The Expense of Being Poor

I came across this January 19, 2015 NYTimes Charles M. Blow opinion article "charles-blow-how-expensive-it-is-to-be-poor" that I now recommend to you. I was particularly struck by this restatement from the St. Louis Federal Reserve in 2010:

"Unbanked consumers spend approximately 2.5 to 3 percent of a government benefits check and between 4 percent and 5 percent of payroll check just to cash them. Additional dollars are spent to purchase money orders to pay routine monthly expenses. When you consider the cost for cashing a bi-weekly payroll check and buying about six money orders each month, a household with a net income of $20,000 may pay as much as $1,200 annually for alternative service fees — substantially more than the expense of a monthly checking account."

Disclosure: As a middle class individual having sufficient cash flow issues that require a banking need for me, I recommend First Republic Bank to you the reader. I discovered this bank when I became irate at the 4% fee on a $50 cash withdrawal from any ATM endowed banks. First Republic reimburses me the ATM fees charged by all banks world-wide. It is regrettable that I must keep a minimum balance in my checking account - - however if I go under, First Republic customer service is so responsive that they almost always waive the fee retroactively.

The Income Inequality Oath

The Income Inequality Oath: First, Do No Harm by Chuck Sheketoff was reposted to the blog of Oregon Center for Public Policy reminds the reader that governments national and local should NOT enact policies that will exacerbate inequality.

Pertinent to Oregon's situation:

The post was originally published on www.blueoregon.com on July 31, 2014 and could be found at http://www.blueoregon.com/2014/07/income-inequality-oath-first-do-no-harm/.

Helot nations

imagine this version of post civil war southern  reconstruction
an actual partition into two entities


a black belt and a white Dixie




much like the partitio9n of the holy lands in 1948


now imagine subsequent dual  evolution


ya ya ya
I get the sense we'd end up where the holy lands are  now


Zionist state centered jewish nation
an uber nation
 and an oppressed dispersed  Palestinian nation
a helot nation




is the black nation here in north America post slavery
all that different from the  post partition Palestinian nation ?


how about Chicanos


not to mention the so called "tribal"  nations


we have inter national inequalities here


us uber national "whites"


mustn't forget  these points of  "contradiction"


the helot nations within America
are a strong if diverse set of bases
necessary in forming a pro equality grand coalition

Lack of Access Promotes Inequality - Western Nebraska Report

Profitable farming in Western Nebraska, and I imagine in many other parts of the United States of America, requires access to resources (land, water, nearby roads et cetera) and significant amounts of capital (to purchase seed, fertilizers and pesticides, own and maintain expensive equipment and hire other individuals, with or without expensive equipment, to work the fields). To the outsider farming appears to be a risky speculative business. For the uninformed, inexperienced and foolish, profitable farming is a risky speculative business.

Big Ag aka Big Agriculture is a growing and ongoing success in the USA with the Big Ag methods exported abroad.

- Intensive Crop Farming

- Union of Concerned Scientists: Hidden Cost of Industrial Agriculture

- Industrial Livestock Production

Lack of Access Promotes Inequality:
As of August 2014, the price of land is at a record high. Uncertain growth of the USA economy with the peculiar on-going government accounting practices suggesting inflation is under control, tells savvy investors and farmer/ranchers that the ownership of land, large parcels of land, is a safe investment producing product that government(s) and corporations (and eventually consumers) will buy. Therefore there are three classes of farmer/ranchers here:

Large land owner operators, like my father-in-law Frank Svoboda, who have several circles of land with center pivot irrigation and/or many sections of dry land suitable for either crop production or grazing, 1 mile x 1 mile, section defined. These large land owner operators have access to the banks and vendors to secure easy terms for their large operation capital needs and often own their own land.

Middle class farmer/ranchers may own or rent a small parcel of land, such as a 1/2 section. These individuals often work several jobs: a little time spent working their own ground, much more time spent working the ground of large land owner operators or taking jobs in the cattle feed lots, newly constructed ethanol manufacturing facilities or nearby towns.

There are no low-income farmers in Western Nebraska.

However, there are low-income ranchers whose condition will never change as their agricultural practice is not respected nor supported by the profit takers. Rancher testifies to the need for Medicaid expansion : Politics
journalstar.com/.../rancher.../article_ee55130e-2879-...
Lincoln Journal Star
Dec 18, 2013 - "This is not just my personal story, it's western Nebraska's personal story," ... With a $10,100 adjusted gross income, she is too poor to qualify for ...

- Steve Bull, August 24, 2014

I am in Western Nebraska. I have two sections of dry land in agricultural production: one half section is organic and produces crops of millet, wheat, field peas and sunflowers, and the other half section is chemically supported "normal" practice and produces field peas, wheat and corn. Last year was a drought year. This year there has been rain and no hail on my crops.

Locality and Inequality by Troutt

David Dante Troutt spoke intelligently about the connection between locality and inequality on the Leonard Lopate Show. Listen to the interview at http://www.wnyc.org/radio/#/ondemand/341035. Troutt has published on this matter with The Price of Paradise: The Cost of Inequality and the Vision for a More Equitable America.

A Year and a Half Later – the Economy is Still Blocked

The Unstable 2000s

“How to Unblock the Economy by Reducing Inequality,” our booklet of November 2011, put forward the argument that extreme inequality had created a fundamental macroeconomic imbalance in the U.S. So much money had been flowing into the pockets of the rich during the early 2000s that they could not find enough investment outlets, given the other side of the coin, namely that too little money had been flowing into the pockets of the poor to sustain the consumption needed to create profitable investment opportunities for the rich. (For macroeconomic purposes, we can define “the rich” and “the poor” as, respectively, those who save and invest most of their income (the top 5% or so), and those who consume most or all of their income (the remaining 95%).

Our theory provided an explanation of the underlying slow growth path of the economy in the early 2000s, when the distribution of income reached an extreme level not seen since 1929. American consumers, trying to sustain and enhance a middle class lifestyle, borrowed money, mostly against their households. And investors, desperate for financial gain, were happy to participate in the housing bubble. But the crash of 2007-2009 brought the whole economy, rich and poor, lenders and borrowers alike, down to earth. By trying to reach for prosperity, investors and households over-reached and it took the crash to remind them that, given the imbalance between rich and poor, the economy could not sustain a full-employment growth rate, i.e., one that was above, say, a level of about 2% a year on average.  

The Outlook Now

We wish we could report that inequality has become accepted among economists as a root cause of our short-term economic imbalance, but this is not the case. The ideology of free market efficiency dies hard, and most economists, even liberal ones, cannot accept that the setting of wages on the one hand and prices (and high-end fees and salaries) on the other might be fundamentally out of whack. What we can say, however, is that there is significant support for the notion that whatever is wrong with the economy is somehow related to inequality.

Meanwhile, we can update our argument in the light of new evidence. The salient fact is that the distribution of income remains extremely unequal – the real median wage has increased by only 1% since 2000 -- while the fruits of the modest level of economic growth that has been experienced since 2009 have gone to the already-wealthy. So the cause of the imbalance has remained in place. From the point of view of economic forecasting, we can now begin to test the consistency of our theory with the emerging facts.

So far, the theory is holding up well. The economy is growing, but growing slowly, about 2% a year on average. This growth has been enough to reduce the rate of unemployment from around 10% to about 7½%, but, four years into the recovery, it is still not enough to reduce the unemployment rate below that still-high level. And it is well known that the true rate of unemployment is much higher, if underemployment and the withdrawal of discouraged workers from the jobs market are taken into account.

At the same time, money is piling up in the coffers of wealthy individuals and corporations, and the Obama administration is urging them to invest more. But of course they are reluctant to do so when consumer demand remains sluggish, given stagnant wages and a high level of overhanging indebtedness. The Federal government is taking a contradictory stance. On the one hand, at the beginning of the year it ended the payroll tax cuts that had been adding to household incomes and expenditures. On the other hand, there is a massive infusion of money into the economy by the Federal Reserve, which, under the policy of Quantitative Easing or QE, is currently buying government and private bonds at the astonishing rate of $85 billion a month or over one trillion dollars a year. Of course, this supports bond prices and reduces interest rates, which are at historically low levels.

Sluggish economic growth is reflected in the slow growth of profits and corporate earnings. Investors are frustrated by the low levels of earnings growth and interest rates and are looking for ways to increase returns, bidding up stock prices in the process. As a test of what Alan Greenspan might have called “excessive exuberance,” we can compare the level of stock prices, as measured by the current market price-earnings ratio – 17.3 according to Value Line Investment Survey of May 24, 2013 -- against the historical ratio, which, again according to Value Line, ranges from 19.7 (July 13, 2007) to 10.3 (March 9, 2009). Using this metric, the upside potential (assuming stocks were to rise from the current P/E of 17.3 to 19.7), is only 14%), while the downside potential (assuming the market drops from the current level to 10.7) is a full 40%. This test suggests that stocks have already entered the danger zone of “excessive exuberance.”
And consumers are gradually beginning to borrow money again – even against home equity – and are risking getting deeper into debt. But household spending, in our view, cannot sustain economic growth unless it is out of income, not borrowing.

Conclusion

In 2013 the economy is at a critical juncture. Because of the continuing extreme level of inequality, it is still caught in the grip of slow growth and high unemployment. Consumers and investors have a choice. They can accept slow growth at a sustainable level, and restrain their optimism by living within their means and not borrowing money to bet on stocks, houses and other risky assets, or, alternatively, consumers can force more rapid growth, as they did in the early 2000s, by borrowing money to support consumption, and investors can borrow money and use it to make speculative investments.

Which is it to be? Slow growth and 7½% unemployment ? Or more rapid growth and higher investment returns financed by bubbles which must burst and return the economy to its slow-growth path?
Our hunch is a bit of both: initially there will be some further asset inflation supported by the Fed’s QE bond purchases, a gradual reduction of unemployment to around 6.5%, and then a financial crisis, a recession, and a return to 7 1/2% unemployment of thereabouts (according to the official count).

Developments in “the rest of the world” could no doubt affect the U.S. picture. Much will depend on Europe, and on China, which are both dealing with economic underperformance.

The unsustainable growth of debt is a very likely feature of the economy for the next several years, although we assume that the Fed will not sustain QE at the current level, and even if it does so, we believe that it’s effectiveness will be diminished. In either case, bond prices will fall, and interest rates will rise.

The most likely suspects when it comes to provoking the next financial crisis are the Treasury securities markets. Treasury bills and notes are currently paying near- zero and 2% interest rates respectively, and 30-year bonds are at around 3%, i.e., a real interest rate of effectively zero. Bill Gross of PIMCO has opined that the thirty-year boom in bonds ended in April. Interest rates have gone down about as far as they can go, i.e., the prices of fixed-income securities have gone up about as far as they can go. So there is little upside potential in owning fixed-income securities today, even less than there is in stocks. But, as in stocks, there is a lot of downside potential. As and when the Fed slows its purchasing of bonds – the new word for this policy is “tapering” -- a drop in Treasury bond prices is likely to follow, followed by the failure of a number of financial institutions that have become overly leveraged, as they are hit by reduced financial asset valuations on their balance sheets and increased interest charges of borrowing Treasury bills, notes, and bonds.

The financial “crisis” this time will probably not be as severe as that of 2008, which followed a period of truly massive borrowing. Households and investment companies will be somewhat more careful. Once bitten, twice shy. But this will be cold comfort for the ranks of the unemployed, more and more of whom will sink into permanent unemployment or part-time work. And GDP growth will be far short of its potential. The economic and financial picture will, we believe, be a dreary one with recurring financial instability and mixed news on the state of the economy, low corporate earnings growth and disappointing stock market returns. And there will be name-calling and finger-pointing among economists and politicians about who or what is to blame, with proposals all over the lot, from extreme austerity to extreme stimulus.

On the ideological level, we hope that there will be an increasing understanding among economists regarding the role of inequality in explaining the poor performance of the economy. Without a reduction of inequality, we do not believe that the economy can reach and sustain steady full-employment growth, although we would not go so far as to say that a reduction in inequality will be enough to bring about strong and stable growth and full employment. Reduced inequality is a necessary condition for unblocking the economy, but not a sufficient one.

did inequality get lost in the election rumble ?