GIVEN the financial wreckage that has become of the international financial system, it may seem extraordinary that until the last quarter of 2008, the US banking industry, where the contagion first began, was still turning a profit, as it has done for the past 18 years. However, the downturn in the last four months of last year was staggering, amounting to $32.1 billion, $6 billion worse than the original predictions of the US Federal Reserve Bank.
Meanwhile, the US budget deficit is slated to hit a record $1.8 trillion. The red accounting figures that are flying around these days, in almost every developed economy, are so extraordinary, the unreal sums seem more like “Monopoly” money. The amount of destroyed value now extends far from the toxic derivative assets that originally poisoned the international financial system, to the shares of perfectly good companies, great and small. These are being caught between a rock and a hard place. On the one hand, they are struggling to survive in a recessionary market place where consumers are shutting their pocketbooks; on the other, they are encountering ever-greater trouble funding themselves. Investors are reluctant to contribute fresh capital while international banks, still uncertain of their own solvency, are refusing to provide working capital.
The only way to get through the recession is for corporations to cut costs and the largest expense in any business is almost always employees. Thus unemployment is rising steadily. US and European multinationals appear to be trying to unload a disproportionate number of job losses onto their overseas subsidiaries in developing countries. Understandable though this may seem, it is imposing an extra burden on vulnerable economies that are already in deep trouble.
Many governments, not least the US and British, are busy printing money to fund what they hope will be an economic bailout. Via a variety of measures such as tax breaks, they are also encouraging consumers to start spending again. This, however, is madness. Many households in the developed world are already in chronic debt. The materialist values of the West combined with amazingly easy credit meant that consumers bought whatever they wanted today assuming that they would be able to pay for it tomorrow. Well, tomorrow has come with a vengeance, and though interest rates are rock bottom, they are still struggling to pay off their huge debts for housing and for consumer goods. The last thing that Western consumers should be doing now is starting to borrow again and buy more things. What is needed rather is a sustained period of saving and the repair of domestic finances.
It is, therefore, extraordinarily irresponsible of any politician to be encouraging an already indebted society to spend even more. As it is, governments are themselves running up gargantuan debts as they pour money into their ailing economies. They are also running the risk of major inflation by printing new money. The bill for this frantic activity will have to be paid in higher taxes, sooner rather than later, by the already indebted consumers. And consumers know it.
The prostate cancer muddle
EXCERPTS from an editorial in International Herald Tribune, Friday:
Scientists have just published the findings of two large trials that were supposed to tell us for certain whether screening for prostate cancer is effective. The studies seem to undercut the value of screening, but they fall short of being definitive. The studies show that screening had little or no effect in reducing prostate cancer deaths.
And they raise the question, not yet definitively answered, as to whether the negative side effects from treating the discovered cancers, many of which are slow growing, might outweigh the benefits.
The primary screening tool is a blood test that detects a protein, known as prostate-specific antigen, or PSA, that is elevated when cancer is present but can be elevated for other reasons as well. A biopsy must be performed to confirm that a malignant tumor is there. Advocates of the test argue that it can detect tumors at an early stage when they can be treated most effectively. Skeptics contend that many if not most prostate tumors grow so slowly that they would never cause symptoms during a patient’s lifetime.
Treating these indolent tumors with surgery, radiation or hormones may unnecessarily subject the patient to debilitating side effects such as incontinence, impotence, infection, painful defecation or diarrhea. The American study, involving almost 77,000 men, found no reduction in prostate cancer deaths after all the men had been tracked for seven years and two-thirds had been followed for 10 years. The European study, involving 182,000 men, found a modest reduction in deaths after nine years — 7 fewer prostate cancer deaths per 10,000 men screened. But there was a high risk of needless treatment given that half of the men diagnosed with prostate cancer would not have had clinical symptoms during their lifetimes. The European research suggests that roughly 50 cases of prostate cancer found through a screening program would need to be treated to prevent a single prostate cancer death.
