“Home is where the fraud is,” reads a recent headline on CNNMoney. Everything in nature matures, ages, degrades, degenerates, and deflates — even a real estate bubble. Near the end, the parasites, swindlers, and scammers are in the news. When the tech bubble blew up, for example, the papers were full of stories about dot.coms without even a Web site. No assets, no business plan, no customers, no staff, no clue…not a prayer. Yet, they raised millions of dollars from hopeful investors, just before they unraveled like a cheap suit.
Thus, we keep a close watch on this house of ours. We keep our eyes wide open at all hours…
Because when America’s houses go down, so goes the U.S. consumer economy with it. Not that it is a goner, although a report from the Financial Times tells us that the New York City property market is “cooling.” But, now we’re reading about property swindles, such as the one we mentioned in our lead.
“Fraudsters will find novice real-estate investors and convince them to sell their good name and credit record. In return, scammers promise to arrange a loan on an investment property, find tenants, make mortgage payments and sell the property for huge profits once it appreciates,” reports CNN MONEY.
“Instead, the fraudsters use the borrower’s name on loan documents — and then walk away with hundreds of thousands of dollars in loan proceeds.
“‘No tenants are found, no rental payments are collected, no mortgage payments are made, the house goes into default, turns out it’s not worth anything, and the borrower is left holding the bag and their credit is destroyed,’ said Rachel Dollar, an attorney in Santa Rosa, Calif., who represents lenders in mortgage-fraud cases.”
Last year, this kind of fraud cost about $1 billion — twice as much as the year before, and nearly seven times as much as 2000.
Parasites, swindlers, scammers, hustlers — have we nothing good to say about anyone or anything? Yes, dear reader, as we promised, we bring you good news — below. But, it is a funny kind of good news. It turns out that the bad news is not so bad after all. Or, to put it another way: eventually, everything is such a swindle that even the swindles are phony. From the report on property fraud, for example, comes a gem: until recently, the fraudsters were rarely caught, because prices tended to rise so quickly that their phony appraisals were exceeded by actual market prices! The swindlers had to work overtime to keep up with imaginations run wild.
But now comes another case:
“Health care is top financial concern for the rich,” says an AP headline. Well, the rich can stop sweating; they may be better off without it anyway, as you will see later in this column.
In the meantime, we note that the Exodus of power and money from West to East continues without interruption. Wages in China rose 12% annually from 1999 to 2002. In 2003, the laboring classes in the middle kingdom earned 13% more than the year before, and by 2004 and 2005, wages were rising at a 14% clip. Yes, they are rising from a low base; they have a lot of rising to do. But, why shouldn’t they eventually rise to meet wage levels in Minnesota or Manchester? Productivity in China is rising at 20% per year, and the Chinese are graduating 550,000 scientists and engineers every year. India is turning out even more: 700,000 per year. Together, the labor pool of very skilled professionals, in those two countries alone, is growing three times faster than the United States.
And yesterday, dear reader, we got a first-hand look at globalization…about which, more below, after the news from our currency counselor…
u2022 “Yes, we could do that a lot cheaper. There are a lot of people in India who are good journalists. We could easily produce a lot of materials for you…whatever you want, in fact.”
Your author was sitting in a London café on Sunday afternoon, speaking to an Indian woman about outsourcing. The woman was headed to Delhi. The subject of our conversation was an idea: setting up an office in India to produce financial research reports.
We had explained how much we spend in London on editorial work — researching, writing, editing. She looked shocked. “You could get a lot more for your money in Mumbai,” she explained.
Maybe. We don’t know. In our line of work quality is hard to determine. Ideas count, and who knows who has good ideas? But we presume we weren’t the only people in the world thinking about outsourcing, yesterday. The same conversation must be happening all over the world. Everywhere and always, businessmen seek to lower costs. They can do nothing about the price of oil or other raw materials, but they can reduce labor costs by replacing Western workers with Asians. Pity the workingman in the West.
u2022 Even the swindles are phony. Americans’ backs are to the wall, we are told. They can cut out the gadgets from Asia to reduce their living expenses, but the big expenses don’t come from Asia. The big ones are rising fast: health care, education and housing. Nothing can be done about them, right?
Wrong. Take health care, for example. It is said to be retirees’ biggest concern. Health care costs are soaring. People spend hundreds of dollars each month on health care insurance. Can’t do without it, right?
We don’t know, but we’re beginning to wonder. Maybe you’re better off not worrying about it.
We have on our desk a report from a group of doctors. They point out that health care may not be as effective or as safe as it is supposed to be. It may be a bit of a scam, in other words. Which is very good news to us; it means we don’t really need so much of it.
Who do you think is most likely to put you in the grave prematurely? A terrorist? A doctor? According to the estimates in this report, you’re about 10,000 times more likely to be done to death by a licensed medical professional than by a guy with a bomb on his chest. There are a number of different estimates:
- About 2.2 million people each year have adverse in-hospital drug reactions…
- About 20 million doses of antibiotics prescribed for viral infections, against which they are useless.
- The number of medical and surgical procedures judged to be unnecessary is estimated at 7.5 million per year.
- About 8.9 million people go to the hospital unnecessarily.
- The number of people who die as a result of medical intervention is probably about a million a year.
“Death by Medicine” is the name of the report. It tells us what we always suspected: a large part of what your “health care” expenses actually pay for is quackery. Much of the rest is merely ineffective.
We’re not a doctor; we do not even pretend to be one on television. But, we know a good swindle when we see one. Modern medicine, like modern education, is probably one part useful, one part wishful, and one part scamola.
Why shouldn’t it be? Is not the health care industry like every other institution, society, organization or business that ever was? Isn’t it entitled to degenerate, to degrade, to get invaded by hustlers, to be subverted by special interests and suborned by special agendas, to be infested with parasites and incompetents? Why should health care be different from the Pentagon or the Teamsters Union?
And at this point, we brace ourselves for the onslaught of health professionals and insurance salesmen who will flood our mail with the redundant information about how we don’t know what we’re talking about. Tell us something we don’t know!
We have no doubt that health care has its share of angels of tender mercy and geniuses of scientific enlightenment. No doubt, there are lucky patients ministered to by Florence Nightingales and Clara Barton, and honest Louis Pasteurs and Alexander Flemings coming up with new cures and treatments. Nor do we doubt that we will be glad they are there when we need them.
But, how much health care really pays off? Over the long run, none of us are good insurance risks. The final chapter of our little dramas was written long ago; it is not subject to emendation by the health care industry. We are all doomed; the best we can hope to do is to meet our fate with dignity and good humor.
No one doubts that health care can be useful from time to time. So can calories, universities, politicians, and televisions. On the evidence, Americans might now be better off with less of all of them.
Bill Bonner [send him mail] is the author, with Addison Wiggin, of Financial Reckoning Day: Surviving the Soft Depression of The 21st Century and Empire of Debt: The Rise Of An Epic Financial Crisis.