Monthly Archives: October 2008

Converge

The dictionary defines the word convergence as “To come together from different directions; meet.” This past week there were two disparate articles that raise both our hope and our concern about pandemic diseases. Each, standing alone, was not particularly significant. But, when read together they are disconcerting.

The first article was one of hope. This article, “Deep in the Rainforest Stalking the Next Pandemic” was written about Nathan Wolfe, a 38-year-old visiting professor of epidemiology at Stanford. Dr. Wolfe states, “Before, the best thing you could do was develop a vaccine, but now people are recognizing that’s not going to be enough.”

“If you find diseases before they’ve really emerged,” he continued, “you can control them early on, before you get a major epidemic.” The article continues, “With the goal of identifying more of these “little sources” — new disease-causing pathogens — and choking them off, Dr. Wolfe started the Global Viral Forecasting Initiative this year. If new disease strains could be culled before they had a chance to take hold in humans, he reasoned, health organizations would have to spend less money and energy on developing expensive vaccines and treatment drugs.”

The second article was a report from Lloyd’s of London. Their Emerging Risks Team issued a new report on the threat posed by a global pandemic.

The report, “Pandemic – Potential Insurance Impacts” focuses on the threat to the global business community and, in particular, the insurance markets of a global pandemic.

The report concludes that a pandemic is inevitable; explaining that with historic recurrence rates of 30-50 years it is prudent to assume that a pandemic will occur sometime in the future.

Trevor Maynard, Manager, Emerging Risks, at Lloyd’s and the report’s author says: “The significant message is that society should not optimize to one particular scenario as a worst case. Much has been said of the 1918 Spanish Flu epidemic, which is said to have killed up to 100 million people worldwide. While Avian Flu is seen as the most likely next pandemic, we have to ensure we are prepared for other types of pandemics that may require different responses and pose different challenges —some of which may well have higher rates of mortality than flu.”

Maynard goes on to say, “The threat of pandemic to the global economy cannot be underestimated.” He explains. “If you look at the example of a recent limited pandemic, such as SARS, the regional economic impact was severe and a repeat of the 1918 Spanish Flu outbreak, even without the current economic conditions, would be expected to reduce global GDP by between 1% and 10%.”

These two articles of warning and prevention are a reminder that pandemics remain a constant and extraordinary threat. The world population in 1918 during the Spanish flu pandemic was 1.8 billion people. Today, according to the Population Reference Bureau, in 2008 the world population is 6.7 billion: 1.2 billion people live in regions classified as more developed by the United Nations; 5.5 billion people reside in less developed regions. “We will likely see the 7 billion mark passed within four years,” said Carl Haub, PRB senior demographer and co-author of this year’s Data Sheet. “And by 2050, global population is projected to rise to 9.3 billion. Between now and mid-century, these diverging growth patterns will boost the population share living in today’s less developed countries from 82 percent to 86 percent.” Over half live in urban environments. Never in human history has the available supply of fuel for a pandemic illness been greater.

According to USA Today, the threat posed by infectious diseases is of growing and immediate concern to infectious disease experts. A soon-to-be released report by the non-profit Trust for America’s Health asserts, “infectious diseases from the developing world are anything but “a back-burner concern.”

The report, “Germs Go Global: Why Emerging Infectious Diseases Are a Threat to America,” cites National Intelligence Estimates that conclude outbreaks of new and resurgent infectious diseases, many of which “originate overseas,” kill more than 170,000 people in the USA each year.

The death toll would climb much higher in the event of a new global pandemic or bioterrorism attack. Infectious diseases, the report concludes, have become “a matter of national security.”

In his brilliant Pulitzer Prize winning book, Guns, Germs, and Steel, Jared Diamond “seeks the root answers to why European societies (and their American offspring) became the dominant powers on Earth in terms of wealth and power. He traces the proximate causes–the development of deadlier weapons technologies, immunity to germs, superior metal working, and writing systems–to the ultimate cause of the way food production varied in human societies and then looks at geographic variations and impediments that affected food production and the spread of technological innovation in all regions of the world.”

Dr. Irwin Sherman, a professor emeritus of biology at the University of California Riverside, in his book, Twelve Diseases That Changed Our World, also describes how bacteria, parasites, and viruses have swept through cities and devastated populations, felled great leaders and thinkers, and in their wake transformed politics, public health, and economies.

The US Center for Disease Control, The World Health Organization, and King County’s Department of Public Health have undertaken surveillance and preventive measures to protect the public from pandemic illnesses. Those investments must remain an international, national, and local priority. All of these agencies face the daunting challenge of developing measures to identify and prevent the spread from numerous germs that have the capacity to change human history. In an age of limited resources, the agencies must remain a key priority. We must commit to the robust funding of early warning systems. We must continue to remain vigilant about the microscopic life forms that with great swiftness and determination can change our world. If we don’t do these things, we are at peril.

A fool too late bewares when all the peril is past.
-Elizabeth I

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Every gun that is made

“Every gun that is made, every warship launched, every rocket fired signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed. This world in arms is not spending money alone. It is spending the sweat of its laborers, the genius of its scientists, the hopes of its children…This is not a way of life at all, in any true sense. Under the cloud of threatening war, it is humanity hanging from a cross of iron.”

-President Dwight Eisenhower

The public assumes that the US withdrawal from Iraq would reduce defense spending. The New York Times reported that the proposed US Defense Department 2009 budget “when adjusted for inflation, will have reached its highest level since World War II.” Although the Federal Government committed over $700 billion  to stabilize the financial markets, it will also spend $711 billion  on defense. Is it likely that we’ll see significant reductions in military spending? Probably not. The war in Iraq and Afghanistan has taken its toll on military equipment and it needs to be replaced. Those who serve in the military need better pay and health care. The development of new and advanced weapons systems will require significant investments. We will need to develop a full spectrum military. We will also see military spending continue to rapidly increase in most countries. The world is still too dangerous.

The next President of the United States will have to make either unpopular reductions in defense department spending or continue the explosive growth of the federal deficit. How will he fund Medicare which is expected to go broke in 2018? How will the federal government, which owes foreign investors over ten trillion dollars, reduce our indebtedness?

The President must also meet the demands of reducing poverty, disease, and hunger. He must recommit to making substantial investments to address our domestic needs. He must also maintain sustainable funding for our military needs. Will the next administration want the US to continue to be a military, financial, and cultural superpower? Do we want to? Can we afford it?

As a superpower nation, we are clearly being reminded of the moral requirement to look beyond our military needs.

  • Each year, more than 8 million people around the world die because they are too poor to stay alive.
  • Over 1 billion people—1 in 6 people around the world—live in extreme poverty, defined as living on less than $1 a day.
  • More than 800 million go hungry each day.
  • Over 100 million primary school-age children cannot go to school.

Based on definitions established by the World Bank, nearly 3 billion people-half of the world’s population-are considered poor. In his recent address at the United Nations Food and Agriculture Organization, Pope Benedict XVI blamed food shortages on “feverish speculation” that drives up prices, along with “corruption in public life or growing investments in weapons and sophisticated military technologies to the detriment of people’s primary needs.”

“Of all the enemies to public liberty war is, perhaps, the most to be dreaded because it comprises and develops the germ of every other. War is the parent of armies; from these proceed debts and taxes … known instruments for bringing the many under the domination of the few. No nation could preserve its freedom in the midst of continual warfare.”

-James Madison, Political Observations, 1795

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The spider to the fly

The US Treasury and Federal Reserve are giving over a trillion dollars to financial institutions. They also intend to invest and assume partial ownership in them as well. Yet, the only thing being promised the American taxpayer is easier credit. Is that a good thing?

Everyone, including my son, who happens to be a junior in college and unemployed, is being inundated by offers for credit cards. Most of my household mail consists of mailers from numerous financial institutions offering me credit cards. They promise low interest rates yet the fine print says that if you make one late payment, they can charge you a usurious 25-30 percent. Credit cards have become so easy to get, but so expensive to manage. The allure of credit cards is appropriately captured by this stanza from the poem Spider to the Fly by Mary Howitt, Will you walk into my parlour?” said the Spider to the Fly, ‘Tis the prettiest little parlour that ever you did spy.

Should we be concerned? In the New York Times article Some Debt Trends Are Good. This Isn’t One of Them, they reported AMERICAN credit card debt is growing at the fastest rate in years, a fact that may signal coming trouble for the banks that issue them. This week the Federal Reserve reported that the amount of revolving consumer credit that is outstanding hit $937.5 billion in November, when seasonally adjusted, up 7.4 percent from a year earlier.” Market Watch in their news piece, Another shoe to drop, says Credit-card debt is on the brink of imploding and will be the next storm to hit the fragile finance industry, an investment research firm predicted this week. The Washington DC think tank, Center for American Progress, believes so. In their report, House of Card, they state, As borrowing in the mortgage market slows, credit card borrowing is accelerating-a dangerous trend because borrowers still face weak income growth. That means the credit card market could eventually run into the same problems that now afflict the subprime mortgage market.

The Center for Responsible Lending, a nonprofit, nonpartisan research and policy organization dedicated to protecting homeownership and family wealth, in its report Pushing the Limit states, During the past few years, the United States has experienced an unprecedented boom in household debt. Although most household debt is in the form of mortgages and home equity lines, credit card debt deserves particular attention. The reason: credit card debt tends to carry high interest rates, large fees and a number of hidden costs, all of which weigh disproportionately on lower income families. They are also concerned about the mortgage refinancing of credit card date. In their report, Risking Homes to Pay Off Credit Cards, The fear of overwhelming credit card debt is driving many Americans to hand their equity back to mortgage lenders in the form of “cash-out”

What are the solutions? The Council on American Progress succinctly summarizes a variety of solutions: implement a credit card safety rating system that can give consumers better information about their credit cards and thus help them make better decisions; and Congress should mandate a higher level of fairness in credit card terms by adopting the Credit Cardholders’ Bill of Rights Act that also bans several of the most abusive credit card practices.

USA Today reports in its article a proposal would limit increases in credit card fees, and rates. The Federal Reserve, the Office of Thrift Supervision, and the National Credit Union Administration are recommending a proposal that would:

  • Bar issuers from raising interest rates on existing debt, except under certain conditions, such as when a promotional rate expires or when a borrower pays 30 days or more late.
  • Prohibit issuers from calculating one month of finance charges based on two months’ worth of activity, a punitive practice called double-cycle billing.
  • Require card issuers to apply monthly payments that exceed the required minimum at least partly to higher-rate card debt. Borrowers often face varying interest rates on credit card debt, for cash advances, balances transferred and purchases.
  • Bar financial institutions from charging checking-account customers a fee for paying an overdraft – unless the customer has had the chance to opt out of this payment.
  • Bar financial institutions from charging checking-account customers a fee for paying an overdraft – unless the customer has had the chance to opt out of this payment.

“Do not accustom yourself to consider debt only as an inconvenience; you will find it a calamity.”

– Samuel Johnson

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The earth is not flat

In this age of global warming, many have directed our attention to the use of cap and trade tools to reduce carbon emissions. According to the U.S. Environmental Protection Agency:

Cap and Trade is a market-based policy tool for protecting human health and the environment. A cap and trade program first sets an aggressive cap, or maximum limit, on emissions. Sources covered by the program then receive authorizations to emit in the form of emissions allowances, with the total amount of allowances limited by the cap. Each source can design its own compliance strategy to meet the overall reduction requirement, including sale or purchase of allowances, installation of pollution controls, implementation of efficiency measures, among other options. Individual control requirements are not specified under a cap and trade program, but each emissions source must surrender allowances equal to its actual emissions in order to comply. Sources must also completely and accurately measure and report all emissions in a timely manner to guarantee that the overall cap is achieved.

Denis Hayes, one of the world’s foremost environmentalists, would seem to be an unequivocal supporter of cap and trade schemes to reduce global warming. Many others from across the political spectrum support them. Yet, in a thoughtful, provocative, and visionary article he effectively challenges our belief in the cap and trade system. He is reminiscent of those who said the earth is neither the center of the universe nor flat. He insightfully argues:

The backbone of any comprehensive policy to limit greenhouse gas emissions must cap carbon at the places — coal mines, oil fields, pipelines, ports — where it enters the economy. Instead, at the behest of corporate behemoths and their green enablers, our political leaders are focusing most of their attention on smokestacks, and when that is obviously impossible (e.g. with gasoline or propane) on refiners or distributors. They want to cap CO2 where it enters the atmosphere — an approach that is guaranteed to fail because there are far too many point sources.

Regarding Europe’s cap and trade schemes he states, “Europe has already attempted a cap-and-trade program, and it belly-flopped.” According to Denis, their failure taught us:

  • The most important part of cap-and-trade is the “cap.” Any successful law must place an impermeable lid on the amount of carbon that enters the atmosphere. To whatever extent additional trees or windmills are used to “offset” additional carbon-based fuels, the exercise is self-defeating.
  • In contrast to regulating a sea of smokestacks, the best course is to require carbon permits at the 2,000 sources where carbon enters the economy. It would be simple, straightforward, and impossible to “game.” It is vastly more effective than trying to police carbon dioxide wherever carbon is burned. In setting the number of carbon permits issued — and thus determining how much coal, oil, and gas can enter the economy — the government would be setting an absolute, easily-enforced cap on emissions.
  • All carbon permits should be auctioned — not given away. In Europe, permits were given away to large carbon users to ease their transition to the new regime. Major polluters made cheap improvements, lowered their emissions, and sold their unneeded permits. This gave windfalls to the worst polluters, penalized companies that had already invested in efficient new factories and renewable energy, and helped guarantee that Europe would miss its Kyoto targets.
  • Auctioning 100 percent of all carbon permits is fair and transparent; it eliminates backroom special-interest pleadings. By reducing the number of permits auctioned each year, the government can guarantee that its emissions targets are met.

Recently, we’ve witnessed historic volatility on Wall Street and world markets as worries of a worldwide recession begin to overtake us. Yet, there remains one bullish market. In a Washington Post article entitled, There’s a Gold Mine In Environmental Guilt, it reported, This is strange territory. The Dow is down. Wall Street needs a bailout. But in the Washington area and across the country, there is still a bull market in environmental guilt. But, are we likely to witness an historic collapse of the market that was established to save the planet?

The New York Times in a counterpoint response to the Post article, A Bull Market on Offsets, but What Are They Really Worth? states, “Writing last year at the online journal Nature Reports Climate Change, a Web site of Nature Publishing Group, an assembly of five scientists and climate experts called the fuzzy notion of additionality the ‘most vexing’ challenge facing the offsets trade — particularly in voluntary markets like those in the United States.”

The blog’s closing paragraph states:

Developing market-wide standards for drawing lines, as well as creating mechanisms for government oversight, the authors of The Nature article say, is a first step. As it is, a wide array of competing industry standards are being developed, the experts lament, which might well undermine the whole enterprise: “Although the consequences are difficult to predict,” the authors write, “the confusion produced by a host of independent ’standards’ operating in a regulatory vacuum has the potential to discredit market-based environmental policies.

The European Community, the United States, and those nations that have committed to reduce human impacts on the climate must heed the words of Denis Hayes and the authors of Nature Reports Climate Change. If we ignore them, we will fail to save the planet.

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