Tag Archives: financial crises

When the Rich Get Risky: Inequality and Financial Crises

One of the most striking–and perhaps most underreported–aspects of the financial crisis is reflected in one economic indicator. The chart below tracks this indicator over the last 90 years. One sees a spike to the left of this timeline, and a spike… Continue reading

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The Consumers’ New Clothes (Sarah Ferguson, Take Note)

I don’t need to tell you that the world has seen its share of change lately. We used to embrace change and make it happen (which entails pretty much everything before Sept. 11, 2001). Then we watched it from the sidelines (the Iraq and Afghanistan wars… Continue reading

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The Economy: Don’t Hit the Reset Button

With apologies to rapper-actor L.L. Cool J and his song “Mama Said Knock You Out,” don’t call it a comeback.

In fact, let’s not call our wobbly progress from the brink of a global financial meltdown a “recovery.” Why? Because we are doomed by our collective mindset to plunge into more financial crises as soon as we recover. Some of the world’s top business leaders, including General Electric Chief Executive Jeffrey Immelt and Microsoft CEO Steve Ballmer, have rightly recognized that we need to create a fundamentally different way of pursuing business and human endeavor.

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The Mysterious CAFRs: How Stagnant Pools of Government Money Could Help Save the Economy

For over a decade, accountant Walter Burien has been trying to rouse the public over what he contends is a massive conspiracy and cover-up, involving trillions of dollars squirreled away in funds maintained at every level of government. His numbers may be disputed, but these funds definitely exist, as evidenced by the Comprehensive Annual Financial Reports (CAFRs) required of every government agency. If they don’t represent a concerted government conspiracy, what are they for? And how can they be harnessed more efficiently to help allay the financial crises of state and local governments?

The Elusive CAFR Money

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Beat the Devil

The rise from the ashes of the American and world economies has been slow and is likely to continue to be slow, at least in the world’s highest income countries. As with all previous recoveries from major financial crises, there is a serious drag from large debts remaining to be paid and depressed prices of real estate and common stocks compared with the end of the boom. Just as getting more into debt enabled us to live beyond our means, the long slow process of paying off that debt, which has barely begun, ensures that we will live well below our means as long as it takes to reduce debt to a more comfortable level. The consequences will be slow growth for the American economy and the world economy for a long time. For example, at the average savings rate since the recovery began last July, it will take approximately ten years to restore the ratio of debt to income that prevailed in the mid-1990′s, let alone the lower ratios for all the years before.

After the recovery began there seemed to be a possibility, for a while at least, that the unprecedentedly large and swift interventions around the world would lead to a stronger rebound than previous aftermaths of financial crises. For much of last year we were optimistic that things could be different this time. We took comfort from the cooperation across nations, regions, political parties and ideologies that produced the initial effective responses to the credit crisis. Over the last five months our optimism has evaporated. On the one hand, virtually all the modest economic growth that has occurred in the United States and most of the world has been a direct result of government programs. The implication is that to keep the economy from slowing, let alone to increase growth, there must be a continuation or an increase in the level of government support and stimulus.

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Paul Volcker: Do the Right Economic Thing

A great deal of the popular anger directed at big banks is completely legitimate, as put nicely by John Cassidy at the end of his interview with Treasury Secretary Tim Geithner,

“The hardest part of his job, Geithner often says, is getting people to comprehend the inner logic of a financial-rescue operation, and the unpopular actions it entails. In fact, his problem may be not economic illiteracy but its opposite: Americans understand all too well what has happened. Financial crises have a way of revealing aspects of our economic system that otherwise remain obscured, such as the symbiotic relationship between Wall Street and Washington, the hidden subsidies that financial firms sometimes receive from the Fed and other government agencies, and the fact that the vast profits that firms like JPMorgan Chase and Goldman generate depend in part on an implicit guarantee from the taxpayer. When ordinary Americans are confronted with these realities, they get angry.”

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Only a New Global System Can Handle a World of Explosive Risk

The recent financial crisis is the first systemic crisis of the 21st Century. By learning its lessons we cannot only avoid a destabilizing cycle of more acute future financial crises, but also equip the world to handle other looming catastrophes such as climate change, global pandemics and bio-terrorism.

One lesson in particular is inescapable — that the world’s governing bodies, from the UN to the World Bank, from the G20 to the IMF, can no longer cope with systemic risks of these kinds. A radical reform of the national and global system is required to ensure that the constantly evolving catastrophic ‘weapons of mass destruction’ are identified before they explode. Otherwise the next decade will see new problems thrown at old and outdated institutions.

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Fed Officials: Unemployment Will ‘Remain Elevated For Quite Some Time’

In yet another sobering acknowledgment that jobs will continue to remain scarce despite the seemingly improving economic situation, Federal Reserve officials believe that unemployment levels will “remain elevated for quite some time,” according to minutes released Wednesday of a recent Fed meeting.

“Participants expected the economic recovery to continue, but, consistent with experience following previous financial crises, most anticipated that the pickup in output and employment growth would be rather slow relative to past recoveries from deep recessions,” the December 15-16 meeting minutes from the Federal Open Market Committee show. The committee is the Fed’s policy-making body.

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Sharing the Privilege of Abundance

Thanksgiving always evokes memories of the days when, as mothers of young children, we would bundle them up to deliver turkey baskets — family to family — to those in Washington, DC who couldn’t afford a holiday dinner of their own.

That simple act connected our children to the original spirit of Thanksgiving — where families stop not only to give thanks for plenty, but to share with strangers in need. Thanksgiving is one of the few days where soup kitchens and food pantries around the country burst at the seams — not just with turkey and stuffing, but with volunteers eager to serve.

Americans, in fact, are the most generous people in the world when it comes to private philanthropy: 85 percent of American families give their time or money, with private giving averaging $300 billion a year.

This year Thanksgiving strikes at a critical hour for families everywhere who have been hit hard by the global financial meltdown.

In the United States, one in nine people rely each month on food stamps. Demand at food pantries and homeless shelters is at record levels. And 17 million American households have had difficulty putting food on the table during the last year — a 14-year high.

Yet while we concentrate our efforts on addressing hunger at home, we must remember another face of hunger in our world — one that’s largely invisible until we glimpse it on our TVs from some distant country, when a typhoon, earthquake, flood, drought or conflict makes the evening news.

It’s easy to forget the silent tsunami of hunger that rips an ever-greater swath through the places where there are no streets, where mothers wonder if their malnourished babies will survive and fathers despair that they cannot provide even a single meal for their desperate families. The compounding impact of the food, fuel and financial crises has pushed the numbers of those suffering chronic hunger past one billion — one in six people on earth — for the first time in history.

Those in the “Bottom Billion” subsist on a dollar a day or less. Each day, hunger and related ailments claim 25,000 lives, mostly children — making hunger the world’s No. 1 public health threat. Even when chronic hunger does not kill, it maims — shattering health, longevity, and hope.

Malnutrition in children under age two causes irreversible damage to their minds and bodies. In countries like Ethiopia, Pakistan and Guatemala, one in two children is stunted. Not only is this an incalculable human loss, but it is a quantifiable financial loss to these nations. Studies show malnutrition causes tens of billions of dollars in losses to poor countries — or as much as 11 percent of GDP.

As we’ve traveled the world, the two of us have shared stories and tears with other mothers — far from Washington — who have watched, helplessly, as their children slipped from their grasp into the maws of hunger. For them, Thanksgiving never comes.

Although the mind reels with the huge needs of the world, the solutions are surprisingly achievable. Many nations — Ireland, China, Brazil, and a growing number of African countries — have beat back the worst of hunger. Inexpensive nutritional interventions can dramatically improve the health — and lives — of women and children. For just 25 cents a day, we can feed a child at school, giving them a real shot at forging a better future.

And with $3.2 billion a year — or $1.5 billion less than Americans spend on Halloween annually and a fraction of America’s private giving — we can feed the 66 million children worldwide who go to school hungry. This alone won’t end hunger, but it would be a huge step forward.

If we are to solve hunger, it will take the political will and resources of governments. It’s encouraging that the Obama administration and Congressional leadership recognize that a sustainable, comprehensive food security strategy is vital to ensure our planet’s future peace and prosperity.

Yet every one of us, at all levels, can make a difference — especially if we work together. The World Food Programme’s first Internet citizens’ campaign, www.wfp.org/1billion, is mobilizing the online community: if a billion Internet users donate a dollar a week, we could transform the lives of a billion hungry people across the world.

As we enter the season of colossal Wall Street bonuses and a frenzy of holiday spending, it is time for us to once more share the privilege of plenty. It is time to declare, once and for all, that not a single child should die from — or be irrevocably stunted by — hunger.

Not on our watch.

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