Poverty

Poverty, poverty on the wall, the French aren’t even the worst of all

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Why are we surprised at the yellow vest uprising across France? Poverty/risk of social exclusion across Europe has continued to spiral upwards since the Global Financial Crisis (GFC). There were 78mn living below the poverty line in 2007. At last count, Eurostat notes that number was 118mn  (23.5% of the European population). In the Europe 2020 strategy, the plan is to reduce that by 20 million.  37.5mn (7.5%) are living in severe material deprivation (SMD) , up from 32mn in 2007.

The SMD rate represents the proportion of people who cannot afford at least four of the nine following items:

  • having arrears on mortgage or rent payments, utility bills, hire purchase installments or other loan payments;
  • being able to afford one week’s annual holiday away from home;
  • being able to afford a meal with meat, chicken, fish (or vegetarian equivalent) every second day;
  • being able to face unexpected financial expenses;
  • being able to buy a telephone (including mobile phone);
  • being able to buy a colour television;
  • being able to buy a washing machine;
  • being able to buy a car;
  • being able to afford heating to keep the house warm.

The French are merely venting what is happening across the EU. The EU could argue that at 18% poverty, the French should be happy compared to other nation states. Europeans aren’t racist to want a halt to mass economic migration when they are the ones financially struggling as it is. Making economic or compassionate arguments aren’t resonating as they feel the problems first hand.

Is it a surprise that the UK, at 22.2% poverty, wanted out of the EU project to take back sovereign control? Project Fear might be forecasting Armageddon for a No Deal Brexit but being inside the EU has hardly helped lift Brits from under a rock. Why would anyone wish to push for a worse deal that turns the UK into a colony?

Why is anyone surprised that there has been a sustainable shift toward populist political parties across Europe? Austria, Italy, The Netherlands, Poland, Hungary, Sweden, Germany…the list goes on. Even France should not forget that Front National’s Marine LePen got 35% of the vote, twice the level ever achieved. Is is a shock to see her polling above Macron?

The success and growth of EU-skeptic parties across Europe will only get bigger. The mob is unhappy. Macron may have won on a wave of euphoria as a fresh face but he has failed to deliver. He may have suspended the fuel tax hikes, but the people are still on the street in greater numbers. He has merely stirred the hornet’s nest. Perhaps UK PM Theresa May should take a look at the table above and realise that her deal will only cause the UK to rise up. At the moment sanity prevails, and when it comes in the shape of Jeremy Corbyn that is perhaps a sign in itself.

Pension blackhole widens

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CM has been saying for quite some time that the US public pension system is a runaway train running out of track. It seems Zerohedge today confirms many of those same trends. The ratcheting down of return targets by ridiculously small amounts because to actuarially mark-to-market to reality is too scary to contemplate.

To quote the article,

CalSTRS is making the bold move to drop its future goal to… 7%…And CalPERS is ratcheting down its return goals in steps to… wait for it, 7% by 2021.

with interest rates near their lowest levels in human history, it’s been difficult for these pensions to generate a suitable return without taking on more and more risk.

And that’s another big problem with pensions – their investment returns are totally unrealistic.

Most pension funds require a minimum annual return of about 8% a year to cover their future liabilities.

But that 8% is really difficult to generate today, especially if you’re buying bonds (which is the largest asset for most pensions). So pensions are allocating more capital to riskier assets like stocks and private equity.”

Does Trump have a right to brag about unemployment?

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The Trump vs Obama camps are lighting up over who was responsible for the drop unemployment rates. Looking at the long term decline one could argue that Obama was a key part of the decline and the incremental drops in the rate are Trumps. Here are the raw figures.

In Jan 2009, according to the Bureau of Labor Statistics, Obama had 115.818m people full time employed. In December of 2012 that number was 115.791m. (-270,000). There were 8.046m and 7.943m part time jobs over the same period. Minus 103,000. At the end of his 8 years, there were 124.3m FT jobs and 5.554m PT jobs. All told his FT workforce went up 8.48mn and PT fell 2.492m. So gross employment increased 5.98m.

Trump started at 124.3mn FT and as of May 2018 there are 128.657m FT jobs and 4.948m PT jobs. So he’s increased FT 4.347m and cost PT 606k. Net increase of 3.741mn jobs. So even if you ran the narrative that Obama’s second term was enough to put the “Great Recession to bed”, Trump has achieved 63% of Obama’s employment legacy in only 30% of his first term as president.

The number of people working two or more jobs surged to over 8mn (a record) under BHO as did food stamps (doubled to c.48m before coming down to 43m by his term end). SNAP stands at 40m now. 3mn fewer.

30 million people claim disability and welfare in the US. The Social Security Administration (SSA) highlighted that back pain and musculoskeletal problems are 33.8% of claims for disabled workers, followed by mental illness at 19.2% in 2013. This compares to 8.3% and 9.6% respectively in 1961. Half of claims in the 1960s came from heart attack/stroke and ‘other’ categories which made up only 17% of the 2013 figure.

Yet the truth is that if Americans wanted more of Obama’s successful policies, Hillary was Obama 2.0. No change in policies. Sensible to keep if they wanted the status quo. Ironic that 19 out of 25 states that voted for Trump had poverty levels exceeding the national average. Which means that had the “marry the state” policies of the Obama admin resonated with the poor it would have been a coronation for Hillary. This is a perfect example as to why a hollowed out middle America want to live the American dream rather than queue up for more welfare. God Bless America?

 

Racial bias in US school discipline? Some shocking correlations

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The GAO has published a 98 page report on discipline in US schools. In a perhaps somewhat irresponsible manner of formatting, it suggests that teachers seem to pick on particular races and disabilities for those reasons alone. It is as if teachers are pushing kids with wheelchairs uncontrollably down ramps. Yet, ‘disability’ of course includes mental problems which could range from anxiety to depression. 11.7% of students are classified with a disability. Yet delving deeply within the stats, of the 56 million K-12 students, 5.7% have been in detention, only 0.4% of the total have been referred to law enforcement, 0.3% have been expelled, 0.2% received corporal punishment and less than 0.1% have been arrested. In short, 99.6% of students stay out of ‘big’ trouble and 94.3% stay out of detention. Single parent households and poverty levels are highly correlated to discipline. Reporting the headlines of the GAO makes for shock and awe but had they reported the 0.X% stats it would deflate the rhetoric.

The NY Times article implied there must be some sort of unconscious bias as teachers were being bigoted bullies. Doesn’t the mainstream media defend the very same people as the last bastions of educational excellence against the tyranny of Education Secretary Betsy DeVos. 80% of teachers are white. Although this has been on a long term decline.

If white students (K-12) represent 50.3% of the total is it fair to assume that they should hold an equal % of disciplinary actions? Do crime stats and incarceration rates reflect race based demographics anywhere in the world? In America, 24.7% of students are Hispanic and 15.5% are black. When it comes to higher levels of poverty, Hispanics are way under-represented in the disciplinary stats despite being higher proportions of the students. Whites are punished more or less in line with their population in that bracket.

In the interests of gender equality, why are girls, at 49% of all students punished at half the rate of boys? Unconscious bias or is it through our own experiences, women are far less likely to bring the wrath of teachers in class? A reasonably safe assumption to make.

Nearly half of all public school students went to schools where 50% or more of the students were low-income, and about a quarter went to schools where 75% or more of the students were low-income. Of the 11.5mn students in 75-100% low income backgrounds, 1 million spent time in out of school detention. Of the 9.9 million students in 0-25% low income schools, 217,000 spent time in out of school detention. 128,500 of those were white. Whites make up 78% of 0-25% low income school populations and only 16% of 75-100% low income schools. Therefore it stands to reason statistically that if students in less poverty stricken schools trigger fewer disciplinary issues, then the stats would naturally bear out such differences rather than it being pure racial profiling.

So it would appear that low income would impact the rates of delinquency. Referring to number of kids living with both parents/step-parent (according to a 2015 Pew Research Center study) in America we find:

Asian: 82%

White: 71%

Hispanic: 55%

Black: 31%

The GAO stats make clear that Asian kids get caught up in the least amount of disciplinary action both by absolute and percentage wise. Blacks the most, Hispanics second and whites 3rd. Could it be an inverse correlation? Psychological studies have shown boys seem to be more impacted by the lack of a father in the house than do girls. Children (especially boys) raised by single mothers are more likely to fare worse on a number of dimensions, including their school achievement, their social and emotional development, their health and their success in the labor market. They are at greater risk of parental abuse and neglect (especially from live-in boyfriends who are not their biological fathers), more likely to become teen parents and less likely to graduate from high school or college.

survey taken by the National Center for Education Statistics (NCES) in the US back in January of 1993 revealed poverty, alcoholism, student apathy and absenteeism were cited as big problems in secondary public schools. Lack of a parent was also high on the agenda.

The American Psychological Association, “poor (bottom 20 percent of all family incomes) students were five times more likely to drop out of high school than high-income (top 20 percent of all family incomes) students…Family poverty is associated with a number of adverse conditions — high mobility and homelessness; hunger and food insecurity; parents who are in jail or absent; domestic violence; drug abuse and other problems — known as “toxic stressors” because they are severe, sustained and not buffered by supportive relationships…Community poverty also matters. Some neighborhoods, particularly those with high concentrations of African-Americans, are communities of concentrated disadvantage with extremely high levels of joblessness, family instability, poor health, substance abuse, poverty, welfare dependency and crime

Broken homes and poverty are undoubtedly a big issue. The report said, “Besides lack of parent involvement, the school problems viewed as serious by at least 10 percent of public school teachers included student apathy, poverty, student absenteeism, student disrespect for teachers, parental alcoholism and/or drug abuse, and student tardiness. Behaviors and attitudes of students were more likely to be seen as problematic by teachers at the secondary level than by teachers at the elementary level. Parent alcoholism, on the other hand, was described as “serious” as often by elementary teachers as by secondary teachers and poverty was described as “serious” more often by elementary teachers.”

85% of kids likely to go to college or higher levels of education came from stable family backgrounds. 61% of kids likely to drop out before graduating high school are from broken homes. Sixty One Percent!

So before reading into it that teachers must be subconsciously racially profiling students in handing out punishment, perhaps the overwhelming weight of societal evidence points to far bigger problems that need addressing. Poverty, single parent households and a whole raft of issues need dealing before the government watchdog should report back racial bias at a top down level. According to the logic, perhaps teachers should be forced into student discipline quotas. That way (un)conscious bias won’t afflict teachers and whites can be punished in line with their demographically representation.

Let’s not forget that financial institutions have often been targeted for charging black customers higher interest rates on loans than whites. What they always fail to mention is that Asians pay even lower rates than both. That is the problem with selectivity in data without meaningfully looking at the broader picture. Just like the recent Florida school shooting where a look at what is going on in terms of school security over decades paints a different picture to what the mainstream narrative would want us to believe.

Food insecurity & poverty levels by US state & the 2016 election result

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The US Department of Agriculture listed the level of food insecurity by US state as at the end of FY2016. Looking at the data, Deplorables (states that voted Republican (red) in the 2016 election) made up 20 of the 25 states that suffered the most from it. Coincidence? Looking at the % below the poverty line and 19 out of 25 states voted for Trump. Coincidence? There is a touch of irony that the Democrats, which push for citizens to be married to the state, were by and large rejected by those suffering the most and want to be free of the shackles of poverty. So is it any wonder they’d reject the establishment. Should also be a signal for the Democrats to think more widely about what makes the Deplorable tick – not free hand outs. Opportunity!

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Italy votes – will it mimic the referendum?

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Remember the 2016 Italian referendum which was to decide on  whether to grant more power to the incumbent party to accelerate decision making? Well it ended up being a vote on ousting then PM Renzi who put his resignation on the ballot if it failed. The split between the yes/no was largely decided by economic condition. The poorer southern regions were distinctly red while a smattering of wealthy areas voted green (yes).

It is kind of telling that the furthest province in the north (Bolzano/Bozen) had the highest YES vote (63.69%) in the country while the Province of Catania (south-east Sicily) had the highest NO vote at 74.56%. Bolzano/Bozen was diligent with a 67.41% turnout vs 57.41% in Catania. It is a rich/poor divide by the looks of things. If you wish to dig into the details look no further than this site for who voted how.

The last poll showed Beppo Grillo’s eurosceptic M5S party leading with 28%. Berlusconi’s centre right Forza Italia alliance with the anti-immigrant The League is expected to get around 29%. The incumbent PD is looking at around 20%.

Since the collapse of Lehman in 2008, Italy has added 3mn to poverty (now 18mn or 29.7% of the population; EU average is 25%) with the unemployment rate above 11%. Since Merkel’s open door policy 600,000 illegal immigrants have flocked to Italy from Libya.

Italy is the 3rd largest economy in Europe and 30% of corporate debt is held by SMEs who can’t even make enough money to repay the interest. The banks have been slow to write off loans on the basis it will eat up the banks’ dwindling capital. It feels so zombie lending a la Japan in the early 1990s but on an even worse scale.

Monte Dei Paschi De Siena, a bank steeped in 540 years of history has 31% NPLs and its shares are 99.9% below the peak in 2007. Even Portugal and Spain have lower levels of NPLs. The IMF suggested that in southern parts of Italy NPLs for corporates is closer to 50%!

However one views the rising wave of nationalism in Europe, Italy will likely follow the pattern of Austria, the UK, Germany, Holland, Poland, Hungary and France. A growing number of European citizens want to be first in line rather than feel they have an EU directed obligation to bow down to political correctness. How else do we explain the AfD’s surge past the SPD?

If the eurosceptic/anti-immigrant patties get up  we shouldn’t be the least surprised. More Europeans want their own countries to be made great again. The house of cards is crumbling.

An eerily potent lesson for today

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In 2011 then Polish Central Bank Head Marek Belka spoke about why Eastern Europe understood austerity better than the West ever will. As our governments bloat budget deficits to avoid taking much needed reform and belt tightening he said of Western Europe….

“Because the people here still aren’t used to prosperity. Let me give you an example from my days at the International Monetary Fund. It was at a time when the Latvians had to implement a drastic austerity program, which caused consumer spending to drop by 25 percent in a year. I asked a Latvia negotiator how his country expected to survive this dramatic crisis. He said: What crisis? We had a crisis when the Soviets were sending us to Siberia. Here in Eastern Europe, many still remember why they were once poor, and they’re not afraid of reasonable reforms that are painful in the short term.”

Experience is a great teacher. It gives the test first and the lesson afterwards. Maybe time we prepare to be Latvians.