• Tag Archives Inequality
  • US Homelessness Rate Rose This Year For First Time Since 2010

    Here’s one statistic about the US economy that you probably won’t find in President Trump’s twitter feed.
    Thanks to a surge in homelessness centered around several large west coast cities, the overall rate of homelessness in the US ticked higher this year, the first increase since 2010, according to a survey from the Department of Housing and Urban Development.
    The U. S. Department of Housing and Urban Development released its annual Point in Time count Wednesday, a report that showed nearly 554,000 homeless people across the country during local tallies conducted in January. That figure is up nearly 1 percent from 2016.
    Of that total, 193,000 people had no access to nightly shelter and instead were staying in vehicles, tents, the streets and other places considered uninhabitable. The unsheltered figure is up by more than 9 percent compared to two years ago.
    Increases are higher in several West Coast cities, where the explosion in homelessness has prompted at least 10 city and county governments to declare states of emergency since 2015.
    The homelessness crisis is only one byproduct of the burgeoning wealth inequality in the US caused by the Federal Reserve’s decision to pump trillions of dollars of ‘stimulus’ into the markets.
    Central-bank money printing has caused asset valuations to balloon while wages for everyone but the most highly skilled workers have stagnated, as the chart below illustrates.

    This post was published at Zero Hedge on Dec 7, 2017.


  • A Radical Critique of Universal Basic Income

    This critique reveals the unintended consequences of UBI.
    Readers have been asking me what I thought of Universal Basic Income (UBI) as the solution to the systemic problem of jobs being replaced by automation. To answer this question, I realized I had to start by taking a fresh look at work and its role in human life and society. And since UBI is fundamentally a distribution of money, I also needed to take a fresh look at our system of money. That led to a radical critique of Universal Basic Income (UBI) and an outline for a much more sustainable and just system of money and work than we have now. To adequately explore these critical topics, I ended up writing a 50,000 word book, Money and Work Unchained. Universal Basic Income (UBI) is increasingly being held up as the solution to automation’s displacement of human labor. UBI combines two powerful incentives: self-interest (who couldn’t use an extra $1,000 per month) and an idealistic commitment to guaranteeing everyone material security and reducing the rising income inequality that threatens our social contract–a topic I’ve addressed many times over the past decade.

    This post was published at Charles Hugh Smith on TUESDAY, DECEMBER 05, 2017.


  • Did Janet Yellen Just Recommend Buying Bitcoin

    Janet Yellen’s last semi-annual testimony before Congress as Fed Chair has just concluded, and as usual it was filled with long-winded platitudes, which were enough to make the blood of anyone actually listening to her slow-motion drawl, come to a boil.
    For one, Yellen’s hypocrisy hit bitcoinian levels when she had the temerity to say that she is ‘very disturbed’ about the trend toward rising inequality, noting that the central bank only has a ‘blunt tool’ that can’t be used to target certain groups. She’s right: the “blunt tool”, also known as a money printer, is can – and has – been repeatedly used to target a certain group: the ultra wealthy, i.e., the 0.1%, those who as Credit Suisse showed two weeks ago, have never been wealthier.
    And just to make sure all your blood has boiled over, Yellen added that the Fed is very focused on ‘very disturbing long-term trends’ in inequality adding that “our own focus”’ is on taking those trends and studying them… and making them bigger than ever she should have also added.
    Demonstrating her extensive skills of pointing out the obvious, Yellen also said that ‘we’re suffering from slow productivity growth,’ and there should be a focus on how that can be improved. It appears that the Fed is unaware that most employees spend several hours a day on Facebook, LinkedIn and SnapChat; it also appears that the Fed is unaware that most employers are aware of this, and is why there has been so little wage growth to “reward” this collapse in productivity.

    This post was published at Zero Hedge on 29, 2017.


  • George Soros To Congress: “Please Don’t Cut My Taxes”

    After transferring over the bulk of his personal wealth to his ‘Open Society’ Foundation – the umbrella organization for a network of dozens of political groups that push Soros’s far-left agenda across the US and Europe, Soros is still comfortable enough to justify giving away even more of his money – this time to the US federal government.
    Taking a page out of Warren Buffett’s book, Soros and a group of some 400 other rich Americans – including doctors, lawyers and CEOs – are sending a formal letter to Congress chiding lawmakers for trying to reduce taxes on the richest American families at a time when wealth inequality is rapidly expanding. Instead, the letter asks Congress not to pass any tax bill that ‘further exacerbates inequality’ and adds to the debt (both of the current Republican plans would add $1.5 trillion to the debt over 10 years).
    The letter was penned by Responsible Wealth, a group of ‘enlightened’ rich people that includes Ben & Jerry’s Ice Cream founders Ben Cohen and Jerry Greenfield, fashion designer Eileen Fisher and philanthropist Steven Rockefeller, in addition to Soros. Along with the big names are many individuals and couples who rank among the top 5% of Americans (those who have $1.5 million in assets or earn $250,000 or more a year).
    In a rebuttal to Congress’s argument that corporate tax cuts will help stimulate growth, the letter argues that corporations are already reaping record profits. Instead of handing more money to the wealthy, the letter’s signers argue the government should use the funds to invest in education, research and roads that benefit everyone, while protecting entitlement programs like Medicaid.

    This post was published at Zero Hedge on Nov 14, 2017.


  • The Results of Financialization – Part III

    THE BIG REVERSAL
    After three and half decades the global economy has now entered a three and half year period of slow rotational change which will likely be seen in future years as the “Great Reversal”.
    DEBT + DEMOGRAPHICS + DISRUPTION = DEFLATION
    We are leaving an era which as witnessed unprecedented global debt growth, work force demographics and the emergence of profoundly disruptive technologies. These trends through globalization, labor arbitrage, and oversupply have coupled to deliver slow inflation, disinflation and even deflation in various areas of the world.
    What we have experienced during this era on a global basis is:
    A decline in real interest rates (which have been a prime supporter of asset prices), A drop in real labor earnings in advanced economies, and, A meteoric rise in inequality within countries alongside a drop in inequality between them.

    This post was published at GoldSeek on 5 November 2017.


  • What Could Pop The Everything Bubble?

    As central bank policies are increasingly fingered by the mainstream as the source of soaring wealth-income inequality, policies supporting credit/asset bubbles will either be limited or cut off, and at that point all the credit/asset bubbles will pop.
    I’ve long held that if a problem can be solved by creating $1 trillion out of thin air and buying a raft of assets with that $1 trillion, then central banks will solve the problem by creating the $1 trillion out of thin air – nothing could be easier. This is the lesson of the past eight years: if a problem can be solved by creating new money and buying assets, then central banks will solve that problem. Problem: stock market is declining. Solution: create new money and buy, buy, buy stock index funds. Problem solved! Market stops falling and quickly rebounds as ‘central banks have our backs.’
    Problem: interest rates are inhibiting lending and growth. Solution: create a few trillion units of currency and buy enough sovereign bonds to drop interest rates to near-zero.
    Problem: nobody’s left who can afford to buy the new nosebleed-priced flats that underpin China’s miracle-grow economy. Solution: create new currency, lend it to local government agencies who then buy the empty flats.
    Problem: stagnant employment and deflation. Solution: create a trillion in new currency, buy a trillion in new government bonds that then fund infrastructure projects, i.e. bridges to nowhere.

    This post was published at Charles Hugh Smith on SATURDAY, OCTOBER 28, 2017.


  • Observations on Wealth-Income Inequality (from Federal Reserve Reports)

    There’s a profound difference between assets that produce no income and those that produce net income.
    To those of us nutty enough to pore over dozens of pages of data on wealth and income in the U. S., the Federal Reserve’s quarterly Z.1 reports and annual Survey of Consumer Finances (SCF) are treasure troves, as are I. R. S. tax and income reports.
    Allow me to share a few observations on family wealth and income drawn from my review of these documents:
    Changes in U. S. Family Finances from 2013 to 2016 (42 pages)
    Financial Accounts of the United States (198 pages)
    Corporate profits clock in at $2.135 trillion annually, around 11% of the nation’s GDP (gross domestic product). (Page 10 of Z.1) This has changed very little over the past few years; corporate profits totaled $2.140 trillion in 2014.
    Most people who follow financial matters closely probably know corporate profits have been around $2 trillion annually for awhile.
    But how many know that proprietors’ income from small businesses ($1.375 trillion) and rental income of persons–i.e. not corporations–($740 billion) together equal corporate profits? ($2.115 trillion for small biz/rentals, $2.135 trillion for corporate profits.

    This post was published at Charles Hugh Smith on FRIDAY, OCTOBER 27, 2017.


  • Bank Of America: “This Could Send The Nasdaq To 10,000”

    Last weekend, One River’s CIO Eric Peters explained what he thought would be the nightmare scenario for the next Fed chair, who as we now know will either be Jerome Powell or John Taylor, or both (with an outside chance of Yellen remaining in her post). According to the hedge fund CIO, the “worst case scenario” is one in which despite an improving economy, yields simply refuse to go up, leading to the final asset bubble and Fed intervention that “pops” it:
    ‘if we don’t see a sustained cyclical jump in wages, then yields won’t go up. And if yields don’t go up, then the asset price ascent will accelerate,’ continued the strategist. ‘Which will lead us into a 2018 that looks like what we had expected out of 2017; a war against inequality, a battle for Main Street at the expense of Wall Street, an Occupy Silicon Valley movement.’ He paused, flipping through his calendar. “Then you’ll have this nightmare for the next Federal Reserve chief, because they’ll have to pop a bubble.’ While Peters never names names in his pieces, the “strategist” in the weekend letter was BofA’s Michael Hartnett, who several days after Peters penned the above, followed up with some thoughts of his own on precisely this topic, and in a note released this week, described what he believes is the “biggest market risk” for the market. Not surprisingly, it is precisely what Peters was referring to in the above excerpt.

    This post was published at Zero Hedge on Oct 20, 2017.


  • $1 Trillion In Liquidity Is Leaving: “This Will Be The Market’s First Crash-Test In 10 Years”

    In his latest presentation, Francesco Filia of Fasanara Capital discusses how years of monumental liquidity injections by major Central Banks ($15 trillion since 2009) successfully avoided a circuit break after the Global Financial Crisis, but failed to deliver on the core promise of economic growth through the ‘wealth effect’, which instead became an ‘inequality effect’, exacerbating populism and representing a constant threat to the status quo.
    Fasanara discusses how elusive, over-fitting economic narratives are used ex-post to legitimize the “fake markets” – as defined previously by the hedge fund – induced by artificial flows. Meanwhile, as an unintended consequence, such money flows produced a dangerous market structure, dominated by both passive-aggressive investment vehicles and a high-beta long-only momentum community ($8 trn and rising rapidly), oftentimes under the commercial disguise of brands such as behavioral Alternative Risk Premia, factor investing, risk parity funds, low vol / short vol vehicles, trend-chasing algos, machine learning.
    However as Filia, and many others before him, writes, only when the tide goes out, will we discover who has been swimming naked, and how big of a momentum/crowding trap was built up in the process. The undoing of loose monetary policies (NIRP, ZIRP), and the transitioning from ‘Peak Quantitative Easing’ to Quantitative Tightening, will create a liquidity withdrawal of over $1 trillion in 2018 alone. The reaction of the passive community will determine the speed of the adjustment in the pricing for both safe and risk assets.

    This post was published at Zero Hedge on Oct 18, 2017.


  • Andy Xie Warns “The Bubble Economy Is Set To Burst” As Political Tension Soars

    Central banks continue to focus on consumption inflation, not asset inflation, in their decisions. Their attitude has supported one bubble after another. These bubbles have led to rising inequality and made mass consumer inflation less likely.
    ***
    Since the 2008 financial crisis, asset inflation has fully recovered, and then some. The US household net worth is 34 per cent above the peak in 2007, versus 30 per cent for nominal GDP. China’s property value may have surpassed the total in the rest of the world combined. The world is stuck in a vicious cycle of asset bubbles, low consumer inflation, stagnant productivity and low wage growth.

    This post was published at Zero Hedge on Oct 12, 2017.


  • Paul Tudor Jones Warns Disastrous “Wealth Disparity” Will End In “Revolution, Taxes, Or War”

    Having previously warned of the “disastrous market mania,” and told Janet Yellen to “be terrified” in April, legendary trader Paul Tudor Jones has a new message for CEOs, urging them to stop embracing the profit-above-all-else ethic creating massive wealth-inequality, or face the “tearing down of our civilization via war, revolution, or taxes.”
    ‘One of the key things that always ends up tearing down great civilizations and countries is wealth disparity. It’s not sustainable,” explained the billionaire hedge fund manager at the Forbes Under 30 Summit in Boston, telling corporate chiefs that they have gone too far in embracing economist Milton Friedman’s profit-above-all-else ethic and they need to change how they do business.

    This post was published at Zero Hedge on Oct 7, 2017.


  • Survey shows UK and US Pensions Crisis is Imminent

    Both UK and US drop in Global Retirement Security Rankings US falls due to sharp income inequality and reduced workforce to support retirees UK is two spots away from being in the bottom 10 for government indebtedness FCA’s Andrew Bailey says ‘clear risk’ that savings rate for retirement is too low UK’s retirement savings gap set to widen to 2.3trn due to automation of jobs UK expected to fall into major pensions crisis by 2028 The economics of retirement funding is at breaking point. Thanks to low interest rates, looming inflation rates and slow growth the future of our retired populations are at serious risk.
    Currently there are 600 million individuals placing pressure on already-established retirement systems. This is set to get worse as the results of the last decade of financial experimentation show themselves and ageing populations widen the cracks in our economies.
    Most pension schemes were formed in a time when manufacturing and traditional bricks and mortar business were the pinnacle of Western economies. This is no longer the case. Globalisation has seen countries switch to service economies. Our financial planning has failed to keep up.

    This post was published at Gold Core on October 7, 2017.


  • Fed Admits The Failure Of Prosperity For The Bottom 90%

    As the stock market hits all-time highs in its 2nd longest bull market run in history, the lift of asset prices has surely lifted the economic prosperity of all. Right?
    Not really.
    New reports from the Hamilton Project and The Federal Reserve show the real problems facing Americans today.
    First, the Hamilton Project as noted by Pedro Nicolaci Da Costa last week:
    ‘An expansion that began, believe it or not, more than seven years ago has extended a longer-run trend of wage stagnation for the average US worker, despite a sharp drop in the official unemployment rate to 4.4% from an October 2009 peak of 10%.
    No wonder the recovery seems so lopsided, particularly given economic inequality levels not seen since before the Great Depression. After adjusting for inflation, wages are just 10% higher in 2017 than they were in 1973, amounting to real annual wage growth of just below 0.2% a year, the report says. That’s basically nothing, as the chart below indicates.’

    This post was published at Zero Hedge on Oct 2, 2017.


  • Bank of America: “The Best Reason To Be Bearish Is…There Is No Reason To Be Bearish”

    Back in mid-July, Bank of America chief investment strategist Michael Hartnett wrote “The Most Dangerous Moment For Markets Will Come In 3 Or 4 Months” in which he warned that “further upside in risk assets will create problems later in the year” and concluded that “ultimately, we believe the extremely strong performance by equities and bonds in H1 is very unlikely to be repeated in H2” because “monetary policy will have to tighten to raise volatility, reduce Wall St inflation, and reduce inequality. There are two ways to cure inequality: you can make the poor richer, or you can make the rich poorer. The Fed will reduce its balance sheet in the hope of making Wall St poorer.”
    Or maybe not, because almost three months later, the same Hartnett today writes that the “best reason to be bearish is…there is no reason to be bearish.” and admits that the “Icarus ‘long risk’ trade extended into autumn (Humpty-Dumpty “great fall” postponed a tad longer) by low inflation, big liquidity ($2.0tn central bank buying), high EPS, and promise of US tax reform”, noting that the “monster rally in credit and equity markets began 18 months ago when best reason to be bullish was there was no reason to be bullish.”
    And with the VIX approaching all time lows as the S&P hits another daily high, the BofA strategist reiterates that his “Icarus Rally” price targets for Q4 remains 2630 in the S&P, 6666 on the Nasdaq, and the 10-year Treasury hitting 2.85%, as the rising dollar pushed the EURUSD down to 1.15. So what will prompt Q4 peak in the market? According to the BofA strategist, the catalyst will be a “Q4 “top” driven by tax reform, i.e. “peak Policy, a rise in MOVE index, and a peak RMB.
    As Hartnett details further, here are the three catalysts that could end the current period of record complacency. Tax reform = “peak policy” = buy rumor, sell fact…but too early to sell fact; tax reform = quicker Fed balance sheet reduction and less share buybacks if capex accelerates (since 2009 lows S&P equity market cap up $15.3tn, Fed’s balance sheet up $4.5tn, share buybacks up $3.5tn) Big jump in the MOVE index of US Treasury market volatility (i.e. “bond shock”) catalyst for cross-asset vol, but requires inflation to rise

    This post was published at Zero Hedge on Sep 29, 2017.


  • Visualizing America’s Rampant Racial Wealth Inequality

    Even though the United States is on course to become “majority minority” by 2044, Statista’s Niall McCarthy notes that the country still has a huge and growing racial wealth gap.
    A new study by Prosperity Now and the Institute for Policy Studies has found that white households in the middle-income quintile own nearly eight times as much wealth as middle-income black earners and ten times as much as middle-income latino earners.
    Last year, the same research claimed that if current trends continue, it will take 228 years for the average black family to reach the same level of wealth white families have today. For latino families, it would take 84 years.
    Since 1983, black and latino families have seen their real wealth fall considerably from $6,800 and $4,000 to just $1,700 and $2,000 respectively in 2013. Even though white households took a hit during the financial crisis, they still boasted a median wealth of $116,800 in 2013.
    The research projects that the gap will widen even further in the years ahead with black household wealth declining 30 percent from today by 2024. The median latino household will see their wealth fall 20 percent while white households will experience a five percent increase by that point.
    In addition, while policy-makers are crowing about the fact that aggregate American real incomes are finaly back above 1989 levels, the truth is slightly more awkward… It’s all the 1%…

    This post was published at Zero Hedge on Sep 17, 2017.


  • Jackson Hole: Inflation, Phillips Curve, Income Inequality, Housing and The Taylor Rule

    Janet Yellen, ‘Super’ Mario Draghi and other Central Bankers are meeting at the 2017 Economic Policy Symposium on ‘Fostering a Dynamic Global Economy’ at Jackson Hole for the next three days.
    Topics will include the persistent low inflation in advanced economies, like the US 1.5% growth rate on Personal Consumption Expenditures Core Prices YoY despite the staggering fiscal and monetary stimulus thrown at it.

    This post was published at Wall Street Examiner by Anthony B Sanders ‘ August 24, 2017.


  • How Central Banking Increased Inequality

    Although today high levels of inequality in the United States remain a pressing concern for a large swath of the population, monetary policy and credit expansion are rarely mentioned as a likely source of rising wealth and income inequality. Focusing almost exclusively on consumer price inflation, many economists have overlooked the redistributive effects of money creation through other channels. One of these channels is asset price inflation and the growth of the financial sector.
    The rise in income inequality over the past 30 years has to a significant extent been the product of monetary policies fueling a series of asset price bubbles. Whenever the market booms, the share of income going to those at the very top increases. When the boom goes bust, that share drops somewhat, but then it comes roaring back even higher with the next asset bubble.
    The Cantillon Effect The redistributive effects of money creation were called Cantillon effects by Mark Blaug after the Franco-Irish economist Richard Cantillon who experienced the effect of inflation under the paper money system of John Law at the beginning of the 18th century.1 Cantillon explained that the first ones to receive the newly created money see their incomes rise whereas the last ones to receive the newly created money see their purchasing power decline as consumer price inflation comes about.
    Following Cantillon and contrary to Fisher and other monetary theorists of his time, Ludwig von Mises was the first to emphasized these Cantillon effects in terms of marginal utility analysis. With an increase in the stock of money, the cash balances of the early receivers of the newly created money increase. Correspondingly, the marginal utility they give to money decreases and the individuals in question buy either investment or consumption goods, thus bidding up the prices of those goods and increasing the cash balances of their sellers. With this step by step process, the price of goods will increase only progressively and affect both the distribution of income and wealth as well as the different price ratios.

    This post was published at Ludwig von Mises Institute on August 16, 2017.


  • Why Blackrock Isn’t Worried At All About Record Low Volatility

    Yesterday, in an extensive, eloquent essay, One River’s Eric Peters described why it’s only a matter of time before record low breaks the market’s current phase of “metastability” and explodes higher. Below is the punchline:
    To sell implied volatility at current levels, investors must imagine tomorrow will be virtually identical to today. They must imagine that bond yields won’t rise despite every major central bank looking to hike interest rates and exit QE. They must imagine that economies at or near full employment will not create inflation; that GDP will neither accelerate nor decelerate; that governments will tolerate historic levels of income inequality despite citizens voting for the opposite; that strongly rising global debts will be supported by decelerating global growth. And volatility sellers must imagine that nine years into a bull market, amplified by a proliferation of complex volatility-selling strategies and passive ETFs with liquidity mismatches, that we will dodge a destabilizing shock to market infrastructure. I can imagine a few of those things happening, but neither sustainably nor simultaneously. It is much easier to imagine a tomorrow that looks different from today.
    As volatility declined, investors have had to sell even more of it to sustain sufficient profits. This selling reinforces the trend lower, which produces an illusion that legacy volatility shorts are less risky today than yesterday. Lower volatility thus begets lower volatility. And this also ensures that quantitative models reduce overall portfolio risk estimates, which allows (and in many cases forces) investors to buy more assets at prevailing prices. This in turn reduces volatility, reflexively. Naturally, the reverse is also true. Rising volatility begets rising volatility. And given the unprecedented volatility-selling in this cycle, I can imagine a historic reversal.

    This post was published at Zero Hedge on Aug 7, 2017.


  • Earnings Rise with Boost from Falling U.S. Dollar But Consumers Will Bear the Brunt of Rising Prices

    There seems to be an unlimited supply of methods in which the rich in America keep getting richer and the average Joe picks up the tab. (Think about the $16 trillion secret bailout of Wall Street by the Federal Reserve from 2007 to 2010 for the quintessential example.)
    Yesterday, Fortune Magazine ran this sobering headline: ‘The Wealth Gap in the U. S. Is Worse Than In Russia or Iran.’ The article quotes Richard Florida, author of The New Urban Crisis, as follows:
    ‘Inequality in New York City is like Swaziland. Miami’s is like Zimbabwe. Los Angeles is equivalent to Sri Lanka. I actually look at the difference between the 95th percentile of income earners in big cities and the lower 20%. In the New York metro area, the 95th percentile makes $282,000 and the 20th percentile makes $23,000. These gaps between the rich and the poor in income and wealth are vast across the country and even worse in our cities.’
    Against that backdrop comes news from FactSet last Friday that with 57 percent of the companies in the Standard and Poor’s 500 Index reporting actual earnings results for the second quarter of 2017, ‘ten sectors are reporting year-over-year earnings growth, led by the Energy, Information Technology, and Financials sectors.’ FactSet adds this: ‘The only sector reporting a year-over-year decline in earnings is the Consumer Discretionary sector.’ That would be the sector in which the average Joe lives.

    This post was published at Wall Street On Parade By Pam Martens and Russ Marte.


  • We Need a Social Economy, Not a Hyper-Financialized Economy

    We all know what a hyper-financialized economy looks like–we live in one:central banks create credit/money out of thin air and distribute it to the already-wealthy, who use the nearly free money to buy back corporate shares, enriching themselves while creating zero jobs. Or they use the central-bank money to outbid mere savers to scoop up income-producing assets: farmland, rental properties, etc.
    This asymmetric wealth accumulation and avoidance of risk creates a self-reinforcing feedback loop, as the super-wealthy financiers and corporations use a slice of their income to buy political protection of their income streams, creating cartels and quasi-monopolies that are impervious to competition and meaningful regulation. The only possible output of a hyper-financialized economy is rapidly increasing wealth and income inequality–precisely what we see now. What we need is a social economy, an economy that recognizes purposes and values beyond maximizing private gains by any means necessary, which is the sole goal of hyper-financialized economies.

    This post was published at Charles Hugh Smith on THURSDAY, JULY 27, 2017.