Another Great Depression May Be Knocking Our Door

INTRODUCTION: The present symptoms in the world market make us recall the beginning of the great depression of early thirties wherein markets were full of the gluts of commodities but customers were not available to purchase the commodities despite the prices were going down. The total demand in markets had lagged behind the total supply. It was Lord Keynes to point out that the lack of effective demand had been the sole factor causing initiation of that great depression. The lack of effective demand was taken as resulted on account of investment lagging behind saving. The investment was lagging behind saving because the inactive portion of total saving was not being compensated through autonomous investment based on deficit financing. The problem was solved by adopting deficit financing and pump priming as suggested by Keynes.

THE PRESENT PROBLEM: The present situation in the world market also points towards the lack of effective demand. But, this time the reason is not being taken as the lack of investment or, in other words, the uncompensated inactive portion of saving. The budget deficits in all the developing and the developed economies are not only being enormously increased but are also regarded as rapidly outpacing the inactive saving. All the same, the producers are not finding adequate effective demand and threatening entry of another great depression is being suspected in the world. There are three factors most responsible for making the deficit financing ineffective in controlling the present depressive trend in the world market, as discussed below.

(I) In latter seventies a group of prudent economists had warned the developing world that inequalities of income distribution were going on increasing with the advancement on development path. They had opined that this would create a strong barrier on the path of economic development and economic growth. Their warning was neglected on account of two reasons. Firstly, the policy makers had a wrong notion in their mind that the slowly rising inequalities would create a sound group of rich investors to feed the future development based on heavy investment plans. Secondly, the policy makers were either under the influence of the rich group that was grabbing the fruits from distribution inequalities, or some of the policy makers belonged to the fruit grabbing rich group. Therefore, some from the high income group started to rapidly become richer but their number went on decreasing side by side. The growth rate of their income remained considerably higher than the growth rate if national income on account of rising inequality of income distribution. The remaining of the riches, lagging behind in the fast race of rapidly becoming richer, were thereby slang down to the following middle income group to add to the number of persons in middle income group.

On the other hand, the poverty alleviation programmes helped a considerable number of persons from the low income group shift to middle income group. Thus the mass of middle income group went on rapidly increasing in number and thereby the middle income group became a dominant consumer group. The middle income group has become so wide and so dominant that today the word 'market' means the market of consumption items pertaining to the consumption of middle income group, unless it is otherwise specified. The rich minority heavily invested in the production of commodities pertaining to the consumption of the vast middle income group. But, the disposable income of this group increased with a lower rate than the growth rate of the production of their consumption items because of the rising inequality of income distribution and a high degree competition among producers to squeeze the purchasing power of this market dominating group. That is why we are coming across slackness especially in the market of the consumers' goods pertaining to the consumption of middle income group.

(II) In the days of the thirties when the world was suffering from great depression, great many portion of total inactive saving was completely inactive and a small portion was used in speculation that was but limited mostly to commodity speculation only. As per the 'Liquidity Preference Theory' given by Keynes, the liquidity engaged in speculation was responsible for high interest rate. Therefore, a check on speculation was suggested so that, firstly, the prevailing interest rate may go down fast to become lower than the 'Marginal Efficiency of Capital' so as to induce the productive (i.e. induced) investment and, secondly, the liquidity (purchasing power) used fore speculation may be, to whatever extent, diverted to consumption expenditure so as to add to the falling short effective demand in the commodity market. If we look at the present scenario, only a small portion of total inactive saving is completely inactive and a multiple times of this, is the deficit financing being practiced almost throughout the world. Moreover, the amount of deficit financing may also be exceeding the total sum of the completely inactive saving and the saving used for commodity speculation. But, the great many portion of the inactive saving today being stated as converted into active saving is being used for non-commodity speculation like shares and debentures. The sum total of the completely inactive saving, the saving utilized in non-commodity speculation and the saving utilized in non-commodity speculation makes the total bulk of inactive saving. I don't think that the total deficit finance, whatever the big bulk, has so far out paced the above stated total bulk of inactive saving throughout the world. Thus, the present situation, in this way, is not much more different from that resulting in the great depression of early thirties. The actual inactive saving is not being compensated by deficit financing whereby a depressive pressure is liable to emerge similarly as during the early thirties.

(III) The commercial banks and many of other financial institutions are always interested in financing trade and commerce rather than consumers because of the obvious fact that consumer loans are not only lesser safe but the interest rate also is generally lower on consumer loans, especially in developing countries. Therefore, the actual financing to trade and commerce remained more than its desirable level and consumer credit remained below its desirable level for considerably a long period in the past. This caused a rapid extension of markets going on whereby the middle man profit went on increasing to make the commodities costlier without raising the producer's profit. The increasing prices ultimately caused a decreasing total demand in the markets.

The producers are having no way but to allure customers by launching various sale enhancement schemes. These schemes are though being proved fruitful up to some extent, so far, but on the cost of decreasing profit rate. Today's producer has much concern with the rate of profit (marginal efficiency of capital in the words of Keynes) instead of the total profit. Therefore, if the state of affairs remains persisting, the producers will have to cut production in the near future. This will become a green signal for the entrance of a real depression in the world market and this will harm the world economy not less than the great depression of early thirties.

SUGGESTION: To solve the problem of the endangering slackness so as to block the way of threatening entrance of suspected world wide depression, first of all the big investors should be made ineffective in the priority fixation and plan formulation. Thereafter, the growth of their properties should be curbed. The government investment (autonomous investment) should be directed from creating extra overheads (to attract new induced-investment) towards creation of external economies for the existing producers of general consumption goods. The expenditure of middle income group on education, insurance, medical treatment, telecommunication, entertainment etc. engulfs a considerable part of their income whereby their expenditure on physical goods of consumption falls short, especially, in the developing economies. Therefore, the government should make its welfare expenditure to concentrate on providing these services to the middle income group at a considerably reduced cost. The gulf between the incomes of the general mass and the rich minority should be immediately alleviated by taking strong measures to rapidly lessen the inequalities of income distribution. The consumer loans should be made quite liberal and financing to trade and commerce should be discouraged. The governments should take the drastic and acrid step to strictly curb or even suspend the speculative activities, at least for time being, until the depressive threat vanishes. The instruments of the monetary policy and the fiscal policy should be used in a way that share of consumption expenditure of the rich minority and share of income of the general mass may increase rapidly. These efforts should go on being honestly made until the purchasing power in the hands of general mass starts being commensurate to the supply of general consumption goods in the market.

Myth Vs Fact Helping Homeowners - Another Perspective

The looming mortgage crisis has affected almost everyone in all facets of life. When the homes stop selling the builders stop building, the carpenters stop nailing, the painters stop painting, paint stores stop selling and Home Depot stock hits record lows. Vertical damage is universal in almost all aspects of retail, services and durable goods. Let's face it; America is a nation that is fueled by land development and salesmanship. Unfortunately, ingenuity, invention and production have taken a back seat to Americans selling products owned or built by other countries. For Goodness sake, GM is second in sales to Toyota now, who'd a thunk it?

The reason for this article is not to bemoan today's economic footprint but to help people understand the most common myths that you hear about the housing and mortgage debacle. What you hear from our completely un-biased and non-partisan media auspiciously omits some of the important facts that might help the average American better understand exactly what we are up against.

Living in Atlanta, right around the corner from CNN, I have originated my fair share of mortgages for reporters and correspondents, who will remain nameless. I can honestly attest that news reporters, anchors and correspondents have the exact same blank stare and vacant head nod as John Q. Public does when loan officers dive into the details. However, now that we have a mortgage crisis they have mysteriously morphed into expert authors as they recite Democratic talking points. If questioned, most reporters that write columns about the mortgage industry have no clue as to the real life ramifications of the political solutions they publicize and promote.

As evidence I have taken excerpts from an article by Andrew Jakabovics named "Myth vs. Fact: Helping Homeowners" and corrected some of the Democratic talking points he has recited. Mr. Jakabovics writes for americanprogress.org, an organization that resembles the aforementioned non-partisan press. My initial intention was to post this article as a rebuttal to his article on his company's website. However, after taking a glance at the website it would appear that any article that fails to blame President Bush for personally orchestrating the entire debacle will fall on deaf ears.

The bill referred to in Mr. Jakabovics's article is the Federal Housing Finance Regulatory Reform Act of 2008; a bill that will raise taxes on mortgages to the tune of $500 million per year. The bill is a part of a larger piece of legislation that will eventually transfer $300 billion dollars of "at risk" mortgages that have been hand-picked from our nation's lenders portfolios. These loans will carry a higher default rate that will cost the Federal Housing Administration dearly that will be made up by additional funding from Uncle Sam. Guess where Uncle Sam gets his money

Mr. Jakabovics Wrote:

1. Myth: "The bill offers a bailout to speculators."

o Mr. Jakabovics: "All legislation under consideration requires owners to live in the homes they want refinanced."

o Correct Answer: Agreed, however I do not know how much of a "myth" this is. Let's move on.

2. Myth: "The bill offers a bailout to lenders."

o Mr. Jakabovics: "To take advantage of an FHA loan guarantee, lenders and investors must take a "haircut" and pay closing costs plus an insurance premium up front."

o Correct Answer: The bill is linked to legislation that takes the worst loans from our nation's lenders portfolios and transfers them to the Federal Housing Administration which is Government funded. Am I missing something here?

Furthermore, "an insurance premium" PMI, MIP has always been on loans over 80% loan to value on ALL agency loans funded by Fannie Mae, Freddie Mac and FHA. The insurance premium will not represent a change from the norm as the writer infers. I assume that the "haircut" refers to the fact that all loans will be trimmed to the actual appraised value. This will still present FHA with an an "at risk" loan at 100% LTV.

3. Myth: "The bill offers a bailout to homeowners. "

o Mr. Jakabovics:" Under the House's Home ownership Retention Mortgage program and the Senate's Hope for Homeowners program, each part of the legislation now before Congress, individual homeowners would have to pay an ongoing insurance premium to cover the costs of the FHA credit enhancement."

o Correct Answer: Ditto from above.

4. Myth: "There is no need for Congress to act; the private sector's Hope Now Alliance has been very successful in making necessary workouts."

o Mr. Jakabovics: "Few borrowers have been offered substantive, long-term modifications to their loans. Moreover, a loan-by-loan approach to the housing crisis simply can't address the scale of the need."

o Correct Answer: I agree that Hope Now Alliance is inept. However it is the best response the Executive branch could muster with the Legislative branch bickering and fighting about which side of the aisle can claim credit for "solving" the mortgage crisis.

A loan by loan solution is exactly what is needed; sweeping legislation that over regulates the banking industry will stifle the flow of money. History has proven time and time again the when congress tell the banks who and how to loan their money they simply stop loaning it.

The truth is, both sides deserve the blame here. In an election year neither Republicans nor Democrats are going offer much in the way of concessions that until after the election. The only difference is that the Democrats have ABC, CBS, NBC and every production being produced from Hollywood cheer-leading their point of view. Admittedly, the Republicans have Fox and Talk radio, until the Dem's pass the "Fairness Doctrine."

5. Myth: "The housing crisis only affects irresponsible borrowers, so taxpayers who struggle to meet their obligations shouldn't pay for their mistakes."

o Mr. Jakabovics: "The housing crisis affects all homeowners and even renters."

o Correct Answer: Agreed, blaming homeowners for getting caught up in the mortgage fiasco is analogous to blaming kids in the 60's for smoking pot. By in large most people caught up in that atmosphere have learned from the experience and moved on.

In closing, none of the answers you have read here can be considered a "fact". The only fact is that we are in a serious financial crisis that is extremely fluid. What America needs is our top financial minds, which will exclude the majority of politicians, putting their heads together to come up with a non-partisan answer. The answer isn't letting the market "correct itself" nor is it boot strapping federal agencies and private banks with a mandate that bails out everyone in a bad mortgage.

The answer is in between those two extremes. The problem is that Democrats and Republicans are dragging their feet even more than usual because we are in an election year. Neither side is willing to give up ground with an election looming for fear that it may possibly give the other side bragging rights in November, ironically while their constituents suffer.

Aubrey Clark is a mortgage professional of 15 years, and an editor for Direct Banc, a low interest rate credit card directory and Lend Fast a Nationwide Home Mortgage Loan Company He lives in Atlanta Georgia with his wife and four children.

Another Way Around the Credit Crisis - Minnesota Bill Authorizing Banks to "Monetize" Public Works

In August 2007, the nation was stunned by the collapse of a major Minneapolis bridge, killing nine. The bridge had been rated structurally deficient by the U.S. government as far back as 1990, and it was only one of more than 70,000 bridges across the country with that rating. The American Society of Civil Engineers estimated that it would take nearly $190 billion to fix the country's failing bridges over the next two decades. Minnesota and other states have the manpower and the materials to rebuild. What they lack is only the money to do it. Municipal governments have to borrow money by issuing bonds, and the interest they must pay on these bonds is going up.

On March 13, 2008, Erik Sirri, director of the SEC's division of trading and markets, told Congress that the credit crisis has spread to municipal bond auctions. "There is no question that the recent dislocations in the municipal bond markets have created unanticipated hardships for municipal issuers and in some cases dramatically increased their borrowing costs," Sirri said. The inability of cities and states to sell municipal bonds to investors at reasonable interest rates seriously threatens plans to build new roads, schools, airports and other public works projects.1

Although the cost of borrowing is going up for municipal governments, this is not because they are bad credit risks. In fact, they are extremely good credit risks. Creditors know where to find them, and local governments have the power to tax to pay their bills. The problem lies with the bond insurers called "monolines," which have ventured into the very risky mortgage-backed securities market. This has put the insurers' triple-A ratings in jeopardy, along with the ratings of the municipal bonds they insure.

While borrowing costs for municipal governments are skyrocketing, the interest rate the Federal Reserve charges to banks has been going down, even though banks are proving to be much riskier investments than local governments. The Federal Reserve is a private banking corporation that is owned by other banks. It was established in 1913 to prevent bank runs and otherwise keep the banks from getting into trouble for over-leveraging (lending out many times their assets), and that remains its principal function today. The Federal Reserve recently extended $200 billion in financing to 20 top investment banks at wholesale rates, but these low rates are not being passed on to municipal governments or home buyers. The Federal Reserve is evidently working for the banks more than for taxpayers or local governments.Thinking Outside the Box: The Minnesota Transportation Act

Many people are getting tired of waiting for the Federal Reserve and the federal government to act, and one of them is a Minnesota resident named Byron Dale. Dale has drafted a bill called "the Minnesota Transportation Act" (MTA), which is scheduled for hearing before the Minnesota Senate Transportation Committee on March 25, 2008. If adopted, the bill could represent a major innovation in the way state and local projects are funded. It would mandate Minnesota's Transportation Department and State-chartered banks to enter into an agreement providing that the banks would advance funds for legislatively-approved transportation projects in the same way that banks make commercial loans - simply by "monetizing" the projects themselves. Banks routinely monetize the promissory notes of borrowers just by making book entries to a checking account and saying "you have a new deposit with us." (More on this below.)

Under the MTA, the state-chartered banks would create a pass-through account titled an Asset Monetization Account (AMA), monetizing the bid value of projects. This would be done in the same way that banks monetize collateral, except that the deposit would go on the bank's books as an asset rather than a liability, turning the bid value of the project into "money" without debt. This money would be debited electronically out of the AMA and credited to the State's Transportation Account (STA), from which it would then be debited out and credited in to the contractor's bank account in a state bank, according to the terms of the contract. The contractor would spend this money to complete the project. The money would flow into Minnesota's economy, where it would provide for better, safer, more durable roads and bridges. It would be used to purchase goods and services, benefiting business. It would go to pay taxes, helping the State balance its budget. And it would flow back into the state-chartered banks as interest on outstanding loans, reducing the number of loan defaults and improving the profits of the state-chartered banks. In this way, says Dale, the MTA would benefit every segment of society.Too Radical? Maybe Not . . .

Dale says he has been proposing this sort of state funding alternative for years; but only now, with the looming liquidity crisis, have legislators begun to take him seriously. His plan may not be such a radical departure from existing practice as it sounds. Commercial banks are already in the business of creating money. Except for coins, our entire money supply is now created by banks in the form of loans.2 Indeed, banks create all the money they lend. This was confirmed by the Chicago Federal Reserve in a booklet called "Modern Money Mechanics," which states:

"Of course, [banks] do not really pay out loans from the money they receive as deposits. If they did this, no additional money would be created. What they do when they make loans is to accept promissory notes in exchange for credits to the borrowers' transaction accounts. Loans (assets) and deposits (liabilities) both rise [by the same amount]."3

Many other authorities have confirmed this money-creating mechanism of commercial banks.4 State-chartered banks get their authority to create money from the State, and the State has the authority to determine the purpose for which banks create money. State banks are now permitted to create money to monetize a mortgage or other promise to repay. They could as easily be authorized to "monetize" the promise of contractors to deliver labor and materials to the State in the form of road and bridge repair and construction.

The argument against this creative approach is that it would be inflationary, but would it? Inflation results when "demand" (money) increases faster than "supply" (goods and services); and in this case goods and services would be increasing along with the money available to spend, keeping the money supply in balance and prices stable. In fact, it is the lending of money created out of thin air that is inflationary, because banks create the principal but not the interest necessary to pay back their loans. Additional loans must therefore continually be taken out just to service the "money" (or debt) that is already in the money supply; and this newly-created money goes into the pockets of middlemen rather than contributing to the productivity of the community. "Demand" (money) thus goes up without a corresponding increase in "supply," creating price inflation.

The solution to this conundrum is to authorize banks to monetize the production of real goods and services, creating supply and demand at the same time. There is substantial precedent for this approach, stretching as far back as the early American colonies:

* In the early eighteenth century, the colony of Pennsylvania issued money that was both lent and spent by the local government into the economy, producing an unprecedented period of prosperity. This was done not only without producing price inflation but without taxing the people.

* When Abraham Lincoln needed money to fund the American Civil War, rather than paying 25 to 36 percent interest charges, he avoided going into debt by printing Greenback dollars that were "legal tender" in themselves. Again, historians of the period attest that this issue of Greenbacks was not responsible for price inflation.

* A successful infrastructure program funded with interest-free "national credit" was instituted in New Zealand after it elected its first Labor government in the 1930s. Credit issued by its nationalized central bank allowed New Zealand to thrive at a time when the rest of the world was struggling with poverty and lack of productivity.

* The island state of Guernsey, located in the British Channel Islands, has been funding infrastructure with government-issued money for over 200 years, without creating price inflation and without government debt.5 But Is It Constitutional?

These governments could create the money they needed because they were sovereign entities, but what about individual States governed by a federal Constitution? In the United States, the U.S. Constitution controls. But that august document says very little about the creation of money - so little that banks have stepped in and taken over the business by default. Here are the sole Constitutional provisions directly addressing the creation of money:

Article I, Section 8, Clause 5

: The Congress shall have Power...To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures.

Article I, Section 10, Clause 1

: No State shall...coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debt.

Congress has been given the power to coin money, but minting coins is not the same thing as issuing paper money, checkbook money, accounting-entry money, or electronic money - the forms of money used most often today. Arguably, "to coin" money was an archaic way of saying "to create" money, but then what is to be made of the clause stating, "No state shall . . . make any Thing but gold and silver Coin a Tender in Payment of Debt"? "Coin" here clearly means precious metal coins, period.

That clause is interesting for another reason: when was the last time you heard of a State paying its debts in gold or silver coin? States routinely pay their debts with the bank-created accounting-entry money that now composes over 97 percent of the U.S. money supply (M3), and that form of money is omitted from the Constitution altogether. The States therefore violate the Constitution every day, something they must do if they are to pay their debts at all, since gold and silver coins are no longer in general circulation. The Constitution obviously needs to be amended to suit the times. Meanwhile, the Tenth Amendment to the Constitution (part of the Bill of Rights) provides:

X - Rights of the States under Constitution

: The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

Creating checkbook money is not specifically delegated to the United States, so it must be delegated to the States, unless it is specifically prohibited to them. What about the provision that "No State shall . . . emit Bills of Credit"? According to "the 'Lectric Law Library," "bills of credit are declared to mean promissory notes . . . . Bills of credit may be defined to be paper issued and intended to circulate through the community for its ordinary purposes as money redeemable at a future day." Bills of credit are promises to pay later rather than what is being discussed here: checkbook money issued as "legal tender" - the sort of dollars banks issue every day when they make commercial loans. The Constitution does not say who is authorized to issue this sort of money - whether in paper, electronic or accounting-entry form - so under the Tenth Amendment, this right is reserved to the States and to the People.

As the credit crisis deepens and exposes the inability of the existing banking structure to meet the public's needs, creative funding plans similar to the proposed MTA could be popping up in communities around the country. If the U.S. Congress and the privately-owned Federal Reserve will not issue the funds necessary for bridge and road repair and other urgent public projects, we can encourage our State legislators to fill the breach; and if they won't do it, we the people can get together, apply for a bank charter, and create the funding ourselves. (See E. Brown, "How to Start Your Own Bank," webofdebt.wordpress.com, February 23, 2008.)

Ellen Brown, J.D., developed her research skills as an attorney practicing civil litigation in Los Angeles. In "Web of Debt," her latest book, she turns those skills to an analysis of the Federal Reserve and "the money trust." She shows how this private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. The website is http://www.webofdebt.com/

Her eleven books include the bestselling "Nature's Pharmacy," co-authored with Dr. Lynne Walker, which has sold 285,000 copies.

Flood Insurance - Another Example of Excessive Spending by a Government Agency

How can this be? The short version is that FEMA which is the federal emergency management agency typically pays close to 20% more than it should pay for flood insurance claims. These payments are made to the individual participating insurance companies. Last year that meant close to $350 million in overpayments as reported by the (GAO) Government Accountability Office in expenses to insurance entities that were considered overpayments for their expenses.

The Government Accountability Office says that this is excessive. Over 97% of the national flood policies are in place and are managed by just 87 insurance companies. These 87 companies control roughly 89% of the insurance premium for flood policies in the United States. The government's participation with private insurance companies with regards to flood insurance began in 1983 as a co-op.

As insurance premiums continue to rise especially in the coastal areas, the government is now pressing the private insurance companies to produce ongoing reports comparing their actual expenses in comparison to the 34% the government allocates for every premium dollar in expenses for flood premiums.

This over payment of close to $350 million of budgeted expenses compared to actual expenses is definitely within the radar of the GAO. The GAO also found that claims expenses are adjusted based on the size of the claim. The government has unknowingly incentivized the insurance companies in that the greater the claim the greater the reimbursement. This tends to organically inflate claims to newer and higher levels as the government is paying for damages and not private insurance company. The insurance companies are only adjusting the claims and being reimbursed for their expenses albeit in the form of overpayments.

As is the case in most government programs there is fat and abuse and clearly this over payment of approximately 20% for reimbursed expenses needs to stop.

R. Glenn Matsen, CEO, MBA, CPCU, ARM, CLU, ChFC has over 30 years of risk management experience in providing insurance solutions for the small business owners needs. His website contains detailed information on tech insurance [http://technologyinsurancequote.net/tech-insurance] and provides visitors with a quick technology insurance quote [http://technologyinsurancequote.net].

Another Problem For LTC Insurance: Earlier Alzheimer's Diagnosis

Long term care (LTC) insurance is already on shaky ground. New diagnostic criteria for Alzheimer's disease will likely make the problem even worse.

Scientists and doctors have lately developed ways of detecting the disease at earlier stages than previously possible. A recent study of a new imaging technique, known as diffusion tensor imaging (DTI) or diffusion MRI, revealed that this method holds even more promise than traditional MRIs for detecting Alzheimer's. Using brain imaging, doctors may someday be able to identify the disease before symptoms begin to manifest themselves. Alzheimer's Foundation of America (AFA) spokesman and geriatric psychiatrist Richard E. Powers told WebMD Health News, "I believe that five to 10 years down the road we will be able to tell someone we are 99% certain that they will develop dementia within 10 years."(1)

In light of these advances, working groups formed by the National Institute on Aging and the Alzheimer's Association recently recommended a new diagnostic category be created for "preclinical Alzheimer's disease." The working groups also suggested that biomarkers, such as those revealed by brain imaging, ought to play a greater role in diagnosis. Although the diagnosis of "preclinical Alzheimer's disease" would initially be used only in research, not medical practice, it is likely that it would quickly seep out into the general medical community. Together with the new focus on brain imaging, this could lead to more people without apparent memory impairment being diagnosed.

This is, of course, good news in the long term. Alzheimer's cannot be stopped or reversed today. But when effective therapies are available, early diagnosis will likely be critical.

In the short term, however, the ability to spot, but not stop, Alzheimer's is liable to cause some serious problems for the already troubled LTC insurance industry and its customers.

Those who discover that they are developing Alzheimer's will rush to buy LTC insurance before they begin to have serious symptoms. Almost all of these people will then go on to have expensive claims. Meanwhile, those who discover through early testing that their risk of developing Alzheimer's is low will be less likely to buy the insurance. This adverse selection will drive premiums higher in an unsustainable spiral, because with each premium increase, fewer healthy people will be willing to pay.

Insurance companies will be forced to respond. Some may decide, as MetLife recently did, to simply stop selling LTC insurance. Others may try to require pre-issuance medical testing for coverage and exclude those with incipient Alzheimer's. Alternatively, companies might continue to issue LTC insurance without testing but stop covering costs related to Alzheimer's, which would eliminate one of the main reasons people buy the insurance.

Earlier diagnosis will also have potential short-term costs on a personal level. There is still no cure for Alzheimer's, and the most commonly used drug treatments work in less than half of people tested, according to the Mayo Clinic. Even when the drugs do work, the improvements are moderate and short-lived. Early diagnosis, then, has the potential to lead to fear and depression while offering only minimal advantages in treatment, as HIV diagnosis did before effective treatment options became available.

Some people, however, may be glad to know what lies ahead, even if there is little they can do about it. Pat Sneller, a Texas man who was diagnosed early as part of a research study, told the Dallas Morning News, "Yes, you have longer to know about it, but if there are things undone in your life that you want to do, you can do them."(2) Since his diagnosis, Sneller has devoted himself to advocating for Alzheimer's awareness.

We can hope that earlier diagnosis will eventually lead to better treatment and prevention. If this happens, it will be worth far more than emphasizing the pointlessness of selling LTC insurance, which cannot be both affordable and broadly useful.

In the meantime, those who get the sad news that they have preclinical Alzheimer's will need to do what all of us should be doing anyway: Save money, build equity and arrange our affairs to provide for ourselves and our families as best we can, no matter what life throws at us.

Insurance companies have no magic printing presses to care for all of us in our old age, and, while medical science can produce wonderful results, it usually does not do so overnight. Until the medical marvels come, we will have to stick to the old-fashioned approach of saving prudently and accumulating as few regrets as possible.

Sources:

(1) MedicineNet.com: New Brain Scan May Predict Alzheimer's

(2) Dallas News: After Early Alzheimer's Diagnosis, Flower Mound Couple Face Their Fears, Embrace Activism

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Carbohydrate Sensitivity Explored - Another National Epidemic

If you've ever heard someone say they are a carbohydrate addict, they probably aren't far off the mark. Carbohydrate sensitivity is a relatively new phenomenon, in terms of it being the national epidemic that it is. With the increasing consumption of packaged, refined and sweetened foods over the past decades, there has been a corresponding decrease in whole, unprocessed foods. Eating a diet consisting of heavily refined foods, which includes a high-carbohydrate content, will cause you to gain weight and eventually develop carbohydrate sensitivity.

This carbohydrate-craving trend most likely occurred from decades of misconceptions about diet as well as through misleading advertising and diet fads. Consider this: we are eating over twelve times the amount of sugar our great grandparents were consuming in the early part of the century. That's roughly equivalent to 160 pounds of sugar per person per year. Now, imagine filling up your living room or garage with those 160 of those one pound packages you buy at the grocery store-really get a mental picture of it. Let's say you don't eat as much as others, and cut it in half. It's still a hefty pile, isn't it? You see, most people have no idea that they're eating so much sugar. Much of it is hidden in processed foods as well as their beverages.

Chalk it up to a lack of relevant health education by our government, or just a lack of impetus on the part of individuals to do their own research, but whatever the cause of this health crisis, the bottom line is this. Sugar is lethal in large doses. It may not kill you the way heroin might in a single overdose, but its chronic strain on the pancreas and the body will trigger diseases that will most certainly destroy you. Before it does that though, eaten out of moderation sugar will first cause you to become overweight.

Inside the body, carbohydrates are converted to glucose (sugar). Translated, that means carbohydrates equal sugar, and for those of you who are already overweight, those complex carbohydrates will also be stored as fat. This is called carbohydrate sensitivity. I know-- it's not fair! But here are the facts: your body isn't supposed to eat all the sweet stuff you've put into it, and if you are sensitive to carbs, it means your body has gotten out of whack.

What is Carbohydrate Sensitivity?

Carbohydrate sensitivity is connected to the pancreas and insulin production, but I'll get to that a little later. Here's a number to shake you up. Did you know that up to 40% of a person's carbohydrate intake during a meal can be converted and stored as fat? Multiply that times a few meals a day, and you see the outcome: a bulging waistline. The problem with a high-carbohydrate diet is that it's devastating to your natural metabolic processes.

This means that when you become carbohydrate sensitive, your body can no longer burn fat effectively, and those moderate to low-glycemic and complex carbohydrates get stored as fat. Many people walk around completely unaware that they're metabolically challenged from their carbohydrate intake. I know that I was completely ignorant for years, which was at least partly due to my misconception that I had to be overweight to be carbohydrate sensitive. Wrong. I was just extremely active and things looked all right on the outside. Slowly but surely, I'd reach for the carb every time over the protein.

I was carbohydrate addicted. The beginning of my real education on the subject and my change in diet was when I learned about insulin in the body and a low-glycemic approach to eating.

Insulin Loves Glucose

Before you start yawning and think, oh boy, now it's getting technical and here's where I sign off, please don't! Learning about the glucose-insulin response just might change your life.

Your hormone insulin really loves glucose. Inside your body, glucose is a byproduct of carbohydrate breakdown. When you eat carbohydrates, your body breaks it down into a form of sugar called glucose. Now I'll keep it simple here for the layman.

Insulin is like an escort. It escorts the sugar into your muscle cells, where it's then used to produce energy. We need energy, so we can thank both insulin and glucose for their terrific partnership-that is, when they have a normal relationship.

Now, complex carbohydrates make the insulin release more slowly from the pancreas, which is what you want. You want a slow courtship of insulin and glucose. Let's say you eat simple sugars or highly processed foods containing sugar. Those carbohydrates break down very fast into glucose. What happens then is that insulin levels rise rapidly in order to escort more glucose into the tissues and your bloodstream is quickly bombarded with excess insulin. If you didn't understand how it works before this, can you see how that this kind of chronic situation in the body will absolutely lead to diabetes? Remember, diabetes spares no one when it comes to diet and lifestyle induced diabetes.

Your body can normally handle occasional overloads of simple carbohydrates and store them as extra glucose, rather than fat. But many people have abused their systems for so long-through simply eating too many refined carbohydrates or living with other problematic factors such as chronic stress-that their bodies start to work against nature. Essentially, their once normal and healthy metabolism begins to malfunction, and their compromised bodies store carbohydrates as fat instead of burning glucose for energy.

Once you've become carbohydrate sensitive it tends to go downhill. Even a balanced meal of chicken or pork, some potatoes or bread, and a nice array of vegetables don't get metabolized correctly. This kind of meal in and of itself shouldn't be fattening. However, you can become so sensitive to the bread and the potatoes in your meal that you will deposit even the carbohydrates and protein as body fat. And if you eat a piece of bread or a small plate of pasta, your body will send your insulin levels soaring, reacting as strongly as if you had eaten a piece of cake.

To add insult to injury, your intake of sugar also raises your cholesterol. Now, you can understand why so many people struggle to lose weight and promote better health, even when they switch to a "healthier" diet.

Other Factors Triggering Carbohydrate Sensitivity

Lack of exercise

Glucose is stored in the muscles, and if you have a low percentage of muscle and a high percentage of fat-where can glucose go? One of the most important things you can do to overcome this sensitivity is to change your body composition by exercising. This will preserve and enhance lean muscle mass which will help lower your body fat and raise your metabolism.

Chronic Stress

Our bodies deal with stress by raising cortisol levels, a hormone secreted from our adrenal glands. This, in turn, triggers the release of glucose from its "storage "depots" and into the bloodstream. Insulin levels also increase so glucose (which you remember is dearly loved by insulin) can be escorted from the blood to those working muscles that need it for energy.

But when stress is constant, high glucose and insulin are also constant. Being under acute stress is the same as if you had eaten a piece of cake--and experiencing chronic anxiety and stress is like eating cake all day long. The result is insulin resistance inside the insulin receptors on the cells-they simply don't recognize insulin anymore. The escort glucose might as well be an imposter now.

To add insult to injury even further, stress spikes insulin levels as if we ate the cake, and then we do eat cake--giving the insulin response system a double whammy.

Serotonin Hormone

Serotonin, one of your brain's central neurotransmitters, is involved in regulating your appetite and hunger. If you have too little serotonin, you will crave carbohydrates and feel depressed. Increasing your serotonin blunts your yen for carbohydrates. Serotonin is also a mood regulator and increases your sense of well-being. Not surprisingly, when this hormone is stimulated you eat less, gain less, and burn more calories.

How Do You Know if You're Carbohydrate Sensitive?

If you're a woman, the odds are you'll become carbohydrate sensitive sooner and more easily than a man will. While men tend to use carbohydrates for energy, women tend to store them as fat. This is especially true as women age. Menopausal women tend to be more prone: they don't have enough estrogen stores to deal with cortisol and its tendency to make the body store fat. It's just female biology.

Factors That Might Indicate Carbohydrate Sensitivity

--You crave carbohydrates

--You are overweight or obese

--You don't exercise very much or at all

--You're a woman and over forty

--You suffer from chronic or bouts of depression and compulsive overeating (serotonin or other neurotransmitter imbalance, possibly)

--You have been over-stressed for some time

--You are hormonally challenged and under a doctor's care

--You react negatively to eating sugar, i.e., you become tired, groggy, and your mental response becomes sluggish

--You reach for carbohydrates over protein most or all of the time

--Your diet doesn't consist mostly of whole foods, especially low to moderate glycemic foods

If you identify with the signs, consider that you might have a problem, but don't despair. I promise you can learn how to stop this heart-breaking cycle and get off the carbohydrate-sugar rollercoaster forever.

Maria Calidonna is a weight management coach and writer who lives in Westchester County New York. She is married with five children and currently training for the 2009 Track and Field World Master's Championships in Finland.

You can visit Maria's product website at http://www.marketamerica.com/bodyandmind for her low glycemic Transitions Weight Management Kit and other related health supplements. She also invites you to visit her weight management and health coaching blog at [http://www.mariacalidonna.com]