Opinion

The Great Debate

Obama and the American dream in reverse

“It’s like the American dream in reverse.” That’s how President Barack Obama, ten days after taking office last year, described the plight of Americans hit by the faltering economy. His catchy description fell short — the dream has turned into a nightmare for tens of millions.

So much so that an opinion poll this week showed that 43 percent of those surveyed thought that “the American Dream” is a thing of the past. It “once held true” but no longer does. Only half the country believes the dream “still exists,” according to the poll, commissioned by ABC News and Yahoo against a background of dismal statistics on growing poverty, inequality, unemployment, and Americans without health insurance.

Before turning to the gloomy numbers, a brief detour to the meaning of the phrase “the American Dream,” long a familiar part of the U.S. (and international) lexicon.  The survey defined it as “if you work hard, you get ahead.” That’s neat shorthand for the concept that the American social, economic and political system makes success possible for everyone.

More expansive definitions of the American Dream invariably feature home ownership, and there the dream went into reverse on a particularly large scale, with the subprime mortgage boom and subsequent housing bust. Last year alone, there were 2.8 million foreclosures — 7,700 a day — on homes whose owners could no longer afford their mortgages.

The statistic that best explains growing doubts over the achievability of the American Dream was released by the Census Bureau in mid-September. In 2009, the Bureau said, 3.8 million people joined the ranks of the poor by falling below the poverty line, defined by the government as an annual income of below $22,000 for a family of four.

from The Great Debate UK:

Double dip a done deal?

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-Jane Foley is research director at Forex.com. The opinions expressed are her own.-

Earlier this week the S&P 500 was down 15 percent from its April 2010 high.   The ongoing debate on whether the U.S. economy is poised for a double dip recession can be linked with these falls.

At present there is insufficient evidence to conclude that the U.S. economy will fall back into recession, though there are signs that the recovery could be losing momentum.  A key question is whether the adjustment in asset prices seen since the end of April has been appropriate.

Welcome to the Teenies, sorry about those returns

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-James Saft is a Reuters columnist. The opinions expressed are his own-

As we say goodbye to a decade so abysmal it never even earned a nickname, it is time to take bets on how the coming 10 years will shape up in economics and financial markets.

Welcome, then, to the Teenies, a word that will describe the decade as well as the small returns in financial markets and the shrinking financial sector it will bring.

So, let’s run through some themes for the 2010s:

Banking – The decade will end with meaningful reform of banking in place, but what is not clear is if this happens soon or only after a new banking crisis brought on by an unwillingness to take tough steps now. The likelihood is that regulation limits leverage and causes the share of the economy captured by financial services to shrink. It will be a lousy decade to be a shareholder, but given the government backing, perhaps not a bad one to be a bondholder.

from The Great Debate UK:

Residue of the Great Recession

Drummond- Don Drummond is Chief Economist at TD Bank Financial Group. The opinions expressed are his own. -

The Great Recession is over in North America.  But repair will be a slow work in progress and great risks remain.  Many of these risks are centred on policy matters.  The recession shook our understanding of some policy matters to the core, leaving more questions than answers.

The Great Recession produced deep output and employment losses in many countries, certainly including Britain and the U.S., but also an unprecedented degree of synchronization around the globe. 

from The Great Debate UK:

Why is the UK still in recession when the U.S. isn’t?

Recent U.S.  gross domestic product data show the world's biggest economy emerged from recession in the third quarter, while in the UK data show that in the same period Britain's economy contracted.

British economist and author John Kay theorizes that Britain is mired in its worst recession on record in part because government support has not been evenly distributed across sectors.

"We've poured money into the financial sector -- by and large the financial sector in Britain is doing OK," he said.  "But very little of that is getting through to small and medium-size businesses out there in the rest of the economy."

Japan, nominally lost, not really so

Al Breach was Russia economist with UBS and Goldman Sachs and is currently managing partner of TheBrowser.com. The views expressed are his own.

albreachHOSTENTAL, Switzerland – How bad was Japan’s “lost decade”? As we look east for clues as to the possible fate of western economies, it is worth dwelling on what actually happened, and not just how it was reported.

Japan’s stock market bubble burst at the end of 1989, and house prices started to fall about a year later. Asset prices at the peak were wildly inflated. Stock prices were trading at ratios of well above 50 times boom-time earnings, while the total value of housing represented around 300 percent of GDP.

from The Great Debate UK:

Tiptoeing toward economic recovery after Lehman

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- David Andrews is director of David Andrews Media, a financial public relations consultancy with high profile fund management and financial services clients based in the UK, Ireland, Cayman Islands, Cape Verde, Beijing, Europe and the U.S. The opinions expressed are his own. -

David is a former financial journalist best known for his weekly Daily Express and Conde Nast ‘Money Matters’ columns.
Few will be lifting a glass to toast the first anniversary of the collapse of investment bank Lehman Brothers a year ago this week. With billions of dollars under management and thought to be invincible, the private bank was generally regarded as a potential gateway to the riches of Croessus for the ordained Masters of the Universe who prowled its Jackson Pollock-lined corridors.

But when the bank started to drown in the treacherous quagmire of its collateralized debt obligations (CDOs) - a type of structured asset-backed security whose value and payments are derived from a portfolio of fixed-income underlying assets – America’s Federal Reserve elected not to send in the cavalry.

Japan: The mother of all miserable recoveries

jamessaft1(James Saft is a Reuters columnist. The opinions expressed are his own)

Investors met the news that Japan’s economy has emerged from a bone-breaking recession calmly and rationally: they sold shares quickly and in large amounts and made bets that consumer prices are going to be falling for years to come.

That’s because Japan’s recovery, coming as it does after a global bubble in the production of what I call, for lack of a more technical term, “stuff,” is really not sustainable.

The fact that the consumer portion of the recovery is only a reflection of income transfers from government to individuals isn’t very encouraging either.

Recession at half time?

Christopher Swann– Christopher Swann is a Reuters columnist. The views expressed are his own –

Recession historians on Wall Street often consider a downturn over when job declines fall to half their peak.

The July employment report, with its revisions, takes us past this milestone. The numbers were better than expected in almost every respect. There was even a tick up in hours worked, especially in manufacturing. The output component of the recession has probably already ended.

An abnormal recovery

jamessaft1 (James Saft is a Reuters columnist. The opinions expressed are his own)

Things in the U.S. economy are moving in the right direction, but the pace will be slow, frustrating and very likely to disappoint investors betting on a rip roaring old-fashioned recovery.

News that the Standard & Poor’s Case-Shiller 20 City house price index rose for the first time in almost three years in the three months to May was greeted with much rejoicing.
The Case-Shiller data is important and encouraging but not nearly as positive as it looks at first glance.

For one thing, house prices are supposed to rise in the spring; when looked at on a more meaningful seasonally adjusted basis prices are still falling, though at a slower rate than before.

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