Counterparties: America’s worst long-term trends

June 14, 2012

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In a speech today on the economy, President Obama framed the election as a contest of economic policies. Voting for Romney is a vote for Bush, the argument goes. Given that two-thirds of the public blames Bush for the state of the economy, it’s not a bad one to make.

But Obama will be fighting more than a few long-term trends that he didn’t mention – and that aren’t as obvious as the headline unemployment rate. Last week, a Federal Reserve study showed that the net worth of the median family has fallen to mid-1990s levels. Looking closer at the Fed’s data, Felix thinks “it’s fair to say that the median US household is no richer now than it was 30 years ago”.

For a view of what a long-term lack of growth looks like, Monica Potts chronicles the life of the Christian family, which is trying to make a living in one of the poorest counties in America:

For most of their adult lives, the Christians have made less than $22,113 a year, the poverty line for a family of four. This makes them like a lot of families in Owsley County, where 40 percent of the population lives in poverty and 30 percent lives just above it. More families rely on food stamps than make the national median household income of $49,445.

As more Americans join the ranks of the long-term unemployed, it’s worth reading the story of a 58-year-old man who has been out of work since 2010 and applied for more than 380 jobs. And for those who can get jobs, employment doesn’t always provide that much value. Mark Bittman looks at food service workers and concludes that “we don’t seem to mind or even notice that our servers might be making $2.13 an hour”. – Ben Walsh

On to today’s links:

Primary Sources
The memos Goldman execs use to prepare for meetings with hedge fund managers – DealBook

A surprisingly plausible “end of the world as we know it” – Dani Rodrik

EU Mess
A plain-English guide to Target2 – Felix
Europe’s cross-border banking system is unraveling – and that’s a bigger worry than Greece – WSJ
Spain is now making Ireland’s crippling mistakes – Harvard Business Review
It’s never a good sign when the lender of last resort refuses to buy your bonds – Tim Duy

Grieving father struggles to pay his dead son’s student loans – ProPublica

New Normal
Wealth inequality is even worse than income inequality – Bloomberg View
The Fed’s survey of wealth and income is out: How’d you do? – Dealbreaker

Another Foxconn employee jumps to their death – Techland

Allen Stanford gets 110 years in prison for a $7 billion Ponzi scheme – NYT

Data Points
Reminder: The rise of China is about growth rates, not absolute wealth – Bill Easterly

How JPMorgan’s derivatives bets caused chaos in the the market for blue-chip corporate CDS – Reuters

“Muthuball”: How a Stanford undergrad’s paper could change the NBA – GQ

New Normal
There is something called Underearners Anonymous – WSJ

Old Normal
The plague – yes, THAT plague – is resurfacing in affluent neighborhoods in New Mexico – Yahoo


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