The results of the President's economic policies are becoming plain to see. The economy is mired in stagnation; inflation is picking up; and new unemployment claims are surging. The national debt is reaching catastrophic levels. The Fed is printing money to finance purchases of new debt (they bought 80 percent of the newly financed deficits for the past eight months). The most absurd economic policies in American history are bearing fruit. The economy is a total mess.
Obama often speaks of "the race to the bottom." Now we know what he means. The American economic engine, once the envy of the world, is now a joke, and a bad one at that. Obama's policies have strangled the private sector and broken the finances of the federal government.
So what is Obama doing now? He's beginning his re-election campaign. Wonder what part of this record he plans to defend?
Thursday 28 April 2011
Thursday 21 April 2011
The Workplace Financial Fitness Toolkit
On April 12, 2011, we launched the Workplace Financial Fitness Toolkit. With the support of the New York Stock Exchange (NYSE) Foundation, Punam Keller, from the Tuck School of Business, and I have designed a customized workplace financial fitness program using an innovative and practical approach based on well-established financial literacy and marketing principles. Every employer interested in starting a financial education program can use this toolkit.
Lack of financial literacy in the United States is well documented—the research tells us that most people lack basic financial knowledge and are not well equipped to deal with complex financial decisions. As a result, many individuals have difficulty making sound financial decisions. Remedying this problem is terribly complicated, one reason being that individuals have different needs, different preferences, and face different economic circumstances.
The workplace is an ideal venue to provide tools to facilitate financial decision-making. The goal in developing the toolkit is to provide a checklist of recommended financial fitness action items along with marketing materials to encourage employees to improve their financial fitness.
In essence we have developed two toolkits: an Employer Customization Toolkit and an Employee Customization Toolkit. The Employer Customization Toolkit contains (1) the Employer Checklist, (2) motivational information about the importance of every employer providing or facilitating 10 key steps to financial fitness, and (3) additional materials to help employers with implementation of the financial fitness recommendations. The recommendations are divided into three stages: basic, intermediate, and advanced. Employers who currently offer financial fitness assistance can use the Employee Customization Kit to motivate employees to participate in the financial fitness programs offered.
The Employee Customization Toolkit is designed to empower employees to improve their own financial fitness. The Employee Customization Toolkit contains (1) the Employee Checklist, (2) motivational information on the importance of every employee improving aspects of their financial fitness, and (3) implementation guidelines for each recommendation. Like the Employer Customization Toolkit, the employee toolkit allows individuals to customize or select the fitness recommendations that suit their needs.
Developing the program was a challenging task. But we very much benefitted from the guidance of Michelle Greene, the VP, Head of Corporate Responsibility, executive director of the NYSE Foundation and a champion of financial literacy. We also assembled a team of experts to help us in this work. We benefitted from the insights of academics like Robert Clark (North Carolina State University College of Management) and Eric Johnson (Columbia Business School), financial literacy leaders like Carrie Schwab-Pomeratz and Michael Townsend from the Schwab Foundation and Ted Beck from the National Endowment from Financial Education (Carrie and Ted also serve on President Obama’s Council on Financial Capability), Janet Parker from the Society for Human Resource Management (a former member of President Bush’s Council on Financial Literacy), and Jennifer Wayman from Olgivy PR Worldwide (one of the creators of the The Heart Truth, an award-winning national awareness campaign about women and heart disease with its signature Red Dress symbol).
On April 12, not only did we launch the program but we also rang the opening bell at NYSE, an experience I will never forget. And yes, we took a lot of pictures which are now posted on the FLC’s Facebook page. You can also watch a video of the opening bell ceremony (did I say it was memorable?).
http://www.facebook.com/pages/Financial-Literacy-Center/119369231450239
http://www.nyse.com/events/1302515608944.html
We hope many companies will embrace the Workplace Financial Fitness Toolkit and customize it to meet their goals of assisting employees in the attainment of financial independence and security. The program can be found here:
http://nyse.nyx.com/financial-fitness-kit
Lack of financial literacy in the United States is well documented—the research tells us that most people lack basic financial knowledge and are not well equipped to deal with complex financial decisions. As a result, many individuals have difficulty making sound financial decisions. Remedying this problem is terribly complicated, one reason being that individuals have different needs, different preferences, and face different economic circumstances.
The workplace is an ideal venue to provide tools to facilitate financial decision-making. The goal in developing the toolkit is to provide a checklist of recommended financial fitness action items along with marketing materials to encourage employees to improve their financial fitness.
In essence we have developed two toolkits: an Employer Customization Toolkit and an Employee Customization Toolkit. The Employer Customization Toolkit contains (1) the Employer Checklist, (2) motivational information about the importance of every employer providing or facilitating 10 key steps to financial fitness, and (3) additional materials to help employers with implementation of the financial fitness recommendations. The recommendations are divided into three stages: basic, intermediate, and advanced. Employers who currently offer financial fitness assistance can use the Employee Customization Kit to motivate employees to participate in the financial fitness programs offered.
The Employee Customization Toolkit is designed to empower employees to improve their own financial fitness. The Employee Customization Toolkit contains (1) the Employee Checklist, (2) motivational information on the importance of every employee improving aspects of their financial fitness, and (3) implementation guidelines for each recommendation. Like the Employer Customization Toolkit, the employee toolkit allows individuals to customize or select the fitness recommendations that suit their needs.
Developing the program was a challenging task. But we very much benefitted from the guidance of Michelle Greene, the VP, Head of Corporate Responsibility, executive director of the NYSE Foundation and a champion of financial literacy. We also assembled a team of experts to help us in this work. We benefitted from the insights of academics like Robert Clark (North Carolina State University College of Management) and Eric Johnson (Columbia Business School), financial literacy leaders like Carrie Schwab-Pomeratz and Michael Townsend from the Schwab Foundation and Ted Beck from the National Endowment from Financial Education (Carrie and Ted also serve on President Obama’s Council on Financial Capability), Janet Parker from the Society for Human Resource Management (a former member of President Bush’s Council on Financial Literacy), and Jennifer Wayman from Olgivy PR Worldwide (one of the creators of the The Heart Truth, an award-winning national awareness campaign about women and heart disease with its signature Red Dress symbol).
On April 12, not only did we launch the program but we also rang the opening bell at NYSE, an experience I will never forget. And yes, we took a lot of pictures which are now posted on the FLC’s Facebook page. You can also watch a video of the opening bell ceremony (did I say it was memorable?).
http://www.facebook.com/pages/Financial-Literacy-Center/119369231450239
http://www.nyse.com/events/1302515608944.html
We hope many companies will embrace the Workplace Financial Fitness Toolkit and customize it to meet their goals of assisting employees in the attainment of financial independence and security. The program can be found here:
http://nyse.nyx.com/financial-fitness-kit
Wednesday 20 April 2011
Greek Restructuring -- Sooner or Later?
It is interesting to see folks saying that if the Greeks restructure their debt (meaning a partial default on their debt) that a financial Armageddon will soon follow. Since restructuring or some type of default is inevitable for Greece, I guess there must be a financial Armageddon in our future. Last week the IMF suggested that the Greeks must restructure within 12 months and now more voices have been added saying essentially the same.
What those who worry about the coming Armageddon don't seem to get is that "restructuring" or a "partial default" is inevitable for Greece, Ireland, Portugal, Italy, and Spain. Indeed, one should add Germany and France to that list since their governments and banks have backstopped the former countries with bailouts in the past 24 months.
What is wrong with a default or partial default by Greece? Nothing. Those who have made bad loans to Greece should lose money. Is there any reason that they should be insulated from their bad decisions and the losses should be spread to those who did not make bad decisions? That's the problem with bailouts. They transfer wealth from those who made good decisions to those who made bad decisions. Why is that a good (or fair) idea? The answer is: it isn't.
Lending money to people who can't possibly pay it back is stupid and will eventually result in loss. Call it financial Armageddon or whatever you will. It is inevitable. The Western European plains are soon to be littered with defaults, partial defaults and restructurings. There is no way to avoid it. You may as well plan for it.
What those who worry about the coming Armageddon don't seem to get is that "restructuring" or a "partial default" is inevitable for Greece, Ireland, Portugal, Italy, and Spain. Indeed, one should add Germany and France to that list since their governments and banks have backstopped the former countries with bailouts in the past 24 months.
What is wrong with a default or partial default by Greece? Nothing. Those who have made bad loans to Greece should lose money. Is there any reason that they should be insulated from their bad decisions and the losses should be spread to those who did not make bad decisions? That's the problem with bailouts. They transfer wealth from those who made good decisions to those who made bad decisions. Why is that a good (or fair) idea? The answer is: it isn't.
Lending money to people who can't possibly pay it back is stupid and will eventually result in loss. Call it financial Armageddon or whatever you will. It is inevitable. The Western European plains are soon to be littered with defaults, partial defaults and restructurings. There is no way to avoid it. You may as well plan for it.
Saturday 16 April 2011
Why Bail Out Bondholders?
Debts continue to rise in the US and in Western Europe. The so-called bailouts of Greece and Ireland simply enable those countries to get deeper in debt and continue the fiction that some day those debts can be paid off. They can't.
Over the next sixteen months, more European countries will be added to the bailout list: Portugal first, then Spain, and then attention will focus on Italy. The purpose of a bailout is to enable a country to continue to expand its debt. Is that a good idea?
Isn't it time the lenders took a loss. Why are we protecting the lenders? The lenders are sophisticated, highly paid folks, who took a risk that is not working out. They should get burned for their mistake. Why bring the taxpayers into the picture and continue to increase debt levels that everyone knows will never get paid.
It is time for a "workout," as they say in the finance world. Lenders and borrowers need to sit down at a a table and "work out" a new repayment schedule -- a schedule that will inevitably lower debt levels and force the lenders to restructure their way into losses. This is going to happen anyway. Why not start now, instead of pushing policies that simply increase debt to even higher levels and perpetuate the myth of eventual repayment.
Capitalism can't work unless you let it work. Let it work.
Over the next sixteen months, more European countries will be added to the bailout list: Portugal first, then Spain, and then attention will focus on Italy. The purpose of a bailout is to enable a country to continue to expand its debt. Is that a good idea?
Isn't it time the lenders took a loss. Why are we protecting the lenders? The lenders are sophisticated, highly paid folks, who took a risk that is not working out. They should get burned for their mistake. Why bring the taxpayers into the picture and continue to increase debt levels that everyone knows will never get paid.
It is time for a "workout," as they say in the finance world. Lenders and borrowers need to sit down at a a table and "work out" a new repayment schedule -- a schedule that will inevitably lower debt levels and force the lenders to restructure their way into losses. This is going to happen anyway. Why not start now, instead of pushing policies that simply increase debt to even higher levels and perpetuate the myth of eventual repayment.
Capitalism can't work unless you let it work. Let it work.
Tuesday 12 April 2011
Yellen and Dudley
Academic economist Janet Yellen, now President of the San Francisco Federal Reserve Bank and Bill Dudley, long time Wall Street (Goldman Sachs) economist, now president of the New York Federal Reserve, have both chimed in on inflation in the last 24 hours. They don't see it coming. The Fed, in their view, should continue to expand its balance sheet to historic levels, effectively printing massive quantities of new dollars. Why?
Well, in their collective view, the economy is still weak and the incredibly surging commodity prices will soon be reversed. Maybe they should be trading, not running FRS banks. Their views and analysis show the poverty of economics as a science. Both Yellen and Dudley are staunch supporters of President Obama. He doesn't see any inflation coming, so neither do they. It's that simple.
Once again, the Yellen-Dudley theme is that government knows best. In this case, the government's agent is Ben Bernanke, whose famous utterance in 2007 that housing prices were justifiably high based on sound economic fundamentals, still echoes as a reminder of how little economists know about the economy.
There ought to be a rule that when you don't know anything about the future don't do anything that might make things worse. If that were the case, Ben Bernanke would be joining the ranks of the unemployed, instead of setting up future problems for the struggling American economy. His cheerleaders, Yellen and Dudley, should go back and do some research to justify their political leanings instead of sounding off about things they know nothing about. All we have learned from their pronouncements is that they both still worship at the shrine of Obama. We've learned nothing about the future of inflation from either of them.
Well, in their collective view, the economy is still weak and the incredibly surging commodity prices will soon be reversed. Maybe they should be trading, not running FRS banks. Their views and analysis show the poverty of economics as a science. Both Yellen and Dudley are staunch supporters of President Obama. He doesn't see any inflation coming, so neither do they. It's that simple.
Once again, the Yellen-Dudley theme is that government knows best. In this case, the government's agent is Ben Bernanke, whose famous utterance in 2007 that housing prices were justifiably high based on sound economic fundamentals, still echoes as a reminder of how little economists know about the economy.
There ought to be a rule that when you don't know anything about the future don't do anything that might make things worse. If that were the case, Ben Bernanke would be joining the ranks of the unemployed, instead of setting up future problems for the struggling American economy. His cheerleaders, Yellen and Dudley, should go back and do some research to justify their political leanings instead of sounding off about things they know nothing about. All we have learned from their pronouncements is that they both still worship at the shrine of Obama. We've learned nothing about the future of inflation from either of them.
Friday 8 April 2011
Sound and Fury ...Signifying Nothing
The budget impasse is a lot of drama over very little. A $ 40 billion spending reduction shows that neither political party understands the depth of the US's national debt problems. It will likely take a failed treasury auction before the politicians on either side of the aisle understand how serious the US situation is. We are not that far from a Greece debacle or a Portugal debacle....and the European Central Bank is not available for our needs. Perhaps Obama should go ahead and take his Virginia vacation this weekend as planned. He doesn't really understand what's going on anyway.
By contrast, the victory in Wisconsin for Scott Walker is a true victory for fiscal sanity. Things look brighter in Wisconsin, but they remain pretty dim for the US taxpayer.
By contrast, the victory in Wisconsin for Scott Walker is a true victory for fiscal sanity. Things look brighter in Wisconsin, but they remain pretty dim for the US taxpayer.
Friday 1 April 2011
Celebrating Financial Literacy Month
April has been declared Financial Literacy Month and we, at the Financial Literacy Center, celebrate it by meeting with our team members to present preliminary results from the 19 projects the teams are doing in year 2. The research teams are tailoring educational materials for people at various stages of their lives: young workers, mid-career workers, those approaching retirement, and retirees. They are also targeting underserved populations such as low-income, young, and disabled workers, all of whom are particularly vulnerable during periods of financial turbulence.
The second year activities cover a range of topics, including:
• How automatic enrollment in pension plans can improve savings
• How to increase the use of the government’s key tax-time savings policies, particularly the Saver’s Credit targeted to lower-income households
• How financial advisors help their clients decide when to claim Social Security benefits and whether this advice is based on client attributes
• How to develop an effective curricula to teach financial literacy to pre-service K-8 teachers and adult learners
• How to improve access to financial services for legal immigrants
• Whether additional disclosure would be valuable in helping people anticipate and plan for health care expenses in retirement
• Whether an intensive online “financial bootcamp” for women is effective in modifying behavior.
We held our meeting at Harvard Law School and I am grateful to Howell Jackson for hosting the workshop in the elegant rooms of HLS. But the New England weather did its April fool’s trick: rather than warm spring weather, we got several inches of snow today. (Note to self: move closer to the equator!)
You can read more about our projects at: http://www.rand.org/labor/centers/financial-literacy/projects.html
And you can see a picture of all of us on Facebook!
The second year activities cover a range of topics, including:
• How automatic enrollment in pension plans can improve savings
• How to increase the use of the government’s key tax-time savings policies, particularly the Saver’s Credit targeted to lower-income households
• How financial advisors help their clients decide when to claim Social Security benefits and whether this advice is based on client attributes
• How to develop an effective curricula to teach financial literacy to pre-service K-8 teachers and adult learners
• How to improve access to financial services for legal immigrants
• Whether additional disclosure would be valuable in helping people anticipate and plan for health care expenses in retirement
• Whether an intensive online “financial bootcamp” for women is effective in modifying behavior.
We held our meeting at Harvard Law School and I am grateful to Howell Jackson for hosting the workshop in the elegant rooms of HLS. But the New England weather did its April fool’s trick: rather than warm spring weather, we got several inches of snow today. (Note to self: move closer to the equator!)
You can read more about our projects at: http://www.rand.org/labor/centers/financial-literacy/projects.html
And you can see a picture of all of us on Facebook!
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