loans, which most recently amounted to $7.32 trillion, a decrease of $9 billion for the week, and are at the same the same level when Lehman filed for bankruptcy having not grown at all in all of 2013 (blue line below), and their conventionally matched liability: deposits, which increased by $60 billion in the past week to $9.63 trillion, an all time high. The spread between these two key monetary components - at least in a non-centrally planned world - which also happen to determine the velocity of money in circulation (as traditionally it is private banks that create money not the Fed as a result of loan demand) is now at a record $2.3 trillion.
Which, of course, also happens to be the amount of reserves [11]the Fed has injected into the system (i.e., how much the Fed's balance sheet has expanded) since the great experiment to bailout the US financial system started in September 2008, in which Ben Bernanke, and soon Janet Yellen, stepped in as the sole source of credit money. The only difference is that while the Fed is actively pumping bank deposits courtesy of the fungibility of reserves, loan are unchanged.
For those who still don't understand the identity between Fed reserves and bank deposits, here is Manmohan Singh with the simplest explanation on the topic [12]:

When central banks buy securities, one of the immediate effects is to increase bank deposits, which adds to M2 (in the U.S., practically the Fed has bought from nonbanks, not banks). Whether banks maintain those added deposits as deposits, or convert them into other liabilities (or, by calling in loans, reducing or moderating the growth of their balance sheets), is an open question.

Actually it's not. As the JPM London Whale episode taught us, it is the excess deposits on bank balance sheets courtesy of the Fed, that serve as collateral for marginable derivatives (IG9, HY9, ES, etc) which then can and are used by banks to chase risk higher, often with leverage that runs into the orders of magnitude. In other words, as the chart below shows, in the past week, the Fed injected a net $69 billion in risk-ramping power on the commercial bank balance sheets, and, more importantly, since the failure of Lehman, this amount is a record $2.308 trillion.
[13]
So for those confused where the money comes from to ramp equities ever higher on a daily basis for the duration of QE, and why the S&P correlates (and "causates") exquisitely with the Fed's balance sheet, now you know. More impotantly: don't expect banks to lend out much if any real new loans as long as they can generate far greater and far less riskier returns simply by chasing risk in the capital markets.

10 Disturbing Facts About "Exceptional" America

1. 65% of Americans say news organizations focus on unimportant stories [4] rather than on important ones (28%).

[4]

 

2. More express concern over civil liberties [5] (47%) than protection from terrorism (35%) for the first time in Pew Research Center polling.

[5]

 

3. 3% of Americans still connect to the internet at home via a dial-up connection [6].

[6]

4. During the first two years of the nation’s economic recovery, the mean net worth of households in the upper 7% of the wealth distribution rose by an estimated 28%, while the mean net worth of households in the lower 93% dropped by 4% [7].

[7]

 

5. For the first time in more than four decades of polling on the issue, a majority (52%) of Americans favor legalizing the use of marijuana [8].

[8]

6. 15% of American adults do not use the internet or email [9].

[9]

7. 56% of U.S. adults say they would not want to undergo medical treatments to slow the aging process and live to be 120 or more [10], but roughly two-thirds (68%) think that most other people would. 

[10]

 

 

8. In 23 of 39 nations surveyed, a majority or plurality of the people say China either already has replaced or eventually will replace the U.S. as the top superpower [11].

[11]

 

9. One-in-ten (7.7 million) children were living with a grandparent [12] in 2011. Approximately 3 million of these children were being cared for primarily by that grandparent.

[12]

10. In 2012, 36% of the nation’s young adults ages 18 to 31—the so-called Millennial generation—were living in their parents’ home [13].

[13]

 

Via Pew Research [14]

GDP Size relative to China

We paid $634 million for the Obamacare sites and all we got was this lousy 404

It’s been one full week since the flagship technology portion of the Affordable Care Act (Obamacare) went live. And since that time, the befuddled beast that is Healthcare.gov has shutdown, crapped out, stalled, and mis-loaded so consistently that its track record for failure is challenged only by Congress.
The site itself, which apparently underwent major code renovations over the weekend, still rejects user logins, fails to load drop-down menus and other crucial components for users that successfully gain entrance, and otherwise prevents uninsured Americans in the 36 states it serves from purchasing healthcare at competitive rates – Healthcare.gov’s primary purpose. The site is so busted that, as of a couple days ago, the number of people that successfully purchased healthcare through it was in the “single digits,” according to the Washington Post.

http://www.digitaltrends.com/opinion/obamacare-healthcare-gov-website-cost/

Moody's offers different view on debt limit

One of the nation’s top credit-rating agencies says that the U.S. Treasury Department is likely to continue paying interest on the government’s debt even if Congress fails to lift the limit on borrowing next week, preserving the nation’s sterling AAA credit rating.
In a memo being circulated on Capitol Hill Wednesday, Moody’s Investors Service offers “answers to frequently asked questions” about the government shutdown, now in its second week, and the federal debt limit. President Obama has said that, unless Congress acts to raise the $16.7 trillion limit by next Thursday, the nation will be at risk of default.
Not so, Moody’s says in the memo dated Oct. 7.
” We believe the government would continue to pay interest and principal on its debt even in the event that the debt limit is not raised, leaving its creditworthiness intact,” the memo says. “The debt limit restricts government expenditures to the amount of its incoming revenues; it does not prohibit the government from servicing its debt. There is no direct connection between the debt limit (actually the exhaustion of the Treasury’s extraordinary measures to raise funds) and a default.
The memo offers a starkly different view of the consequences of congressional inaction on the debt limit than is held by the White House, many policymakers and other financial analysts. During a press conference at the White House Tuesday, Obama said missing the Oct. 17 deadline would invite “economic chaos.”
The Moody’s memo goes on to argue that the situation is actually much less serious than in 2011, when the nation last faced a pitched battle over the debt limit.
“The budget deficit was considerably larger in 2011 than it is currently, so the magnitude of the necessary spending cuts needed after 17 October is lower now than it was then,” the memo says.
Treasury Department officials did not immediately respond to requests for comment.

http://www.washingtonpost.com/blogs/post-politics-live/liveblog/live-updates-the-shutdown-4/?hpid=z2#c1e3ada3-dc00-41d8-92cb-327c5c814d82

US Treasuries Are "Riskier" Than Italian And Spanish Bonds

In the equity asset management world, the word risk is ubiquitously interchangeable with the word "volatility" for myriad asset allocation models that promise mathematical precision way beyond the realms of possibility in a dynamic world. However, extending that definition of risk, we thought it worth pointing out that, for the last month, US Treasury bonds have become more volatile (more risky) than Italian and Spanish bonds. Something to ponder for The Fed's new head we suspect...

The 3 month volatility of US Treasuries is now higher than that of Spain and Italy (both of which offer significantly higher yields than the US)...


One can only imagine the automated overweighting that a lower risk, higher return implies for the peripheral European bond markets... but for all those MPT asset allocators out there, when all you have is hammer...

This is what decline of a superpower looks like

WASHINGTON (MarketWatch) — Foreign policy analysts at home and abroad have been predicting for years the inevitable decline of American power, often with a fair amount of schadenfreude and sometimes even with glee.

But now that political dysfunction in Washington is accelerating, the downsizing of the world’s only remaining superpower, all you hear is whining.

“The American self-blockade is shocking,” Karl-Georg Wellmann, a foreign-policy expert for German Chancellor Angela Merkel’s Christian Democratic party, complained to the business daily Handelsblatt. “The position as the West’s leading power will be affected.” 

http://www.marketwatch.com/story/this-is-what-decline-of-a-superpower-looks-like-2013-10-08/print?guid=EA658968-3030-11E3-B4B5-00212803FAD6

Self Employed as a share of non-farm employment

What Does Heart Surgery Really Cost, And Why Is It 70 Times More Expensive In The US?

Indian philanthropist and cardiac surgeon, Devi Prasad Shetty is obsessed with making heart surgery affordable for millions of Indians. As Bloomberg notes [4], Shetty is not a public health official motivated by charity. He’s a heart surgeon turned businessman who has started a chain of 21 medical centers around India. By trimming costs, he has cut the price of artery-clearing coronary bypass surgery to 95,000 rupees ($1,583), half of what it was 20 years ago, and wants to get the price down to $800 within a decade. The same procedure costs $106,385 at Ohio’s Cleveland Clinic. Of course, this will come as no surprise after we showed the incredible spread of the price of an appendectomy [5]. “It shows that costs can be substantially contained,” notes the World Heart Federation, "it’s possible to deliver very high quality cardiac care at a relatively low cost." But, for Americans of course, when you have government footing the cost (and deficit spending), who cares?

Via WaPo, [6]
[7]

Via Bloomberg [4],

...

“It shows that costs can be substantially contained,” said Srinath Reddy, president of the Geneva-based World Heart Federation, of Shetty’s approach. “It’s possible to deliver very high quality cardiac care at a relatively low cost.”

Medical experts like Reddy are watching closely, eager to see if Shetty’s driven cost-cutting can point the way for hospitals to boost revenue on a wider scale by making life-saving heart operations more accessible to potentially millions of people in India and other developing countries.

“The current price of everything that you see in health care is predominantly opportunistic pricing and the outcome of inefficiency,” Shetty, 60, said in an interview in his office in Bangalore, where he started his chain of hospitals, with the opening of his flagship center, Narayana Hrudayalaya Health City, in 2001.

...

In the future, Shetty sees costs coming down further as more Asian electronics companies enter the market for CT scanners, MRIs and catheterization labs -- bringing down prices. As India trains more diploma holders in specialties such as anesthesiology, gynecology, ophthalmology and radiology, Narayana will be able to hire from a larger, less expensive talent pool.

One positive unforeseen outcome may be that many of the cost-saving approaches could be duplicated in developed economies, especially in the U.S. under health reform.

“Global health-care costs are rising rapidly and as countries move toward universal health coverage, they will have to face the challenge of providing health care at a fairly affordable cost,” said the World Heart Federation’s Reddy, a New Delhi-based cardiologist who is also president of the Public Health Foundation of India.

NSA's Utah Spy Supercenter Crippled By Power Surges

Long before Edward Snowden's whistleblowing revelations hit the world and the Obama administration's approval ratings like a ton of bricks, we ran a story in March 2012 which exposed the NSA's unprecedented domestic espionage project, codenamed Stellar Wind, and specifically the $1.4+ billion data center spy facility located in Bluffdale, Utah, which spans more than one million square feet, uses 65 megawatts of energy (enough to power a city of more than  20,000), and can store exabytes or even zettabytes of data (a zettabyte is 100 million times larger than all the printed material in the Library of Congress), consisting of every single electronic communication in the world, whether captured with a warrant or not. Yet despite all signs to the contrary, Uber-general Keith Alexander and his spy army are only human, and as the WSJ reports, the NSA's Bluffdale data center - whose interior may not be modeled for the bridge of the Starship Enterprise - has been hobbled by chronic electrical surges as a result of at least 10 electrical meltdowns in the past 13 months.

The facility above is where everyone's back up phone records and emails are stored.
Such meltdowns have prevented the NSA from using computers at its new Utah data-storage center which then supposedly means that not every single US conversation using electronic media or airwaves in the past year has been saved for posterity and the amusement of the NSA's superspooks.
This being the NSA, of course, not even a blown fuse is quite the same as it would be in the normal world: "One project official described the electrical troubles—so-called arc fault failures—as "a flash of lightning inside a 2-foot box." These failures create fiery explosions, melt metal and cause circuits to fail, the official said. The causes remain under investigation, and there is disagreement whether proposed fixes will work, according to officials and project documents. One Utah project official said the NSA planned this week to turn on some of its computers there."
More from the WSJ on this latest example of what even the most organized and efficient of government agencies ends up with when left to its non-private sector resources:

Without a reliable electrical system to run computers and keep them cool, the NSA's global surveillance data systems can't function. The NSA chose Bluffdale, Utah, to house the data center largely because of the abundance of cheap electricity. It continuously uses 65 megawatts, which could power a small city of at least 20,000, at a cost of more than $1 million a month, according to project officials and documents.

Utah is the largest of several new NSA data centers, including a nearly $900 million facility at its Fort Meade, Md., headquarters and a smaller one in San Antonio. The first of four data facilities at the Utah center was originally scheduled to open in October 2012, according to project documents. The data-center delays show that the NSA's ability to use its powerful capabilities is undercut by logistical headaches. Documents and interviews paint a picture of a project that cut corners to speed building.

Backup generators have failed numerous tests, according to project documents, and officials disagree about whether the cause is understood. There are also disagreements among government officials and contractors over the adequacy of the electrical control systems, a project official said, and the cooling systems also remain untested.

The Army Corps of Engineers is overseeing the data center's construction. Chief of Construction Operations, Norbert Suter said, "the cause of the electrical issues was identified by the team, and is currently being corrected by the contractor." He said the Corps would ensure the center is "completely reliable" before handing it over to the NSA.

But another government assessment concluded the contractor's proposed solutions fall short and the causes of eight of the failures haven't been conclusively determined. "We did not find any indication that the proposed equipment modification measures will be effective in preventing future incidents," said a report last week by special investigators from the Army Corps of Engineers known as a Tiger Team.

The architectural firm KlingStubbins designed the electrical system. The firm is a subcontractor to a joint venture of three companies: Balfour Beatty Construction, DPR Construction and Big-D Construction Corp. A KlingStubbins official referred questions to the Army Corps of Engineers.

Tsk tsk: this is what happens when you use taxpayer dollars to pay the lowest bidder - you can't even build an efficient totalitarian superstate!

The first arc fault failure at the Utah plant was on Aug. 9, 2012, according to project documents. Since then, the center has had nine more failures, most recently on Sept. 25. Each incident caused as much as $100,000 in damage, according to a project official. It took six months for investigators to determine the causes of two of the failures. In the months that followed, the contractors employed more than 30 independent experts that conducted 160 tests over 50,000 man-hours, according to project documents.

This summer, the Army Corps of Engineers dispatched its Tiger Team, officials said. In an initial report, the team said the cause of the failures remained unknown in all but two instances. The team said the government has incomplete information about the design of the electrical system that could pose new problems if settings need to change on circuit breakers. The report concluded that efforts to "fast track" the Utah project bypassed regular quality controls in design and construction.

Contractors have started installing devices that insulate the power system from a failure and would reduce damage to the electrical machinery. But the fix wouldn't prevent the failures, according to project documents and current and former officials.

Contractor representatives wrote last month to NSA officials to acknowledge the failures and describe their plan to ensure there is reliable electricity for computers. The representatives said they didn't know the true source of the failures but proposed remedies they believed would work. With those measures and others in place, they said, they had "high confidence that the electrical systems will perform as required by the contract."

A couple of weeks later, on Sept. 23, the contractors reported they had uncovered the "root cause" of the electrical failures, citing a "consensus" among 30 investigators, which didn't include government officials. Their proposed solution was the same device they had already begun installing.

Wait, we know: it's the Syrians.
So for those who have no choice but to live in a totalitarian banana republic, may we suggest at least laughing about it. We present the Domestic Surveillance Directorate.