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Posts Tagged ‘great recession’


How badly are US citizens financially struggling this late in an economic expansion?

In early January 2016, the US Department of Education announced the rate of people defaulting on their student loans had dropped from 11.8 percent in 2015 to 11.2 percent in 2016. Back in 2013, the default rate had nearly hit 15 percent.

In 2015, the Obama white house issued a report which stated, “The cohort default rate published by the Education Department is “‘susceptible to artificial manipulation.’” The report stated that the share of student borrowers paying down their loans more accurately reflects what is occurring than default rates alone. The report noted that a rising number of students are unable to make payments on their loans, but manage to avoid defaulting. Because of this, the report stated the actual default rate plus those former student loan borrowers out of school who are not paying down the balances on their loans stood at 25 percent.

However, it turns out the White House report understated the numbers by quite a lot. Leaked documents in early January 2016 showed only 46 percent of students out of school three years or more are paying down their student loan principal. This means 54 percent are not paying down their loans.

However, on closer inspection, something else is terribly amiss, as well. To be among the 46 percent, you cannot be in default, and you must have paid down the principal of your loan by at least one dollar. So if somebody who has owed $30,000 in student loans since they graduated from college ten years ago paid a dollar on the principal of their loan eight years ago, they have officially paid down their loan and are among the 46 percent. If somebody borrowed $16,000 twenty-five years ago, paid off a dollar on their balance, and haven’t paid a dime since, and have incurred tens of thousands of dollars of penalties and late fees, they, too, are among the 46 percent.

The bar for those who have not defaulted and are paying down their loans are about as low as one can get. The actual crisis, therefore, is even greater than we have been led to believe. This suggests a number of things.

One is that the number of people failing to pay on their student loan balances is significantly less than 46 percent if we raise the bar to $2 or higher. Second, the US economy is historically weak enough that tens of millions of student loan borrowers are unable to pay down their balances (There are roughly 42 million people who have student loan balances).

This suggests the economy is historically weak, and the consequences of this weakness will spread throughout the United States when the economy begins to tank this summer. This suggests defaults will be historically high on home mortgages, car loans, credit card debt, and much more. All of which, strongly suggests this next recession will be worst for the 99 percent than the Great Recession of 2007-09.

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The US government has been redistributing income from the 99 to the 1 percent for the last thirty-five years. The result of this government created income and wealth inequality has been an economy far weaker in virtually all measurements than any of the last century. That’s because the underlying economic factors have been weakened.

According to a study by the Pew Charitable Trust,

“Although income and earnings have increased over the past 30 years, they have changed little in the past decade. The typical worker had wage growth of 22 percent between 1979 and 1999 but just 2 percent from 1999 to 2009. (This is not in inflation adjusted wages, in which case, wages would’ve been stagnant or declining over the last thirty-five years).

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• The Great Recession eroded 20 years of consumption growth, pushing spending back to 1990 levels. Over the 22 years before the start of the downturn, household expenditures grew by 16 percent. But households tightened their purse strings after the start of the recession in 2007, and spending has yet to recover. As a result, the net increase in average annual household spending is just 2 percent since 1990. That’s despite twenty-six years of inflation growth.

• The majority of American households (55 percent) are savings-limited, meaning they can replace less than one month of their income through liquid savings. Low-income families are particularly unprepared for emergencies: The typical household at the bottom of the income ladder has the equivalent of less than two weeks’ worth of income in checking and savings accounts and cash at home.

• Even when pooling all of its resources—including from accounts that are potentially costly to access, such as retirement accounts and investments—the typical middle-income household can replace only about four months of lost income.

• Most families face financial strain across all balance sheet elements: income, expenditures, and wealth. In addition to being savings-limited, households face other financial challenges; just under half of families are “income-constrained,” reporting household spending greater than or equal to their income; and 8 percent are “debt-challenged,” with payments equal to 41 percent or more of their gross monthly income. Fully 70 percent of households face at least one of these problems, with many confronting two or even all three.

http://www.pewtrusts.org/~/media/assets/2015/01/fsm_balance_sheet_report.pdf

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The Great Contraction, the last recession, which happened to be the worse recession since the Great Depression, left a lot of damage in its wake. Jobs, for example.

Since the recession ended, people have had to create their own jobs. More than ever before, we see people earning extra cash via Uber, Lyft, AirBnB, and starting their own coffee shops, or food carts, as their main means of income. Forty years ago, in my neighborhood in Portland Oregon, we didn’t have a single coffee shop within twenty blocks.

Now we have four within ten blocks, and that’s only to the East of me, and that doesn’t count the food carts that serve only coffee.

We didn’t have more than a few food carts operating in the area. Now we have quite a few. You need to do something for a living. These food cart folks, and most of the coffee shop owners, and the folks I know working as Uber drivers, aren’t making a lot of money.

That’s because these folks, along with the rest of us, are battling it out among themselves for fewer and fewer dollars. The 1 percent is now stealing 37 percent of all US income, compared to 8 percent back in 1980. That means the rest of us are battling it out to get a piece of that 63 percent of yearly income, compared to 92 percent back in 1980, back when the economy was producing way more jobs than nowadays, with rising real wages, and with an economy and population much smaller than today.

Where’d are jobs go? They’ve been exported to China, Pakistan, India, Mexico, Vietnam and elsewhere thanks to international income redistribution agreements, which are falsely marketed as international trade agreements. The difference between the old higher US wages and the new lower overseas wages goes straight into the already fat wallets of the rich via higher corporate profits, rising dividends and surging share prices.

And that folks is precisely why the rich are now stealing 37 percent of all the yearly income produced in the United States, and why more and more people are thrust into poverty, and why thousands upon thousands of US citizens are now working for peanuts at coffee shops and for Uber and Lyft and other made up jobs.

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On Feb 4, U.S. Trade Representative Michael Froman  joined other trade ministers from throughout the Pacific Rim in signing the Trans-Pacific Partnership (TPP) in New Zealand. Signing is not the same as ratifying. What the signing means is that the negotiations are concluded; the text is done; and that the TPP can now be submitted for a Fast Tracked vote in Congress at almost any time. Because of Fast Track legislation pushed President Obama, Wall Street Democratic Senator Ron Wyden, Wall Street Presidential Candidate Hillary Clinton, and almost all the Republican Party except a few, such as US Senator Jeff Sessions.

The TPP is the largest international income redistribution treaty ever concocted. It will ship millions of US jobs to China and Vietnam, circumvent US law and the US Constitution, and raise prices for US citizens and citizens throughout the area of the Pacific on such things as medicines. The difference between the old higher US wages and the new lower wages, and the difference between the old lower prices and the new higher prices, will go straight into the pockets of the rich via higher corporate profits, rising share prices, and soaring dividends. The TPP will also drive millions of immigrants from Latin America to the USA illegally because their jobs will be shipped to Vietnam and China too, and they won’t have anyplace else to go.

Currently, the 1 percent steal about 37 percent of all the income produced yearly in the USA, up from 8 percent in 1980. Wyden, Obama, Clinton and almost the entire Republican Party intend to redistribute even more to the 1 percent with the TPP. And here we are facing the unfolding storm of the greatest economic crisis since the Great Depression. I’ve been watching it unfold since last summer. It’s picking up steam, and officially should hit somewhere between September 2016 and June 2017. The entire US manufacturing sector has been in recession, for example, since November 2015.

It’s critical that Congress is hearing strong constituent opposition to the TPP right now. Please write your Members of Congress and urge them to come out publicly against the TPP.

For the better part of a decade, we have told our representatives we want a “Fair Deal or No Deal” on Trans-Pacific trade. Now that the text is finalized and changes are all-but-impossible, it’s clear that — while a handful of well-connected corporations got a more-than-fair deal for themselves — for everyone else, the TPP would be a disaster for the economy, the environment and public health.

The TPP Is Bad for Jobs & Wages
As you would expect from a deal negotiated with hundreds of corporate advisors, while the public and the press were shut out, if enacted, the TPP would offshore good-paying American jobs, lower wages and increase inequality by forcing Americans into competition with highly-exploited workers abroad paid less than 65 cents an hour.

The TPP’s much-touted new labor standards are so abysmally weak that countries could literally set their minimum wage at $1/day and their maximum hours of work at 24/day and still be in compliance. The pact simply does not do enough to protect jobs at home or human rights abroad. Instead, it would only accelerate the global race to the bottom in wages and working conditions.

On top of that, the TPP is so poorly negotiated that it contains a massive backdoor for products that are assembled mostly from parts made in third-party countries such as China, with no TPP obligations whatsoever, to enter the US duty free.

The TPP will also force China to manipulate its currency by at least 15 percent. This increases the profits of US corporations manufacturing products in China, and exporting them to the USA. This will compel many US companies to export jobs to China since the currency manipulation will increase the profits of these companies from 36 to 140 percent.

Tell Congress we can’t afford a massive new job-killing, wage-suppressing trade deal.

The TPP Is Bad for Food Safety
The TPP would flood the United States with unsafe foods. Going beyond previous trade deals, the TPP includes first-of-its-kind language allowing corporations to challenge both U.S. food inspection protocols and individual food inspection decisions.

Consumer advocates have warned the TPP could have a major chilling effect on efforts to keep out unsafe foods that don’t meet the same standards that U.S. farmers, ranchers and other producers are required to meet.

Tell Congress we can’t afford a trade deal that jeopardizes the safety of the food we feed our families.

The TPP Is Bad for the Environment
The TPP would actually roll back environmental enforcement provisions found in all U.S. trade agreements since the George W. Bush administration, requiring enforcement of only one out of the seven environmental treaties covered by Bush-era trade agreements.

Beyond just failing to mention the term “climate change” in its thousands of pages, the TPP would also provide corporations with new tools for attacking environmental and consumer protections, while simultaneously increasing the export of climate-disrupting fossil fuels.

Tell Congress we can’t afford a trade deal that threatens the air we breathe, the water we drink and the future we leave for our children and grandchildren.

The TPP Is Bad for Access to Medicine
Many of the TPP’s intellectual property provisions would effectively delay the introduction of low-cost generic medications, increasing health care prices and reducing access to medicine both at home and abroad.

The TPP contains requirements that TPP nations allow additional 20-year patents for new uses of drugs already under patent, among other rules that would promote the “evergreening” of patent monopolies. Other TPP provisions may enable pharmaceutical companies to challenge Medicare drug listing decisions, Medicaid reimbursements and constrain future U.S. policy reforms to reduce healthcare costs.

Tell Congress we can’t afford a trade deal that limits access to life-saving generic medications.

The TPP Is Bad for Human Rights
The TPP includes several notorious violators of international human rights, such as Brunei, where LGBT individuals and single mothers can be stoned to death under Sharia law and Malaysia where huge numbers of ethnic minorities are trafficked through the jungle in modern slavery.

Tell Congress we can’t afford to ignore the actions of notorious human rights abusers.

Too many Congress members have hemmed and hawed about the TPP, refusing to state their position. Now that the text has been public for months, and that the agreement has actually been signed, the time for fence-sitting is over. Please contact your Members of Congress now and urge them to oppose the TPP.

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By Kelly Conklin

Thirty-seven years ago, my wife and I founded Foley Waite, an architectural woodworking company based in Kenilworth, New Jersey. My high school woodshop teacher, Mr. Thomas, instilled in me the pride of making things with my hands, and I’m incredibly lucky to have turned that passion into a successful small business.

We started with just the two of us working in a tiny shop, and now we have thirteen employees who are also highly skilled in our trade, allowing us to provide a very high level of quality and detail in each custom project we install across the tri-state area.
But like many others, our small business struggled through the Great Recession. And although we’ve slowly rebuilt, and we’ve been able to restore wages to their pre-recession levels, we are watching very nervously as Congress considers again making it harder for American small businesses to compete.

Even with the economy as fragile as it is, apparently some Congressmen and President Obama think it’s a good idea to “fast track” another bad trade agreement, this time with many low-wage countries in Asia that undercut businesses like mine. As a business owner, I think it’s a bad idea to give the President a blank check to negotiate another bad deal for the American economy.

For decades, we’ve heard that so-called “free trade” agreements will lead to higher wages, new jobs and more economic development. Free trade was supposed to be the panacea that will cure our nation’s economic ills.

But small business owners like me know better. These trade agreements have been anything but free, and they’ve given the advantage to huge corporations that make cheaper, low-quality knock-offs, costing me business and holding down wages for employees in my industry.

Outsourcing American jobs overseas doesn’t make our economy stronger. Instead, unbalanced trade agreements tip the scales against workers and employers who want to do the right thing and create jobs at home.

In my case, it’s because fast-tracked agreements like NAFTA – and the newly proposed Trans Pacific Partnership (TPP) – devalue the work we do. We pride ourselves on family-supporting wages and high-quality work, but overseas companies can ignore wage standards, environmental rules, and labor laws, and end up paying their workers a fraction of what my employees earn. That puts downward pressure on prices and wages, which hurts both business and workers.

What this nation needs is smarter trade deals that lift up both business and workers. Trade agreements that get other countries to live up to our standards, rather than force us to compete downward, will be how my business grows and our economy grows. I want to value the individuals who make my community strong.

For me, this isn’t about “fairness” or “leveling the playing field.” After four decades building a small business, I know life isn’t fair, and that the playing field is never level. But going down the same road of previous failed trade deals challenges common sense.

The question is crystal clear: do we need another bad trade deal? The answer is a resounding, “no!” Congress should reject fast track and move towards an economic policy that values American work, American manufacturing, and American jobs.

Conklin is the co-owner of Foley Waite in Kenilworth, NJ. He is also on the National Executive Committee of The Main Street Alliance, a national network of small business coalitions working to build a new voice for small businesses on important public policy issues.

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“As Ben S. Bernanke walks away from the Federal Reserve’s marble headquarters on the Mall here after presiding over his last policy meeting on Wednesday, he will leave behind a bittersweet legacy.

On one hand, his unprecedented efforts to drive down interest rates and stimulate the economy are widely credited by his peers with saving the nation from a second Great Depression, strengthening the economic recovery and leaving the nation’s financial condition poised to take off this year.

Yet those same policies have added momentum to one of the greatest surges in economic inequality in US history, helping the wealthiest Americans add to their enormous riches while the incomes of almost everyone else stagnated.”

What isn’t mentioned in Bernanke’s legacy is the probable wholesale corruption going on at the Federal Reserve. The primary purpose of the Fed appears to be to shield rich investors from any market forces they encounter that lessons their wealth. In other words, the Feds primary responsibility appears to be to rescue the rich from their own foolish decisions. This has opened the door to what appears to be a massive amount of corruption, both in the Fed and in the US government. See Breakdown of the $26 Trillion the Federal Reserve Handed Out to Save Incompetent, but Rich Investors–Johnhively.wordpress.com

As for the rest of Bernanke’s dubious legacy, click on the link below.

Ben Bernanke Leaves Legacy of Stimulus and Stagnation–The Sydney Morning Herald

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From the Pew Research Center

 

According to new research from the Pew Research Center, this year, a record 36 percent of young adults (18-31 years) live with their parents. That’s up from 34 percent in 2009, the year the Great Recession officially (so we’re told), but not really, ended.

Since 1981, the percentage of young adults living at home hovered around 31 percent. The Great Recession continues to change that.

As usual, the folks at Pew don’t seem to understand the underlying reasons why this has occurred. They cite three reasons why the trend is increasing. By the way, the phase “Millennials” is used to describe the 18 to 31 year old people in their report.

1. “Declining employment. In 2012, 63% of 18- to 31-year-olds had jobs, down from the 70% of their same-aged counterparts who had jobs in 2007. In 2012, unemployed Millennials were much more likely than employed Millennials to be living with their parents (45% versus 29%).

2. “Rising college enrollment. In March 2012, 39% of 18- to 24-year-olds were enrolled in college, up from 35% in March 2007. Among 18 to 24 year olds, those enrolled in college were much more likely than those not in college to be living at home – 66% versus 50%.”

3. “Declining marriage. In 2012 just 25% of Millennials were married, down from the 30% of 18- to 31-year-olds who were married in 2007. Today’s unmarried Millennials are much more likely than married Millennials to be living with their parents (47% versus 3%).”

Those reasons seem okay, but they’re like looking at a house that’s burned down and saying a fire caused that. Wouldn’t a more important question be, “What caused the fire?” Ergo, they’re saying more Millennials are living at home because less of them have jobs. The more important question is, Why is this so?

The answer is that over the last thirty years, the federal government has been corrupted by big money, and so our favorite politicians continue to pass legislation that redistributes income from the 99 to the 1 percent, such as corporate trade treaties, erroneously called “free trade treaties.”

The result is that less and less of the income produced in the United States goes to the 99 percent. The 99 percent took home about 92 percent of the national income in 1978. The economy created almost 4 million private sector jobs that year because the 99 percent had enough money to demand the goods and services necessary to create those jobs. That’s almost 250 thousand private sector jobs per month that was created, despite the economy being about 50 percent the size of today, and with only about 58 percent of the population.

In the last three months, the economy has created an average of 175 thousand jobs on average, a fairly high rate for the last thirteen years, and a massive underachievement worthy of Bart Simpson. That’s because the 99 percent nowadays only get about 68 percent of the total income produced in the nation, so the demand for goods and services is far less than those days when the 99 percent had a voice in the federal government.

The 1 percent doesn’t use their money to buy the goods and services necessary to create jobs. They purchase such things as derivatives, stocks, bonds, gold, politicians such as Wall Street Senator Ron Wyden, and legislation that redistributes income from the 99 to the 1 percent.

The war against the middle class continues, more and more income and wealth is being redistributed to the 1 percent via the corrupt federal government every week, so that this low grade Depression we’re in will get worse in the long run. So we can anticipate a growing number of young people will have no choice but to live with their parents in the years to come.

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