Lower Rents Due to Falling CPI Will Not Lead to Deflationary Psychology

Calculated Risk has been pointing out that the housing tax credit encourages renters to buy a house, which pushes rents down. This causes the CPI to appear lower.

In a post last week, CR wonders if this will lead to a deflationary psychology in which consumers delay purchases waiting for lower prices. I believe this will not happen and that the primary risk is inflation. The housing issue results in one part of the economy getting cheaper due to excess supply. It does not mean other things will get cheaper. The risk, IMHO, is that lower rent prices will mask inflation in the rest of the economy caused by loose monetary policy.

Although I don't see it causing deflation, the credit doesn't do much good. It just moves the problem around. The problem is banks and individuals entered loan agreements that would only work if houses prices rose. The only way to make houses expensive is to limit building them and to destroy some housing units. (Other ways are immigration and getting people who live together to form separate households.) All of this is crazy. The government should stay out of this for two reasons: a) it’s wrong to bail out failed business deals and b) it won’t work. If they succeed it making houses expensive suppliers find some way to come in and produce more, making the excess supply problem worse.

Spam That Claims to Be "Legit"

I wonder if people who sent out spam (not just unwanted e-mails, but out-and-out spam) ever get any replies. This one managed to get through a spam filter:

I am Mr Merlin Arthur a legit loan lender, I give the loan in various species, any body interested should contact me and if you want the loan, then the application must be filled out and returned.

I don’t know how many people reply, but I doubt saying you’re a legit lender helps. Do they think some readers are going to say, “This sounds like a scam! Wait, though, it says he’s a legit lender. I'll go ahead and fill out this application and e-mail it to Bulgaria.” (The country code on the e-mail really was Bulgarian.)

Move-On Publicizes a Moving Story of a Dispute Over Life-Saving Medical Care

Move-On sent me a link to a blog they sponsor that features a woman who is lobbying her health insurance company to pay for critical medical treatments. The clinics that she believes have a treatment for her condition are out-of-network, so the insurance company refused to pay for it. There is no discussion of how much the treatment costs, how much money the woman has or could scrape together, and whether the providers might accept less if she shows them evidence of financial hardship. In the Move-On mindset, the insurer "didn't approve the treatment" so you keep asking without ever thinking of putting together some money and working out a deal on your own.

Move-On believes a government-run health plan would prevent disputes like this one. Most everyone would want the government running insurance if that were true. Unfortunately, there is no reason to think a government-run insurance plan would be better than a private one.

If the government can’t do the job and sometimes private contracts don’t do it, how can people of modest means get state-of-the-art treatments?
1. Prior to a peril that you can’t afford financially (an illness in this case), you need to insure against it. Buy health insurance before getting sick. This same thing holds true for homeowners/renters insurance, auto insurance, life/disability insurance, and liability umbrella insurance.
2. Make sure the contract covers payments to out-of-network providers, even if the percentage it pays is less. Pay a little extra for a high life-time maximum.
3. Save money. It always comes in handy. If the insurance company won’t pay on a claim, you can use the cash and fight the insurance company at a later date. The more money you accumulate, the higher deductible you can select, saving money on premiums.
4. Negotiate. Look for less expensive alternatives (not inferior ones) to a suggested medical treatment. Think creatively.

The counterargument is that some people neglect to buy insurance, can’t save money, and don’t have the skills to figure out contracts and evaluate potential medical treatments. It is very important we do everything we can to help people in these situations though government programs and just helping people we know personally. Most people, though, can and should manage their own lives. (If most people cannot, and we just have to turn it over to the government, we are in big trouble.)

Move-On’s story about someone who is sick and fighting a battle with an insurance company being publicized by a political organization brings up so many feelings. I shutter to think of an insurer’s bureaucracy causing someone to delay treatment for a life-threatening illness. My heart goes out to anyone caught up in such a mess. I hope Move-On is not intentionally discouraging this person from pursuing normal avenues in such as case, such as working a little carrot-and-stick using an attorney to get at least a partial payment from the insurer, scraping together a little cash, and offering this partial payment to the medical provider; so that Move-On can make a political case in favor of government-run insurance.