A bit more focus on economics this month. Meanwhile, Iraq and Israel-PA are playing themselves out right now and there are some real opportunities, now that the deck of cards has been reshuffled.

Israel-Palestine: Have you noticed that every time Israel assassinates someone, it's always a Leader of Whatever. Evidently, there are no non-generals in the Palestinian army, just as in the Israeli army. Sharon has upped the ante against Hamas in order to prod Abbas into either taking over security for portions of the Palestinian territories or be eaten up by Arafat and a vacuum to be filled by Israel. Abbas, in my opinion, is a weak short-term figure. When the going got tough last week, he ran to Jordan for an eye operation which was not an emergency. Arafat handled matters and is still very much in control, and the Americans and Egyptians are pushing very hard from the sidelines to get all sides not to make a laughingstock of the efforts Bush has begun to make. I think Sharon has a strategy; I don’t know what it is, but as I said right after the war, there would be the appearance of progress without real progress and if and when Sharon kills Arafat and the heads of Hamas, then I will begin to think he is really interested in moving in a different direction. Well, maybe that time is now. I can’t be sure, but there are some signs.

Hamas is part of the problem but it is also part of the solution. Abbas can’t deliver the Palestinians, Arafat is not prepared to move from revolutionary to statesman but Hamas can deliver the Palestinians – the $64 million challenge is to get Hamas into the peace process. This is now within the realm of possible – Hamas exists because foreigners keep it in business, and almost all of its patrons are under pressure to withdraw. Sharon’s moves against its leaders cause real pain – the heads of Hamas want other people’s kids to be martyrs using other people’s money, but they want their own faces clean and their own families safe. Iraq is out of business, Syria is being pushed out of business, the Saudis have found out their double-dealing game is up, and the Iranians know they are in a contest with North Korea for First Place on America’s 2004 Edition of Deck of Cards with Pictures of Wanted Shits. There is a real opportunity here; Sharon said the Occupation was evil, and he said it in Hebrew in front of his own Likud party – not in English to a New York Times columnist. He recently met with Yesha – the council that represents the Settlers and read them the riot act without regard for their opinion. No sitting prime minister has ever done that before. He is a very strong figure with good ties to Bush who also is very strong, he has no domestic opposition and seems willing to deal with Abbas or whoever seems reasonable, and it is unlikely Israel or the Palestinians will find such constellations in as favorable an alignment to get from here to there. Both Peres and Barak were willing, but they were not strong politically and Clinton was not very strong either, and no Arab would waste the effort dealing with them. So there are definitely signs here that are different from those of the past. The deck has been reshuffled and public opinion everywhere wants this to happen.

Iraq: Despite the appearance of anarchy, Iraq is beginning to move forward and, to their credit, the various factional leaders are making an effort to think about the country of Iraq and not just their little factions. Remember that there was not much electricity before the war, except that you didn’t read about it and all the other problems going on inside the country. There is now more electricity than there was before the war, oil production now meets domestic needs and 60% of the schools have reopened. The country is in a big mess that wasn’t produced in a day and will take several years to fix. By all accounts, there has been progress over the past few months, and I suppose that once Hussein is located and killed, things will begin to move forward faster because there are too many people withholding information and forcing America to waste resources putting down resistance as long as they think Saddam and his henchmen are still coming back. Remember that it took 6 months after World War II to confirm the death of Hitler.

North Korea: The Americans are playing it smart here. North Korea has lousy cards to play in this contest and the Americans aren’t giving into their bluffs. Repositioning of troops away from the demilitarized zone will make it easier to deal with North Korea in the future and the general move toward Australia as a military base for the region is part of a realignment of American troops across the globe that is real, not imaginary.

Iran: The situation continues on its path. It is important but what is going on is part of the natural process and I have nothing new to say that I haven’t already said recently.

Interest Rates / National Debt / Euro: The Americans are actually doing something very smart. They have weakened the dollar, squeezing the Europeans by letting them sweat with an overvalued Euro, and lowered interest rates to the point that (i) Americans can borrow money for next to nothing – they can lock in low mortgages and actually make money when interest rates go back up by just parking money in a CD and letting the bank pay them interest at a more normal rate which will probably equal or exceed their mortgage payments; (ii) the rest of the world has no choice but to continue to invest in Dollars and buy US debt even though we are essentially refinancing all of American debt at virtually no interest; and (iii) they are weakening France and Germany, the two big Euro powers, and making them eat shit for what all the heartache they gave to the US for the past few years. What this means is that this is a great time to go out and borrow money. Go buy that house or apartment over the next few months. The fed is supposed to lower interest rates again at the end of this month and that will bring interest rates down even further. This represents a real tax cut to Americans because mortgage payments is probably the biggest cash flow hit most people have to deal with every month. It is also good for America because the national debt is being refinanced at a lower rate, and the other tax cuts are providing stimulus to the economy as well as the stock markets (ie: the cut on taxing stock dividends). A burden will fall to the next generation but economic growth should make up a shortfall if it produces overall revenues which go into government coffers which will also ease things up for the states which right now are taking hits (but also being prodded into long overdue reforms). This month has seen very encouraging signs – durable good orders, construction starts, bank lending ratios, business capitalization, new IPO activity (companies listing themselves on public markets) – that economic growth may be underway.

Medicare and Health Benefits: Here’s a subject hardly ever discussed on these pages. Well, I run a company and I can tell you that workers are scared these days. They didn’t think much about health insurance in the past; it was a benefit taken for granted because companies just paid for it and didn’t pay that much. Now it’s become so expensive that companies have stopped paying for it and people can’t afford it and workers are especially afraid of not being covered if they lose their jobs or if companies hire them without giving them benefits, something which is happening more and more. My insurance costs $428 per month as a single guy. That’s mucho dinero. 

Before you start singing the praises of the Belgian health system, remember that I have done the math before on Global Thoughts and come to the conclusion that American health care is still a good deal because our dollars buy us better health care for less than the package deal other countries pay in higher taxes that incorporate health benefits. We have the best facilities, drugs, doctors and turnaround (meaning speed of getting what you want) in the world. Problem is that twenty percent of working Americans don’t have insurance and this is bad, particularly because if you go to a hospital and have nothing, you will be cared for and it is the other 80% who will subsidize it. Remember though that not everybody without insurance cannot afford it – a good number of people either think they don’t need it or don’t want to shell out the money to pay for it.

At the last few dinners I have attended, this is serious dinner table talk. Government has begun to actually tackle the problem and I have no doubt that, at the least, legislation to provide prescription drug coverage for elderly people on the Medicare program, will be enacted this year because it is nuts that people on Medicare do not have this kind of coverage at present, given the high cost of prescription drugs that is literally forcing people to choose between drugs and food.

To me the most serious problem with the present insurance situation is that it is unfair. As I said, I am paying $428 a month for coverage under our company’s plan, and our company only has 8 employees. If I worked for a large company, that company could buy the same insurance for half the cost. The smart cookie would say that if I pooled my insurance with other companies, I could get the same discount. The insurance companies are very wise to this and absolutely forbid it. Just the same way that the airline companies don’t allow you to transfer tickets or credits on nonrefundable tickets (but JetBlue does, by the way). The most urgent reform needed, besides some kind of portability on health insurance (meaning something that lets health insurance travel with a person when he or she moves from one company to another rather than make them reapply), is some sort of standard where people pay something approaching a standard price for similar insurance instead of the patently unfair situation which I have described. While we’re at it, the government should force airlines to allow transferability of credits because common law favors the transferability of property and there is no doubt in my mind that the airlines are acting in a monopolistic manner with contracts of adhesion (meaning the consumer has no choice but to accept these high-handed terms).

Airline Safety: Another point, while we’re at it. I have always gotten nervous about airline companies that were in financial trouble, because they tend to cut corners on costs and safety. There is disturbing evidence of such activity at US carriers, and there are serious alerts out there regarding United Airlines. The rate of maintenance-related crashes is up 30% in recent years and I am no longer confident that US carriers are as safe as one should expect, particularly since government oversight has become worrisomely lax. I personally would try to avoid United and American Airlines; carriers such as Delta, JetBlue and Continental, which are healthier, are better bets. I have had lousy experiences this year with United and American; my latest travel notes on the trip to Australia mentions my review of United’s cross-country services.

Party Politics in America: President Bush embarked on a fundraising tour this week that raised him more in 4 days than all the Democratic candidates combined have raised over the past 3 months. The Republicans are gaining in areas you’d least expect: young first time voters, college campuses, senior citizens (Democrats are strong in 65 and older, but Republicans come out with a majority when the definition is changed to 60 and older). They are aggressively wooing Hispanics, Blacks and Jews and are gaining converts.  The 2004 Elections could yield a landslide for Bush and a further realignment of American politics toward the Republicans, who already control both houses of Congress.