"For whatsoever a man soweth, that shall he also reap."

The ancient Biblical wisdom quoted above accurately portrays what the world can expect over the next few years.

Incurring long term debt to finance consumption, speculating on successive stock, then real estate bubbles and dependence on unsustainable health and old age entitlements all carry costs. There really is no such thing as a free lunch.

The United States has been on a binge of funny money, entitlements, easy credit and unsustainable consumption for almost 100 years. Now its time to pay the piper. How bad will it be?

When the stock market crashed in the early 30s, it required 14 years after the bottom to recoup the lost value. That is probably a reasonable estimate of the time required for America to recover from this financial hangover, once we reach the bottom.

When will that depth be reached? Hopefully in 2009, but possibly not until 2010 when Medicare goes "cash flow negative." Possibly not until 2017 when Social Security follows suit.

The only certainty is that however long it took to dig this hole, it will probably take that long to climb out.

The risk is that in the attempt to stop the current bleeding a new bubble is being created, a currency bubble. The Federal government together with the Federal Reserve are inflating the currency to incredible levels in the so far futile effort to sustain liquidity. If they go too far, pass some ill defined unknown tipping point, then it's possible that hyperinflation could result.

To appreciate what that might mean read a little history about Germany during the third decade of the 20th Century. The crises eventually led to the end of the fledgling German Republic, which was replaced by the Third Reich.

In other words, our current situation is bad but it could easily get worse.

Interesting Times

Earlier today I spoke with my friend Greg Fossedal on the telephone and we agreed that the election is over but for the counting. Obama is opening a lead over McCain that has been expanding ever since the financial crises caught our attention. Neither of us can imagine a scenario that wins the election of McCain. Of course this is the year of the unexpected and our expectation of the electoral outcome smacks of conventional wisdom, which is usually wrong.

Then a gentleman with whom I correspond but who I have never personally met, Peter Poranski (obviously an Irishman), made a comment in an email, which I found fascinating. Peter said that if we elect McCain we'll be a Socialist country in two years, but if we elect Obama we'll be there in six months. So, that leads me to ask, if we are ending up in the same place either way, why vote for the cheap imitation? Clearly "We are the change we have been waiting for!" Obama is the "The Man!"

Nevertheless, all is not well. I write this tonight on my balcony, having watched the sunset over the Potomac, the monuments and, I fear, the Republic.

Today the White House is occupied by a man who pays lip service to Free Markets but then tells the Secretary of the Treasury to do what needs to be done, regardless of the politics and candidate McCain echos that after the Bailout's initial defeat in the House but adds, regardless of the law!

A similar point of view led his predecessor Lyndon Johnson to create the diabolical twins Freddie and Fanny in an effort to hide the financial implications of financing the war in Viet Nam. In 1965, LBJ also brought us the blessings of Medicare, which goes into the red on a cash flow basis in 2010 and depletes it's unfunded Congresional IOUs in 2018; falling 20% short of breakeven thereafter.

Another President, FDR, created another Ponzie Scheme known as Social Security to show "progress" and buy votes in the midst of the Great Depression. This piece of financial sleight of hand goes into cash flow negativity in 2017 and exhausts its unfunded Congressional IOUs in 2042; falling 30% short of returning the "contributions" made by employees thereafter.

Imagine paying into a health insurance plan or savings account and discovering that when you need the money back you should forget about any return on investment at all and will only receive back 80 or 70 cents, respectively on these two entitlement programs, on each dollar of principle you deposited into the system?

Imagine that the consensus solution to put these trains back on the track is to raise the payroll tax, the most regressive tax imposed on Americans, as much as 50% while cutting benefits to close the 20% Medicare and 30% Social Security shortfall.

In other words, all that money we paid into the Medicare and Scoial Seurity surpluses between the 80's and now simply evaporates. Meanwhile we have the satisfaction of knowing the money stolen from each or our pachecks every payday by that bandit FICA has helped fund a solvent and robust Federal Thrift Savings Plan for Federal Employees and Congress Critters, featuring those dreaded personal accounts the rest of us can't be trusted with. FICA has also paid for series of wars, weapons systems and boondogles like the infamous "Bridge to Nowhere." Doesn't all that make you proud to be an American?

Wow, if Wall Street did that we'd all be howling that those greedy capitalists should be sent off to jail. Yet your elected leaders over at least 40+ years have done exactly that. My friends (with apologies to John McCain) we have been taken for a ride. Neiher Senator Status nor Senator Quo, as my friend Greg Fossedal calls Obama and McCain, will change this scenario if elected President this November.

As the old Chinese curse says, "May you live in interesting times." We are well and truly cursed.

The Good Idea Test and Wellness Tokens

How do you know if an idea is really good?

We all hear lots of ideas. Some are obviously bad like those inspiring the Darwin Awards each year. Those ideas are usually fatal to the poor soul who acted on them. If you aren't familiar with these awards, visit http://www.darwinawards.com/ where a record of 746 "Enterprising Demises" is kept. Obviously any idea that kills you probably isn't a good one.

However, the relavant merits of most idea aren't that obvious.

How can we quickly evaluate whether or not an idea we hear is a good one? I have a simple rule. In my experience, an idea is likely to be a good one if my initial reaction to the new idea is, "Gee, I wish I'd thought of that!" This is my version of the "Blink Test," named after the Malcolm Gladwell book "Blink: The Power of Thinking Without Thinking."

Over the years this test has consistently proven an accurate indicator of the relative merit of the idea. I have learned if the new idea has to be sold to me and I buy it, I'm usually sorry in the long run.

When I first heard about Wellness Tokens that reward people for behaviors that keep them healthy, my initial "Blink Test" response was, "Why didn't I think of that?"

Before I tell you about Wellness Tokens, let's explore the problems of our current system of medical care.

Consider how our current system works, or doesn't depending on your pont of view. We are basically ignored until we get sick or hurt. Then herioc measures are undertaken, massive quantities of expensive drugs are prescribed and everything possible is done to put Humpty Dumpty together again. But the odds are that once we are sick enough to need the Doctors, Hospitals and drugs we will never be quite the same again regardless of the quality of care we receive. Although lip service is paid to the idea of prevention, the efforts are usually half hearted and inneffective. Too often prevention is focused on using fear to scare the hell out of us, which causes most of us to simply retreat into denial rather than change our behaviors.

The medical establishment (Think: AMA, hospitals, health insurance companies and pharmaceuticals companies.) have created a cozy little system that tends to discourage or even exclude alternatives to their put Humpty Dumpty back together model. And of course all the financial incentives are on the side of treatment/cure rather than prevention/wellness. That is all well and good for the medical establishment; however, should you or I fall into their cozy little system we had best have great insurance or a good bankruptcy lawyer.

In other words our system isn't a system of health care at all, it's a system of medical care. Until you need to cure a disease, heal a trauma or deal with the symptoms of age--so long as you are healthy--you really aren't a suitable candidate for medical care. And, relatively little or no attention is paid to helping us stay healthy and thus avoid the need for medical care.

So, with that background, what exactly is a Wellness Token and why am I promoting it?

This good idea was initially published in 2006 by a Belgian economist named Bernard Lietaer in an article titled "Wellness Tokens: A Currency That Promotes Preventive Care."

In his original paper Lietaer begins by describing the problem and pointing out the difference between medical care and health or wellness care.

Lietaer describes the importance of financial incentive in determining the focus of care. For example until the late 19th Century Chinese Doctors were compensated by patients so long as the patient maintained good health and if the patient became ill the Doctor paid the patient. Imagine that for a moment. The financial incentive in pre 20th Century China was wellness and prevention.

The Wellness Token, according to Lietaer, is designed to emphasize the focus on three areas: wellness, prevention and holistic health care rather than on after the fact medical care. Wellness Tokens would focus in a manner familiar to anyone who has ever participated in a frequent flyer program. Tokens would be earned in two ways:

• Providing non-medical help to the elderly, handicapped and folks who need chronic care; and,
• Participating in specifically qualified preventitive health programs (For example: obesity reduction programs, educational programs, fitness programs, etc.).

Lietaer writes that Wellness Tokens could be redeemed in part for other goods and services such as preventive therapies, discounts for purchases of healthy foods, fitness programs and such. For example, according to Lietaer, the Elderplan Insurance Company of Brooklyn, NY accepts alternative currency for up to 25% of insurance premiums for elderly customers.

After reading all of that is there any doubt that the Wellness Token conceived by Bernard Lietaer passes my "Blink Test?" Although I didn't think of it, I can at least write about it and introce you to the concept!