David Cay Johnston, says, The Rich Get Richer

The Rich Get Richer

The rich, thanks to government handouts, are getting richer at everyone else’s expense. At least that’s what David Cay Johnston claims in the book Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense (and Stick You with the Bill)

“This enormous growth of incomes at the top is not the result of market forces — there’s some market forces — but it’s largely the result of all these rules nobody knows about,” he tells Dan and Aaron in this clip.

The problem starts with government subsidies, says Johnston, a Pulitzer Prize-winning journalist. States are spending around $70 billion on government subsidies, he estimates. That doesn’t include the hundreds of billions more doled out in federal subsidies.

“Is that capitalism?,” he complains. “Go compete in a competitive arena. Don’t go to Washington and say ‘give me money’ either by saying ‘I don’t have to pay taxes’ or forcing other people to pay taxes that go to me. Go earn your money in the marketplace.”

The wealth gap in America is outpacing much of the world. “Income inequality in the United States has soared … with 1 percent controlling 24 percent of American income in 2007,” New York Times columnist Nicholas Kristof recently wrote. Kristof notes that’s worse than “historically unstable countries like Nicaragua, Venezuela and Guyana.”

What’s even more striking is that many of these unfair advantages are given to the biggest political contributors. The Wall Street bailouts are a perfect example.

“There’s been a massive turnover of money to people who didn’t have to face the consequences of the market,” Johnston says. “Goldman Sachs got its bad bets paid off at 100 cents on the dollar. I’ve never seen the government do that for me.”

If the trend continues the next crisis could be a lot worse than 2008 and 2009, Johnston warns.

Delinquent Mortgages Hit Record 15%

  • The percentage of loans that were in foreclosure or behind at least one payment hit 15.02%, the most since MBA’s records began in 1972.   Foreclosures will likely stay high in 2010.
  • Real estate Web site Zillow.com recently said one in five homeowners were underwater in Q4!!
  • 4.5 million foreclosure filings are expected this year, up from 2.8 million in 2009.
  • “The bulk of foreclosures are coming in spring and summer, and we do expect home prices to continue falling through the end of this year,” said Celia Chen, director of housing economics at Moody’s Economy.com.

AP Poll: Mortgage Payments Worry Many

US News and World Report

Apr 14, 3:26 PM EDT

AP Poll: Mortgage Payments Worry Many


WASHINGTON (AP) — One in seven mortgage holders worry they may soon fail to make their monthly payments and even more fret that their home’s value is shrinking, according to a poll showing widespread stress from the nation’s housing crisis.

In an ominous snapshot of how the sagging real estate market and sour economy are intersecting, the Associated Press-AOL Money & Finance poll also found that 60 percent said they definitely won’t a buy a home in the next two years. Continue reading

The Cash Advantage (Even When Rates Are Low)

NY Times

Published: March 16, 2008

ALTHOUGH short-term interest rates have been dropping, many advisers still recommend that investors hold plenty of cash — and that they keep it in safe and simple accounts. “The biggest mistake people make is reaching for yield and putting their capital at risk,” said David Darst, the chief investment strategist of the global wealth management group of Morgan Stanley. “They should think of cash as their safe harbor.”

Over the last year, Mr. Darst has raised his recommended allocation to cash several times. Morgan Stanley now advises individual investors to hold 16 percent of their portfolios in cash, up from 5 percent a year ago.

And Mr. Darst said that cash really means cash — with nothing fancy about it. He suggests putting this money into some combination of money market mutual funds, short-term certificates of deposit or Treasury bills. Continue reading

CNNMoney.com – Interest Rates Tumble

CNN Money

CNNMoney.com
The bond yield tumble, and the economy
Monday March 24, 7:15 am ET
By Paul R. La Monica, CNNMoney.com editor at large

Bond yields have plunged in the past few weeks. And even if you are not an active investor, you should care about what’s been going on in the bond markets lately. Here’s why.

The yield on the benchmark U.S. 10-year Treasury currently stands at about 3.33%, down from nearly 4% about a month ago. The rate on this long-term government note is a key factor behind what happens to fixed-rate mortgages.

If rates continue to fall, they could hit not only a new low for the year – the 10-year briefly touched 3.28% in January – but could come close to falling below the 3.07% level they hit in June 2003, which was a 45-year low at the time. Continue reading

Economic Update – March 9,2008

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  • Housing Foreclosures hit an all time high of 0.83% of all mortgages nationwide.

  • Over 5.8% of homeowners were behind in their mortgage payments, the largest number in more than two decades.

  • House prices lost a staggering 8.9% in 2007 – and they’re still dropping.

  • The supply of unsold houses rose to 4 million, or to over a 10 month’s supply.Homeowners’ equity fell below 50% for the first timesince 1945, hitting a new low of 47.9%. As Barry Ritholtz expressed, never before have banks and other various and sundry lenders owned more of the average American’s house than they do.

  • For February 2008 – the economy lost 63,000 jobs. That means 63,000 people lost their job in one month. Actually, the number was 101,000 people who lost their jobs in February, but the government hired 38,000 just to make the numbers look better.

  • In January 2008 – the consumer price index, the widely reported statistic used to measure inflation, rose 4.3% from January 2006.

  • According to John Williams of Shadow Government Statistics, he comes up with a reading of 11.8% inflation for the January CPI calculation. With oil at $106-a- barrel and every kind of commodity up 30% or more (aluminum, oats, silver-hit a 27 year high recently), and double-digit gains in other commodities such as, coffee, corn, wheat, zinc, etc. This just makes more sense than the economic statistics given to us by the government.