A False Sense of Security!

“Out of the mouth of babes shall the wise be made foolish.”baby waving
The problem with the so-called wise, they’re seldom wise enough to catch on when they’re foolish…

Take for example this story about a 5-year-old who cracks the new Xbox security.  Sometimes “infant logic” trumps the wisdom of those who are ascribed as intelligent.

When a viewpoint arises, that is convincing and inherently logical it captures the crowd, and it becomes near impossible psychologically, to counter its premise. At such times, an arrogance born of a seeming zombie-like consensus assumes its position to be beyond reproach and supersedes any other counter facts or conclusion. When that happens, anyone holding a contrary view is thought ignorant or stupid. In reality, it is often exactly opposite. This crowd mentality is born from the central idea that we must cooperate, get along to survive. This group behavior is no more obvious than in large crowds. The group dynamic will create a herd instinct and from such, riots can break out.

Security is an assumption based on repeated tests usually conducted by similar group or thought patterns. Thus when someone like this 5-year-old tries something completely out of the group think pattern, a breach is found.

Is it possible we follow a group dynamic and skew our thoughts based on harmony with others?

 Group thinking examined further 

Further examination on the topic of group think and how far afield it can remove someone from simple logic; I had a telephone conversation over the weekend from a strong supporter of the new health care law. I thought it better to talk over the phone rather than attempt to chat through the Internet. We have differing views on the long-term consequences of the law. I’m not a fan while he thought it was doing a lot of good. The conversation never turned ugly, each of us listened to the other. I don’t think either of us changed our opinion but it gives me insight and reaffirms what I’ve heard from other supporters. What he said sounds reasonable and beneficial to many. His general line of reasoning is as follows.

Before the health care bill was enacted into law, the uninsured were a burden on the whole who were insured, therefore the cost to the public isn’t greater overall because the burden to pay for others was always there. He identified himself as someone professionally involved in health care insurance. He claims he’s helped approximately 40 people obtain affordable health care. In particular he stated someone he knew had a serious medical problem that wouldn’t have been covered under the pre-existing conditions clause prior to the new law. Since then that individual received the necessary life-sustaining surgery and didn’t have exorbitant out-of-pocket expense because of his level of income. I tried to make a point that the burden wasn’t shared by all taxpayers before, only the health insured, however this fell on deaf ears.

  What’s wrong with universal health care coverage? 

rainbow endAll of this sounds good and as anyone that has experienced having their wishes come true based on a desire should realize if wishes were gold at the end of the rainbow, we’d all be wealthy. Universal health care coverage or any other name you want to call it, isn’t an unknown. It has been implemented in other countries, with fewer participants but it’s been done. Rather than trying to explain the differences and the problems as well as the associated costs, I’m going to attempt to explain this for people willing to actually consider logical and reasonable argument.

One of the last things said to me over the course of our phone conversation is the real crux of the problem with this  health care law. You have to keep in mind this like any other social welfare program is paid for by those who earn sufficient income to supplement those who need assistance with the costs of health care coverage. You don’t magically get something for nothing no matter how good the intention. Many people, including this telephone conversation believe that despite our $17.4 trillion dollar national debt, something will come along and restore fiscal soundness. I asked him what that might be and all he could say is, they know a lot more than we do and they will work this out. He then went on to say what I’ve heard from others who seem to lose sight of reality when it comes to the national debt. He said the Obama administration is reigning in spending and lowering the (annual) deficit. Clearly he hasn’t seen the proposed numbers. At first, like most of these smoke and mirror budget proposals, a large number is put forth, then haggling goes on over this or that program and they cut some of the increase. Afterwards, the propaganda machine gets into full swing and they talk about the deficit reduction that just happened through the latest round of talks. It’s a total scam. The increase is still an increase, just not as large as the first proposed increase. What does this have to do with health care? Well the answer lies in this simple graphic explanation.

health care costs - before & after the new law began in 2014

Health care costs – before & after the new law began in 2014 – assumes employer participation

This law is implemented in stages. The first phase only covers the individual mandate. The employer mandate is supposed to be in effect in 2015. This means not all of the effects will be realized until sometime afterwards. Some people believe in the magic fairy dust spread around by government spokespersons that with all of the new participants the costs will go down because the shared pool will be larger. All it has become is an increased Medicare program and anyone following the costs of that program realize it was going broke before this new law.

 It’s a Variation of a Ponzi Scheme 

Abandoned building - old Detroit

Abandoned building – old Detroit

Whenever you have someone selling you on a great investment idea or business that can’t fail, and everyone will benefit, you need to realize they’re selling you another variation of the Ponzi scheme. Everyone participating at first gets excited about the new idea and how much it’s going to benefit them. Early on the benefits will be paid and it will make people believe in it. This gives the sponsors of it more liquidity at first to pay out and incentivize people in promoting it. Reality eventually catches up to the participants (insufficient revenue) and they’re left with little to no value in what they first invested in and if the perpetrators are clever or powerfully connected, they get away with it, leaving those behind to clean up the mess they left. Sadly, this is what will happen to the citizens of the United States as we continue to swallow the malarkey spread by the people either in office or seeking to get into power. Deep down, they know it won’t last, the money will become worthless and all of the empty promises will echo down the unmaintained streets and ramshackle structures. This is what’s coming if we don’t quit believing these political charlatans as they promise the next panacea. Vote those “do-gooders” out of office, no matter what the party because they will lead us to ruin.

Five Key Elements of a Ponzi Scheme

  1. The Benefit: A promise that the investment will achieve an above normal rate of return. The rate of return is often specified. The promised rate of return has to be high enough to be worthwhile to the investor but not so high as to be unbelievable.
  2. The Setup: A relatively plausible explanation of how the investment can achieve these above normal rates of return. One often-used explanation is that the investor is skilled and/or has some inside information. Another possible explanation is that the investor has access to an investment opportunity not otherwise available to the general public.
  3. Initial Credibility: The person running the scheme needs to be believable enough to convince the initial investors to leave their money with him.
  4. Initial Investors Paid Off: For at least a few periods the investors need to make at least the promised rate of return – if not better.
  5. Communicated Successes: Other investors need to hear about the payoffs, such that their numbers grow exponentially. At the very least more money needs to be coming in than is being paid back to investors.
A Rake's Progress is a series of eight paintings by 18th century English artist William Hogarth.

A Rake’s Progress is a series of eight paintings by 18th century artist William Hogarth.

Why I’m posting about this topic is simple, and other like minded people probably have similar reasons. First, I’m old enough and in a low enough income that I could just sit back, collect my government benefits and keep my mouth shut. After all, I will likely continue to benefit from programs like this without concern, however someone has to pay the bills. Those bills will come due and if we have enough foresight and grasp of history we should understand the likely debtors will be our children or in my case, my grandchildren. Is this the legacy we wish to leave behind?

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