Any strategy to reduce intergenerational poverty has to be centred on work, not welfare, not only because work provides independence and income but also because work provides order, structure, dignity, and opportunities for growth in people’s lives – Barack Obama..
Using percentage figures to describe the predicaments of unfortunate sections of society often hides and dehumanises the condition. With unemployment remaining stubbornly high (at over 9%) it comes as no surprise that news emerged today showing poverty levels in the USA have grown by 0.8% in 2010. That’s 46 million Americans living below the poverty line. Roughly that many receive food stamps, 50 million have no health insurance and the poverty figures are the highest (in percentage terms) since the bureau of census figures were first collated fifty two years back. Working Americans also saw their median income fall by 2.3% to $49,445, circa £31,000.
The United States has long had one of the highest poverty rates in the developed world. Amongst the thirty four countries tracked by the Paris-based Organisation for Economic Cooperation and Development, only Chile, Israel and Mexico have higher rates of poverty than the USA.
Whilst Tim Geithner is visiting Europe encouraging the continents leading financial politicians to get their financial house in order those on the receiving end of the gentle persuasion could be forgiven for raising an eyebrow (or two) at the hypocrisy. The myth of a jobless recovery has by now surely been exposed as the double speak it always was. Geithner has been more pre occupied with suggestions that the European Financial Stability Facility (EFSF) should be increased beyond the €440billion agreed in June 2011. This none too subtle code for further banking recapitalisation could herald a unified agreement for the USA govt and the Federal Reserve to act in concert with European leaders to create a massive Q.E. 3.
As international alarm grows regarding certain European countries sovereign debt crises Angela Merkel continues to utter soothing words. Citigroup’s chief economist warns that Greece’s exit would lead to “financial and economic disaster. As soon as Greece has exited, we expect the markets will focus on the country or countries most likely to exit next from the euro area,” Willem Buiter said in a note published on Tuesday.
Pacific Investment Management Co.’s Mohamed A. El-Erian believes that the International Monetary Fund needs to act quickly with the European banks at risk of being engulfed in the region’s sovereign-debt crisis. With very little confidence in the USA or European policy the PIMCO c.e.o. believes that a full blown crisis could be imminent unless assertive action is taken. The firm oversees about $1.34 trillion of assets as the world’s largest manager of bond funds. The World Bank and the IMF meet from Sept. 23-25 in Washington, if no coherent policy is in place after that meeting many commentators would begin to question what ammunition is left to solve the crises.
According to the Wall Street Journal BNP Paribas can no longer borrow dollars; “We can no longer borrow dollars. U.S. money-market funds are not lending to us anymore,” a bank executive for BNP Paribas, who declines to be named told one of their journalists, “Since we don’t have access to dollars anymore, we’re creating a market in euros. This is a first. We hope it will work, otherwise the downward spiral will be hell. We will no longer be trusted at all and no one will lend to us anymore.”
He’s not the only one worried. France’s three biggest banks have been the subject of whisper campaigns about their solvency for months after Moody’s threats of a downgrade.
Societe Generale, France’s third-largest bank by assets, said it could resist a freeze in dollar financing from U.S. money-market funds, which cut their lending to European banks amid the euro debt crisis.
“Even if it were to go to zero, there would be no problem,” Societe Generale Chief Executive Officer Frederic Oudea said in Bloomberg Television interview today. The bank could withstand a freezing of financing from U.S. money-market funds “forever,” Oudea said.
The advice that Greece should default and do it in ‘big style’ on its bonds to stop a deterioration of the economy will have no doubt made Chancellor Merkel and President Sarkozy choke on their lunch. The suggestion came from Mario Blejer, a former Bank of England adviser who took the reins of Argentina’s central bank after its 2001 default on $95 billion. “Greece should default, and default big, you can’t jump over a chasm in two steps.”..
European stock market indices had positive days, the STOXX closed up 2.09% and the DAX up 1.85%. The UK ftse closed up 0.87% and France’s CAC up by 1.41%. The SPX is currently up 0.85%.
The forex markets have seen sterling fall markedly versus the dollar the franc and yen. The euro has recovered some of it’s recent losses versus the dollar where it had reached a ten month low last week. The dollar has fallen versus the yen and the franc.
Looking towards the London open the Jobless figures in the UK to be announced at 9.30 gmt could affect sentiment. Both the claimant count and claims change are expected to show modest rises. The ILO unemployment figure is predicted to show an increase from 7.8% to 7.9%. Average earnings data is published this is expected to show a modest rise of 0.1% when including bonuses.