The musings of a physician who served the community for over six decades
367 Topics
Downtown A discussion about downtown area in Philadelphia and connections from today with its historical past.
West of Broad A collection of articles about the area west of Broad Street, Philadelphia, Pennsylvania.
Delaware (State of) Originally the "lower counties" of Pennsylvania, and thus one of three Quaker colonies founded by William Penn, Delaware has developed its own set of traditions and history.
Religious Philadelphia William Penn wanted a colony with religious freedom. A considerable number, if not the majority, of American religious denominations were founded in this city. The main misconception about religious Philadelphia is that it is Quaker-dominated. But the broader misconception is that it is not Quaker-dominated.
Particular Sights to See:Center City Taxi drivers tell tourists that Center City is a "shining city on a hill". During the Industrial Era, the city almost urbanized out to the county line, and then retreated. Right now, the urban center is surrounded by a semi-deserted ring of former factories.
Philadelphia's Middle Urban Ring Philadelphia grew rapidly for seventy years after the Civil War, then gradually lost population. Skyscrapers drain population upwards, suburbs beckon outwards. The result: a ring around center city, mixed prosperous and dilapidated. Future in doubt.
Historical Motor Excursion North of Philadelphia The narrow waist of New Jersey was the upper border of William Penn's vast land holdings, and the outer edge of Quaker influence. In 1776-77, Lord Howe made this strip the main highway of his attempt to subjugate the Colonies.
Land Tour Around Delaware Bay Start in Philadelphia, take two days to tour around Delaware Bay. Down the New Jersey side to Cape May, ferry over to Lewes, tour up to Dover and New Castle, visit Winterthur, Longwood Gardens, Brandywine Battlefield and art museum, then back to Philadelphia. Try it!
Tourist Trips Around Philadelphia and the Quaker Colonies The states of Pennsylvania, Delaware, and southern New Jersey all belonged to William Penn the Quaker. He was the largest private landholder in American history. Using explicit directions, comprehensive touring of the Quaker Colonies takes seven full days. Local residents would need a couple dozen one-day trips to get up to speed.
Touring Philadelphia's Western Regions Philadelpia County had two hundred farms in 1950, but is now thickly settled in all directions. Western regions along the Schuylkill are still spread out somewhat; with many historic estates.
Up the King's High Way New Jersey has a narrow waistline, with New York harbor at one end, and Delaware Bay on the other. Traffic and history travelled the Kings Highway along this path between New York and Philadelphia.
Arch Street: from Sixth to Second When the large meeting house at Fourth and Arch was built, many Quakers moved their houses to the area. At that time, "North of Market" implied the Quaker region of town.
Up Market Street to Sixth and Walnut Millions of eye patients have been asked to read the passage from Franklin's autobiography, "I walked up Market Street, etc." which is commonly printed on eye-test cards. Here's your chance to do it.
Sixth and Walnut over to Broad and Sansom In 1751, the Pennsylvania Hospital at 8th and Spruce was 'way out in the country. Now it is in the center of a city, but the area still remains dominated by medical institutions.
Montgomery and Bucks Counties The Philadelphia metropolitan region has five Pennsylvania counties, four New Jersey counties, one northern county in the state of Delaware. Here are the four Pennsylvania suburban ones.
Northern Overland Escape Path of the Philadelphia Tories 1 of 1 (16) Grievances provoking the American Revolutionary War left many Philadelphians unprovoked. Loyalists often fled to Canada, especially Kingston, Ontario. Decades later the flow of dissidents reversed, Canadian anti-royalists taking refuge south of the border.
City Hall to Chestnut Hill There are lots of ways to go from City Hall to Chestnut Hill, including the train from Suburban Station, or from 11th and Market. This tour imagines your driving your car out the Ben Franklin Parkway to Kelly Drive, and then up the Wissahickon.
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Philadelphia Revelations
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George R. Fisher, III, M.D.
Obituary
George R. Fisher, III, M.D.
Age: 97 of Philadelphia, formerly of Haddonfield
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.
Academic economists make a useful distinction between "money" and "credit" when they point out that real money is always and everywhere created by governments and governments alone. To sustain this argument, it can be argued that banks only appear to double the money in circulation when they issued "credit" to the borrower, but simultaneously allow the depositors to retain the right to withdraw the same amount of "money". It's a little artificial, but it helps to clarify the next idea, which is fractional reserve banking.
Federal Reserve Bank of Philadelphia
Self-reserved banking, to coin an otherwise unnecessary phrase, would be to insist that a bank limit its total loans to the amount of money in its vaults, which is what private individuals do when they loan to friends. Since the volume of bank withdrawals is ordinarily quite stable and amounts to only a small fraction of reserves, self reserving would unnecessarily limit the bank's ability to lend, thus constraining the economy in general. Only in the event of a bank panic, or "run" on the bank, would the bulk of the reserves be useful, and this rare risk can be covered by creating reserve banks who guarantee to come to the rescue. Since the federal government alone can create "real" money out of thin air, a federal reserve bank is a logical arrangement to establish. Its existence makes possible the concept of fractional reserves at the local level, which any reserve bank can then control by declaring what numerator it will tolerate before it prefers to infuse money into the denominator of the equation.
And from all this comes the "multiplier effect", where a bank can loan several times as much money as it has in reserves, so long as the federal reserve permits it. When those loans get deposited in other banks, they serve as reserves for a second (or third, or fourth) bank, and the multiplier effect can get quite dizzying. In our system, the Federal Reserve can thus control the inflation or deflation in the general economy by adjusting reserve requirements of the banks it governs. It does so by increasing or decreasing the "money in circulation", which is not really money, but credit, which feels exactly the same to those who can get it.
We're playing with words a little, but that's the general idea.
Let's make this as succinct as we can: The Trader's Option is this: what risks will the trader likely take with his employer's money, when he is placed in the position of getting half of any winnings, but when he fails, he only gets fired. Almost any newspaper reports the millions and millions commonly available to lucky traders. There are indeed some timid souls who refuse to take risks of this sort, but on Wall Street, no one wants to hire them. Wall Street wants buccaneers, unafraid of risks. Make your pile as big as you can, take your lumps when you stumble, goodbye. Most of the time, someone else will hire you after six or ten months. No one will ask whether your failures were due to lack of skill or lack of luck. Napoleon once summed it up. He didn't hate unlucky generals, he just fired them.
The odds for the trader are not bad: The Trader's Option compensates richly for the turmoil of a sudden short period of unemployment, which tough-minded traders regard as the price of doing business. But what about the employer? It was his money the trader lost; if the mistakes are bad enough, the firm will go out of business. Unfortunately, often not.
If the traders are poorly trained and poorly controlled if the risk management is more talk than performance, the managers, of course, need to be fired, but ultimately the company goes out of business. But if the Federal Reserve comes along and rescues the company with an infusion of cash when no one else will consider it, moral hazard is created. The Buccaneers will take this rescue as a challenging dare to take even more risks in the future; in the long run, more banks will fail because of soft-heartedness than from tough love. No one worries about the offending bankers, the worry is that the innocent bystanders will get hurt. This is counterparty risk. If the bank is big enough, tangled up with every other major firm, almost everyone in the country could be an innocent bystander.
We will probably never know for certain whether the chaos from letting Bear Stearns fail would have been worse than the moral hazard we now have from rescuing Bear Stearns. What's absolutely clear is that we must quickly get out of the position where these choices have to be made. The completely sensible position is laid out in the proposal by the Federal Reserve to establish a central clearinghouse for financial instruments like Credit Derivatives, which will collect proportional assessments from all participants in the market, to be held in reserve against a market collapse. Not to protect the offending firm which mismanaged its affairs -- that firm must die -- but to protect all the innocent bystanders, the counterparties whose funds were tied up and possibly lost by the offender. The purpose of this insurance policy is not to protect the offender, but to free the hand of the Fed to snuff him out promptly. No one gets hurt here except the offender, and he better get wallopped.
Because the assumption is that a well-run firm will police its ruffians better than an outside regulator can ever hope to do, and will do so even more vigorously if there is absolutely no hope of pardon. The alternative to this bloody-minded approach is the regulation approach -- the Keystone Kops approach.
In noting that our Constitution has lasted for over two centuries, we assert that this simple short document has largely anticipated everything important to anticipate, including the Industrial Revolution, atomic warfare, and the Information Age, to name a few. When an occasional issue arises that is not only unmentioned in the Constitution but where no one is certain what to do, our system leaves us spiritually adrift. Such an issue is found in o0ur monetary system, where we have been wandering for two hundred years.
The founding fathers worried a great deal that popular majorities would abuse minorities, particularly in the case of the majority poor people voting themselves the property of minority rich ones, or that debtors in the majority might dishonor the rights of creditors. Although we have developed a welter of laws about debt and creditors, bankruptcy and taxation, they are if anything too specific. What is lacking is a few general words in the Constitution about the principles of credit and money. The problem now is the same as it was in 1787; we don't know what to say.
Albert Gallatin
For a very long time, some very well educated people were strongly opposed to the creation of a bank, later to mean a banking system. Alexander Hamilton's proposition that a "national debt is a national treasure" was greeted with horror by several Presidents, as well as by Albert Gallatin, one of the most sophisticated financial thinkers of the time. Underlying this perplexing reaction to the simple proposal to create a bank was surely the perception that making the Federal Government into a substantial debtor creates a powerful ally to all debtors in their eternal struggle with all creditors; the outcome of such an unequal struggle would inevitably be to the disadvantage of creditors. In common parlance, the word capitalist seems to imply a creditor. It took a very long time for it to become understandable that debtors, too, were essential beneficiaries of a capitalist system, but that idea still often meets with dissent. However, when millions of the world population belong to religions which prohibit the payment of interest, it should not be surprising to find many Americans who cannot get their heads around the idea that debtors and creditors need each other to an equal degree.
In the case of inflation, governments have always been somewhat favorable to debauching the currency. Naturally, a major debtor hopes to repay its debt with cheaper money. Since it has more or less always been necessary to use police powers to maintain a common currency, Kings and governments have long been in control of money, whether that means gold bars or beaded wampum. And for the same length of time, governments have been discovered bending the rules in favor of themselves. Bronze has been substituted for gold, the edges of coins have been shaved, the printing presses print paper money unrestrainedly, and the consumer price index has been manipulated to encourage inflation. Political parties have sought votes from debtors by promising to regulate banks, promote silver as a substitute for gold, disadvantage foreign competitors, inhibit or manipulate the value of the currency on foreign exchanges.
Alan Greenspan
For forty years we have operated without any fixed standard for money. Money for all that time has lacked any physical representation or discipline. Money has become a computer notation. At first, it was based on calculations of monetary aggregates, a bewildering concept promoted by Milton Friedman. More recently, it is entirely based on inflation targeting as promoted by Alan Greenspan. With a target of maintaining steady prices, an inflation rate of 2% is set as a specific target for the Federal Reserve. If inflation falls below that target, more money is created; if it rises above that level, less money is created. How much there is of it does not matter; it's beyond calculation. Although this simplified description fills almost any listener with doubts, it seemed vindicated by seventeen years without a notable recession. Even though events beginning in 2007 raise pretty serious doubts, it may still prove to be the best possible monetary system.
Even though this most fundamental of all commercial issues cry out for a simple principle to be stated in the Constitution so that neither populist congressmen not rapacious financiers can ruin us, it is not presently possible even to imagine what a new Constitutional amendment would, should or even could say. Meanwhile, some immense power rests in the hands of shadowy figures whom we blindly trust, for lack of a better idea about how we should select them or what we should instruct them to do.
In the case of the American Constitution, the initial problem was to induce thirteen sovereign states to surrender their hard-won independence to a voluntary union, without excessive discord. Once the summary document was ratified by the states, designing a host of transition steps became the foremost next problem. The dominant need at that moment was to prevent a victory massacre. The new Union must not humble once-sovereign states into becoming mere minorities, as Montesquieu had predicted was the fate of Republics which grew too large. Nor must the states regret and then revoke their union as Madison feared after he had been forced to agree to so many compromises. As history unfolded, America soon endured several decades of romantic near-anarchy, followed by a Civil War, two World Wars, many economic and monetary upheavals, and eventually the unknown perils of globalization. When we finally looked around, we found our Constitution had survived two centuries, while everyone else's Republic lasted less than a decade. Some of its many flaws were anticipated by wise debate, others were only corrected when they started to cause trouble. Still, many tolerable flaws were never corrected.
Great innovations command attention to their theory, but final judgments rest on the outcome.
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Benjamin Franklin advised we leave some of the details to later generations, but one might think there are permissible limits to vagueness. The Constitution says very little about the Presidency and the Judicial Branch, nothing at all about the Federal Reserve, or the bureaucracy which has since grown to astounding size in all three branches. Political parties, gerrymandering, and immigration. Of course, the Constitution also says nothing about health care or computers or the environment; perhaps it shouldn't. Or perhaps an unmentioned difficult topic is better than a misguided one. Gouverneur Morris, who actually edited the language of the Constitution, denounced it utterly during the War of 1812 and probably was already feeling uncomfortable when he refused to participate in The Federalist Papers . Madison's two best friends, John Randolph, and George Mason, attended the Convention but refused to sign its conclusions, as Patrick Henry and Thomas Jefferson almost certainly would also have done. On the other hand, Alexander Hamilton and Robert Morris came to the Convention preferring a King to a President, but in time became enthusiasts for a republic. Just where John Dickinson stood, is very hard to say. Those who wrote the Constitution often showed less veneration for its theory, than subsequent generations have expressed for its results. Understanding very little of why the Constitution works, modern Americans are content that it does so, and are fiercely reluctant about changes. The European Union is now similarly inflexible about the Peace of Westphalia (1648), suggesting that innovative Constitutions may merely amount to courageous anticipations of radically changed circumstances.
President Franklin Roosevelt
One cornerstone of the Constitution illustrates the main point. After agreeing on the separation of powers, the Convention further agreed that each separated branch must be able to defend itself. In the case of the states, their power must be carefully reduced, then someone must recognize when to stop. If the states did it themselves, it would be ideal. Therefore, after removing a few powers for exclusive use by the national government, the distinctive features of neighboring states were left to competition between them. More distant states, acting in Congress but motivated to avoid decisions which might end up cramping their own style, could set the limits. The delicate balance of separated powers was severely upset in 1937 by President Franklin Roosevelt, whose Court-packing proposal was a power play to transfer control of commerce from the states to the Executive Branch. In spite of his winning a landslide electoral victory a few months earlier, Roosevelt was humiliated and severely rebuked by the overwhelming refusal of Congress to support him in this judicial matter. The proposal to permit him to add more U.S. Supreme Court justices, one by one until he achieved a majority, was never heard again.
Taxes Disproportionately
Although some of the same issues were raised by the Obama Presidency seventy years later, other more serious issues about the regulation of interstate commerce have been slowly growing for over a century. Enforcement of rough uniformity between the states rests on the ability of citizens to move their state of residence. If a state raises its taxes disproportionately or changes its regulation to the dissatisfaction of its residents, the affected residents head toward a more benign state. However, this threat was established in a day when it required a citizen to feel so aggrieved, he might angrily sell his farm and move his family in wagons to a distant region. People who felt as strongly as that was usually motivated by feelings of religious persecution since otherwise waiting a year or two for a new election might provide a more practical remedy. However, spanning the nation by railroads in the 19th Century was followed by trucks and autos in the 20th, and then the jet airplane. While moving residence to a different state is still not a trivial decision, it is now far more easily accomplished than in the day of James Madison. A large proportion of the American population can change states in less than an hour if they must, in spite of a myriad of entanglements like driver's licenses, school enrollments, and employment contracts. The upshot of this reduction in the transportation penalty is to diminish the power of states to tax and regulate as they please. States rights are weaker since the states have less popular mandate to resist federal control. It only remains for some state grievance to become great enough to test the present power balance; we will then be able to see how far we have come.
High Gasoline Taxes of Europe
Since it was primarily the automobile which challenged states rights and states powers, it is natural to suppose some state politicians have already pondered what to do about the auto. The extraordinarily high gasoline taxes of Europe have been explained away for a century as an effort to reduce state expenditures for highways. But they might easily be motivated by a wish to retard invading armies or to restrain import imbalances without rude diplomatic conversations. But they also might, might possibly, respond to legislative hostility to the automobile, with its unwelcome threat to hanging on to local populations, banking reserves, and political power.
It helps to remember the British colonies of North America were once a maritime coastal settlement. The thirteen original states had only recently been coastal provinces, well aware of obstructions to trade which nations impose on each other. Consequently, they could readily design effective restraints to mercantilism within the new Union. Two centuries later, repeated interstate quarrels provided fresh viewpoints on old international problems. As globalization currently becomes the central revolution in trade affairs of a changing world, America is no beginner in managing the intrigues of international commerce. Or to conciliating nation states, formerly well served by nation-state principles of the Treaty of Westphalia, but this makes them all the more reluctant to give some of them up.
An entirely new concept like reconstructing health insurance on the "whole life" model can be expected to provoke concerns. Here are a few of what surely is not yet a complete list:
Inflation. It is true that rampant inflation would be injurious to the whole idea of permanent health insurance. However, it is the job of the Federal Reserve to maintain price stability, and many changes have taken place in the Federal Reserve's methods of operation since 1913. The most notable one was the abandonment of the gold standard by President Nixon in 1972 as a late consequence of flaws first introduced at the Breton Woods Conference in 1945. Observers may be of the opinion that the gold standard was stronger protection against inflation than the present inflation-targeting one, but the latter is nevertheless the system under which we operate. It should be recalled that in 1945, America had two-thirds of all the gold in the world, and international trade was being stifled by the unbalanced distribution of any common means of exchange. The correction of this gold maldistribution finally came to an end when a correction was no longer necessary, and indeed in 1972, it was possible to foresee an American gold shortage if trends continued. The American currency is no longer supported by a link to gold or any other commodity. In its place, the Federal Reserve issues or withdraws currency from circulation in response to inflation, attempting to maintain a steady inflation rate of 2% to match the growth of the economy. There are disputes about exactly which inflation rate would be ideal, but the ability of the Federal Reserve to maintain its stated targets has been reassuring. While there is room for argument among economists about the precisely optimum inflation target, the variation has been less than 1/2 %, even in times of economic disorder as severe at the present one. The projected finances of funded health insurance can safely sustain much greater miscalculation than this. If a threat is present, it comes from other directions.
Inflation
The suggested choice of an index fund composed of the entire list of domestic American common stocks was intentional and may be vital. The Affordable Care Act's provision for mandatory universal coverage makes it official that the full faith and credit of the American taxpayer stands behind the funding, so the American stock market is a close surrogate of that pledge. Anything which could destroy the stock market would constitute a threat to America much greater than a collapse of its health insurance, and enormous efforts would surely be invoked to prevent such a disaster. The wisdom of ransoming the whole economy to a comparatively small component of itself can be questioned, but it is nonetheless difficult to imagine a default when such heavier consequences would follow it. The same can be said of a permanent stock market decline, a devaluation of the currency, or a bond market default. These things can happen, but injuring health financing would scarcely enter the discussion.
The Changing Mix of Disease. Most of the rest of the world still concentrates its medical attention on the treatment of contagious diseases. In America, contagious disease scarcely makes the top ten concerns. No one would have predicted this a century ago, and no one can predict the mix of diseases, or their cost, a century from now. We do know that people will continue to be born and invariably to die, but we do not know what will kill them or what it will cost. It is even possible that an epidemic will unexpectedly sweep the globe, or an asteroid will hit the earth, but in general, big changes occur over more than a decade and give some time for readjustment. We tend to feel confident that our longevity will continue to lengthen, although in Russia it has lately shortened. Generally, new treatments have patent and development costs at first, and then become cheaper. But even healthcare workers enjoy raising their own salaries. It is difficult to predict population costs for healthcare eighty years from now, or whether they will be distributed evenly throughout the population. Unfortunately, this uncertainty will bedevil any system of financing that can likely be devised, but that does not mean reimbursement systems cannot be designed to cope with it.
Therefore, it is essential that any long-term plan, not just this one, build an accordion system into its initial design, and assign the task of watching over this problem to a permanent oversight body, particularly one which is able to resist the general economic pressures bearing down on the Federal Reserve. Inevitably, there will be times when the two bodies are adversaries. The easiest approach is, to begin with, the first and last years of life as anchors, and extend the reimbursement to intervening years as needs can be projected. This is one of several reasons why it is advisable to anticipate two parallel systems, one paying the bills as they appear and raising premiums if need be, while the other reimburses the first one as its fund permit. If a cure for cancer or Alzheimer's disease should appear, there might be funds to reimburse the other system for eight, ten or more years, readjusting premiums as it goes. If those miracle cures prove to be astonishingly expensive, the accordion would contract the other way, or its premiums would readjust in the other direction. Let us be clear what we are attempting: to reduce the annual premium of health insurance for the working years of life as much as we can. We must resign ourselves to remaining uncertain how much the premium can be reduced in the far future. No one spends public money as carefully as he spends his own. Complexity is therefore useful in areas where moral hazard is an important issue. Otherwise, grown-ups will behave like children at someone else's picnic.
Fluctuating Interest Rates.
At the time of this writing, the Federal Reserve has forced American short-term interest rates almost to zero, and held them there for three years. Japan did the same thing two decades ago, and they have had the unprecedented experience of remaining near zero for nearly twenty years, held there against the will of the Ministry of Finance by what is known as a "liquidity trap". Meanwhile, by the Fed buying long-term bonds in what it calls QE3, long-term interest rates have been forced in the opposite direction to a higher level than normal by the Federal Reserve. It is not necessary to explain here how this was accomplished, or why.
What it is important to see is that the value of bonds, both short and long-term, can be manipulated by the Federal Reserve at the will of the Chairman or at most a handful of committee members. Therefore, predicting future prices or rates is nearly futile for everyone else, and investing in bonds is much riskier than it seems. However, there are economic consequences to interfering with markets, so over long periods of time, there are limits to what the Federal Reserve can do without destroying the economy. In a sense, this is one of the prices we pay for controlling inflation by inflation-targeting. There are boundaries within which the Federal Reserve can operate, and eventually, interest rates will revert to their long-term averages. In the very long run things will average out, and in the present context, we are imagining investment horizons of eighty or more years. This is why insurance companies can buy bonds with serenity, and just wait long enough for interest rates to normalize. But there must be an organization with some feature of immortality to intervene if the counterparty (The Federal Open Market Committee) is immortal and has unlimited funds at its disposal.
However, the Federal Reserve is not independent, no matter how hard we try to make it so. We are here discussing money which belongs to individuals who can vote, and who will surely be concerned about the investment policies of 17% of the Gross Domestic Product. The Federal Reserve can thus be easily imagined to develop an occasional severe conflict of interest between what is good for healthcare financing and what is good for the economy as a whole. The pressures which the public might decide to exert are not predictable, except that they would be hard to resist. The public has long proven itself to be a poor investor, buying high and selling low, even when it knows better. It almost seems better to avoid bonds in the portfolio of investments entirely rather than take the political risks, until it is recognized that this fund would soon develop the need to pay its claims every year, even if the stock market is at a low or stock dividends are zero. Therefore, it becomes clear enough that when bonds start paying 4% or more, the fund ought to buy some of them and hold them to maturity, just as life insurance companies do. Perhaps it becomes clearer why insurance companies hold a portfolio of 60% stocks and 40% bonds, but it is not exactly clear what to do when a fund of this size proposes to start when interest rates are at their present extreme. This sort of technical issue just has to be left to bond market professionals, since it involves short selling and other arcane issues that the public ought to know enough to stay away from.
The Investment Fund Becomes a Gorilla. Any insurance company must segregate a claims reserve fund, to assure it always has money available to pay its claims. In the system we envision here, the potential claims are too far in the future to be confident how much they will eventually become for a newborn baby, etc., but for the cohort just beginning that last year of life, the average cost of the previous year's Medicare claims will be abundantly clear in Baltimore, where they keep such records; it will probably be close to 20% of Medicare's budget. It certainly will be clear contributions to the pool of Health Savings Accounts cannot possibly match the claim cost of the first year in operation, and should try to do no more than reducing the initial end-of-life claims by whatever is available.
Adverse selection of beneficiary composition. Since the actual beneficiary would be the Medicare Trust Fund (and not the subscribers, who would then be dead) the impact of the news of this program would focus on the reduced Medicare premiums for younger subscribers. Medicare premiums would be reduced by no more than 20%, which would nevertheless probably be greeted as a windfall. The true beneficiaries would mainly be successor cohorts already in retirement, although paying off some of the Medicare debts dating back to 1965 would be a splendid idea. The fund will gradually level out, but it will likely take at least ten years to do so. Social Security and Medicare had the same problem at the time of their beginnings and elected merely to borrow the money, essentially never repaying it to the "pay as you go" system.
Eventually, Medicare will be put to the expense of developing premium billing systems of some complexity. At least, this new system has a source of revenue in the investment of its cash accumulations, with an estimated time of twenty years for it to catch up with itself. Much would depend on the medical costs of the twenty years prior to the individual last year of life; at the moment, they are might even be sufficiently lower to make this approach workable. But if some new treatments, for cancer let us say, are more expensive than the years they would add to longevity, this mixed blessing would have to be treated as an independent problem. Other solutions are available; the ability of the government to borrow at lower than prevailing rates are based on the assumption that it is a sovereign debtor. While this advantage is not guaranteed, it does exist and probably would be difficult to change. Furthermore, whether pre-funding would initially appeal more to younger or older people is hard to predict, calculating the potential source of revenue or losses from various mixtures would have to account for any difference in costs among various ages. Creating enrollment quotas for various ages in the early years of an accordion expansion might be workable.
And then, there are some macroeconomic perplexities. As mutual fund and index fund usage expand, fewer stockholders vote their proxies; the present proposal would make this problem worse so there would be even less resistance to lavish management salaries. The influence of family controlled stock within the portfolio, and of hedge-fund control would increase; possibly, foreign control would be easier. While true enough, these issues are not for this paper to deal with, only to mention.
The success of a pre-funded program would probably be judged by the extent of voluntary acceptance of it, and success would mean the endowment fund grows to be vast and well-distributed. Success would entail huge sums of money, potentially disruptive of the existing financial system. At peak capacity, the financial markets would have to absorb weekly inflows of about 1/4% of GNP, and eventually liquidations of double that size. Success might also entail a significant shrinkage of our oversized medical complex. Background churnings of that size would soon underlie every calculation in the markets, with uncertain consequences for what would probably be a steadily growing world financial marketplace, perhaps a disruptively international one. Not everything can be predicted so far in advance, but it is safe to say it would be tested for flaws until the markets conclude it is flawless, a very long time indeed. Such a Leviathan cannot be set on automatic pilot, but neither dare it relies on having the wisdom to make unblemished mid-course corrections. There are risks in attempting a middle approach, which must just be accepted as being less than the potential rewards of taking the risk.
109 Volumes
Philadephia: America's Capital, 1774-1800 The Continental Congress met in Philadelphia from 1774 to 1788. Next, the new republic had its capital here from 1790 to 1800. Thoroughly Quaker Philadelphia was in the center of the founding twenty-five years when, and where, the enduring political institutions of America emerged.
Philadelphia: Decline and Fall (1900-2060) The world's richest industrial city in 1900, was defeated and dejected by 1950. Why? Digby Baltzell blamed it on the Quakers. Others blame the Erie Canal, and Andrew Jackson, or maybe Martin van Buren. Some say the city-county consolidation of 1858. Others blame the unions. We rather favor the decline of family business and the rise of the modern corporation in its place.
Originally the "lower counties" of Pennsylvania, and thus one of three Quaker colonies founded by William Penn, Delaware has developed its own set of traditions and history.
Start in Philadelphia, take two days to tour around Delaware Bay. Down the New Jersey side to Cape May, ferry over to Lewes, tour up to Dover and New Castle, visit Winterthur, Longwood Gardens, Brandywine Battlefield and art museum, then back to Philadelphia. Try it!
Millions of eye patients have been asked to read the passage from Franklin's autobiography, "I walked up Market Street, etc." which is commonly printed on eye-test cards. Here's your chance to do it.
In 1751, the Pennsylvania Hospital at 8th and Spruce was 'way out in the country. Now it is in the center of a city, but the area still remains dominated by medical institutions.
Grievances provoking the American Revolutionary War left many Philadelphians unprovoked. Loyalists often fled to Canada, especially Kingston, Ontario. Decades later the flow of dissidents reversed, Canadian anti-royalists taking refuge south of the border.
