Posted: August 3rd, 2011 | Author: Joe | Filed under: Economy | Tags: Debt, Economy, Recession, Wealth | 1 Comment »
The Great Recession is the most racist recession in generations!
At least that’s the implication in the CNN Money story titled: Recession worsens racial wealth gap
It all revolves around the “wealth gap.” There’s been much chatter about the gap between rich and poor since 2008, and the writers of this CNNMoney story (and others) seem to think the gap is due to race.
Can a recession be racist? Is the wealth gap really race based?
Here’s the breakdown of the effects of the recession along “race lines”…
The wealth gap (2009).
The story relies on data from a 2009 study by the Pew Research Center, which found that:
“[T]he median wealth of white households was 20 times that of black households and 18 times that of Hispanic households.”
The study defines household wealth as:
“the sum of a family’s assets minus the sum of its debts.”
Assets include:
- homes
- cars
- savings accounts
- financial investments
Debts include:
I’m not sure what they group into “other things”. Presumably other debt?
Regardless, the study found that while the Great Recession hammered just about everyone’s wealth, the gap between white households and black or Hispanic households is the widest it has been since 1984, when the government began publishing such data by ethnicity.
The AP puts it differently:
“The recession and uneven recovery have erased decades of minority gains, leaving whites on average with 20 times the net worth of blacks and 18 times that of Hispanics, according to an analysis of new Census data.”
The wealth of blacks vs. whites.
The Pew study uses the data from the Census Bureau to highlight the disproportionate effect of the housing market on blacks and Hispanics.
The study acknowledges that:
“The wealth of white households in America has always been greater than black and Hispanic households. But the recession widened the gap significantly”
Why would the recession widen the gap significantly? That implies that those at the bottom fell farther or those at the top rose greater or a combination of both?
Remember that talk above about an “uneven recovery”?
Why it isn’t a race thing.
Dig a little deep and you start to see inklings that even the AP and CNN know that this is not a race-based issue:
“the wealth of white households has probably benefited from the rise in stock prices over the last few years, since a much higher share of whites own stocks.”
If this were really due to race, then we’d be seeing ads from ETrade, Scott Trade, Fidelity, etc.. stating things like:
“$7 online trades*”
* Whites only
or using phrases like
“Minorities need not apply”
Since this is clearly not happening, I submit a better use of the Pew and media’s time and energy would be to conduct a study analyzing the wealth gap in terms of general education and financial education.
Outright racial discrimination is simply not legal, and not present in the majority of the U.S. any longer. Certainly not to the extent that would be necessary to “keep minorities down” in the wealth gap on purpose.
The real problem with these kinds of reports and studies is that it allows people to remain distracted by issues that are no longer real (i.e. racial discrimination) at the expense of ignore real causes of the problem like education and general financial savvy.
I may be going out on a limb here, but I think that most blacks don’t invest in the stock market because they simply don’t hear family members or community leaders talking about assets and investing and building wealth. They get no exposure to that. Instead, they hear about racial discrimination and how white people want to keep them down, all while they can’t do it alone and need a government program to do it for them.
Nobody ever got wealthy living on public assistance.
Further evidence
The study goes on to make the following points:
- The main asset of minorities is their home
- older whites are more likely to have 401(k) retirement accounts or other stock holdings.
If your biggest asset was your home, then you’re definitely at the lower end of the wealth scale after the historic housing bubble burst. But is that a racial thing?
The AP article points to the “uneven recovery” as the culprit to the wealth gap being so large this time around:
“What’s pushing the wealth of whites is the rebound in the stock market and corporate savings, while younger Hispanics and African-Americans who bought homes in the last decade… are seeing big declines”
Also according to the study, Hispanics are more likely to be employed in the construction industry and more likely to live and buy homes in states such as California, Florida, Nevada and Arizona – each at the forefront of the real estate bubble.
Again, is that a race thing? Is there a law stipulating that Hispanics can only go into construction?
The media and government policy wonks are now lamenting that this pushes our country further into “what the Kerner Commission characterized as ‘two societies, separate and unequal,’”
Focusing on race does nothing but perpetuate this. Instead, we should focus on introducing concepts of personal finance to more minorities. Educate them instead of indoctrinate them into believing that they need a government handout to survive.
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Posted: September 22nd, 2010 | Author: Joe | Filed under: Economy, Employment | Tags: Economy, Employment, Recession | 2 Comments »
Can someone please explain this to me?
“The longest recession the country has endured since the Great Depression ended in June 2009, a group that dates the beginning and end of recessions declared Monday.”
According to The National Bureau of Economics (NBER), the recession ended last year, in June 2009. Not only does this ring hollow with near 10% unemployment and no sign of it falling any time soon, but it just doesn’t make sense when you look at the data and match it to the start and end dates given by NBER.
I understand that unemployment is a lagging indicator and it will take a while for it to come back down. I get that. But I also understood a recession as being defined by “2 or more consecutive quarters of negative GDP growth”. In other words, a shrinking economy.
But as this data shows the U.S. economy didn’t have 2 consecutive quarters of negative growth until the second half of 2008 – fully 6 months after the NBER’s claim of December 2007 as the start of the recession!
US GDP 2006-2010
However, if you look at when unemployment began to rise, it was 2007 ( data from the U.S. Bureau of Labor Statistics):
But if we’re using the unemployment rate to determine the start of recession, shouldn’t we use that to determine the end? Or, conversely, if we use GDP to determine the end, shouldn’t that be the metric for the start?
I’m really trying to reconcile this with some sort of impartial logic, but I can’t help but wonder if the reason is really political.
Paragraphs like this one from an AP article make me wonder if the dates and data are being chosen simply to place 2 recessions under one unpopular republican president:
“In President George W. Bush’s eight years in office, the United States fell into two recessions. The first started in March 2001 and ended that November. The second one started in December 2007”
Somebody tell me I’m wrong. Someone explain to me how the recession can impartially and objectively be said to have started in December 2007, and end in July of 2009, because it just doesn’t add up to me.
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Posted: February 5th, 2010 | Author: Joe | Filed under: Economy | Tags: Economy, Housing, Mortgage Rates, Mortgages, news, Recession | No Comments »
It looks like there’s a “mini-wave” of mortgage refinancing that’s been pushing the rate of applications up to a six week high. But the home buyer tax credit doesn’t expire until the end of April, and that doesn’t apply to refinancing anyway, so why the rush?
The rush may be due to the anticipated end to the Federal Reserve MBS purchase program at the end of Q1, 2010. The MBS program is the mechanism by which the Fed has been buying mortgage-backed securities from banks, helping to keep mortgage rates near historic lows.
For example, the average 30-year mortgage rate has been near 5% for almost a year.
According to the Mortgage Bankers Association, their mortgage index jumped 21% last week, as a result of a 26.3% increase in demand for refinancing while purchase loan requests were up 10.3%.
It’s not all rosy news though, the report also states that the borrowing cost was up 0.40% from the record low set last March. Analysts expect both mortgage rates and mortgage costs to be headed higher throughout the year.
Source
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Posted: May 13th, 2009 | Author: Joe | Filed under: Economy | Tags: Economy, Recession | 2 Comments »
I’m sure most of us have been affected by the recession, but how many have been fundamentally changed by it?
According to a Money Magazine survey (May, 2009), it has not only changed us but the changes will be permanent:
How we’re feeling.
54% say they’re worse off than a year ago and many worry about the next 12 months.
- 30% worry they will lose their home
- 52% worry a household member will lose their job
- 55% worry a household member will take a pay cut.
Men vs. Women.
More women than men (49% to 35%) believe the U.S. economy will be better a year from now, and more men (47% to 29%) believe the economy will be worse in the next year. It would seem that men are more pessimistic (some would say realistic), but they also seem more self centered:
When asked who will be affected more in the long term?
- 55% women said “my children”
Maybe this reflects the natural tendency of women to show more concern for their offspring? I don’t know, but I found it interesting.
How we’ve changed.
- 89% say they’ve changed how they manage their money.
No surprise here. You’d have to be pretty unconcerned with things to not change in some way. They go on to list 3 new habits:
- 65% eat more often at home
- 58% cut back on luxury purchases
- 61% look for deals and discounts when buying
This is not wholly surprising, but I would think looking for deals is a good habit even when times are good. Also, some might consider dining out a luxury purchase.
- 70% say their financial values and priorities are changing.
More frugal:
- 63% plan to save more than ever before
These are good things indeed, maybe not for the economy in the short term but certainly for the economy and society in the long term. I would also speculate that most Americans never thought about a plan prior to this.
More averse to risk:
- 63% accept less gains for less volatility
- 52% think they’d be better off with money in under their mattress than in the stock market.
This is a problem. It’s a common problem, but a problem nonetheless. The money under the mattress will be worth a lot less after inflation, and the risk in the stock market is much less than it was a year ago. Part of the problem may be that people are thinking short term as well as letter their emotions (fear) take over their decision making. It will only hurt them in the long run.
Less materialistic:
- 63% feel it’s less important to buy the newest “stuff”.
- 59% feel guilty when buying non-essentials.
Buying less stuff is good! I’m not sure the guilt is a good thing… I believe in moderation. But if it takes guilt for some people to moderate their behavior, then so be it. 
- 94% say the economic crisis will have a lasting effect on how they manage their money.
The survey goes on to point out various attitudes about money that respondents say have changed. Call me a cynic, but I think most people are saying this because it’s all very real to them now. If the economy, or their personal fortune, rebound sufficiently I believe most people will go back to their old ways.
How I’ve been affected.
How I’m feeling.
Count me in the segment who is worried about a job loss. My company was acquired by an international corporation 2 years ago and some of their decisions of who to lay off don’t add up. This always worries me because if I understand the rationale for a decision, I can plan around it. For example, if management is looking to wind down certain projects, then I can try my hardest to become a part of more favorable projects. However, when management says a certain project is the future of the company, then proceeds to lay off some of the most productive people on that project, it’s a bit unnerving.
Where the current economic conditions come into play is that I know it would be very difficult to find a new job should I happen to fit whatever criteria management is using to determine layoff targets.
How I’ve changed.
I was lucky to receive my financial wake up call some years back, and have since ditched credit card debt and excess spending. Still, I have decided that 8-12 may be the new 3-6 and beefed up my emergency savings in a high yield account.
I’ve also upped the contribution rate on my 401k because I believe that eventually, the economy will recover. I still have 25-30 years before I need that money, and that’s a lot of time to recover. Besides, the stock market hasn’t been this cheap in a long time.
How about you? How have you changed the way you manage or look at money?
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