Juggling Dynamite

The bad food industry and big pharma are killing us, literally.  People are desperate for affordable drugs, but the vast majority would not need drugs at all if they ate healthy foods in appropriate quantities.  Harvard economics professor Ken Rogoff (co-author of ‘This time is different’ on the credit crisis) offers us an important reminder on the bad economics of allowing the food industry to freely poison our population.  A few big players make big profits while we, the tax payers and society as a whole, are left to bear the crippling costs of a population who are physically handicapped and slowly destroyed by the food they are ingesting.

Of course individuals and parents need to take much more responsibility and care in the food they are “using”. But at the same time, as a civil society, we see fit to regulate and control the sale and use of other addictive, harmful substances like drugs, cigarettes and alcohol. It is not ok to offer cigarettes to our children, why is it ok to feed them poisonous food?  Why are we allowing (even tax-subsidizing) poisonous and addictive food to be freely marketed and inflicted on children and adults across the board? When I see everyday that about half of the people around me are literally eating themselves to death, I see them as similar to other drug addicts.  They might as well have needles dangling from their arms.  And yet there is an attitude today that this type of self-destruction is a personal choice beyond the concerns of the state.  It is impolite to mention.

The fact is that the societal cost of all this is enormous and the health care system in its current form cannot bear it.  The economics of our current attitudes and ideas about food are simply not sustainable.

Here is Rogoff:

“A systematic and broad failure of regulation is the elephant in the room when it comes to reforming today’s Western capitalism. Yes, much has been said about the unhealthy political-regulatory-financial dynamic that led to the global economy’s heart attack in 2008 (initiating what Carmen Reinhart and I call “The Second Great Contraction”). But is the problem unique to the financial industry, or does it exemplify a deeper flaw in Western capitalism?

Consider the food industry, particularly its sometimes-malign influence on nutrition and health. Obesity rates are soaring around the entire world, though, among large countries, the problem is perhaps most severe in the United States. According the US Centers for Disease Control and Prevention, roughly one-third of US adults are obese (indicated by a body mass index above 30). Even more shockingly, more than one in six children and adolescents are obese, a rate that has tripled since 1980”.

See the whole article: Coronary Capitalism.

Economic growth in developed economies almost ground to a halt in the last three months of 2011, with the U.S. driving what growth there was, according to the Organisation for Economic Co-operation and Development (OECD)

Gross domestic product (GDP) in the 34 economies in the OECD, including the U.S., Germany, Japan and the UK, grew by just 0.1 percent in the last quarter from the previous one. It rose 1.3 percent from the same time a year earlier – the slowest rate of growth in two years.

This despite the concerted efforts of global central bankers including the European Central Bank, the Bank of Japan and the Federal Reserve to flood the banking system with more liquidity in recent months.

More austerity cuts in the Eurozone as well as State and local governments in the US will accentuate already slumping growth.  See: Recession looms as growth slows in developed countries.  Here is the latest data for each country (chart: Simon Hunt Strategic Services)

Jonathan Tepper of Variant Perception and co-author of Endgame (with John Mauldin) offers us an excellent, detailed and wonderfully readable paper on how and why currency break-ups have been common, important solutions throughout economic history. His conclusion: far from the end of the world, Greece and Portugal should leave the Euro as soon as possible.

“Many economists expect catastrophic consequences if any country exits the euro. However, during the past century sixty-nine countries have exited currency areas with little downward economic volatility. The mechanics of currency breakups are complicated but feasible, and historical examples provide a roadmap for exit. The real problem in Europe is that EU peripheral countries face severe, unsustainable imbalances in real effective exchange rates and external debt levels that are higher than most previous emerging market crises. Orderly defaults and debt rescheduling coupled with devaluations are inevitable and even desirable. Exiting from the euro and devaluation would accelerate insolvencies, but would provide a powerful policy tool via flexible exchange rates. The European periphery could then grow again quickly with deleveraged balance sheets and more competitive exchange rates, much like many emerging markets after recent defaults and devaluations (Asia 1997, Russia 1998, and Argentina 2002).”

See the whole excellent report: A Primer on the Euro Break-up:  Default, Exit and Devaluation as the optimal solution