MacroScope

Giving up on the middle class

With more dismal U.S. economic data emerging this week, one marketing consultant wealth manager is advising her financial industry clients colleagues to ignore the masses altogether and focus solely on the ultra rich.

In an article on wealthmanagement.com, April Rudin, CEO of The Rudin Group (which, for the record, says it only focuses on clients of high and higher net worth), describes a “new reality” in which many wealth managers are marketing themselves to people who “will in the future not be able to afford their products and services.”

In the wake of the financial crisis, middle class families in the U.S. are burdened by too much debt, the rising cost of health care, fewer jobs and the ever-increasing price tag on retirement.

She adds bleakly:

The middle class is toast.

More Americans find aging is a gateway to poverty

Over the last several years, more Americans have found that aging has left them in the clutch of poverty. Between 2005 and 2009, the rate of poverty among American seniors rose as they aged, as did the number of people entering poverty, according to a new report from the nonpartisan Employee Benefit Research Institute (EBRI).

Poverty rates fell in the first half of the last decade for almost all age groups of older Americans (defined as age 50 or older) but increased since 2005 for every age group. Says Sudipto Banerjee, EBRI research associate and author of the report:

As people age, personal savings and pension account balances are depleted, and as people age, their medical expenditures tend to increase.

Separate checks, please

 

 

    Jack Ablin, the chief investment officer at Harris Private Bank, has come up with an interesting way of looking at the U.S. healthcare debate – in particular, why does health care cost so much. His idea? Think of it like going out for dinner and splitting the bill with hundreds of thousands of other diners versus paying for your own meal. Would you order the steak and champagne or the chicken and a glass of water? Ablin enlisted the help of the owner of Aqua Grill in Ponte Vedra Beach, Florida, to help him find out.

It involved sifting through three years of guest checks and comparing the average spent per patron when a bill was split evenly versus the average when separate checks were tabulated.

“The results were dramatic, but not surprising,” Ablin wrote in a note to clients. “On average, splitting the bill costs diners about 20 percent more than paying their own check. The difference would be undoubtedly wider with large parties. Given that we spend about $2.5 trillion on health care annually, imagine the cost savings if we migrated to high-deductable policies and health savings accounts. Congress needs to look at shifting health care payments away from third-party payers and to individuals, using a combination of high-deductible health insurance policies and privately-directed health savings accounts.”

from Global Investing:

Another nail in the Malthusian coffin?

All the talk of addressing the global imbalances throws a spotlight on contrasting demographic trends in the world's two most populous nations -- China and India.

Prior to the financial crisis, India's annual growth rate of about 9 percent seemed positively moribund next to China's double-digit economic expansion. But purely on demographics, the dimming power of the US consumer could give India an edge over its neighbour in the longer run.

That's what India's trade minister Anand Sharma seemed to suggest last week when he reminded the audience at a London conference that the country had "20 percent of the world's children":

U.S. state budgets battered by recession

Eighteen months into the worst recession in decades, and the pain of the downturn is reaching into nearly every U.S. state, city and municipality.

With ever more people out of work, consumer spending has dried up, depriving local government of sales tax revenue. The continued housing slump has wiped out real estate transfer taxes, while declining corporate profits have eroded business tax revenue.

From Maine to California, the slump has drained coffers at the very time that the cost of providing jobless benefits and healthcare has risen, straining public finances.

More than green shoots

MacroScope is pleased to post the following from guest blogger Stewart Armer. Stewart is head of socially responsible investing at Fortis Investments. He outlines here how huge stimulus plans could boost sustainable economic development. His team blogs on this issue at SRI Blog.

While we are still debating if the worst is over, it has become clear that economic crisis has turned into an opportunity for sustainable economic development.

Our recent analysis of the fiscal stimulus packages of G-20 countries shows that almost half of the announced spending will be spent on the environment and social sectors.  The major recipients include healthcare ($333 billion), sustainable transport ($209 billion), education ($151 billion), social housing ($95 billion), clean and efficient energy ($84 billion), and clean water and air ($68 billion).