http://globaleconomicanalysis.blogsp...recession.html
I found this very interesting as I have asked, on several boards, what will pull us out of our present
deteriorating financial circumstances. No one seems to have a reply and this may be why.
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http://globaleconomicanalysis.blogsp...recession.html
I found this very interesting as I have asked, on several boards, what will pull us out of our present
deteriorating financial circumstances. No one seems to have a reply and this may be why.
You have to hit the 'bear' boards to see comments about an L shaped protracted recession. There are in fact lots of comments in regard to that possibility, based on ...
A. high (and probably higher) taxes at the federal, state and local level serving as a continuing drag on US economic growth
B. high existing debt service burdens plus the sudden curtailment of additional credit (i.e. a major tightening of creditworthiness by lenders) for American consumers will limit their ability to 'spend' - thus 'permanently' reducing levels of US economic activity.
C. sustained high energy costs impose an ongoing drag on both US individuals and businesses ( with a major shock due when this winter's heating bills start to arrive)
D. record individual and business default and bankruptcy losses, in combination with rising energy costs / rising commodity costs / rising taxes / rising labor costs, are erasing profit margins for many US businesses - which in turn will make it impossible for them to expand and in many cases forcing layoffs / contractions in their US operations.
E. ongoing devaluation of the US dollar as a result of increased gov't spending on 'bailout' packages / unemployment benefits / social welfare benefits etc (and the necessity for the gov't to increase borrowing from foreign lenders to enable that spending) will cause the US dollar denominated price of all imported products to increase ... which in turn will create an increasing drag on the US retail sector. This will particularly be the case for auto / appliances / electronics / bottom end (WalMart) products etc.
F. a combination of financial pressures on American consumers has already / will cause them to economize in regard to service sector spending. Restaurant meals will be foregone in favor of home cooking. Upscale vacations will be foregone in favor of 'stay-cations'. People will mow their own lawns, groom their own pets, trim their own hedges, brew their own coffee etc. This will take a permanent 'bite' out of many US service industries, and will particularly hammer the food service / hospitality industry. The resulting reduction in earnings by 'tipped' employees as well as outright unemployment increase will further reduce US economic activity.
G. ongoing globalization trends, in combination with high US business tax rates / high US gov't mandated wage rates, benefit costs, environmental compliance costs, worker safety costs, litigation costs etc., will probably motivate many US businesses who have already / will go through layoffs / contractions in their US operations to NEVER add those US operations back. Instead, as economic conditions again warrant re-expansion, that re-expansion will take place overseas. This in effect will cause what otherwise might have been a U or V shaped recession to remain L shaped within the US at least.
In regard to your other point, the 'tin foil hat' crowd will tell you that there is absolutely NOTHING on the horizon that is capable of pulling us out of our present deteriorating financial circumstances. In fact, they will tell you that since the re-emergence of international competition in the 1970's ( international competition was pretty much bombed out of existance by 1945, and took 20+ years to rebuild) America has been sustaining it's 'accepted' standard of living via the piling on of debt and the liquidation of accumulated assets. Well, at this point, foreign lenders have essentially 'pulled the plug' on the ability of Americans to pile on even more debt - and America is either running short of remaining assets to liquidate, or is unable to liquidate them (due to declining market prices i.e. real estate and/or a lack of 'qualified' and willing buyers). The logical result will be a permanent reduction in the 'accepted' American standard of living back to levels that are on a par with the rest of the world ... a fact which will be perceived by many as being a recession that continues forever !
Well, I take that back (nothing at all on the horizon). There are a few 'tin foil helmets' out there that DO see something on the horizon that is capable of pulling America out of our present deteriorating financial circumstances. An attack on Iran which expands into World War 3 ! Like WW1 and WW2, there's nothing quite as effective as the destruction of foreign competitors' means of production to leave American industry in the 'driver's seat' of international commerce. But this would require 'terrorist attacks' and energy supply threats to also get Europe, Russia, China, India etc. involved in such a new war on a global scale.
(snip)"The US economy is showing signs that it is in a recession and heading for a hard landing, due in large part to the subprime crisis and the inevitable end to fractional reserve banking. Unfortunately economists believe that the short term solution to saving the banking theocracies from completely collapsing, with a crisis of this magnitude, is to wage war. However this strategy has the reverse effect, and completely collapses an economy if the war drags on by mushrooming the national debt and depleting the resources of the warring nations. This kind of economic lifeline has two major consequences: First it devastates the populace and the environment, and second it consolidates assets for the elite.
There is also one major setback to this proposal of a war with Iran: An attack on Iran would be nothing less then World War III. But then again maybe that is what the US economy needs to stay alive, a World War: The Perfect Consuming Machine. After all it was World War II that decisively ended the great depression, and since most economic indicators are worse now then they were then, it would be reasonable to assume that the United States will start World War III for nothing other then to continue the American lifestyle, maintain the banking plutocracy, and consolidate world assets into the corporate coffer.
If World War III, the minimum expected death toll for which is 200 million, is allowed to take place to save the banking institutions from collapse, then it is a true sign of corporate economic intelligence and control. However this will not resonate well with humanity, but then again, corporations are anything but human and war is everything but humane."(snip)
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Blimey. Aren't you cheery and fun today!!!
^^^ well, have a look at the top stories on Bloomberg ...
and you'll see that we weren't cherry picking the bad news !
Too many houses were built during the housing bubble. For the past 20 years, Americans have been using gasoline like there's an unlimited supply, which there isn't. Once all of the surplus housing is sold off and Americans start reducing their consumption of oil, which we're already doing, things will return to normal. The only difference is, Americans will act responsibly, because they don't have a choice. Americans will no longer be able to buy McMansions and SUV's that they can't afford.
The high price of fuel along with new CAFE standards will force American auto manufacturers to build more fuel efficient vehicles which will make them more competitive with the Japanese. Competition from Japanese non-union plants in the U.S. will force unionized auto-workers to accept realistic wages and benefits.
Sorry but I have to categorize this as 'wishful thinking'. If you look at the historical data, you will see that the average level of US home ownership hovered around 63% for decades ... but suddenly sprang up to 69% by 2004-2005 (as a result of Clinton's HUD policy / directive to increase minority - low income home ownership levels). Now that banks and FNM / FRE clearly realize that the 6% rise in home ownership levels was based on unsustainable mortgage loans being approved for people who really couldn't afford them, it will mean that average US home ownership levels will again fall back to 63% - if not lower (for a variety of reasons from tighter mortgage lending standards to higher tax rates). As a result, some 69/63 or 9.5% of existing housing will not be resellable in the short term. This 'overhang' of available housing stock versus would-be 'qualified' buyers will keep the market price of housing depressed for the forseeable future.Quote:
Once all of the surplus housing is sold off and Americans start reducing their consumption of oil, which we're already doing, things will return to normal. The only difference is, Americans will act responsibly, because they don't have a choice. Americans will no longer be able to buy McMansions and SUV's that they can't afford.
again this is 'wishful thinking'. As US automakers must re-tool away from SUV and towards small / hybrid cars, the first question management will ask is whether to spend $1 billion doing so at an existing American factory with $35/hr UAW workers, to spend the same $1 billion on a new US factory with $18/hr non-union workers, or to spend the same $1 billion for a new factory in Korea / China / Mexico. Going offshore would allow the automakers to pay $2/hr wages instead of $18/hr for non-union US workers - would allow the automakers to avoid the costs of employer SSI, mandatory benefit costs like comp & unemployment, OSHA worker safety compliance costs, environmental compliance costs, high US corporate tax rates (if and when a profit is ever earned again) etc. Thus the more likely scenario is the permanent closure of US auto plants with UAW workers, and the export of that manufacturing with associated permanent loss of jobs - since the US automakers really need to gain a cost advantage over the US production of Toyota / Honda etc. if they're going to survive in the long term (as opposed to merely equalling them).Quote:
The high price of fuel along with new CAFE standards will force American auto manufacturers to build more fuel efficient vehicles which will make them more competitive with the Japanese. Competition from Japanese non-union plants in the U.S. will force unionized auto-workers to accept realistic wages and benefits
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It looks like the home ownership rate fluctuated between 63% and 66% between 1978 and 1998. It then went up to 69% by 2004 and is now down to 67.8%.
http://www.census.gov/hhes/www/housi...c/histt14.html
It will probably fall a few more percentage points and then stabilize. As a result of the lower demand, the number of new houses being built will most likely continue to decrease in the near future. As the population is increasing, the demand for housing will increase and eventually the surplus houses will be sold off. The housing market will then begin to increase again, although not anywhere as fast as it’s been over the past few years during the bubble.
Your figure of 69/63 does not reflect the growing population. 63% of the total population from one year is a higher number than 63% of the population from a previous year. Eventually 63 percent of the U.S. population will be a greater number than 69 percent of the U.S. population in 2004. If the percentage goes back to historical levels, it will probably be somewhere between 63 and 66 percent.
From what I’ve read, American Automobile manufacturers are expected to hire a significant number of workers over the next few years as many workers will be retiring, although at much lower wages than the current workers. I don’t know of any plans to move any significant amount of production overseas, although I did read that Chrylser will be importing some cars from China. GM is currently spending $326 million on a new plant in Flint Michigan for building the engine and generator for the Volt, while the Volt will be manufactured in GM’s Hamtramck plant 60 miles away.
http://gm-volt.com/2008/07/29/its-of...lint-michigan/
If anything, the trend seems to be for foreign manufacturers to move their assembly here because of the weak dollar. Volkswagen will begin manufacturing automobiles in Tennessee
http://www.detroitnews.com/apps/pbcs...TO01/807150397
and Toyota is planning to begin producing the Prius in the United States.
again, there is a large element of 'windex for the crystal ball' here. For example, a UAW worker earning $36/hr would have no problem getting approved for mortgage financing on a median priced house on the basis of income, but might have a problem based on (lack of) job security over the 30 year term of the mortgage. On the other hand, a non-union auto worker earning $18/hr might have a problem with income level or saving up a 20% down payment in addition to meeting normal costs of living.Quote:
It will probably fall a few more percentage points and then stabilize. As a result of the lower demand, the number of new houses being built will most likely continue to decrease in the near future. As the population is increasing, the demand for housing will increase and eventually the surplus houses will be sold off. The housing market will then begin to increase again, although not anywhere as fast as it’s been over the past few years during the bubble.
The point of course is that the 63% historical average homeownership number corresponded to a US economy with pay rates that no longer exist, with income tax levels and property tax levels that (will soon) no longer exist, with commuting costs that no longer exist, with suburban retail and service industry levels that (will soon) no longer exist, etc. Undoubtedly a new equilibrium point will be reached, but where the bankers will allow that equilibrium point to fall depends on other factors as well such as future long term interest rates.
If nothing else, your growth assumption is flawed because of the nature of America's future population growth. In general, both the prevailing birth rates and the prevailing immigration rates indicate that the vast majority of new US population growth will continue to be among the 'poor' and 'unskilled'. Thus while you are correct that the DEMAND for housing will continue to increase, it seems likely that most 'new Americans' are likely to be seeking PUBLIC housing as their earnings potential is not likely to ever measure up to future mortgage lender creditworthiness standards.
As to the US Automakers having 'plans to move any significant amount of production overseas', were you aware that most of the Chevy AVEO parts are produced in a a GM plant in Thailand ? And as to the Chevy Volt being 'built' in Michigan ...
(snip)"That gap concerns U.S. automakers, which often have to shop Asian manufacturers for the most expensive parts of today's hybrids and their first generation of plug-in vehicles. The batteries for General Motors Corp.'s Chevrolet Volt will be made in either South Korea or China, depending on which supplier is chosen, and likely will cost more than $10,000 per vehicle.
"One of the reasons for having hybrids is to reduce dependence on foreign oil," said Sherif Marakby , for Ford Motor Co.'s chief engineer of hybrid core engineering. "You don't want to substitute dependence on foreign oil with dependence on foreign materials for lithium-ion batteries.""(snip)
(snip)""For a plug-in hybrid, the battery is 50% of the vehicle. You cannot outsource 50% of the vehicle and have reliable production," he said. "You have to produce where you sell."(snip)
from
In other words, there is likely to be very little different from US auto companies, asian auto companies, and european auto companies within a very few years. All will 'assemble' components in America in order to obtain the 51% US content level to avoid tariffs, but all will also source the vast majority of their high value added components from low cost overseas sources. This translates into an ongoing substitution of $18/hr assembly jobs, and a continuing loss of $36/hr jobs which currently still make high value added components (like engines, transmissions etc.)
There are many areas in the country where someone earning $18 an hour can afford to buy a house. I doubt it’s necessary to save 20% of the cost of a house in order to get a mortgage. Just looking at Wells Fargo’s website, it says, “Wells Fargo Home Mortgage provides a variety of loan programs that can help you buy a home without a lot of cash, or any at all”.
https://www.wellsfargo.com/mortgage/...iptions/nocash
The poverty rate in the U.S. is approximately 12%, so there is no way that the vast majority of US population growth will by among the ‘poor’ and ‘unskilled’. The poor would have to have 10 times as many babies as the rest of the population for them to make up the majority of population growth.
As for immigrants, many of them are highly skilled professionals, including many scientists and engineers.
The AVEO is the cheapest car GM makes, so it doesn’t surprise me that parts are produced overseas. Their more expensive cars probably get many of their parts domestically.
I’m pretty sure the batteries will be manufactured in Troy, Michigan.
http://www.compactpower.com/Document...nt_program.pdf
I’m not sure if there are tariffs on automobiles from most countries. I know there aren’t on ones from Mexico or Canada. The main reason manufacturers are moving to the U.S. is probably because of the low value of the dollar.
past history based on unrealistically low mortgage interest rates which failed to correlate with the actual risk of default. This will not keep happening in the future.Quote:
There are many areas in the country where someone earning $18 an hour can afford to buy a house.
more history ... or soon to be history. See thread about FNM's announcement that they will no longer buy Alt-A mortgage loans after the end of this year.Quote:
I doubt it’s necessary to save 20% of the cost of a house in order to get a mortgage.
well, all you need to do is add up the numbers at i.e. 83 births per 1000 for Hispanic teens and 64 births per 1000 for black teens and 26 per 1000 for white teens ... with the effect of illegal immigration on the future US population at to see that the number of 'poor' people being added to the US population far exceeds the few thousand highly skilled immigrants that are legally allowed into the US every year.Quote:
is no way that the vast majority of US population growth will by among the ‘poor’ and ‘unskilled’.
Additionally, in terms of middle class birth rates, America is currently hovering at a 'break even' level (2.1% lifetime). Western Europe's middle class birth rate has actually fallen BELOW the break even level, which will arguably occur in the US as well if a slow economy persists ( L shaped recession). Thus the percentage of 'poor' Americans versus middle class Americans will continue to rise, with the vast majority of population GROWTH occurring among the 'poor'.
this is a play for US gov't subsidies by GM ... which would simply transfer the higher cost of manufacturing batteries in the USA from the vehicle buyers / car manufacturer to the US taxpayer. See the other thread on 'green no longer being cool'. However, if US taxpayer money is going to be used to subsidize hybrid / electric vehicles in any case, it is preferable to see that a US corporation will get a chunk of that money versus a Japanese corporation and a Chinese / Korean battery supplier.Quote:
I’m pretty sure the batteries will be manufactured in Troy, Michigan
actually, the main reason that car manufacturers are moving vehicle ASSEMBLY to the US, and moving some low value added component manufacture to the US, is to be able to claim 51% 'American Content'. This allows them to avoid having to pay a tariff, and also opens the door for them to be able to sell vehicles to the US federal / state / local gov'ts (which constitutes a very large market share with a nice profit margin).Quote:
The main reason manufacturers are moving to the U.S. is probably because of the low value of the dollar
Admittedly, there are also two other factors which are prompting companies that import components that import components from Eastern Europe or Asia to try and develop low cost alternate sources in America (albeit in Mexico or central American countries more often than the US or Canada). The first factor is the steadily rising price of ocean shipping due to rising fuel costs. The second is the time lag in the supply chain, which results in 4-6 weeks worth of 'useless' product being eaten between the time a problem is identified with a component at an American assembly plant and the time the problem can be fixed at the Asian manufacturer and correct product shipments start arriving at the American assembly plants. All of the 'useless' product that had left the Asian factory and was somewhere on the ocean, or at a US port, or in a US rail / truck shipment, must be scrapped.
In places like New York or San Francisco, someone earning $18 an hour obviously could never afford a home. There are still many places in middle America where housing is affordable for people with this level of income.
Banks are going to have to do something with their deposits, and what else are they going to do but lend it? If there aren’t many people that aren’t able to put down 20% for a house, which there probably aren’t, banks will have to lend money to people that have less money to put down. I’m sure they’ll be a lot stricter than before, when they were providing mortgages for almost anyone who asked for one, but they’re not going to put them out of reach for practically everyone.
I don’t see what this has to do with the number of poor people being born. This only shows statistics for teen pregnancies broken down by race. Most births are probably from mothers that aren’t teens. Even though teen births have gone up, they are still much lower than in the past. I don’t see what race has to do with it either. There are plenty of Hispanics and African Americans that aren’t poor.
There are a lot more than a few thousand highly skilled immigrants legally allowed into the US each year. The current number of H1-B visas given out each year is 85,000. Some governors and CEO’s are pushing for this to be increased.
I don’t think birth-rate is an accurate way to measure population growth, since there is no way to know how many children a woman will have in her lifetime, until she’s past her child-bearing years. If you look at the birth to death ratio, the US population is increasing, even without immigration. The current birth rate is 14.2 per thousand, compared with 8.3 deaths per thousand.
http://encarta.msn.com/media_7015005...or_region.html
Just because a person is born to a poor family doesn't mean they will stay poor. The biggest factor in the number of poor people in the US is how well the economy is doing, not how many people are born poor. The number of poor people in this country increased dramatically during the recession in early 1980's, and the number of poor people in this country dramatically decreased during the economic boom of the 1990's.
again you seem to be missing the point that then was then, and now is now. $18 an hour = about $37,400 per year gross. Subtract 6.2% + 1.45% SSI / Medicare tax leaves about $34,500. Subtract federal income tax of another 5% leaves about $32,700. OK so even if a decent home can be found for an $80k sale price, under new lender regulatory guidelines it first means that Mr. $32,700 a year must save up $20k in cash to cover a 20% down payment plus closing costs. Once Mr. $32,700 has saved up this money, and can prove to the bank where it came from, a 'subprime' mortgage application then comes into play. Under new lender regulatory guidelines, this means that the maximum percent of after-tax income which can be 'used' towards housing is 30% ... or in this case $9,800 a year or $817 a month. So first take off the top the cost of property taxes, which will run at least $1800 a year or $150 a month ... as well as the cost of mandatory homeowner's insurance which will run at least $1200 a year or $100 a month. This leaves $568 per month available for mortgage payments, which WOULD be enough to cover a $60k 30 year 'subprime' mortgage at 8% interest rate and leave $125 per month towards home maintenance / repairs.Quote:
In places like New York or San Francisco, someone earning $18 an hour obviously could never afford a home. There are still many places in middle America where housing is affordable for people with this level of income.
So it now falls to the bank's credit committee to try and postulate how likely it is that Mr. $32,700 per year is going to remain employable at $18 per hour for the next 29 years - how likely it is that the $80k 'fixer-upper' property is going to require a new roof or new furnace or new septic system or some other expensive home repair that Mr. $32,700 is not going to be able to afford - how likely it is that insurance companies are going to jack homeowners' insurance rates for Mr. $32,700's neighborhood sky high due to 50% of the neighborhood's housing being vacant / unsold resulting in rising crime rates etc. And of course there is the issue of the $80k property needing to be in full conformance with Fannie Mae / Freddie Mac requirements
Lastly, given a shortage of bank capital, the bank's credit committee has to then decide whether loaning $60k to Mr. $32,700 per year is the most productive use of bank capital as compared to other options i.e. a 'prime' mortgage loan or home equity loan to someone with a much higher income level, a leveraged buyout business loan that will net the bank far more than an 8% return, a buyback of bank stock shares to raise the share price and restore investor confidence etc.
Do the math. Just among unwed teenage mothers you're looking at an average birthrate of 58/1000/year or 3.1 'new poor people' being born to every 2 'poor people' every 20 years. In contrast the average birthrate for 'middle class' people is barely higher than the 2.1 children which must be born every 20 year generation to simply 'replace' the dying. This in turn means that, with no economic factors considered which might cause current 'middle class' people to become 'poor people' (or vice versa), with every generation the number of American 'poor' will increase by 50% while the number of middle class taxpayers will essentially remain the same. This also does not consider that America 'imports' far more 'poor people' than middle class or rich people !Quote:
I don’t see what this has to do with the number of poor people being born
nope, sorry ... (snip)""Ten years into welfare reform, caseloads may have decreased, but the number of people living in poverty has not," Robert Wharton, the president and chief executive officer of the Community Economic Development Administration, wrote in a recent story in the Chicago Sun-Times. "At the same time, the safety net of services and support that once protected the poor lies in tatters. Today, working parents in ill-paid jobs often work themselves right out of eligibility for desperately needed assistance."Quote:
the number of poor people in this country dramatically decreased during the economic boom of the 1990's
During his 1992 presidential campaign, Democratic Party candidate Bill Clinton promised to "end welfare as we know it." Four years later as president, he signed into law the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, commonly known as "welfare reform." That landmark legislation set work requirements for most welfare recipients and limited the length of time they could collect assistance. (The law's "charitable choice" provision allowed religious organizations to receive government funding for providing certain welfare-related services.)
There is no question that welfare reform has succeeded in reducing welfare rolls in the states. It also proffered a golden calf to corporations that were prepared to take advantage of the wholesale or partial privatization of welfare systems in a number of states. And, in January 2001, President George W. Bush's faith-based initiative opened the doors to religious organizations to get government grants to provide services previously made available by government agencies.
The end result is that, despite (or, because of) the dramatic decline in the number of welfare recipients -- by perhaps more than 50 percent nationally -- there is also growing evidence that poverty in the U.S. has actually deepened.
In addition, "welfare reform", an issue that once commanded at least some attention in the mainstream media, has basically fallen off of that radar screen.
The outcomes of welfare to work programs vary from state to state, and from locality to locality. Some programs have changed lives for the better, helping former welfare recipients find good jobs with decent wages and benefits. Other W-2 initiatives have failed and are complicit in the creation of a new under-class with more women and children in poverty lacking even the most fundamental services.
A 2002 report by the Chicago, Illinois-based Joyce Foundation found that while hundreds of thousands of welfare recipients in the Midwest went to work since 1996, most had "taken jobs that pay low wages, are part-time, or don't last ... As a result, most of those who have made the transition from welfare to work remain poor.""(snip)
from
the point of the above, of course, is that in 1996 Bill Clinton was arguably forced to sign the 'welfare reform act' which did force formerly non-working welfare recipient 'poor people' into working 'poor people'. There were just as many 'poor people' in America prior to 1996, but they didn't show up in income statistics since many weren't required to seek an 'income' thus file a tax return thus show up in gov't statistics on income demographics !
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Your estimate of $37,400 a year for a worker earning $18 an hour does not include any overtime. In addition, his spouse can work, which is very common. With overtime and a second income, the total family income would probably be closer to $60,000. A family with an annual income of approximately $60,000 shouldn’t have much trouble buying a $100,000 - $150,000 home.
I don’t see what the teen pregnancy rate has to do with the poverty rate. Just because a teenager has a baby doesn’t mean the teenager is poor. Jamie Lynn Spears just had a baby. I doubt very much that her baby will grow up poor. I’m not sure how you determined there will be 3.1 poor people born to every two poor people. If you go by your teenage birth numbers, there will be 1160 babies born per 1000 teenagers over 20 years (58 *20). Again, not all teen births are to poor people and not all people who are born poor grow up to be poor. As I said before, the poverty rate fluctuates, it doesn’t just go in one direction.
The poverty rate did decline significantly during the Clinton Administration. In 1993 the poverty rate was 15.1%. By the year 2000, the poverty rate dropped to 11.3%:
http://www.census.gov/hhes/www/pover...v/hstpov2.html
again do the math ... try 1.058 to the 20th power instead of 58*20. In exactly the same way that compound interest rapidly builds wealth, compound population growth rapidly increases the number and percentage of 'poor people'.
As to your point about overtime and other household income sources, your statement is true on the face of it. However, new regulatory guidelines now require lenders to evaluate a 'worst case scenario' ability to repay. Under that scenario, it is unlikely that overtime would be considered to be a reliable, repeatable income source.
Your calculation is based on the teenage population growing at 5.8% anually, when it is actually growing at about 1%. Again, just because a teenager gives birth to a baby doesn't mean the teenager is poor or that the baby will grow up to be poor. If the number of poor people in America is increasing faster than the overall population, what is your explanation for the poverty rate falling from 15.1% in 1993 to 11.3% in 2000? The poverty rate today is still lower than it was in 1993. (See table below)
http://www.census.gov/hhes/www/pover...v/hstpov2.html
^^^ well. mostly because of a change in gov't interpretations re the 'official' poverty level which includes to some extent the equivalent cash value of welfare / medicaid / other social welfare benefits ...
"(snip)The most significant effect of the proposed measure is on the proportions
of poor people in families that receive welfare and in families with one or
more workers. For families that receive Aid to Families with Dependent
Children (AFDC) or Supplemental Security Income (SSI), their share of the
poverty population decreases from 40 to 30 percent. For families with workers,
their share of the poverty population increases from 51 to 59 percent. The
proposed measure also noticeably affects the proportion of poor people in
families that lack health insurance; their share increases from 30 to 36 percent."(snip)
from
Also the welfare reform act of 1996 did get some 'career' unemployed to become re-employed ... which resulted in an eventual increase in income and an eventual rise above the 'official' poverty level.
but on the subject of children born to unwed teen mothers versus probability of remaining 'poor' ...
(snip)"Unwed childbearing, and in particular teen pregnancy, can devastate a young woman's economic prospects, not to mention the economic, educational, and health prospects of her children. The child of an unwed teen high school dropout is nine times more likely than the child of a wed adult high school graduate to live in poverty, according to researchers Nick Zill and Kevin O'Donnell. Moreover, only one in three teen moms finishes high school, and nearly four out of five end up on public assistance. "(snip)
from
they gave the statistic of 58 births per 1000 ... which last time I checked was equal to 5.8 births per 100 or 5.8%. Obviously this figure doesn't directly correlate to the current growth rate of the US TEENAGE population, because today's teens were born in the 90's. However, it WILL apply to the growth rate of the US teenage population 13 years in the future. It does, however, immediately apply to the number / growth of American 'poor'.Quote:
Your calculation is based on the teenage population growing at 5.8% anually, when it is actually growing at about 1%
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I'm not sure where you got the number of 58 births per 1000. I didn't see it the article in your above post. In the article you previously linked to,
http://www.washingtonpost.com/wp-dyn...120501208.html
it gave a rate of 40.5 births per 1000. That was for teenage girls only. If teenage boys are included, the birth rate comes out to approximately 20 births per 1,000 teenagers.
^^^ it was a weighted average of birth rates to teenage girls over the entire age range of 19 or younger who are black ( 63.7 per 1000), hispanic ( 83 per 1000) and white ( 26.6 per 1000). The 40.5 births per 1000 in 2005 and 41.7 births per 1000 in 2006 applies to girls aged 15 to 19, but does not include girls who are younger than 15 who apparently account for the 'missing' 16 births per 1000 ! And before you start another round of minutiae, yes the 58 per 1000 figure does include girls who are not yet technically teenaged i.e. girls ages 10, 11 and 12 who have also given birth !
Trying to restore focus where it is needed, for a fact the USA is becoming 'poorer'. Part of the reason is a disproportionately high birth rate to 'poor' American mothers ... many of them teenaged, many of them high school dropouts, and many of them unable to provide their child with a 'competitive' equal opportunity. America is also 'importing' poor people ( with the majority actually 'importing' themselves illegally ), who also tend to exhibit a comparatively high birth rate. Compounding the problem, America is also 'exporting' quite a few 'rich' and middle class people in the form of skilled working age former Americans pursuing offshore employment, very highly paid / 'very rich' Americans seeking offshore 'insulation' from the IRS, and also in the form of expatriate retirees seeking much lower costs of living offshore (to assure they don't run out of retirement money). And the birth rate for the 'rich' and middle class Americans who remain is only 0.1 percent higher than the rate necessary to 'replace themselves'.
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Including girls under 15 would significantly lower the teen birth rate. The 16 births per thousand were not counted in the statistics, but neither were the 1,000 girls. If you include girls who are pre-15, it would bring the rate down to approximately 28 births per 1,000 girls (the average of 16 and 40) or 14 births per 1,000 teenagers (boys and girls).
While there has been a slight increase in teen births in the past year or two, over the long term, the teen birth rate has dropped dramatically. From a high of 61.8 in 1991, it has dropped to approximately 40 today.
http://www.guttmacher.org/pubs/2006/09/12/USTPstats.pdf
Since you seem to think that teen births are the main cause of poverty, this would mean the poverty rate should significantly decrease as the teen birth rate has.
You seem to have this mistaken notion that anyone who is born poor in this country will remain poor the rest of their life and their descendants will always be poor. That's not the way it works. There are plenty of people who are born poor and eventually become middle class, or even wealthy. In general, the biggest factor as to how much poorer or richer the USA is becoming is how well the economy is doing. When the economy is growing fast, the USA becomes richer, when the economy grows slowly or shrinks, the USA becomes poorer. Right now the economy is growing slowly. Eventually the economy will pick up and people will become richer. That's the way it has always been. There have always been economic downturns and they have always been followed by economic recoveries.
^^^ your contentions seem to fit in perfectly with other truisms involving 'always' ...
- real estate always goes up in value
- auction rate municipal bonds can always be cashed in
- the American standard of living always rises from one generation to the next
I guess that the level of 'proof' needed in regard to an 'L shaped recession' will be several years worth of the American economy 'treading water' ... actually backsliding as the rate of economic growth falls below the rate of inflation.
That's generally how free market democracies work. Businesses and entrepreneurs are always coming out with new and improved products, which results in economic growth and higher standards of living. When something happens which negatively impacts the economy, the economy adjusts. When the price of gas dramatically increases, people start buying more fuel-efficient cars and driving less, and gas becomes more affordable. When home-builders overbuild new houses, they reduce the number of new homes built until the excess houses are sold off.
Man, I wish I could remember all that stuff I read about market technicians.
Eagle, I think you should tip your hat to Melonie. I mean no disrespect, but all of her posts I've read, including these, are specific, quantitative and accurate. It seems to me that you've put a lot of thought into your posts, but there's a lot of speculation and academic material in your argument.
First, banks the country over have constricted credit immensely, and in some cases shut it down. You can put bank and CU failures in the latter group. This isn't speculation; it's not a "model." It's right now. A full service bank can tolerate losses to 0.50% of outstanding loan balances or so. (sub prime shops can tolerate much higher losses as they charge much higher rates). Banking is a narrow margin business. (more like a grocery store than a jewelry store). Rest assured they fear unusually high losses far more than they fear a reduction in market share. And right now there's so much blood in the water that you'd be a fool to be swimming.
10 years ago more than half of the banks and mortgage companies out there would lend you 125% of your home's (inflated) value. Two years ago you could easily get a 100% LTV and still get decent terms. EVERYONE had 80% LTV first mortgages paired with 100% LTV seconds or HELOCS. Now you better have 20% equity and they're going to scrutinize your appraisal as though it was your passport from Oman.
I don't think anyone here disputes that there have always been downturns and there will always be recoveries. They do, however, vary in duration and intensity. A blind person could tell you this is a perfect storm brewing.
Your 8/19 post is pretty much "spot on" correct, yet it's beyond simplistic. The textbooks don't necessarily make it plain that the homebuilders don't really simply "make fewer homes." Many go out of business, those that don't tighten their belts. They all buy fewer materials, less equipment, less land.
What happens to the young couple who already have a Tahoe with a payment of $700 payment and now their monthly fuel expense has gone from $300 / month to $600 per month. At the same time the value of their home dropped from $130k to $90k? Hope he's not a builder, or the fam's really toast! The bright side is that if you really want a Tahoe, you can get a good deal on one now on every streetcorner.
It's still the best system in the world, but sometimes it's painful and this will be epic, I think. (come on over, I'm making tobasco popcorn).