Monthly Archives: May 2015

Countries With the Widest Gap Between the Rich and the Poor

24/7 Wall St.

170428950 (1)The United States, which prides itself as a land of opportunity, has the fourth-most uneven income distribution among developed nations, according to recently-released data. Only Turkey, Mexico, and Chile had worse income inequality, with Chile ranking as the most unequal overall.

The Gini coefficient measures how much an economy deviates from perfect equality — where everyone has the same income. A score of zero indicates perfect equality, and a score of one indicates extreme inequality. Based on index figures for Organisation for Economic Co-operation and Development (OECD) countries, these are the least equitable countries in the developed world.

Click to see the countries with the widest gap between the rich and the poor

The income redistribution structure of each country, which includes taxes, as well as transfers like welfare, social security, and unemployment insurance, can make a big difference in how severe the gap between rich and poor is. In…

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Yanis Varoufakis has a point – the Greek debt crisis is mostly about the collapse of NGDP

The Market Monetarist

The Greek Finance Minister Yanis Varoufakis has a new article for Project Syndicate. He is making a point that Market Monetarists have been making since the outbreak of the euro crisis – it is not really a ‘debt crisis’, but rather a monetary crisis.

This is Varoufakis:

The view that Greece has not achieved sufficient fiscal consolidation is not just false; it is patently absurd. The accompanying figure not only illustrates this; it also succinctly addresses the question of why Greece has not done as well as, say, Spain, Portugal, Ireland, or Cyprus in the years since the 2008 financial crisis. Relative to the rest of the countries on the eurozone periphery, Greece was subjected to at least twice the austerity. There is nothing more to it than that.

Here is his graph:

Now compare that with a graph I had in one of my blog posts back in 2012:

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FOMC Minutes: Fed Still Preparing To Raise Rates, But On Measured Basis

24/7 Wall St.

Stock Split ImageThe market is just going to have to get used to the notion that the interest rate hike cycle is coming. The good news is that the rate hikes are not coming in June, at least that is what the wording from the minutes of the last FOMC meeting is indicating. One consideration that traders and investors should consider is that the word “patient” was not used in these minutes and that these are the minutes from the April 28 – 29 FOMC meeting.

Another consideration, which 24/7 Wall St. had addressed in detail, is that bankers, investors, consumers, and business owners simply do not need to worry excessively about rising interest rates. The market has seen waves of overreactions to getting ready for higher interest rates.

The big news is that a June rate hike is doubtful, even if it wasn’t ruled out entirely. A few officials thought that the…

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Governments Pay $5.3 Trillion in Global Energy Subsidies

Cheap, but dirty

24/7 Wall St.

474366331Government globally subsidizes consumers’ energy costs by a total of $5.3 trillion, about 6.5% of global GDP and more than the gross domestic product of all but the world’s largest two economies, the United States and China. The total is also likely to be higher than global spending on health care, which amounted to an estimated 6% of global GDP in 2013. The energy subsidy estimate reflects the 2015 total.

The energy subsidy costs were reported on Monday by the International Monetary Fund (IMF), which defines energy subsidies as “the difference between what consumers pay for energy and its ‘true costs,’ plus a country’s normal value added or sales tax rate.” The “true costs” of energy include supply costs and the damage that energy consumption “inflicts on people and the environment.” The damages come from carbon emissions and global warming. The IMF says, “Most of these externalities are borne by…

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US GDP Growth Moves Toward Zero

24/7 Wall St.

SmokestacksA new Wall Street Journal poll of prominent economists revised their collective GDP growth estimate for the year from 2.7% to 2.2%. To some extent the worry about a slowdown is based on the current price of the dollar. Another factor is a slowdown of economies overseas. Yet another is that consumer spending will be hog-tied by rising gasoline prices and mediocre job creation. As experts ratchet down expectations, more and more of them have stepped toward zero growth for U.S. gross domestic product this year.

The world of economists was shaken recently as the Atlanta Federal Reserve moved its forecast for this year to zero GDP growth. Some analysts believe that if the Fed raises rates, recent growth in business world, among consumers, in the stock market and in the housing market will deteriorate. At what point will consumers pull back if they see the value of their retirement…

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Why the Natural Unemployment Rate May Now Be Lower

24/7 Wall St.

179125086The Chicago Federal Reserve recently released a report showing its projections regarding the changing labor force composition and the natural rate of unemployment. What is interesting about the observation is that changes in the labor force composition may have lowered the natural rate of unemployment.

In short, more of the workforce would be employed in a full-employment scenario, or that the unemployment rate would be low even in a full-employment scenario — to 5.0% or less.

Another observation was that a lower natural rate may help explain why wage inflation and price inflation remain low, despite actual unemployment recently reaching 5.5%. The Chicago Fed’s report noted that demographic and other changes should continue to lower the natural rate for at least the remainder of the decade.

It is important to recall that the labor force participation rate has declined steadily over the past 15 years. Some of the decline was…

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Being Poor

Whatever

Being poor is knowing exactly how much everything costs.

Being poor is getting angry at your kids for asking for all the crap they see on TV.

Being poor is having to keep buying $800 cars because they’re what you can afford, and then having the cars break down on you, because there’s not an $800 car in America that’s worth a damn.

Being poor is hoping the toothache goes away.

Being poor is knowing your kid goes to friends’ houses but never has friends over to yours.

Being poor is going to the restroom before you get in the school lunch line so your friends will be ahead of you and won’t hear you say “I get free lunch” when you get to the cashier.

Being poor is living next to the freeway.

Being poor is coming back to the car with your children in the back seat, clutching…

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