By Peter Ward April 22, 2016
Financial Impotence Rife in America
Broken piggy bank. ©Ken Teegardin, www.SeniorLiving.Org
How does the average American cope with a $400 emergency? The latest survey from the Federal Reserve Board shows that 47% of respondents would either need to cover the expense by borrowing or selling something, or wouldn’t be able to cover $400 at all.
Neil Gabler’s long read, published in The Atlantic this week, examines a relatively new area of economic research – instead of studying debt and savings, looking at how consumers would deal with an unexpected cost.
Gabler writes the article from a very personal angle, admitting that despite being the author of five books, hundreds of articles, and a writer who lectures, teaches and writes television scripts, he is among that 47% who would struggle to find $400 in an emergency.
The article uses several terms to describe this economic struggle-financial impotence, financial distress, financial insecurity, and others. They all refer to the thin margins most American consumers are operating with. A 2014 Bankrate survey found that only 38% of Americans would be able to cover a $1000 emergency room visit or a $500 car repair with their savings.
Gabler’s personal story demonstrates the perils faced by the middle class, and how, despite a successful career one can easily find himself in a financially hazardous situation.
The article also addresses who is at fault. The surge of credit debt has contributed, particularly during The Great Recession, when consumers increasingly used credit as an emergency source of funds. Another study argues that while the sophistication and complexity of financial products has increased, consumer financial knowledge of those products has failed to keep pace.
Gabler concludes that ultimately, as the cost of living rises, wages continue to stagnate, and savings remain low, there is very little consumers can do but dream of winning the lottery.
Texas Courts’ Big Business
San Antonio court house © Senapa, Creative Commons Zero, Public Domain Dedication
Is the judicial system being run like a business? In a letter obtained by Buzzfeed, a Texas judge has claimed the state treats municipal courts like ‘cash cows’, and profits from those too poor to pay low-level fines.
Buzzfeed published the views of John W. Bull, presiding judge at San Antonio’s municipal court, on Tuesday, after obtaining a letter he wrote to the Office of Court Administration in Texas through a public records request.
Judge Bull wrote the letter to protest a state program overseeing the collection of court fines and traffic ticket fees, and other low-level offenses. Texas takes about 30% of the fees, which generated $236 million in revenue last year. Bull claimed the program puts municipal courts under “constant pressure to bring in ‘revenue.’”
The article follows a Buzzfeed investigation published in October 2015 which revealed Texas courts were illegally jailing people who were unable to pay their traffic tickets and other fines. State law says that judges must assess a defendant’s ability to pay before jailing them for not paying a fine, a law that the investigation found many judges were not following.
Other Texas judges contacted for the story backed up Bull’s concerns. One municipal judge said, speaking anonymously, that the state has “converted justice into a business venture.”
Oil Prices Interactive Timeline
Oil train, © Russ Allison Loar
How do you stop oil prices from falling when supply is higher than demand? Cutting supply is the logical answer, but it’s not so easy to implement. The Wall Street Journal published an interactive timeline on Sunday which plotted negotiations to freeze oil output against fluctuating, but still low, oil prices.
The scrolling timeline plots key news events against a chart of oil prices.
The timeline begins December 4, 2015, when a meeting of the Organization of the Petroleum Exporting Countries (OPEC) ended without an agreement to cut oil production, sending oil prices plummeting.
The next flash point is February 16, 2016. On that day, Saudi Arabia, Russia and other OPEC members agreed to freeze production levels provided other suppliers followed suit. Prices rose on that news, but fell again when Iran called the plan a joke, and said it would increase its oil output.
On March 1, Russia’s energy minister suggested a ‘critical mass’ of oil producers had agreed on the freeze, and prices increased again. But on March 14 the talks between oil producers hit obstacles, and the meeting was delayed until April. On April 17, oil producers meeting in Doha failed to agree to a deal, and once again, oil prices sank.
Yahoo’s Impending Sale Explained
Marrisa Mayer, Yahoo CEO, at Chirp. © Jolie O’Dell
Yahoo used to be the top navigational tool for the web. Founded in 1995, the company was the biggest search provider until the dot com crash in 2000. Now, Yahoo’s only option appears to be a sale of its core business.
On Tuesday, Yahoo announced an 11% year-on-year drop in revenues and a quarterly loss of $99.2 million. The company’s staggering decline has been presided over by a string of doomed CEOs, who attempted numerous failed strategy shifts, and a handful of abysmal, expensive acquisitions. Current CEO Marissa Mayer announced last month that the company would officially listen to bids, putting itself on the auction block.
Shareholders are now calling on Yahoo to sell its core business – email, advertising and news – sooner rather than later, and keep its most valuable asset, the company’s stake in the Chinese e-commerce giant Alibaba. In December, Yahoo’s stake in Alibaba was valued at around $30 billion. Yahoo is currently valued at around $35 billion, including the Alibaba stake.
If the company isn’t sold by the time of its annual shareholders meeting in late June, activist shareholder Starboard Value is expected to take steps to force through a sale. Starboard has already nominated nine candidates to replace the entire Yahoo board.
Yahoo is unable to compete with the likes of Google and Facebook, the two internet giants cleaning up in digital advertising, and buyers are not exactly lining up to acquire it. The one company named consistently as a potential buyer is telecoms giant Verizon.
This Week’s Top Headlines
Intel announces 12,000 job cuts in global restructuring initiative – Jana Kasperkevic, The Guardian
Panama Papers: US opens criminal investigation – BBC
Saudi Arabia Set to Secure $10 Billion Loan to Address Budget Shortfall – Nicolas Parasie, The Wall Street Journal
Harriet Tubman is the next face of the $20 bill; $5 and $10 bills will also change – Samantha Masunaga, LA Times
Persistence Pays as Google’s Banned Rivals Win EU Crackdown – Marie Mawad, Aoife White, Bloomberg News
SunEdison files for Chapter 11 bankruptcy – Nathan Bomey, USA Today
Mitsubishi Motors shares dive, Japan officials raid facility – Chang-Ran Kim, Reuters
Gender Pay Gap Grows For College Graduates: Women Now Earning $8,000 Less Than Male Peers – Lydia Tomkiw, IB Times
VW emissions: ‘US deal struck’ to buy back diesel cars – BBC
Wall Street Bonus Pay Restricted Under U.S. Regulators’ Proposal – Jesse Hamilton, Elizabeth Dexheimer, Bloomberg News
