Elegy

For the first 2/3s this came across as yet another dire misappropriation of Cruz's talents (just how Cuban is she really?), but in the new - and somewhat suspect - epilogue fashioned for Phillip Roth's tale about slimy academics and their younger prey, she returns to give what must be her best ever English-language performance.

Overall the movie brought to mind Phillip Pullman's oft-quoted remark that making films of books involves taking all the literature out. This is because Spanish director Isabel Coixet and her cast have obviously pulled out most of the stops to put some of their own cinematic 'literature' back into this adaptation of The Dying Animal. The score, mostly those hauntingly elegaic pieces by Eric Satie, also works hard in this respect.

Ben Kingsley puts in a fine, nuanced performance as Professor Kepesh. It's still a little difficult to comprehend some of the choices his character makes, and given their centrality to the narrative, this did slightly spoil my enjoyment of what was otherwise an above average production.

GRADE: B++

Britain on the brink

An interesting post by Ambose Evans-Pritchard on the chances of Britain going tits up.

Some of his key metrics are:

- The budget deficit is climbing to 8% of GDP and the national debt will jump from under 40% of GDP to nearer 60% according to Fitch Ratings

- Credit Default Swaps (the cost of insuring against the bankruptcy of the British state) have reached 86 basis points. Compare Germany (35), USA (43), and France (49)

- Household debt has soared to 165% of personal income

- We can now only afford a 1% economic stimulus plan compared to the 14% projected for China

- The size of the state has gone from 37% to 46% in a decade

- Labour ran a budget deficit of 3% of GDP the top of cycle. Compare this to the 2% surplus at the end of the Lawson bubble, which means we go into this slump 5% of GDP worse off

- But we'll still be in the AAA club, albeit at the lower end...somewhere near Portugal, so it's not all bad.

Evans-Pritcchard states the obvious about New Labour hash-making:

"How could the regulators possibly think this was in the interests of British society? What economic doctrine justifies such stupidity? Why were 120% mortgages ever allowed? Indeed, why were 100% mortgages ever allowed? Debt is as dangerous as heroin."

Perhaps this smug Scottish hedgie called Hugh Hendry should be first against the wall when the revolution comes, but meanwhile we might take note of his bet that all of the key American banks will be in public hands in the very near future. (Watch the mid-section of the video!)

"I see Dead people..." hehe.

Quote of the Day

"There is such a thing as collective guilt, and I am guilty, by association with this tribe, of having participated in casino-capitalism. Most people believed they were on the right side of the great divide between the haves and the have-nothings, that they had a natural gift for slot machines and poker. Now it turns out that many of those who thought they were playing a good game were fooled. It’s sad that most of us didn’t find the game itself disturbing, only the thought of losing: it appears that we have no sense of justice, but only of advantage and disadvantage. Cruelty doesn’t bother us. That is why Iceland is grieving. We had the chance to be decent people,and we blew it. Someone has now set up a website to which offended Icelanders send in photos of themselves in their homes, holding up a piece of paper on which is written the plea: ‘Do I look like a terrorist?’"
Haukur Már Helgason on Iceland's current state of mind

Trip Pic of the Day: Tikal

There weren't many of this kind of visitor to Tikal back in '88 when I first came here. I'd braved a bus journey twice interrupted, first by the genocidal local commandos known as Kaibiles and then by AK waving adolescents, most probably insurgents.

Nowadays sitting cross-legged at the base of the Temple of the Grand Jaguar is possibly the best way of experiencing it. At some point in the early 90s the staircase was closed off to clamberers.

This time I discovered that Temple II opposite is no longer open to frontal assault either. Instead a winding wooden staircase has been erected on the south side.

At present Tikal's Temple IV, the highest in the pre-Colombian world, is under-going a bit of nip and tuck and consequently, visitors are also unable to make it up on to the roof cone for the best view in the Mayan biosphere.

Some more pics of Tikal here.

Advent over the horizon

At the height of her disenchantment with London V used to describe her existence there as 'like living in a high security prison.' Living in Antigua is also like living in a jail, but one run on Guatemalan lines, where the inmates are basically free to do what they want. 

Being able to watch/listen in to London life from a distance is an odd privilege.  You have a much stronger sense of how closed a society it is, how its citizens are in a sense trapped within a mesh of routines and expectations that seem truly bizarre to me now after just 6 months of exile status. 

Listening to the news of MFI and Woolies going into administration today part of me thought good riddance. By the time they'd mentioned the fact that Woolworth's was a 'national institution' all of me was saying it. Crappy stuff for crappy people. It can't be a bad thing that less money will be wasted on scented candles and cooking oils with floating chilies in them this December in the UK. 

Christmas was one of those things that kicked off here in Guatemala whilst I was away in Belize. The Gallo tree that soared from the highest point in Flores and the annoying radio jingles were the first warning I had of this unfortunate state of affairs after re-crossing the border. But it's a real lesson to spend the last 30 days or so before Yuletide in a country such as this where consumerism's hold is a tad more flimsy.  You have to look a bit harder for pointless toot on which to frit your away your income here, though they seem to overcome this problem by literally burning their cash on fleeting pyrotechnics. 

I still feel some of the old righteous anger welling up inside me when I tune in to Five Live on my Internet radio. Today the bile was triggered by a pensioner complaining that her credit card company had raised her monthly payment threshold. Why do people in Britain still feel they have some sort of right to live off someone else's money? And Peter Mandelson seems to be encouraging the notion that Brits can borrow and spend their way out of recession, as if that, and all sorts of other forms of robbing the future to pay for the present, weren't essentially the problem in the first place. How about some saving for a change? 

Dodging the Decimation

On Boxing Day 2004 a close friend of a family member watched from his hotel room in Khao Lak as the sea mysteriously receded. He got up and ran down towards the retreating shoreline. Two weeks later came the terrible news that his bloated corpse had been identified. 

What a difference experience - or at least a crucial piece of remembered information - can make to final outcomes. I sometimes wonder whether I would have been one of those people who'd have run in the other direction - to the hills - even lacking specific knowledge about the implications of this apparently portentous event. Some people seem to have an intuitive skill with those critical judgment calls. I don't really know how I would have reacted - I've made some good ones and some bad ones in my life. 

The doomed enthusiasm of the subject of my anecdote is nevertheless more appealing to me than the behaviour of those who just carry on building sandcastles on the beach. This kind of inertia in the face of highly mobile macro conditions unfortunately seems to be strongly ingrained in the citizens of the UK. 

Many of my more outwardly 'dynamic' acquaintances have very possibly had me down as along-term sandcastle builder myself, but I'd say to them now that we are simply different types of evolved animal...and that there's an important difference between moving all the time and moving at the right time. (Time perhaps for a quick aside on Sir Isaiah Berlin (OP)'s theory of hedgehogs and foxes and his interesting notion that Tolstoy was a fox who rather fancied himself as a hedgehog...) 

Leaving London earlier this year certainly felt like heading for the high ground after a worrying breakdown in what the folk up north tend to call normalcy.  The family member who shared an office for many years with the man whose Thai business adventure ended so sadly, told me last week that she'd heard that 1 in 5 people in London will soon be out of work. Even 'half-empty' types such as myself finds that a bit hard to believe - the number is more likely to be something like 1 in 10, though in areas like Canary Wharf, the figure of 1 in 5 may not be so pessimistic after all. 

The PR industry, where I was apparently engaged in sandcastle construction until earlier this year, is indeed likely to be decimated. The last time consumption dropped like this - during the '90/'91 recession - major London agencies like Rowland simply folded. Thanks to the leveraged bet that New Labour placed on the financial services sector, there is every reason to suspect that the contraction this time round will be even worse than 18 years ago and that the communications industry, along with much of the rest of the UK economy, is set for several lean years. 

Back in October I was nevertheless tempted back into some limited hobbeyist investing, having discovered the ease of playing the market short using ETFs. I used DUG for example to successfully track the price of oil down from around $80 a barrel to where it is today, just above $50. TZA on the other hand enabled me to double my gain on every percentage point lost by the Russell 2000 index. (I recently heard a bunch of God-squadies of various persuasions prattling on about how short-sellers are the kind of evil-doers who profit from others' pain but, let's be realistic, stock market investment is mostly a zero-sum game: your gain is nearly always going to be someone else's pain.) 

By the end of the month I had extended my activities to an on-going effort to profit from the see-saw of sell-offs and rallies that then characterised the markets. Day trading, in effect. The trouble was that this turned out to be extremely stressful and was tying me to a desk and computer-screen for several hours a day - precisely the lifestyle I had come here to get away from. 

And then I made a silly mistake. Before setting off for Belize I decided to close a bunch of positions so that I could loll around in a hammock without having to fret about what was happening back in NYC. I sold some bank shares that I had bought at the distressed price of just under one Dollar a share. Then, on my last day in Flores I couldn't resist the temptation to take a peak at Google Finance and found myself chewing on my own liver the instant it became clear that shares in said bank had jumped to $20 before falling back again to around $14. 

I realised that in selling off these assets prematurely I had broken all my own rules of investing and I had done it largely because of the chronic anxiety engendered by riding that roller-coaster every morning for several weeks. Even with thousands of shares at a price of $1 each I could perhaps have afforded to lose this money in the event of that particular bank imploding, but it occurred to me afterwards that, psychologically at least, I could ill afford to part with the hypothetical gain I'd ended up missing out on. I could find no other way of looking at it - I'd just taken one of the the most expensive snorkeling trips in history. 

So, I am out of the day trading business and back into the knowledge accumulation (and sunbathing) business once again. What follows is a rationalisation of my new, healthier, long-term strategy. No more short positions, no more smash and grabs. I'm now in it for the duration of the recession, depression, dark ages...whatever. 

First a few caveats. Historically the US market turns around about 4-6 months before the end of the prevailing recession. By my estimates this means that the bottom could still be some way off - Q3, 2009 at the earliest - and that if the danger of deflation can be avoided. Rarely is there one full and final thump for the market as a whole however, and investors who wait until consumers are feeling good about themselves again before attempting to climb out of the hole are probably going to miss the chance to benefit from any future upswings. 

It would also be a mistake to pretend that the current crisis is entirely the fault of a few coked-up investment bankers and that everything else in the economy was hunky-dory (and appropriately valued) the moment before the credit crunch stole walked off with our collective cheese. The US  economy has been living way beyond its means for some time, with the American ratio of debt to disposable income rising from 70% in the late 90s to around 140% in 2008. Real incomes have meanwhile been fairly stable as housing and equity wealth has begun to decline and levels of savings in America went negative in 2006. Consumption, which represents 71% of US GDP, is going to be hit hard now and may well take considerable time to recover. 

Remember though, that unless you are a resident of Argentina, your GDP generally contracts by around 1-2% a quarter during a downturn, not 40% or even 70% in a few weeks. 

So, here are a few suggestions for those brave and the patient investors who might have squirreled away some funds they don't mind locking up for 3-5 years. 

What these picks have in common is that they generally conform to my old - and mostly successful ploy - of buying at panicky prices and simply waiting for more stable states of mind to kick-in.  It goes without saying too that all remain susceptible to more pain before gain - another banking collapse perhaps, or maybe even an Islamist nutjob atentado in the heart of capitalist proto-optimism.

Let the bottom-fishing begin: 

DIG: Having used its evil twin DUG to slide down the oil and gas index at double-pace, it may now be time to switch to DIG. Fears of a deep global recession have seen a massive collapse in energy prices, but I've always seen $50 as the floor here. That's low even for the Saudis and there will be strong pressure from the likes of Iran, Russia and Venezuela to get things moving upwards once again. DIG costs $30 today. It's been as high as $131 in the 52-week range, so if you do have some cash you are willing to put away for a few years, a bet on energy prices once again rising in response to the diminishing supply seems a relatively safe one. 

GEX - a bit more 'ethical' than DIG, GEX is a fund which tracks global enterprises engaged in the development of alternative, environmentally-friendly energy sources. The New York Times today reported worries that the global downturn will hinder efforts to develop new sources of energy. (For instance, Theolia, one of France's largest alternative energy companies, has recently canceled plans for a subsidiary devoted to emerging markets, and has pulled back on its goals of how much energy it could produce by 2009.) 

There's undoubtedly some scope for renewed faith in global short-termism, yet I suspect that the upcoming Obama Presidency is still likely to stimulate investigation into alternatives to OPEC-dependence and, as I mentioned above, for how many years can energy prices really stay this low?  GEX used to cost $62 before collapsing to $15. It now trades close to $20. 

Las Vegas Sands Corp - LVS: Back on the dark side, this casino company recently looked on the brink when an industry analyst questioned its future as a going concern. Then it raised $2.1bn in new financing. Shares still dropped to an all-time low of $2.19 on Friday but have since rallied to $4. It has traded at $122 within the last 12 months. It won't do your soul any good, but it's a gamble that could pay off...

Citigroup - C:  Felt like a desperately risky venture at $3 last week, but was always going to be too big for the US Government to simply let go. Now trades at $6 and may possibly soon be catching up with the likes of Barclays (BCS) at $10 and Morgan Stanley (MS) at $14, major financial players whose futures now look just a little less secure than Citi's.  The trouble is that Citi has been issuing CDOs like Mexican governments used to print out the pesos and who knows how secure America's prime mortgage debt will prove to be in 2009.  Still looks a bit oversold now though. (The 'do you feel lucky punk?' play in this area has to be FAS though - the triple-leveraged financial bull fund which will give you three times the value of any future banking sector resurrection.) 

DBA - commodities like wheat, soya, sugar and corn have all taken a tumble along with oil. DBA tracks the Deutsche Bank Liquid Commodity Index and has fallen in price from $43 to $23. The fund may not have the potential for massive gains on the back of a future recovery, but it is worth keeping an eye on. 

Valero Energy Corp - VLO: - refiners have been hit hard and perhaps none harder than Valero, which earlier this year traded over $70 only to fall to as low as $13. It's medium term prospects are probably fairly similar to those of DIG above. 

Yahoo - YHOO:  Investors here must be feeling a bit like I did after my Belizean holiday, given that earlier in the year the Yahoo board turned down an offer of over $30 from Miscrosoft. Now trading at $10, this one looked to me a bit like a ride to nowhere a few weeks ago, but I have since looked into the company's cash position and discovered that it owns some tasty little digital businesses in the far east. Microsoft swears it isn't interested any more, but who knows? Rather unlikely to disappear down a hole in the next 18 months, so perhaps it is cheap at the price after all. 

Domino's - DPZ:  The pizza delivery firm has seen its share price sink to $2.5 from around $15 over the past few months without any obvious sign of imminent catastrophe. It has also been reported that board members have been frantically buying up the shares at these discount prices. (If Tacos are more your thing then Rubio's Restaurants - RUBO are looking similarly distressed, but right now also less likely to recover quickly.) 

Chico's FAS - CHK and Guess - GES:  Purveyors of expensive ladies' frocks are feeling the pain. Chico's and Guess stock recently shed 80% of their value. These are still good companies and CHK looks cheap at $2.37 this morning (and Guess not so bad at $12.50). 

EWZ - "Brazil, the country of the future....and always will be" goes the old gag. Less than 12 months ago The Economist rather blithely predicted that this time Brazil had enough local consumer demand not to go down with the lurgies as soon as America sneezed, but as it turned out this country of vast potential, along with the other members of the BRIC club, has become a major casualty of wealth destruction in 2008. The EWZ fund  tracks the performance of the MSCI market in Brazil and is today priced at $32, about 70% off its highs. 

Another developing market that has taken a pummeling is China. FXI tracks the Xinhua China 25 index and has dropped in price from $64 to $24 and remains very close to this low today. Nobody really thinks China is yesterday's news though, do they? 

Alcoa- AA and Steel Dynamics - STLD: The slow down in US (and maybe also global) manufacturing has depressed the values of stocks in companies like Alcoa and Steel Dynamics (aluminium and steel production respectively). STLD fell from $40 to $5 and AA from $44 to $7. Both are likely to remain depressed as long as the US economy struggles, but look like solid longer-term bets.

Quote of the Day

"A cloud of critics, of compilers, of commentators darkened the face of learning, and the decline of genius was soon followed by the corruption of taste."

Gibbon

[I spotted this gobbet from The Decline and Fall of the Roman Empire the other day in David Mitchell's Cloud Atlas and it hastened me to reflect on the awful hall of mirrors my professional existence had become in the last few years before I left London.]

Time to jump

One of the most consistently accurate predictors of imminent financial collapse has been the arrival of each new instance of the "world's tallest building."

As it was for the Chrysler Building in 1929, so it has been for the Burj Dubai, off the top of which we can see some loons jumping in this clip...

Trip Pic of the Day: Flores

What happened here?

When I first came to Flores back in '88 it was - sin ofender - the culo del mundo.

Now this little island township on Guatemala's second largest lake has a charm sharpened with incipient sophistication; a mildy Mediterranean mood one might even suggest.

There are even loads of pretty girls buzzing around the place on mopeds. Ok, some of them are carrying new-borns and have other-halves at the handlebars...but this is surely progress.

Flores was not only the first proper town I visited in Guatemala, it was also the only such place I'd heard much about before I came to these parts. This was because it was the axis around which the revolutionary fantasies of my soon-to-be travelling companion turned. Once known as Tayasal, capital of one of the last independent Maya polities, he rather optimistically conjectured that a limited amount of sponsored insurgency, camouflaged as a Cambridge University archaeological expedition, might restore the autonomy of this region and reestablish indigenous sovereignty in the Petén.

In the end I was to enter Guatemala alone in April 1988, because my revolutionary comrade by then considered me a potential rival vis-à-vis his somewhat asymmetic romantic assault on a young English teacher in Belize, and had duly plotted to remove me from the scene by way of the three day solo excursion to Tikal that he had been strongly recommending to me!

Having arrived in Santa Elena on a late bus from the border which had been stopped en route by both army and guerrillas, I crossed over to Flores on the narrow rough earth causeway that in those days linked it to the southern shore of Lake Petén Itzá. This has since been replaced by a fine raised highway, a gift it seems of Alvaro Arzú Irigoyen, former President of Guatemala and world's best mayor. (Honestly, who cares if he knew in advance that they were going to clobber the bishop? Can't we put that one down to a bit of healthy anti-clericism?)

Cortés visited Tayasal on his way to discovering that Honduras wasn't really worth discovering. He left his sick horse with the Indians he found there, promising to return, but never did. Iberian missionaries later found that the island's inhabitants had given themselves over to a cult of equine worship - it seems that they'd accidentally killed off the Conquistador's mount by feeding it flowers and, uneasy with the idea of being responsible for the death of such a deity had, by way of atonement, constructed a stone statue of the defunct steed, naming it Tzimin Chac or 'Thunder Horse'.

Some more pics of the lovely Flores here.

Trip Pic of the Day: Omoa

Omoa. A pretty name, but basically a godforsaken little seaside stop-over on the northern shore of Honduras.

There was a motley collection of buitres and chuchos - vultures and street dogs - sitting outside my bedroom door when I opened it on the morning of Saturday the 8th.

The Rough Guide claims that more and more travellers are choosing to spend some time in Omoa, but I saw little evidence of other transient foreigners, though I did get a ride from a resident of Maltese origin who had come here many years ago to pursue an interest in sailing following a career as a London cab driver. Food and accommodation is no bargain here either.

Omoa's most noteworthy feature is the fort of San Fernando de Omoa completed in 1775 to defend the area against English pirates. Five years later the Brits, aided by Miskito Indians thoroughly sacked the town. They initially failed to capture the fort, because the Baymen in the vanguard had somehow misplaced their scaling ladders in the first assault, but after a long bombardment from the Royal Navy ships Lowestoffe and Charon, the garrison was eventually overrun and $2m of treasure filched from Spanish coffers.

This part of the Caribbean is fronted by a line of moderately imposing peaks separated from the shoreline by a narrow plain, perhaps not much more than a mile wide around Omoa. A decade after Mitch the bridges along the road from the border with Guatemala have all now been repaired, but the effects of the hurricane are still visible in the disfigured, boulder-strewn banks of the various little rivers which penetrate through to the sea here.

Large-scale agriculture is more conspicuous on the Guatemalan side of the border, where the road turns south west before joining the main Atlantic highway to Puerto Barrios: on one side there are vast plantations of banana, on the other, Palma Africana, another non-native crop plant from which 25% of the world's vegetable oil is derived.

More pics of Omoa here.

New Latinobarómetro survey

Guatemalans are at least fairly consistent on this one.

Do the Venezuelans even understand the question?

Mellow Tune of the Day

Baffled

Word reached me via the Herons Farm grapevine yesterday that Sir Martin Sorrell has instructed WPP companies to tear up any employment contracts that may have been issued but not yet signed.

I'm glad I'm not having to work in that sort of atmosphere any more. Indeed I am generally overjoyed that I saw it coming and made all the right changes in my life long enough in advance.

It seemed all too obvious what was going to happen from the Autumn of 2007. And yet there are there are significant voices out there who still claim to find it all rather baffling.

I was recently reclining in this Belizean hammock listening to a radio interview given by Steven Levitt to Simon Mayo. The Freakonomics co-author excused himself from any intuitive expertise in macroeconomics before suggesting that he could not understand why American blue-chips such as Wal-Mart had shed so much value in October.

According to Levitt, a few investment banks that "were not very important to the American economy" had made some very bad bets, but there was no particular reason why the retail banking system should be punished for this. He cited Iceland's banks in particular, whose only fault he felt, was that their assets had vastly exceeded the local GDP, which petrified the kind of investor who favours government bail-outs as the ultimate safety net for savers.

A welcome antidote to the likes of Nouriel Roubini perhaps, but parts of the 'rogue' economist's message struck me as deliberately disingenuous. To say that the stock market is essentially "a high-end gambling system that bears little relation to the real economy" is really little more than a restatement of the problem. And it's not just a high-end gambling system, frankly. Gamblers who place bets on horses are creating brand new financial risks where none existed before. Stock market speculators, on the other hand, are assuming risks that were already embedded in the wider capitalist system. (In this model it is the entrepreneur who is the gambler!)

Levitt also took some flak from estate agents, about whom the data suggests they wait longer and get a better price for their own homes than they do for the clients. One of the thus accused rang in to say that it is the sellers' inexperience and general anxiety that prompts them to accept the first goodish offer, not bullying from the realtors's profession. I think I'm still with Levitt on that one...

A new Freakonomics book is in the pipeline it seems.

The Island (1973)

Trip Pic of the Day

The Sarita ice-cream parlour at Valle Dorado, Guatemala. Sign reads:

No Pets...

No Food and Drink...

No Guns.

Quote of the Day

"The reader is perhaps curious to know how old cities sell in Central America. Like other articles of trade, they are regulated by the quantity in the market, and the demand; but, not being staple articles, like cotton and indigo, they were held at fancy prices, and at the time were dull of sale. I paid fifty dollars for Copan. There was never any difficulty about price. I offered that sum, for which Don Jose Maria thought me only a fool; if I had offered more, he would probably have considered me something worse."
John Lloyd Stephens on acquiring the ruins of Copan in 1839

Quiko of the Day

'Knowledgability'

If even Faux News suspects that this, even more than the Lehman Bros collapse, was what did for McCain, it's got to be worth re-watching:



And...



But watch out Governor Palin, this red-stater could be on the ticket in 2012:

Throwing the ball down field

Some thoughts on health insurance

Even before the new democratic era of the 80s, many Latin American states - Guatemala included - assumed a degree of responsibility for welfare and pensions, considered one of the necessary burdens of modern nation-building.

Yet social spending in Guatemala has been inevitably compromised because the state has only been able to raise around 10% of GDP in annual taxation. (The average in developed nations is 29%. "Where the tax take is less than a fifth of GDP it is hard for the state to command sufficient resources to provide basic public goods," notes Michael Reid at The Economist.)

The worst off, especially those living in remote rural communities, have thus tended to fall outside the scope of welfare provision. Nevertheless a pair of EU-funded projects run by Medicus Mundi are now attempting to demonstrate the viability of 'inclusive' healthcare in Guatemala, with vocal support at least from VP Rafael Espada, himself a prominent physician.

I recently read a compelling explanation by 'Undercover Economist' Tim Harford of the innate flaws in the American model for voluntary health insurance, which goes a bit like this:

All insurance policies depend on mutual ignorance. If either buyers or sellers knows more than the other, then the market simply won't function properly, no matter how much one maintains a knuckleheaded insistence that the alternatives violate liberal economic principles and represent a major step on the road to socialism.

With many kinds of insurance all parties are more or less equally ignorant of future events, but with health insurance it is often the case that the patient has a better idea than the insurer about his or her propensity to make use of a policy. And when the system is voluntary, the young poor who have more urgent budgetary issues, and anyone else who suspects they might not need the cover in the forseeable future, tend to drop out of the system - which raises the premiums for everyone else. Gradually more and more drop out...

Of course the insurers can take steps to reduce these asymmetries of information, but monitoring patient behaviours adds to the levels of bureaucracy and cost. And the more actuarially accurate the information about the risks underlying the transaction, the more likely the cost of insurance will end up approximating the actual cost of treatment, which kind of defeats the object.

Around 15% of the US population is not covered by any health insurance. The US government still manages to spend on its Medicare and Medicaid programmes (which cover the old and marginal groups) more per person that the UK government spends on the NHS which covers everyone.

So it appears that in a 'market-based' system the insurers sell only to people who think they might need it, which means costlier claims and higher premiums, extensive bureaucracy and a large number of people left uninsured.

Harford deems as hardly much better both the NHS in the UK and the kind of 'social insurance' common elsewhere in Europe. If only 17% of Americans approve of their creaky system, just 25% of Brits are happy with the NHS with its long waiting lists and diminished patient choice.

Instead Harford points to the system rolled out in Singapore where the government gives citizens a tax break but insists that the resulting windfall is invested in a high-interest savings account.

This is in effect the money that the state would anyway have paid on a per-person basis. The government can make up any shortfalls and provide catastrophe insurance for the very major medical bills, but will otherwise leave it to the patients to responsibly manage their own costs, effectively incentivising them to spend only what is necessary. At retirement age, any funds remaining can be transfered to a pension fund, and they can also be willed to surviving relatives at death.

Such a system is of course a distant dream for Guatemalans. Standards of living and levels of education would need to improve substantially here, before a private health-care system fuelled by responsible, self-informing patients could bring widespread benefits.