Zombieism in the healthcare business - The Daily Reckoning
The Daily Reckoning by Bill Bonner
On This Day - 4 June 2013
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Baltimore, Maryland

Dow bounced - up 138 points yesterday. Gold rose $18.

Indecisive noise, in other words.

Here's something more important. From NEWSWEEK:

    The most recent figures show that the top 10% of households own about 91.4% of outstanding stocks and mutual funds, up from 84.5% in 2001. The richest 1% own almost half of all stock and mutual funds. No surprise then that the recent jump in consumer sentiment recorded by the University of Michigan was led by the better - off; upper income households (the top third) had a 15 point increase in sentiment, the bottom two-thirds rose just five points.
Damn! But don't worry. If you're among the rich, you'll get that other 8.6% of stock and mutual fund wealth. With Ben Bernanke on the case, it's just a matter of time until you have 100% of America's stock market wealth. Of course, you'll also be turned into a zombie.

But you're probably wondering: how does that work again? Simple, think of it this way... QE and ZIRP are essentially new forms of wealth. Whoever gets this wealth gets richer. Everybody else gets, relatively, poorer.

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Did you get this new money, dear reader? You may have, without realizing it. It feeds corporate profits and equity prices. The new money is not designed to create wealth, it just transfers more resources - credit at the lowest interest rates in 3 generations - to rich people. Small businesses create new jobs and new wealth. But small business can't borrow at today's low rates. They're lucky if they can borrow at all. Instead, almost all the new credit goes to banks, big businesses and the government.

In the normal course of investing you win some and you lose some. That's what keeps the rich from always getting richer. Wealth goes both ways. But along comes the Bernanke Fed with zero interest lending ...and even bad businesses can refinance their mistakes. If they're big enough.

So you end up with an economy full of giant lumbering zombies...protected by the government and nourished by the Fed...rather than agile, lean start-ups.

Here's the Wall Street Journal on the subject:

And here's the WSJ
    Rick-Averse Culture Infects US Workers, Entrepreneurs

    "Companies add jobs more slowly, even in good times. Investors put less money into new ventures. And, more broadly, Americans start fewer businesses and are less inclined to change jobs or move for new opportunities."
Zombies to the right of us. Zombies to the left of us. Zombies everywhere. And they're getting richer all the time.

Also in the Wall Street Journal was a guest editorial from a Dr. Josh Bloom. Mr. Bloom was commenting on creeping zombieism in the healthcare business. He's in favor of it.

But here's the background story (excerpted from our still-unwritten new book).

Antibiotics have been a great boon to mankind. But Neitszche's dictum, that what doesn't kill you makes you stronger, applies to the little bugs as it does to mankind. Antibiotics killed all except the most robust bacteria, which were able to reproduce and evolve. Then, new antibiotics were introduced to kill the new, more resistant germs. This bacterial arms race has gone on for the last 40 years. And the bugs seem to be winning. Drug resistant bacteria killed 90,000 Americans last year...and the problem is getting worse.

What can be done? More new drugs to fight the bugs that are resistant to the old drugs? New money to fix the problems caused by the old money?

Pharmaceutical companies make money on new products, not on withdrawing old ones. Each new generation of antibiotic means new, patentable and very profitable products to market. Everyone gets what he wants. Patients, doctors, pharmacists and the corporate drug makers.

And as health care grows more important, more costly, and more ubiquitous, so does the downdraft grow more powerful. Combine the development of the drug resistant superbugs with greater numbers of people visiting hospitals. Every year there are more and more patients coming in for un-needed testing and ineffective treatments. Every year, there are more elective and often unnecessary surgeries. Here the unnecessary patients meet the unwanted staph infections. A nice formula for spreading the unstoppable deadly bugs far and wide!

The solution to this problem is the same one facing Napoleon at Berezina river. "Turn back," said the voice of reason. "Go ahead," said the mischievous gods.

David Goldhill writes in the Atlantic about one very reasonable effort to stop the plague:
    "Dr. Peter Pronovost came up with a way to dramatically reduce the number of these often fatal hospital based infections. His solution? A new multimillion dollar machine? A super-drug that costs thousands per dose? Nope. What Pronovost came up with was a simple checklist of clinical protocols. The preventive steps involved things like doctors washing their hands, careful equipment handling, and some other very basic steps to avoid spreading infections.

    "Hospitals that implemented Pronovost's checklist enjoyed immediate success. Where his checklist was put in place and followed, hospital originated infections dropped by two-thirds within three months of adopting it.
But the zombified health industry has little incentive to put in place such simple, cheap solutions. There's no money in de-escalating the bug war. Instead, the money is in coming up with super-antibiotics to fight the super-bugs. And here they come. Reports the aforementioned Josh Bloom, in the May 31, 2013 Wall Street Journal: 'Enterobacteriaceae, or CRE, has emerged that could create a scenario to rival the most terrifying of science-fiction movies..."

Dr. Bloom, however, seems more pleased than alarmed. Why? In the article we learn that, for the first time ever, the US government is giving $200 million to GlaxoSmithKline to help the company "search for new antibiotics." Dr. Bloom, it says at the bottom of the article, is on the staff of a non-profit group, "American Council on Science and Health." The group will not disclose its source of funding. But let's take a wild guess. GlaxoSmithKline?

Bill Bonner is the President & Founder of Agora Inc, an international publisher of financial and special interest books and newsletters.

Disclaimer:
The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

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2 Responses to "Zombieism in the healthcare business"

D fiske

Jun 21, 2013

Sivram.... Be careful what you wish for. These zombies may be covered in gold, but remember what they eat--"BRAINS"....

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SIVARAMAKRISHNAN

Jun 4, 2013

I want to know when the new money will reach my country and people like me to have Zombies to the left,right and centre.

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