George R. Fisher, III, M.D.

Obituary

George R. Fisher, III, M.D.

Age: 97 of Philadelphia, formerly of Haddonfield Dr George Fisher III

Dr. George Ross Fisher of Philadelphia died on March 9, 2023, surrounded by his loving family.

Born in 1925 in Erie, Pennsylvania, to two teachers, George and Margaret Fisher, he grew up in Pittsburgh, later attending The Lawrenceville School and Yale University (graduating early because of the war). He was very proud of the fact that he was the only person who ever graduated from Yale with a Bachelor of Science in English Literature. He attended Columbia University’s College of Physicians and Surgeons where he met the love of his life, fellow medical student, and future renowned Philadelphia radiologist Mary Stuart Blakely. While dating, they entertained themselves by dressing up in evening attire and crashing fancy Manhattan weddings. They married in 1950 and were each other’s true loves, mutual admirers, and life partners until Mary Stuart passed away in 2006. A Columbia faculty member wrote of him, “This young man’s personality is way off the beaten track, and cannot be evaluated by the customary methods.”

After training at the Pennsylvania Hospital in Philadelphia where he was Chief Resident in Medicine, and spending a year at the NIH, he opened a practice in Endocrinology on Spruce Street where he practiced for sixty years. He also consulted regularly for the employees of Strawbridge and Clothier as well as the Hospital for the Mentally Retarded at Stockley, Delaware. He was beloved by his patients, his guiding philosophy being the adage, “Listen to your patient – he’s telling you his diagnosis.” His patients also told him their stories which gave him an education in all things Philadelphia, the city he passionately loved and which he went on to chronicle in this online blog. Many of these blogs were adapted into a history-oriented tour book, Philadelphia Revelations: Twenty Tours of the Delaware Valley.

He was a true Renaissance Man, interested in everything and everyone, remembering everything he read or heard in complete detail, and endowed with a penetrating intellect which cut to the heart of whatever was being discussed, whether it be medicine, history, literature, economics, investments, politics, science or even lawn care for his home in Haddonfield, NJ where he and his wife raised their four children. He was an “early adopter.” Memories of his children from the 1960s include being taken to visit his colleagues working on the UNIVAC computer at Penn; the air-mail version of the London Economist on the dining room table; and his work on developing a proprietary medical office software using Fortran. His dedication to patients and to his profession extended to his many years representing Pennsylvania to the American Medical Association.

After retiring from his practice in 2003, he started his pioneering “just-in-time” Ross & Perry publishing company, which printed more than 300 new and reprint titles, ranging from Flight Manual for the SR-71 Blackbird Spy Plane (his best seller!) to Terse Verse, a collection of a hundred mostly humorous haikus. He authored four books. In 2013 at age 88, he ran as a Republican for New Jersey Assemblyman for the 6th district (he lost).

A gregarious extrovert, he loved meeting his fellow Philadelphians well into his nineties at the Shakespeare Society, the Global Interdependence Center, the College of Physicians, the Right Angle Club, the Union League, the Haddonfield 65 Club, and the Franklin Inn. He faithfully attended Quaker Meeting in Haddonfield NJ for over 60 years. Later in life he was fortunate to be joined in his life, travels, and adventures by his dear friend Dr. Janice Gordon.

He passed away peacefully, held in the Light and surrounded by his family as they sang to him and read aloud the love letters that he and his wife penned throughout their courtship. In addition to his children – George, Miriam, Margaret, and Stuart – he leaves his three children-in-law, eight grandchildren, three great-grandchildren, and his younger brother, John.

A memorial service, followed by a reception, will be held at the Friends Meeting in Haddonfield New Jersey on April 1 at one in the afternoon. Memorial contributions may be sent to Haddonfield Friends Meeting, 47 Friends Avenue, Haddonfield, NJ 08033.

Herbert Hoover, Mining Engineer

The tragedy of Herbert Hoover

Herbert Hoover

is poorly understood without considering two issues which heavily influenced his thinking. First, he was forty years old when the Federal Reserve System was created in 1913; to him in 1929, that's still an experiment. Secondly, the use of gold money had proven over many centuries to be the one and only defense against unrelenting pressure by governments to debase the currency. Hoover's attitudes were certainly reinforced by his own career. He became a rich man consulting and investing in metal mines. Although not born wealthy, when he left the Presidency in the depths of the depression, he moved to an apartment in the Waldorf-Astoria.There are no other examples of such an energetic, imaginative and effective executive in the White House.

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Hilter & Mussolini

After leaving his meteoric twenty-year business career in boredom at its lack of challenge, he took on a monumentally successful job of administering famine relief to a European continent devastated by World War I. On occasions in the course of it, he personally confronted both Hitler and Mussolini with disdain. Franklin Roosevelt was so impressed that he suggested him as a Democratic candidate for the Presidency; Hoover declined. He was nominated at the Republican convention on the first ballot, elected in a landslide. As President, he hit the ground running, simply peppering the Congress with innovative programs and proposals. A substantial part of what would be known as Roosevelt's New Deal grew out of initiatives that Hoover had begun during his short presidency.

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Stock Market Invincible

Under the circumstances, it is not surprising that Hoover was disturbed by the irrational exuberance of the stock market in 1927-28, undisposed to resist proposals by George Harrison of the Federal Reserve to deflate the stock bubble by tightening the money supply. Some observers feel the fatal illness of Benjamin Strong (President of the New York Branch) weakened the resistance of the Federal Reserve to this adventurism. The stance of Hoover is not now known, but it must have been a toss-up between lifetime allegiances to hard-money and resistance to government intrusion into commerce, particularly by a comparatively new agency. In any event, tightening money worked too well. The stock market tanked in October 1929 FB is shutting down in March,

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Stock Market Crash

followed quite promptly by the whole economy. The irony is that Roosevelt proceeded to run for twenty years with the claim that the Depression was caused by Hoover's failure to restrain the 1928 stock bubbles. In fact, the befuddled Federal Reserve bounced around during Roosevelt's time in office as well, turning a recession into the deepest depression in history. When England went off the gold standard, the Federal Reserve tightened again to prevent a flight of American gold to speculators. The result was a run on the banks, so the Fed loosened again, and half of the American banking system disappeared. Following the 1929 crash, the stock market continued to go down -- for fourteen years.

Milton Friedman

After a while, it became clear to everyone that three things -- the money supply, the economy, and the stock market -- go up and down together. The basic question was the same as the political one -- which one goes first, and which ones follow? Although the political parties continue to spin the facts, the world of economists seems nearly unanimous that Milton Friedman and Anna Schwartz and Milton Friedman settled the matter some time ago. Their classic work of scholarship,A Monetary History of the United States 1867-1963 , traces out four American and eleven foreign examples of shifts in monetary tightness which were unrelated to the economy, and demonstrate that the economy promptly follows the direction of the money supply. Almost all of these anomalies took place during the interval after World War I, when the gold standard was temporarily suspended. Different countries returned to gold at different times, and after the 1929 crash abandoned it in different ways at different times. Since the publication of Friedman's work, independent scholars have provided over forty confirmations of the sequence, money leads, the economy follows. And politicians posture. There is a disconcerting note, however. Almost all of the examples studied by monetary scholars could be used as proof of quite a different slogan. In almost every case, a country rescued itself by abandoning the gold standard, and the sooner it got rid of gold, the better it did. That would, of course, be true, during a period of concealed deflation where exuberant economic growth exceeds the expansion of gold supplies. A serious weakness of the gold standard has certainly been identified, leading to expressions like barbarous relic and crucifixion on a cross of gold. But there is the other, time-honored, side of it; since the beginning of history, governments have been tempted to inflate the currency in order to dishonor their debts. Governments will do so again at the first opportunity. Without the discipline of a gold standard, the only dependable defense against the catastrophe of hyperinflation is now the courage of the Federal Reserve, and the rather faint hope that we have learned everything about monetary policy that is important to learn.

REFERENCES

Herbert Hoover: The American Presidents Series: The 31st President, 1929-1933: William E. Leuchtenburg, ISBN-13: 978-0805069587

Amazon

Franklin's Admirers on TV

Brian Lamb

There are now three channels of C-span, continuous cable television programs about the influence of history on current problems. Sessions of Congress and its committees, the speeches of the President, political campaigns, are shown as they happen. But interviews and book reviews are shown in parallel, with an opportunity to go into the archives and organize originally unrelated programs into seminars on a current topic. The editor, Brian Lamb, has a light hand and considerable impartiality. But he's there, all right, organizing blogs into topics just as Philadelphia Reflections tries to do.

Friends Select School

This similarity of design had been floating around for some time, but it suddenly came into focus when I recognized myself in the front row of an audience on C-span, listening to Edmond S. Morgan talking at the Friends Select School about his new book on Benjamin Franklin, a few months earlier. Thank goodness I bought a book and had it autographed because the filming had been so unobtrusive I hadn't noticed it at the time. I clearly need to have haircuts more frequently. Professor Morgan's parting words that evening had stayed with me, "Franklin doesn't tell you everything about himself, but what he tells you -- is straight." That's quite a compliment from the editor of 47 volumes of Franklin's work.

Walter Isaacson

Grouped with this tv portrayal of me as a groupie were interviews with Walter Isaacson and some other Franklin biographers, taken at other times and placing focus on other aspects. Here again, more insights emerged from quickly considered replies to audience questions than from the prepared speeches. Replies to questions from the audience are more in a class with blogs, anyway. Whenever you get all of the adjectives and qualifications polished, you sometimes don't say what you mean. Perhaps that last comment can be rearranged to say that answering audience questions occasionally leads to blurting out precisely what you mean.

And so, two unrelated audience answers need to be linked. A question about Franklin's love life caused Isaacson to refer to Franklin as a lifelong seducer. From the unknown mother of his illegitimate son William, to the simultaneous flirtations with two famous French ladies that took place when he was an octogenarian, and not overlooking several other affairs with Cathy Green and Polly Stevenson and allusions to others, Franklin was obviously an accomplished seducer in the full meaning of the term. It is thus legitimate to suspect the techniques of seduction at work in many of his public projects, from starting the Library Company to persuading the French to help the Revolution. He discovered late in life what many have discovered about the life of a diplomat, and quickly recognized that he was already pretty good at what that seemed to entail. Let's slide to a slightly different application of that idea.

Benjamin Franklin and French Women

By the accident of hostess seating arrangement, I found myself seated next to two historians from Harvard, and somehow it came out that one of them felt that Franklin loved the French. Simply loved them. Somehow that didn't sound quite right when compared with Franklin's early years of mobilizing Pennsylvania to fight the French, starting the first National Guard militia unit to defend Philadelphia against French raiders, supporting General Braddock's expedition with his own money, urging the British government to sweep the French from Canada, and working most of his life to assemble the colonies and Great Britain into one world-dominating entity. It's true that 18th Century France was at the peak of scientific achievement, and Franklin the inventor of electricity was quickly taken in by the European scientific community, but that's scarcely the same thing as loving France. Louis XVI was in fact quite annoyed by all the attention Franklin was receiving. And so the scholar on TV went on to say that correspondence had been discovered in which Franklin quite casually remarked that during the Continental Congress he had strongly argued that America should stand alone and have no European allies. Congress it seems overruled him, so he dutifully set sail for France to seduce them.

We come to another chance social encounter. On a recent trip to Paris, the GIC had taken along as a speaker, no less than a member of the Open Market Committee of the Federal Reserve, a Governor of a Federal Reserve District, to speak about the threat of inflation and currency crisis. In time, our French hosts invited us to look at some documents of interest, like the Louisiana Purchase. Lying on the table was the original treaty between America and France, signed by B. Franklin. The Federal Reserve governor, making small talk, observed that Franklin sweet-talked the French into loaning America too much money, eventually leading to their bankruptcy. As I recall, my rejoinder was, "Well, just print some more paper money, right?" It was intended to be a jocular remark, but it somehow didn't seem to be taken as such.

Taking Risks Demands Its Price

downturn

Someday, books will be written about who discovered what, and sold what, to make S & P futures suddenly go up and down 300 points in ten minutes on August 17, 2007, soon followed by violent volatility in many other markets. Confusion reigned for a few days, but within a week there was general agreement about the difficulty: the "spread" of interest rates between risky loans and very safe ones had been too narrow for months, and was reverting back to normal. Risk had been mispriced; a risky loan was just as risky as it ever was, as everyone should have realized. If the risky borrower was unwilling to pay higher interest rates, why would any lender bother with him? Since this had been obvious all along, why had lenders temporarily believed otherwise, charging rates scarcely higher for dodgy loans than for well-secured ones?

Alan Greenspan

Alan Greenspan (in 1996) had called this question a conundrum, but it's getting easier to understand. The emergence of prosperity in one decade among 200 million impoverished Chinese had resulted in wealth which found its way into international markets, much like a gold rush or the discovery of oil. Sudden huge wealth often cannot be easily assimilated, hence was available to loan at cheaper rates. The globalization of world finance has vastly improved the speed of markets to absorb money gluts, but in this case, had the unfortunate effect of spreading it out into less sophisticated corners of the world economy. It particularly affected residential mortgages, which proved to be the weakest link in the chain of lending and borrowing. Ten years of low-interest rates pushed up the prices of existing homes, tempting builders to overcharge for new construction, and inexperienced buyers to pay those inflated prices with cheap mortgages. Between them, Congress and the banks had devised ways to exploit this situation, making the collapse worse when it came. The interest on home mortgages was preferentially tax deductible, so it became the favorite way to borrow. Banks made it easier to refinance at a lower rate as the spread gradually narrowed. To make it even easier, reverse mortgages converted home ownership into an ATM machine with tax deductibility. Because home prices were steadily rising, banks were willing to reduce down payments, on the assumption that home equity would soon rise to represent the amount formerly required as a down payment. As it would have, perhaps, if homeowners had not promptly drained it out the back door of reverse mortgages. Second homes became a cheaper way to have a vacation; steadily rising prices encouraged outright speculation, called flipping. Congress reinsured mortgages, eventually most of them, through FNMA, and then pressured Fannie Mae to insist on spreading the joys of home ownership to people who could not afford the no-down-payment houses they were romanced into buying. Investment banks offered to buy the mortgages from the local originating banks in order to package them into securitized bundles, which thus deprived the originating banks of any incentive to reject eager buyers, no matter how dubious their credit standing. What is more, this process provided a conduit for spreading bad credit risk into the equity markets, including the equity of the banking system itself, and creating the temptation for hedge funds to start runs on the banks in novel forms. There once was a time when customers lined up at the back door to make withdrawals in a bank run. Since investment banks obtain their deposits by borrowing wholesale, they simplified the process of starting a bank run when the speculative process reversed. Which it did on August 17, 2007, possibly not spontaneously, but certainly inevitably.

Home mortgages were once loans for thirty years; even now, they extend for many years. Homeowners stay in one house for an average of seven years. For legal reasons going back two hundred years, they are non-recourse loans, meaning the house alone is at risk to the mortgage lender, who may normally not pursue the homeowner for assets other than the foreclosure, even if the other assets are considerable. In a housing bubble, this creates a special hazard for lenders during the inevitable decline of house prices back to normal. As house prices fall, as they should and will, many homeowners will find it is cheaper to walk away from a foreclosure than to pay off the mortgage. It has been calculated that potentially as many as 50% of mortgages might eventually find themselves in this squeeze. The situation differs from a car loan, for example. Every new car is worth 20% less than the sale price, immediately after the sale. But this does not tempt car buyers to walk away from their loan, because the car loan is a recourse loan. The uncomfortable prospect is that financial reverses alone might not be the reason homeowners submit to foreclosure. If this particular antisocial behavior loses its stigma, a very large proportion of mortgages could be foreclosed on owners who are perfectly able to pay them off.

Barney Frank and Chris Dodd

For all these reasons, house prices are the main bubble in an economy overstimulated by cheap money, and mortgage financing is at the root of a banking crisis. The banking system itself is precarious because it too responded to the temptation of abundant credit at abnormally low-interest rates. The process took the form of over-leveraging in order to magnify profits in a competitive market. Greed was not the only motivation; corporate raiders in the form of Private Equity could swoop down on any company unwise enough to accumulate internal cash. The new owner would then substitute debt for cash, and the prudent company (under new management, of course) was no better off than if it had itself over-leveraged. The Federal Reserve limits commercial banks to loaning thirteen times their stockholder equity, but investment banks had the foolhardiness to borrow thirty times equity. A decline of only three percent in the value of their loans wipes them out. The Federal Reserve Bank of New York, by the way, is leveraged at over a hundred times its equity. The Fed can print money to pay its debts, of course, but the result is a falling value of the dollar in international exchange and ultimately, world inflation. No one predicts the half-way point in this decline to be sooner than two years, which means a recession lasting at least four years. The first two efforts of public officials to halt the decline, the purchase of toxic debt and direct lending to banks, have been abandoned as failures, and the Barney Frank/ Chris Dodd offer for Congress to repurchase mortgages was simply pathetic, with only two hundred responses when over two million were anticipated. If the public loses faith in the ability of the government to do anything about the matter, prices can be expected to overshoot on the downside, not just return to normal. House prices do need to decline, but slowly enough to avoid a panic. And American banks and businesses need to reduce the extent of their borrowing, but without measures which impair the ability of new businesses to make loans, or the ability of shaky businesses like the Detroit auto industry, to survive.

In closing, a word is needed to explain why the foreclosure of $100 billion of California and Florida bungalows should threaten a collapse in the trillions. Economists have fallen into the habit of equating interest rates with risk; the more risk, the higher the interest rates become. That's true, but the risk is not the only factor affecting interest rates. Since they are essentially the rent paid for the use of someone else's money, interest rates respond to the supply of money interest rates, just as supply and demand of rental housing affect rents. The flood of liquidity from developing countries into the world economy pushed interest rates down, but somehow that was taken to imply that risk had decreased. When interest rates go up again, for whatever reason, the money will effectively evaporate. The best example of this relationship is in the bond market. When interest rates go up, the principal value of existing bonds declines. With interest rates of 5% as an example, bond prices go up and down twenty times as much as the interest rate, but in the opposite direction. To repeat: when general interest rates rise, money in the economy disappears about twenty times as fast. That's a succinct description of what started to happen, when the prevailing risk premium returned to its normal higher level, on August 17, 2007.

Separation and Balance of Powers

Robert Morris

At first glance, the Articles of the Constitution today seem entirely descriptive, but they originally identified power and, only after protracted debate, the decision where it should best be assigned. The Constitution primarily speaks of separation of powers, not so much balance of powers, as in 19th century British foreign relations. Separating powers weakens them; balancing weakens them further. Sometimes, the original intent was flexibility. The notion of separating Kings from Parliaments, and both of them from the Courts, dates back at least to the Magna Carta. To Americans, a preference for bicameral Legislative branches is most plausibly traceable to the Pennsylvania Legislature in 1787, with Robert Morris doing battle against a headstrong unicameral body. The vertical division of power among federal, state and local lines occasionally provoked difficulties, but mainly eases confusion. Even when separation fails to quiet matters, clearer lines of separation usually prove to be required, not clever methods of balancing. Separating rather than balancing powers has been our preferred system, and for us, it often proves sufficient.

However, short little James Madison had also cast about for resources to bestow on weak states and weak government departments as protection against bullying by big ones. His life displayed an instinctive avoidance of systems requiring the weak to appeal to the strong for protection, only to find they had acquired a new master. He reasoned that state governments are able to modify state laws to the disadvantage of neighbors, and should retain that ability. He employed the concept that sovereignty began with the states and should remain there. Resulting interface friction is now seen in sales taxes at border crossings, or varying income and estate taxes. But all fifty states are restrained from laying unreasonable burdens on their own citizens by the threat those citizens might then move to another state. Although it is counter-intuitive, abusive tax systems collect less tax revenue by raising rates than by leaving them alone. In extreme cases, whole industries shift location. The outcome is that state governments have less scope for legislation that if they had no peers able to retaliate. James Madison has every right to be pleased with state legislatures slowly responding to the reality he created. Not merely that states must match taxes with neighbor states, but that fairness is the best policy.

To return briefly to comparison with the present debates of the European Union, speculate what advantage might be found in taking Madison literally on treating states as sovereign nations. Europe in 2012 struggles with the same problem America faced in 1787, made more difficult by diversity of languages and folklore of national sovereignty, made urgent by the failure of alternatives. The European leaders reasoned it was easier to unify nations piecemeal; start with monetary policy and work out more difficult problems later. That may seem to point to the same final result, but it does not teach the same lesson. Behind this dubious assessment of relative difficulty was the clear determination in Brussels to use a heavy hand with nationalists; pay no attention to referenda, avoid them if possible. A seeming advantage of first unifying monetary policy is that no one seems to understand it, thus transferring power to those who gruffly pretend they do. Unfortunately for this approach, it is the citizens' nation to do with as they please; they will eventually remind you of it. There is consequently little choice but to educate them to the advantages of Madison's self-disciplining systems. Essentially, keep it simple and don't hide the problems. Half the world probably does not believe honesty is the best policy, maybe even half of Europe. But we adhere to it, not because of Washington's Farewell Address, but because it seems to work.

A practical example of cross-border discipline concerns monetary policy itself, in 1913 when the American Federal Reserve system was created. The Governor of the Texas Fed soon decided to lower local interest rates to the advantage of Texas, just as he had always done. Within days, interstate bank deposits and loan originations switched direction, with everyone looking for Texas loans and no one willing to keep deposits in Texas banks; the independence of Texas banking simply vanished. What emerges is a general principle: there exists hidden pressure for inter-state prices to be uniform, despite constant overt pressure to respond to local conditions. Freed of state regulation, trade moves in the international direction. If both forces happen to pull in the same direction all will be well, but if they go in opposite directions the whole state or nation will be made to suffer for it, usually by blocking other features of bilateral trade.

At the moment, corporation taxes provide the sharpest focus for the power of uniform sovereignty. The nation to get the attention of the world was not 1787 America, but 2001 Ireland, historically a bit leftish. The Irish abruptly lowered their corporate taxes to 12.5%, attracting a sudden massive migration of Swedish, German and English corporations to headquarter in Ireland. Since Ireland is primarily agricultural, the new corporations prompted a sudden migration from the countryside to Dublin, thus generating an urban housing boom. When the boom collapsed there was alarmed commentary, but the observers who really noticed were the world's other finance ministers. Although the boom did get out of hand, the finance ministers mostly noticed that lower corporate taxes attracted business to Ireland. In spite of massive national deficits, England has since lowered corporate tax rates from 28% to 26% and proposes to lower them to 24% in 2012. (Including state taxes, the USA imposes a 40% rate). A century of theorizing that corporations are unfairly doubly-taxed had not provoked any comparable gold rush to match the Irish experience. Other nations will soon follow, and ultimately corporate taxes may go to 0%. But finance ministers are mindful of the ensuing Irish housing crash from going too fast, and therefore may take a decade to get to the end of cutting. They will surely cut until corporate taxes are uniform among major trading nations, as they probably should have been for a century. Those who are slow will now be punished for it by the markets. James Madison the main visionary of this theory, deserves a statue in the main square of Europe, right away.

Medicare Buy-Out

Could Americans buy their way out of Medicare? Right now, no. In a few years, probably yes. A Medicare buy-out would have a few special complications. The transition to it might take thirty or more years, in view of the several ways it raises revenue and the varying ages of the patients involved. For example, from the time an individual starts his first job, until the age of 66, he is sustaining payroll deductions for future Medicare coverage. Also, from the age of 66 until he dies, he has Medicare premiums deducted from his Social Security payments. Each of these compartments aggregates about a quarter of the cost of the program, and the two methods keep more or less in balance over a lifetime, eventually paying half its cost.

The other half of the Medicare program cost is supplied through general tax sources, as a subsidy, and could continue to build up indefinitely. Eventually, an undeterminable portion of the subsidy is borrowed internationally, and that debt, like a credit-card balance, draws continuous interest. The Economist reports it would be more advantageous for the Chinese to buy American common stock. But using that approach, they would now own a fifth of the major corporations of America, which is politically unacceptable. Therefore, they bought American Treasury bonds. Depending on maturity, these bonds will eventually come due and must then be redeemed or refinanced. This arrangement can only continue with mutual consent of the two nations, and currently, the Chinese economy is shaky.

Moreover, it cannot be said the two funds will keep in balance. That's essentially true in bulk, but the actual revenue for each age cohort is largely based on its historical birth rate. Payroll deductions for the baby boom bulge have reached a peak and are about to decline to zero, whereas the Medicare premium bulge is just beginning, along with benefit payments. These repeated imbalances could prove troublesome to fund.

I wish I believed these receipts had been put into a bank vault, but in fact, they were likely co-mingled for general government expenses and spent long ago. Whether or not they are represented by accountants as paying for part of future Medicare expenses, or for current bridges and battleships, they are going to make a problem when the boomer bulge catches up with them. The formula will remain unchanged, but the proportion of payroll deduction will fall because the Millennial generation is fewer than the boomer generation, who are in turn more numerous than their parents as consumers of Medicare funds. The Treasury would certainly be concerned about any proposal to accelerate the payout to help a Medicare buyout. And even if an exchange of health funding is agreed to, the accounting problem of determining millions of balances of differing size is sure to be a headache. The balance in question is the net of 6.5%, less the rate on Treasury bonds, which could be either a positive balance or a negative one if the bond market and the stock market do not move in parallel. The unpredictability of markets is amply illustrated at present, when trillions of freshly printed bonds do not cause inflation, even for the mundane purpose of maintaining a stable currency. Even inflation targeting does not work as desired, currently reaching 1.5% when the Federal Reserve is trying to reach 2%.

In the longer run, Medicare buy-outs by the grandchild approach would stretch available funds over a longer time span, and augment them somewhat. Longevity is increasing, but the period of working life is not. People are retiring earlier, and they are entering the workforce later in life. Progressive taxation further reduces what working people have left over to spend, and eventually will make them less willing to support the protracted vacations of their children and their parents. So extra investment income will be needed, and shifting other savings around will probably relieve some of the pressure. Even so, it appears certain some elderly people will outlive their savings and must find a way to generate income with their leisure time. Along the same lines, we must also change the mentality of those who regard employment as a punishment to be avoided, but that is not my present topic. One small advantage of the unemployed Millennials is they are less likely to resist working long after they do get a job.

Summary of One Scheme of Medicare Buyout. Childhood health insurance, funded through health insurance for senior citizens. Owned by two people linked by redefining a birthday or some other strategy, all sounds like a peculiar idea. But let me persuade you to do a little math. At 7%, there are 9 doublings in a 90-year life. 2,4,8,16,32, 64, 128, 256, 512. That's rounding up on 6.5% and 85 years, which are closer to realistic estimates of future longevity and interest rate return, but no one can predict. Every dollar at birth (now redefined financially as the 21st birthday) is multiplied 289 times (the approximation process suggested 512). The grandparent aged 40 would have to add $450 to a sinking fund, and a grandparent aged 65 would have to contribute $27,000 to pay it in advance. Eventually, when things settle down and we have added four doublings, the contribution would be $42+ a person, so considerable juggling would be useful for a few years to smooth it out fairly.

Let's aim for $200 a year for five or ten years for everybody over age 40 or something of that nature. To pay for Medicare coverage, that's amazingly cheap. That's a rough estimate, of course. The overall effect is for the child to wear down his gift from grandpa from birth to age 21, paying $42+ at age 40 to support his own grandchild. He pays for his own care from age 21 to 66. During the transition, a late starter would pay $200 a year for several years after age 40 to make up for his late start, and others would pay the same, but starting later. There are a hundred ways to do this, and the choice would be for the most palatable appearance. We have other, possibly more acceptable, approaches, but this one links well with other goals.

Proposal 22: Congress should enable one voluntary transfer between the Health Savings Accounts of members of the same family, especially grandparents and grandchildren, or one transfer to a general pool for atypical families. Members of the grandparent generation who have no grandchildren may choose one substitute from outside the family, or leave the decision to the fund.
Proposal 23: Congress should permit voluntary buy-outs from the Medicare program, which include consideration of returning payroll deductions, and fair accounting for premiums, copayments and benefits already paid for by age groups in transition; but make little effort to encourage buyouts, until prices start to fall.

All in all, the conclusion of this analysis is that targeted programs are probably better for the thirty million people with special needs, so universal one-size-fits-all is probably not a good goal. Privatizing Medicare is a good goal, but we may not be quite ready for it. What's left is to fund the healthcare of children, by mildly overfunding the healthcare of seniors. That ought to end the discussion of this topic, except for demonstrating how you would control the money machine, exposed by the lack of gold or other standards for the currency. It's done by bringing balances to zero once in a while, and it was uncovered by working around the grandparent-grandchild transfer. By studying what's left, we reach the conclusion that fixing the children problem would do the most good for the least cost, and just about everything else has major disadvantages.

Let us then do this much without waiting to see what Obamacare is going to do. If the Federal Reserve's inflation targeting serves the purpose, this may be held in reserve, but the failure of Keynesians to reach 2% inflation when they try to inflate on purpose, should make everyone uneasy about their approach in a currency system which depends on printing money until short-term interest rates rise to 2%. As the man in the audience called out, "Haven't you been to the grocery store, lately?"