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.
At Third and Chestnut Streets in Philadelphia there is a Japanese restaurant occupying the site where Alexander Hamilton once lived and devised the modern banking system. There's no historical marker, possibly because Hamilton's involvement in the Whiskey Rebellion and his political switch of the nation's capital from Philadelphia to the District of Columbia made his memory distasteful to local town fathers. It was at this place Hamilton devised the idea that what America needed most was a national debt -- national debt was a national treasure. Just about everyone was appalled, especially Thomas Jefferson and Albert Gallatin. George Washington didn't know about such things, but he trusted Hamilton and so we got a sovereign debt as a cornerstone of national finance because no one wanted to oppose Washington. Wrangling over this radical idea became a central issue in the next eight presidential elections. After that, we had a century of wrestling with substituting the Federal Reserve for precious metals as a way of controlling the money supply. In a more sophisticated form, our sovereign debt now forms the bedrock basis for the Federal Reserve's control of the banks and the monetary system. Just when things seemed settled, we confront something new and possibly just as revolutionary, the sovereign-wealth fund.
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If a country can have debt, it can have a surplus. Using that surplus to buy corporations was seen as nationalization, just a way- station on the road to socialism or communism. Somehow, what to do with national surpluses never became an issue, probably because it was easier to spend than to save. More recently, surplus funds have fallen to governments from oil or other natural resource discoveries, usually soon in the hands of a despot, combined with rudimentary banking systems that make it hard to invest locally. In 2008 these accumulations worldwide are estimated to exceed $3 trillion. Dubai has about $600 billion, and other countries like Singapore are not far behind. Traditionally, such funds end up in places like Switzerland where they more or less disappear from sight. While a few small countries have experimented with openly investing in stocks and bonds, the matter only surfaced as a real issue after the subprime mortgage mess of 2007. As a consequence of upheavals whose full nature is still obscure, financial giants like Citicorp, Merrill Lynch, and Morgan Stanley found themselves facing liquidation unless they could acquire billions of dollars by selling large blocks of their stock in a hurry. Thus the Americans, who would never contemplate their own government buying controlling shares of leading American corporations -- were jolted to see we had made foreign powers welcome to do so.
Furthermore, this might quickly get out of hand. The Chinese government, unashamedly communist, now holds 70% of American government bonds. Not only would a rapid bond liquidation be disruptive, but the purchase of corporations' controlling stock might be worse, The effective conversion of Wall Street into a street in Chinatown would have highly destabilizing consequences. Since holding vast quantities of bonds has created no problem, it would seem the main international difficulty lies in the voting power of common stock ownership. It might seem possible to prohibit sovereign foreign states from voting their proxies, although it is easy to imagine circumvention by straw-men. A more promising way to sterilize the voting power would be to forbid direct foreign nation ownership except through index funds. One questionable feature of this approach lies in the narrowing minority control which is created as index funds keep growing to a size that disenfranchises almost everybody except the management of corporations, or encourages predatory raids on a small sliver of outstanding listed stocks by promising future golden parachutes to CEOs and others who acquire stock by incentive options and then join in the raid.
Finally, it merits rumination about the growing vulnerability of banks, as agents of the Federal Reserve in its duty to stabilize the currency. The recent credit crunch delivered a setback to the securitization of debt, it is true, but nevertheless, the trend of several decades has been to weaken local banking. The eventual disappearance of banks is not inconceivable. Banks have consolidated into larger banking giants, but the recent troubles of Citicorp show that mega banking does not defend banks from securitization. We have to hope the Federal Reserve is considering responses to this threat to monetary management which are more productive than just a bunker mentality.
The Chairman of the Federal Reserve from 2005-2014, Ben Bernanke, spent much of his time explaining current economic tangles to committees of Congress. At a hearing, his suffering audience asked for some homework. "Please suggest a few articles you think we should be reading." Two of his four resulting suggestions were written by Markus K. Brunnermeier, Professor of Economics at Princeton. Some of what Brunnermeier said was already known, some of it was novel. Of greater significance was that Bernanke, a scholar of economic collapses, and then vested with the power to investigate just about any lead, would make a public endorsement of Brunnermeier's analysis to Congressmen who actually held the power to implement laws. They weren't talking to an audience of helpless college students. Congressmen knew less about the minutia of the topic, but they had the power to act on their beliefs.
No doubt, further investigation will uncover more kinks in the hose, and subtleties will prove particularly arcane, or particularly blameworthy. Nevertheless, we seem to have probably reached the point to assume the main features of the catastrophe were on the table, articulated to people not easily deceived. Moreover, Congressmen had already adopted one 2000 page law that almost none of them had read; this must not be permitted to keep happening. So among other things, let's hope they have at least learned to be careful. If Brunnermeier and Bernanke have given us a list, let's expose it to public discussion. What's usually important is what they do, not what motives they claim.
Markus K. Brunnermeiere
1. Following the dot-com collapse in 2001, the Federal Reserve held interest rates abnormally low, claiming fear of even more severe deflation from the bubble bursting uncontrolled. By this description, the housing bubble was really the second dip of a double bubble. Within endless successions of bubbles, a futile issue is which tooth of the buzz saw cut off your finger. What determines your conclusion is the point where you chose to start. In this case, the preceding seventeen year period of "Great Calming" may perhaps make routine stress-test analysis possible. For contrary example, was a seventeen year quiet period without a major recession actually a coiled spring? If you can guard against such exceptions, perhaps correct conclusions may be reached.
2. The emergence of the developing world, especially China, from extreme poverty into relative affluence generated huge wealth surpluses which no economy was ready to absorb without danger of inflation. There is a feeling that China should have allowed its currency to rise. However, the same was said of Japan two decades earlier, and in any event, we may not have had the power to change it.
In summary, then, the emerging problem was one of too much cheap credit. Because of related uncertainties, this was a storm we probably could not prevent.
3. For decades, America has sought the goal of universal home ownership. Borrowing to buy a home has been encouraged by tax-favored mortgages, loosened credit, and bankruptcy standards, and weak borrowers have been supported by government guarantees in the form of FHA, Fannie Mae, Ginny Mae, and Freddie Mac. The Savings and Loan crisis can be viewed as another variation on the theme of wider home ownership. Meanwhile, renting has been discouraged by low returns for the landlord, with the additional hazard of reducing the mobility of the workforce, particularly in a recession.
4. Home mortgages have traditionally been issued by local lenders. However, cheap credit was primarily available from China, so new conduits needed to be constructed. The process of securitization of mortgages through aggregation and packaging as marketable bonds was a swift and effective way to put the cheap Chinese credit to work, serving the acknowledged national desire to promote home ownership.
In a second summary, cheap credit from the Orient pushed us toward some sort of bubble. Our own encouragement of home ownership assured the bubble would be a housing bubble. Perhaps some other form of a bubble would be preferable; if that is the case, our government is at fault.
The first four bullets in this analysis constitute conventional argument why we had the collapse of a housing bubble in August 2007, and this collapse in some way is supposed to have led to a recession. In his recent memoir, Tony Blair of England reduced the argument to a politician's catchy phrase. "We didn't have a market failure, we had a failure of one sub-segment of one portion of the market." But that is not exactly true. In August 2007 the markets experienced a sudden liquidity crisis, a lack of ready cash to pay immediate bills. A sudden worldwide shortage of cash caused a halt to the trading of just about everything. People could not collect their bills so they could not pay their bills. Survival in this environment depended less on how wealthy you were than on how much loose unemployed cash you happened to have when the music suddenly stopped. Possibly because of the real estate bubble, and possibly for other reasons, the whole world was in a trading frenzy, and cash was king. At this point, Brunnermeier is surely right that the comparatively small amount of real estate defaults was tiny in comparison with the trillions of dollars lost in the crash. He searches for "amplifiers". The possibility exists however that panic and hysteria resulted in bizarre losses, simply because everything uses money, so a shortage of money paralyzes everything. Consider the following issues:
5. It is said that 70% of stock market trades are now conducted between two unattended computers. The finest mathematicians in the world are probably programming those computers, but transaction speeds are now measured in nanoseconds. There is no time to evaluate events; it is inconceivable that every event has been anticipated. Imposing sudden pauses in trading, even for five or fifteen minutes, has proven to be remarkably effective in combating false rumors. However, the shift in trading from deposit banks to investment banks has created a whole host of unexpected advantages for the first trader who ducks out of the market. A traditional "run on the bank" is essentially based on first-mover advantage. But when short-term loans must be turned over in a day or two, simply pulling out for a day amounts to a run on the bank of a slightly different sort. It's the exploitation of the first-mover advantage in commercial credit, money market funds, repo's, daily auctions and many other nooks and crannies. A liquidity crunch makes many people into first-movers who didn't intend to be one.
6. Globalization has tended to externalize transactions within an international corporation into many sales steps between suppliers and assemblers all over the world. While this transformation has been accomplished with remarkable ease, it still vastly increases the volume of short-term loans, subject to the new form of a bank run, by hesitation whenever liquidity dries up.
Boom times and inexperience with new techniques created unsuspected instabilities. Major examples are found in computerization, globalization, derivatives, and -- curiously -- diversification.
7. For fifty years, diversification has been regarded as a safeguard, particularly when the various components are in independent environments. A liquidity crunch wipes out the advantages of diversification, however, because every sale involves money. Just as important is the hidden risk that failure in one area may drag down another. The most drastic example in the recent crisis was in the "Monoline" insurers, who insured only municipal bonds until recently when they diversified into insuring mortgage-backed securities. And of course, when subprime mortgages collapsed, they took down municipal bonds, with many more ripple effects after that. Diversification improves safety, but only if the entities which fail are inconsequential to the whole portfolio. Innovative bundling and tranching of securities can create hidden aggregates with the power to spread contagion if they injure the credit rating, or bond rating, or reputation rating of a company. Advanced mathematics could probably establish guidelines for the danger points, but then other advanced mathematics will find ways to evade the analysis.
8. Credit default swaps are merely short-term insurance policies against definable risks, and they have greatly increased the willingness of international commerce to take risks they would otherwise avoid. However, they are also hidden over-the-counter transactions; when they grew in a couple of years to be several times the size of the entire stock exchange, they frightened the regulators. When the crunch came, regulators were not reassured to be told that most of these swaps were in opposing directions, which would surely "net out" to a comfortable equilibrium. As matters turned out, credit default swaps did not apparently cause many financial failures. But when it was learned that it would take nearly three years to untangle all the paper at AIG, it was highly unsettling. Innovators and mathematical quantitative traders will always outwit regulators because they have a far greater incentive to get ahead of the curve. But more midnight accusation sessions at the time of a crash simply cannot be tolerated. If clearing credit default swaps through an exchange does not improve transparency, something else must be suggested and tried. The issue here is the huge volume of transactions. It should not be impossible to devise volume standards, above which all future innovations must develop transparency mechanisms.
In the fourth summary, the default of subprime mortgages was fairly serious, perhaps amounting to two or three hundred billion dollars. However, the liquidity crunch was much more serious, requiring $850 billion just to get the markets open, and leading to stock market losses in the trillions. More research is needed to decide how much of the difference is explainable by the existence of amplification mechanisms, as Brunnermeier believes, or whether a more substantial explanation for the recession lies in world-wide leveraging and deleveraging. The size of the mortgage defaults was clearly not large enough to explain the crash, but it may have been large enough to destabilize key elements of the system into a domino effect of some sort. The distinction is somewhat semantic, with its main value in moderating political opinion about the issue of "too big to fail". That is, the general public perception of the role of huge economic forces, as opposed to blunders by a few key firms.{ILQ-End}
9. The liquidity crisis of the summer of 2007 was a brief, almost total, lock-up. This is not to imply that worldwide cash shortages had necessarily been building up for months until the system crumpled; simple miscommunication could explain a brief lock-up just as well. But there can be little doubt that chaos convinced major decision-makers they would be wise to conserve their own cash more carefully. The instantaneous main conclusion was that certain interest rates had been too low, and would soon go up. A rise in interest rates forces a decline in the value of the loan, the bond, or the guarantee. If interest rates double, the principle will be worth only half as much for the duration of the loan; even refusing to sell the asset leads to an opportunity loss throughout the duration to maturity. For a while, there was uncertainty just how many roles the subprime mortgages were playing, but it scarcely mattered. Alan Greenspan had famously remarked that low long-term interest rates were a "conundrum". If they went back up to conventional levels, it would not so much matter that foreclosures would rise from 5% to 10% or even 20%. What would matter was that the 80-95% of un-foreclosed mortgages would become 5% bonds in a 10% bond environment, and hence destroy many times as much wealth. Since that cat was out of the bag, it might be a long time before it got stuffed back. Looking back for causes, it was suddenly clear that we had created a situation where everyone was terrified interest rates would become normal. If they became normal suddenly, bankruptcies would be wide-spread. If they went back slowly, fearful paralysis might last a long time. The Federal Reserve had already lowered short-term rates to nearly zero, so their efforts to ease the pressure on deposit institutions led to the purchase of long-term bonds. It was not reassuring to see that if long rates went up later, the lender of last resort would then likewise be in the position of losing money.
10. At a time when commercial liquidity was weak, the public started to draw down its cash reserves. The protracted experience of low short-term rates was particularly hard on unemployed people, especially retirees, who tend to live on the interest on money market funds and CDs because of a concern for the safety of principal. When ready cash is depleted, such people invade their long term securities; when times are precarious, even the affluent ones decline to invest and limit discretionary consumption. The nation thus begins to use up its cash reserves, and the consumer goods segment of the economy starts to weaken. In a primitive country, this sort of response soon leads to famine; in more affluent America, it is less obvious that cars are getting older, clothes are getting worn out. Meanwhile, businesses are declining to expand or to hire, and cash reserves are possibly even expanding, waiting for a more suitable time to invest. If the subprime mortgages and similar toxic debts can be cleaned up before the nation really exhausts its hidden cash reserves, the recession will pass. If cash reserves ever do get depleted beyond a tipping point, industrial growth will slow, and a twenty-year recession such as the Japanese are suffering, cannot be completely dismissed.
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.
When there is inflation, the value of money goes down, so you might expect interest rates -- the rental cost of money -- to go down, too. However, people anticipate higher prices, so lenders build a premium into the interest rate structure to compensate for the value of the money to be lower when it is repaid. That raises interest rates, and the Federal Reserve will generally raise them even higher to put a stop to inflation. So, buying and selling bonds is a zero-sum game, far riskier than it sounds. Consequently, there is a flight toward common stock, thus raising its price. Meanwhile, inflation usually hurts business, tending to lower the stock prices. As a consequence of all these moving parts, long-term investors are urged to buy at a "fair" price and never sell, no matter what. Even that strategy fails for any given stock because somehow corporations seldom thrive for more than seventy-five years. So, the advice is to diversify into a basket of stocks, and the cheapest way to get that basket is to buy an index fund. In a sense, you can forget about the stock market and let someone else manage the index, for about 7 "basis points", that is, seven-hundredths of a percent. All of this explains the choice suggested for Health Savings Accounts of buying total market index funds. Limiting the universe to American stocks is based on a political hunch that it reduces the chances of harmful Congressional protectionism. Having said that, a Health Savings Account must raise cash from time to time, and to guard against forced selling in a down market, some average amount of U.S. Treasury bonds will have to be maintained. Ideally, the number of Treasuries would be small for young people, and grow as they get older, and therefore more likely to get sick. Pregnancy is the one universal cost risk for younger people, and they know better than anyone what the chances of that would be in their own case.
This approach is greatly strengthened by reference to the modern theory of a "natural" interest rate, to which the whole system has a tendency to revert, if only we knew what the natural rate is. It is not entirely constant, but over time it seems to be something like 2%. If we knew for certain what it was, we could set a goal for perpetuities like the Health Savings Account to be "2% plus inflation". Since inflation is targeted by the Federal Reserve as 2%, that would amount to an investment goal of 4%. If you can buy an American total market index fund consistently gaining at 4.007 % per year, you should buy and hold. If it rains less than that, it is either run by incompetents, or it is a bargain which will eventually revert to 4.007% and pay a bonus. If, on the other hand, it gains more than that, there exists a risk it will revert to the mean. That it is being run by a genius is sales hype to be ignored. We suggest buying into it in twenty yearly installments, which should balance out the ups and downs, so then you can forget about even this issue.
But don't count the same issue twice. In order to assure a 2% real return, it is necessary to obtain 4% in the real world of 2% inflation, and the compounded income of 4% accounts for both in equal measure. A compound income of 6%, however, is two-thirds inflation / one third "real", so artificially raising interest rates to control inflation can progressively overstate the requirement, and hence overdo the deflationary intent. Conversely, when the Federal Reserve fails to raise interest rates as Mr. Greenspan did, the result can be an inflationary bubble. The central flaw in adjusting prevailing rates to current natural rates is that we do not know precisely what the natural rate is. To go a step further for immediate purposes, we are also uncertain how much deviation there is between medical inflation and general inflation. As a result, the best we can expect is to make as much income on the deposits as we safely can, and continuously monitor whether the premium contributions to Health Savings Accounts might need to be adjusted. And the safest way to do that is to have two insurance systems side-by-side, one of them a pay-as-you-go conventional policy for basic needs during the working years, and a second one whose entire purpose is to over-fund the heavy expenses at the end of life and the retirement years, permitting any surpluses to be spent for non-medical purposes. With luck, the beneficiary might retain a choice between increased premiums, and increased (or decreased) benefits.
If these calculations are even approximately close, the financial savings would be several percents of GDP, a windfall so large that mid-course adjustments could be tolerated.
That's the good side of C-HSA. What continued to bother me was it was close to providing lifetime healthcare financing, but without much latitude. Perhaps it would be better to settle for half, or a quarter, which would certainly have plenty of latitude for revenue shortfalls. Better still, perhaps a way could be found to phase it in, but stop when it runs low on money. Because it contained so many little pleasant surprises, however, I decided to press onward to see if others could be found.
Whole-life insurance is more profitable than term insurance, but it requires more capital.
What emerged were these new ideas:
1. Multi-year policies. To go from a term-insurance model to a whole-life model, using the life insurance approach. This would take advantage of the uptick of the yield curve in compound interest discovered by Aristotle long ago, inflecting at about the forty year mark. And advances in science would provide some extra years of longevity, to take advantage of it.
2. Escrowed Sub-Accounts. Instead of one big balance, it became apparent that some funds were intended for long-term use, and were therefore entitled to different interest rates ( checking account, savings account, investment account), which the account manager would wish to have locked for a given time or purpose (66th birthday, ten-year certain, $10,000 minimum, etc.).
3. No age limitations. Further longevity could be introduced by making HSA a lifetime compounding experience, cradle to grave, but how to fund it remains an issue concentrated on the life alternatives facing those, age 21-66.
4. Birth and death insurance, catastrophic, disability, etc. Exploring the idea of HSA from birth, I came to realize the extra cost of the first year of life was a serious impediment to all pre-funded health schemes, since one can scarcely expect a newborn child to finance a debt of 3% of lifetime costs, in advance. To make matters worse, the same is even true of the 8% of lifetime costs up to age 21. Thinking that one over, I came to see why nobody had ever devised a really adequate scheme for lifetime coverage. Seen in that light, it became clear the consequences justified solutions which might upset ancient viewpoints about a vital and sensitive subject. Whether recent turmoil (about same-sex marriage, unmarried mothers and the like,) would soften resistance or harden it, was just a guess. The result of this thinking was birth-and-death insurance, covering only the first and last years of life. Furthermore, it became easier to contemplate the issue of perpetuities, or inheritance from grandparent to grandchild. The laws already sanction inheritance to 21 years after the birth of the last living descendant, generally adequate for the purposes in mind here. All such special-needs insurance tends to reduce the remaining liability of general-purpose insurance, and typically is not workable unless the two insurers coordinate with each other and keep adequate records of their compacts.
5. Passive Investing and Dis-intermediation.The whole concept of "passive" index investing was borrowed from John Bogle of Vanguard and Burton Malkiel of Princeton. Recent difficulties in the fixed-income market make stocks seem just as safe as bonds to more people, and generally they provide more yield. The historical asset tables of Roger Ibottson of Yale inspired further confidence in the approach. Having absorbed this lesson, the concept of replacing an advisor with a safe deposit box emerged, although custodial accounts are not expensive. This maneuver could shift the "black swan" risk from the agent to the investor, assuming the agent has not shifted it, already. Ownership of common stock may not be entirely perpetual, but partial ownership of an index fund containing a trillion dollars worth of common stocks, certainly does seem perpetual enough for ordinary purposes.
6. Zero-balance protection devices. The potential that someone might figure out a way to game this system had to be considered, in view of the staggering magnitude of this proposed funding system if it caught on. The brake which suggested itself was to force the balances to return to zero at least once in a time period, and possibly many times oftener, if necessary. Offhand, I do not see how this system could be gamed, so the power to impose zero balances at a trigger level of balance, is a credible threat if it impends.
7. Total-market Index funds as a currency standard. One throw-away idea emerges from this analysis. The world economy went off the gold standard some years ago, and since then has adjusted its currency by inflation targeting. In the recent credit crash, however, the Federal Reserve has been unable to reach the 2% goal for some time, for unknown reasons. If the reason for this remains unclear, or if the reason is unsatisfactory, it seems to me the total market index of the nation's common stock would be a superior proxy for re-basing the currency on the national economy. If other nations copied this standard, their central banks could agree on a system of leveraging it between currencies, but the essential fact would remain that each nation's currency was a proxy related to its national economy, ultimately based on the marketplace. That might even restore matters to where they stood before 1913, when the Federal Reserve was created. This certainly would be superior to what some people accuse the Federal Reserve of plotting (expunging our considerable debt to the Chinese by inflating our currency.) As people say, this matter is above my pay grade, but it certainly would have the advantage of stabilizing the medical system, and ultimately the retirement system. The need for protection against bit-coins might be kept in mind. If it prevented entitlements from off-the-books accounting, I would consider index funds as a currency standard, a considerable advance.
The addition of some or all of the above seven or eight features would provide more than enough extra money to fund the entire medical system until such time as it was forced, by scientific advances, to become a retirement fund with a small medical component. We have the rough estimate of $350,000 average lifetime medical cost, but no way at all of judging the average retirement cost, so this concept will have to terminate in fifty years or so, or when the data catches up with the theory. After all, the limit of desirable retirement income is not infinite for everybody, but it is obvious it is infinite for some people.
This synopsis of the additional concepts for Health Savings Accounts concentrates on paying for healthcare with a cash cushion in reserve, so it does not dwell on technicalities, favorable or unfavorable. It does however skip over one theoretical issue of some importance: where does this money come from? Linked to that is the wry observation that it proposes to reduce medical costs by spending gambling money from the stock market. Since people who would say that, show no reluctance to hurt my feelings, let me make a forceful reply.
The designers of the Medicare program in 1965 faced a huge transition problem, too, and nevertheless, plunged ahead in spite of badly underestimated future costs. So, although revenue surfaced in the HSA proposal had been there all along, it was never gathered and put to use -- wasted, let us quietly say. I do not blame Wilbur Cohen or Bill Kissick for making concessions to get it started. There is little else they could do from 1965 to 1975 except adopt a "pay as you go" strategy. But sometime after 1975 that was no longer the case, and the new opportunity was neglected in a befuddled realization that costs were going to escalate rapidly, although hidden from sight. A great many free-loaders were added during the transition, and there was little to do except wait for them to die. So, yes, things were allowed to get worse than they needed to get, but as a nation we happened to be even luckier than we deserved to be, as scientists eliminated dozens of diseases we might have had to pay for. Until the end of that race between costs and revenues had come into sight, it was not possible to guess which one would win.
So now it is our turn to make proposals. We must face similar daunting problems of transition by a partially paid-up constituency, headed into a fully-expanded set of benefits for at least thirty years. Plus a huge and undeclared national debt from borrowing to pay for previous mistakes. I have tried to be generous in my assessment of the 1965 achievement, which was considerable. Let us see whether the opposition party can bring itself to respond generously and without intransigence, however vigorously they may subject the issue to adversary process. It doesn't mean to be a punishment, it means to be a rescue.
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.
