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dylan huber

Does Income Inequality Help Cause Financial Crises? « naked capitalism - 0 views

  • high levels of income inequality stoke financial crises
  • Richard B. Freeman, an economist at Harvard, is comparing about 125 financial crises around the globe that occurred over the last 30 years. He said inequality soared before many of these crises.
  • ncome inequality is either a symptom of conditions that can produce bank crises (like excessive financailization of an economy) or a secondary contributor.
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  • large scale international capital flows would be associated with the prominence of large international ventures which again could distribute a lot of winnings to a comparatively small (in societal terms) number of beneficiaries.
Alexei Goudzenko

Reimagining Food Systems in the Midst of a Hunger Crisis - IPS ipsnews.net - 0 views

  • "We can and must re- imagine other food systems that take numerous social dimensions into account."
  • These are poverty, caused by trade policies that dump heavily- subsidised produce from developed countries on third world markets, thus rendering local farmers jobless; environmental degradation brought on by industrialised farming, which now accounts for nearly one-third of global green house gas emissions; and an epidemic of malnutrition caused by the colonising effects of mono-crops and a flood of processed food from the global north to the global south.
  • Agro-ecology, which includes systems that produce their own fertiliser using materials and waste from the surrounding environment, is being increasingly viewed as the only viable solution to the hunger crisis. Since prices of fertiliser doubled during the 2008 food crisis, continents like Africa that import 95 percent of their chemical fertilisers could see radically different outcomes in production by adopting agro-ecological techniques.
Susan Cui

Best Way to Fix Housing Market Let Prices Fall (Fast): Tech Ticker, Yahoo! Finance - 3 views

  • "Fixing the housing market" is usually defined as:Stopping house prices from falling Stopping foreclosures
  • Prices. The best way to stop prices from falling is to let them fall far enough to reach equilibrium, fast.
  • Foreclosed houses are selling like hotcakes because prices are finally attractive enough to draw in new capital.
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  • Un-foreclosed houses are NOT selling like hotcakes, but this is because their owners have yet faced up to the reality of how little they are worth (or, put differently, because they don't yet have to sell).
  • The vast majority of plans to "stop prices from falling" involve subsidies of one form or another (tax credits, subsidized mortgage rates, etc.)  These may slow the decline, but they won't stop it
  • subsidizing/encouraging debt-bingeing and homeownership is what got us until this mess in this first place.
  • The fastest and most effective way to stop prices from falling is to let them fall until they've reached equilibrium. And then start rebuilding wealth, equity, and economic growth from there.
  • Lots of Americans are going to lose their houses in the next few years regardless of what we do.
  • Keeping the number of foreclosures as small as possible
  • The best way to stop foreclosures, therefore, is to get people out of houses they can't afford and into houses they CAN afford (whether by renting or buying).
  • Importantly,
  • Foreclosures are caused by owners' inability to make debt payments.
  • will just delay the inevitable
  • the house-price issue
  • (No reason to buy or build now if you think prices will be cheaper tomorrow).
  • Businesses and consumers
  • open up their wallets
  • when house prices stop falling. And the fastest way to get there is to let them fall.
naheekim

Canadian household debt swells to $1.3 trillion - CBC News - 1 views

  • Canadians are increasingly relying on credit cards and credit lines to finance day-to-day expenditures, and the total national household debt in Canada has reached an all-time high of $1.3 trillion,
  • The survey found that 42 per cent of respondents said their personal debt was rising in the past three years, and 21 per cent said they couldn't manage their debt
  • Some 58 per cent of respondents said that day-to-day living expenses are the main cause for the increasing debt.
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  • The survey interviewed 2,014 people and had a margin of error of 2.2 per cent, 19 times out of 20.
  • Third of non-retired Canadians report not saving
  • Many Canadians are not aware of how the economic downturn has impacted their financial situation and continue to load up their credit cards and lines of credit
  • The report finds that 32 per cent of non-retired respondents said they were not devoting any funds toward saving, even for retirement, up from 25 per cent in 2007
  • Of those making under $35,000 a year, 49 per cent surveyed reported that their debt levels rose in the last three years. In comparison, 42 per cent of those making $35,000 to $75,000 a year reported their debt levels rose, while 38 per cent of those making over $75,000 annually reported an increase
  • Personal lines of credit expanded to a new high of $181 billion outstanding in April, an increase of 6.2 per cent year-to-date, and up 20.4 per cent from a year earlier. This type of debt has bloated from $100 billion five years ago and less than $50 billion at the start of the decade.
  • Personal loans from banks totalled $48.5 billion, up 8.1 per cent from a year earlier, and bank credit-card receivables were up 8.9 per cent at $51.5 billion.
alex yesikov

Tag, You're It! Too Big to Fail Risk Transferred, Not Eliminated - Daniel Indiviglio - ... - 2 views

  • Whenever we think of giant firms that a government feels it must bailout, big banks generally come to mind. Sure, an insurance company sneaked in there too, but AIG might have been more of an exception, since it so grossly underestimated the risks it was taking on its financial products and lived in a grey regulatory area. Although last summer's giant financial regulation bill sought to eliminate the systemic risk that led to a crisis a few years ago, it may have merely transferred some of it, creating a new breed of too big to fail firms
  • Those who understand the crisis know that derivatives were involved, particularly through AIG. It needed to be bailed out, because it did not have enough capital on hand to back up the credit default swaps agreements it had written. A large number of those were tied to the housing market, which caused the crisis.
  • In order to avoid this problem derivatives pose in the future, new financial regulation demands that all derivatives are cleared, when possible. For those who aren't familiar with clearing, the general idea is that each derivative is matched with an equal, opposite derivative through a central bookkeeper -- a clearing house -- to net out the risk they pose (more explanation with a lengthy analogy here).
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  • For example, imagine if AIG had cleared all of its credit default swaps. In theory, that means a clearing house would have ensured that the insurer had ample cash (or other collateral) on hand to satisfy their payouts.
Molly Fraser

Japan auto production plunges in april after quake, tsunami - 1 views

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    Toyota Motor Corp. reported Friday that Japan production in April fell 74.5 per cent to 79,341 vehicles while its global production declined 48 per cent to 346,297 vehicles.
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    Japanese automakers have been forced to reduce production amid parts shortages. The magnitude-9.0 earthquake and ensuing tsunami devastated huge areas in northeastern Japan, home to auto parts manufacturers.
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    Auto production works in a unique method in that different factories produce different parts, and oftentimes supply is exclusive to a few choice factories. This causes significant problems when there is a sudden rise in demand for these parts, or if production must be halted, as was the case with the 2011 Japanese Earthquake.
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    Japanese Auto Dealers sell around 9,000 models per month in Canada alone; Honda's production has fallen 81%, producing 14,168 vehicles in April 2011.
Carolyne Wang

How paying people's way out of poverty can help us all - The Globe and Mail - 0 views

  • there’s an increasing awareness, among even the country’s most wealthy, that poverty reaches beyond the tables of the hungry and digs into their own pocketbooks
  • When people are poor, out of work or homeless, it hurts the bottom line of all Canadians. And as the country struggles to maintain a shaky recovery amid growing global economic uncertainty, that’s not a hit they can afford to take.
  • If Ottawa and the provinces fail to make this a priority, Tory Senator Hugh Segal predicts, “over time, we will begin to run out of the money that we need to deal with the demographic bulge because it will be consumed in the health care requirements of the poor, which will increase. It will be consumed in the costs of the illiteracy and unemployment which relate to poverty. ... And it'll be unsustainable.”
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  • It’s already on the radar of some provinces: One of Christy Clark’s first actions as B.C. Premier was to raise the province’s minimum wage for the first time in a decade and offer a tax cut for low-income families. Ontario has launched a sweeping review of social assistance programs that Community and Social Services Minister Madeleine Meilleur has admitted are failing the province’s neediest.
  • Despite Canada’s reputation for a strong social safety net, the country is becoming economically polarized. And the decades-old dominant economic dogma that growing wealth among society’s highest earners would trickle down to those less fortunate is being challenged by an alternative approach: Eliminate crushing poverty among the lowest earners, and wealth will trickle up.
  • The ranks of the working poor have swelled as minimum wages fail to keep pace with rising costs and social assistance levels drop.
  • The recession widened the chasm, and a subsequent recovery hasn’t closed it.
  • On paper, almost as many jobs have been added as were lost during the financial crisis. But they offer fewer hours and less pay – and some of the hardest-hit sectors aren’t coming back.
  • Food bank use hit a record high in 2010. Tellingly, more of the people using those food banks have jobs – they just don’t make enough to pay the bills or feed their families.
  • As the incomes of the country’s top earners have risen, the incomes of Canada’s lower- and middle-income earners have stagnated.
  • Tony Masciotra is diversifying himself. The Argentine-Canadian father of two went back to school immediately after being laid off from his tool and die job at Ford Motor Co. in Windsor three years ago.
  • “I have records of over 100 jobs I have applied for,” he said. “I have looked really hard. ... But I haven’t been able to get a job yet.
  • Mr. Masciotra is part of a growing group of skilled labourers on the brink. The métiers in which they’ve worked for years are no longer economically viable: Many well-paying blue-collar jobs are being replaced by minimum-wage, service-sector ones. And that’s causing significant shifts on both sides of the border, notes MIT economist David Autor.
  • It gets more complicated, and more economically detrimental, if the people who’ve lost jobs aren’t the ones being hired to new ones.
  • They enter what Robin Somerville of the Centre for Spatial Economics calls “structural unemployment.” And if they leave the workforce entirely, they fall off the radar of unemployment stats: The numbers look better precisely because they’re worse.
  • The drop is even more significant because more Canadians are putting off retirement. That should mean more people in the workforce. But it doesn’t: So many younger workers are dropping out entirely that they outweigh the older ones sticking around longer.
  • “If you’re losing opportunities in some areas, and you’re not replacing them with opportunities of equal or greater value, then the overall level of income in the economy is reduced. And the ability of people to go out and buy goods and services is reduced.”
  • Homelessness costs taxpayers money – in both foregone wealth and social service spending.
  • Some see a solution in a 40-year-old experiment: In the 1970s, Manitoba wanted to see what would happen if it guaranteed poor people in a few communities a set annual income.
  • The philosophy behind this is simple: People are more likely to stay in school, out of emergency rooms and out of jail; they contribute to the economy through their purchases; they’re more likely to move eventually above the poverty line and pay taxes.
  • The irony is that Canada already scores high compared to other OECD countries when it comes to helping the elderly. Where it falls short is where it matters: The working-age poor – the ones who should be contributing to the economy.
  • $134,000 Estimated amount for emergency shelter, emergency hospital care, law enforcement and other social services for one homeless person in Calgary, for one year
  • $34,000 Estimated cost to proide supportive housing for one person in Calgary, for one year
  • $12,555 Average cost of hospital stay for non-homeless patient at St. Michael's Hospital in Toronto
  • $15,114 Average cost of hospital stay for homeless patient at St. Michael's Hospital in Toronto
Carolyne Wang

Is income inequality just business as usual? - The Globe and Mail - 0 views

    • Carolyne Wang
       
      The visuals in this link show the distribution of wealth among the highest income earners in Canada.
  • international statistics show that poverty rates are lowest where income inequality is lowest too. That can be because of culture -- the wage spectrum is compressed, as in Japan, where it is unseemly to get too far ahead of others in pay -- or through active redistribution programs, where taxes and the services they buy redistribute incomes and opportunities to try to level the playing field a bit more.
  • For most of the 20th century inequality in Canada - and in virtually all developed nations, actually - had been declining. By the 1980s that long term trend reversed. First because of recessions (where the bottom end of the spectrum lost ground) then because of rowth (when the top part of the income spectrum zoomed ahead). So for the past generation inequality has grown in Canada, in good times and bad.
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  • There are two reasons for hope. One is, oddly, the result of an aging population and the consequent shrinking pool of workers, which may push up wages for workers producing basic goods and services, not just those at the top of the skill spectrum. The other is a culture shift, where a growing number of boomers understand what is at play and start working with others to come up with ways to ensure there will be a resilient middle class for the next generation.
  • When the cost of something goes up, we tend to consume less of it. So, since living wages are higher than minimum wages, employers are likely to hire fewer workers. A living wage campaign is part of the effort to raise the visibility of a sorry development in Canada. The saying that "the best social policy is a job" is in many ways true; but a new reality has developed over the past decade or so - that you can't necessarily escape poverty by working. Working full-time full-year at a minimum wage job, as many adults do, condems you to poverty.
  • Professor Richard Wilkinson just finished a tour of Canada, discussing his research findings from the past 30 years or so. A social epidemiologist, he has gathered international data showing the very tight correlation between life expectancy and income inequality, between literacy and income inequality, between rates of incarceration and income inequality, etc. etc. Over and over again he shows a range of issues that have a strong social gradient which reveal that almost everybody is better off in a society with greater income equality, including the rich. You can see his presentation in Vancouver at this link. http://i.sfu.ca/TmyYCh
  • The Mincome experiment in Manitoba in the mid 1970s, the MacDonald Commission i n the mid 1980s, and the House Report from Newfoundland and Labrador in the early 1990s all had proposals for providing a basic income. Only Manitoba tried it, as a pilot project, for a few years. The problem with the guaranteed income idea is at what rate you set it, and at what rate you tax it back. It could remove the stigma of income support programs, but it could just as easily be a costly experiment that, essentially, guarantees poverty. Also, as Dr. Wilkinson has suggested, at some point on the GDP per capita curve, income inequality is no longer about material deprivation, but rather one of psycho-social responses. We are, after all, pack animals.
  • We can redress some of the vagaries of the market through public policies, but the root cause of growing inequality is how different peoples' work is valued. IN a slow growth environment, which seems to be the foreseeable future for Canada, it will become harder and harder for those at the top of corporate structures to take the types of increases they have been commanding in the marketplace and expect unionized workers to be happy about losing their pension, benefits and wage increases, and expect low-end workers to essentially stay put or lose more ground. Two things can happen - those at the top start moderating their increases; or those in the middle and the bottom start seeing solid increases, particularly as the wave of retirements starts accelerating. The problem with rising incomes, generally, is that usually goes along with rising prices; and we're about to host the largest cohort of retirees we've ever had in history, a group that lives on fixed and low incomes, to whom rising prices are toxic. So how will the highest priced workers get away witih demanding more in that context I wonder?
  • Historically, increasing economic growth first deliver rising inequality, then lowering inequality (Simon Kuznets' famous work back in the 1950s). That's still true of developing nations - economic growth is first badly distributed, then leads to demands for greater equality.
  • We can raise our kids more equitably - but it will take more taxes. We can have less of a winner take all society - but it will require some people at the top to trim their expectations. We can beat this in small ways, but we also need leaders to express the way forward. In the US they have Warren Buffett, Bill Gates and politicians leading the way. We're waiting for more people like Ed Clarke, the CEO of TD Bank, to weigh in on how to make Canada fairer (his suggestion is higher taxes on the rich).
dylan huber

Income inequality | The Economist - 0 views

  • Despite a quarter century during which incomes have drifted ever farther apart, the distribution of wealth has remained remarkably stable. The richest Americans now earn as big a share of overall income as they did a century ago, but their share of overall wealth is much lower. Indeed, it has barely budged in the few past decades.
  • distribution of wealth has remained remarkably stable. The richest Americans now earn as big a share of overall income as they did a century ago, but their share of overall wealth is much lower. Indeed, it has barely budged in the few past decades.
  • Productivity and globalisation have caused real income to rise much faster for those at the top of the income distribution than it has for the poor and middle class. High earners experienced more than a 30% increase in their real income over the last thirty years. Meanwhile, the bottom 50% of wage earners saw their real income increased by only 5-10%.
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  • Whether these shifts were good or bad depends on your political persuasion. Those on the left lament the gaps, often forgetting that the greater income disparities have created bigger incentives to get an education, which has led to a better trained, more productive workforce. The share of American workers with a college degree, 20% in 1980, is over 30% today.
  • the focus should be on giving everyone a an equal chance to be successful. This might mean making the tax code less regressive by expanding the earned income tax credit, eliminating tax subsidies to the rich, and improving access to quality education. 
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