Archive for October, 2012

In the last of a three-part series, All Things Considered talks with several North Carolinians who are living in poverty, but aspire to the middle class. Hard work is key to a better life, they say — but that it’s not easy to keep moving up the ladder.

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via Economy http://www.npr.org/2012/10/31/163900660/at-the-economys-bottom-rungs-striving-to-climb-up?ft=1&f=1017

THIS week’s print edition reviews two new insider accounts that describe the dark underside to America’s bank bailouts. The common theme of both Neil Barofsky’s Bailout and Sheila Bair’s Bull by the Horns is that the U.S. government cared a lot more about saving the incumbent banks and bankers than it did about helping regular Americans blindsided by the collapse of the housing market and the ensuing contraction. As a result, many Americans now believe that the rules are rigged against them for the benefit of a few politically-connected financial speculators: privatized gains and socialized losses. It is difficult to disagree.On one side of the ledger, we see that the big banks are bigger than ever, more than 90% of the gains in GDP in the past four years have accrued to those in the top 1% of the income distribution, and total Wall Street pay is still near record highs despite a sharp drop in employment. On the other, we find that median net worth fell by 40% since 2007, real median income is still 8% lower than in 2007, there are still more than 7 million fewer full-time jobs than in 2007, and there have been at least 4 million foreclosures, many of which could have been prevented through investor-friendly government policies.A few excerpts from the review:Mr Barofsky reports that no one in the Treasury Department and almost nobody at the Federal Reserve seemed …

via Economic Crisis http://www.economist.com/blogs/freeexchange/2012/10/americas-bank-bailouts?fsrc=rss

 

Ever since the start of the global financial crisis the government of Canada has boasted about the strength of the country’s banks, gleefully pointing out for five years running that the World Economic Forum has pronounced the Canadian financial system the strongest in the world. It may be strong, but it is not invulnerable. On October 26th, Moody’s, a big ratings agency, said it was reviewing six of the largest Canadian banks with an eye to downgrading their credit ratings.

via Economic Crisis http://www.economist.com/blogs/schumpeter/2012/10/canadian-banks?fsrc=rss

THE New York Times’ David Leonhardt wrote a nice piece a few days ago on the puzzling problem of stagnant median incomes in America. The real income of the median household peaked in 1999 at $54,932 and has since fallen back to a level first attained in about 1996—over a decade and a half without a real income gain.I thought it would be interesting to take a look at some of the geographic disparities in real income growth over that time period. At right you can see a look at the top and bottom ten states for real median household income growth for 1999-2007 and 1999-2011 (to illustrate the impact of the crisis). A few things stand out. Places that enjoyed strong real income growth over the past decade tend to either be large, sparsely populated plains states or states with a thriving energy industry (or both). Greater Boston seems to show up here quite strongly, and government appears to have buoyed Washington and Virginia. A bad real income performance seems to be strongly related to share of manufacturing in the economy. When one looks at the data as a whole, the more populous states that don’t show up here, like California, Florida, and Pennsylvania, experienced real income gains during the earlier period that were wiped out by the downturn; secular stagnation no doubt pays a role there, but the crisis clearly explains a large share of the poor income …

via Economic Crisis http://www.economist.com/blogs/freeexchange/2012/10/income-stagnation?fsrc=rss

IT ISN’T difficult to be the least dirty shirt in the hamper these days. America’s economy seems to relish the role, continuing to post growth performances that would be utterly disappointing were they not so much better than those managed by other rich countries. Real output rose at a 2% annual pace in the third quarter, reported the Bureau of Economic Analysis this morning. That’s miles better than Europe, which remains stuck in recession. It also marks an acceleration from a second quarter in which growth clocked in at just 1.3%. Yet it’s still far too little given the gap between actual output and what the economy should be capable of producing—nearly $900 billion, a 6% shortfall.Unquestionably, there is good news in the report. The acceleration itself is encouraging. So too are some of the sources of that acceleration. Consumers continue to pull their weight, and an 8.5% rate of growth of durable goods consumption in the third quarter suggests that the appetite for big purchases is holding up. Residential investment boomed, rising at a 14.4% annual pace for the quarter. Despite that the sector managed just a 0.33 percentage-point contribution to total growth. The relatively low contribution reflects just how far residential output tumbled during the recession and recovery. Construction should chip in ever more in coming quarters, however, as inventory levels have been …

via Economic Crisis http://www.economist.com/blogs/freeexchange/2012/10/americas-recovery?fsrc=rss

UK Only Article: 
standard article

Issue: 

The man who must change China

Fly Title: 

The bank bail-out

Rubric: 

How America bailed out the banks rather than its citizens

Main image: 

A full-time occupation

A full-time occupation

Bailout: An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street. By Neil Barofsky. Simon and Schuster; 271 pages; $26. Free Press; £18.99. Buy from Amazon.com, Amazon.co.uk
Bull by the Horns: Fighting to Save Main Street From Wall Street and Wall Street from Itself. By Sheila Bair. Simon and Schuster; 415 pages; $26.99. Buy from Amazon.com
IN JULY 2008 the Federal Deposit Insurance Corporation (FDIC) closed IndyMac, a Californian lender. Anyone who had more than $100,000 in savings suffered heavy losses, including a woman who had just deposited her son’s life- insurance benefits after he was killed in Afghanistan. Later that year the government insisted that derivatives contracts sold by AIG, the failed insurer, would be honoured …

via Economic Crisis http://www.economist.com/news/books-and-arts/21565142-how-america-bailed-out-banks-rather-its-citizens-crisis-mismanagement?fsrc=rss

UK Only Article: 
standard article

Issue: 

The man who must change China

Fly Title: 

Spain’s fiscal woes

Rubric: 

When a bail-out for Spain arrives, it is likely to be prolonged

Main image: 

20121027_FND001_0.jpg

THE calm that has followed Mario Draghi’s vow in July to do whatever it takes to save the euro is deceptive. The head of the European Central Bank (ECB) pledged to make potentially unlimited purchases of short-term government bonds of euro-zone countries that ask for (and receive) help from international lenders. But his pledge is yet to be tested. When it is, the supplicant will probably be Spain, the fourth-largest euro-area economy.
The government of Mariano Rajoy hopes that Spain can get a bail-out of its public finances (it has already won support for its banks) without having to sign up to harsher austerity measures than those it has already implemented. It argues that Spain is suffering a temporary liquidity problem. It wants the European Stability Mechanism (ESM), …

via Economic Crisis http://www.economist.com/news/finance-and-economics/21565214-when-bail-out-spain-arrives-it-likely-be-prolonged-state-denial?fsrc=rss