U.S. Economic/Financial News
Sun-Belt Overtaking Rust-Belt in Rate of Poverty Increase
Feb. 7 (EIRNS)According to U.S. Census Bureau figures, the city with the largest increase in poverty, was not Detroit or Newark, but Sarasota, Florida, where the proportion of people living below the poverty line rose from 9.2% to 13.7% from 2007 to 2009. All of the other metropolitan areas where poverty levels jumped by four percentage points or more were also formerly fast-growing Southern and Western cities: Bakersfield, Calif.; Boise, Idaho; Greenville, S.C.; Lakeland, Fla.; and Tucson, Ariz. Arizona now has the second highest poverty rate in the nation, after Mississippi.
For the last decade or more, Sarasota had seen a growth rate of 5% per year. At the height of the housing boom, over 30% of the economy was devoted to either home construction, finance, or other support activities. When the collapse hit, unemployment quadrupled, zooming from 3.6% in 2006, to 13.4% in 2010. Today, as chronicled by the Jan. 29 issue of Britain's Economist, nearly half of the students in Sarasota schools "are from families poor enough to be eligible for free or cut-price lunches; a tenth of households qualify for food stamps; one in eight residents gets free meals from soup kitchens or food banks; perhaps one in 12 has suffered a recent spell of homelessness." The population of Florida actually dropped in 2008.
Into this deplorable situation, the new Office of Management and Budget Director, Jacob Lew, reports in the New York Times Feb. 5, he plans to cut various community service block grants programsgrants which support these very programssome by as much as 50%, "saving" nearly $1 billion in the process. The remaining funds will then be put onto a competitive basis, making them even less available to those with the most serious needs.
Usury Gone Wild: 59.9% Interest-Rate Credit Card
Feb. 8 (EIRNS)First Premier Bank in South Dakota has issued a credit card for people with poor credit ratings, with a 59.9% interest rateto start! Nearly 700,000 people have signed up for the card, with more than half of them carrying a monthly balance. This is "legal" under President Obama's "Card Act," which supposedly protects consumers from predatory lenders. The Act has no restrictions on usury, but only prevents issuers from raising rates retroactively. It's like a rapist warning you beforehand, but giving you no way out.
In addition to the interest gouging, First Premier charges a $45 processing fee to open the account, an annual fee of $30 for the first year$45 for every subsequent year, and a monthly servicing fee of $6.25 (or $75 a year)plus, naturally, late fees. The bank reports that it opens 50,000 accounts a month. First Premier's website say it is "one of the strongest capitalized banks in the country, and operates with no debt. Our asset growth is funded through time-tested, traditional sources."
Another Fed President Rejects QEII
Feb. 8 (EIRNS)Jeffrey Lacker, the Richmond, Va. Federal Reserve president and an alternate member of the Federal Open Market Committee (FOMC), said in a speech today that the Fed should "quite seriously" re-evaluate the need for large-scale Fed purchases of Treasury bonds, or quantitative easing, round two (QEII). Although Lacker said the economic situation is improving, he warned that "inflation is capable of accelerating, even if the level of economic activity has not yet returned to pre-recession trends," pointing to food and oil prices.
Dallas Fed president Dick Fisher last week said he would oppose any extension of the quantitative easing at next month's FOMC meeting.
Lacker has not called for Glass-Steagall (as Fisher and Kansas City Fed president Thomas Hoenig have), but he warned of a crash in the works if the money-pumping continues without real economic growth: "Be clear: there is no uncertainty about whether the long-run federal budget imbalance will be corrected. Continual increases in debt relative to the size of our economy are simply not feasible and will not happen. The real question is how a sustainable path will be achieved. In advance, by deliberately adopting and following a credible strategy, or in extremis, forced by investor retreat and collapsing market confidence to adopt drastic emergency measures? We would be wise to heed the abundant empirical evidence of the superiority of taking action before a fiscal crisis is upon us."
Lacker explicitly rejected the argument of Fed Chairman Ben Bernanke that there is no danger of inflation, because there is unused industrial capacity, which forces manufacturers to swallow the commodity price increases.