1 US family net worth drop to 1990s level (The New York Times) The recent financial crisis left the median American family in 2010 with no more wealth than in the early 1990s, erasing almost two decades of accumulated prosperity, the Federal Reserve has said. The median family, richer than half of the nation's families and poorer than the other half, had a net worth of $77,300 in 2010, down from $126,400 in 2007, the Fed said, a decline of almost 40% between 2007 and 2010. The crash of housing prices explained three-quarters of the loss.
This vast loss of wealth was compounded by a loss of income, as the earnings of the median family fell 7.7% in the same period. Figures are reported in 2010 dollars. Despite these setbacks, consumers have continued to spend surprising amounts of money in recent years, helping to keep the economy growing at a modest pace. The survey underscores where the money is coming from: Americans are saving less for future needs and making little progress in repaying debts.
The share of families saving anything over the previous year fell to 52% in 2010 from 56.4% in 2007. Other statistics show that total savings have increased since 2007, suggesting that a smaller group of families is saving more money, while a growing number manage to save nothing. And the report highlighted the fact that households made limited progress in reducing the amount they owed to lenders. The share of households reporting debt declined by 2.1 percentage points in the past three years, but 74.9% of households still owe something. The median amount of debt didn't change.
2 Why Spanish bailout won't work (Andrew Ross Sorkin in The New York Times) The euro zone’s offer of $125 billion to bail out Spanish banks over the weekend was hailed by finance ministers and officials across Europe as a masterstroke. Germany’s finance minister, Wolfgang Schäuble, suggested no further bailouts would be needed, saying, "Spain is on the right track." On Sunday, some analysts and investors even applauded, with David R. Kotok, co-founder and chief investment officer of Cumberland Advisors, proclaiming: "Euro zone leaders rose to the occasion." How wrong they were.
By now, it should be apparent that the bailout has failed — or is at least on its way to failing. Indeed, it now appears that the bailout could make things in Spain worse, not better. And market indicators for the next domino in line for a bailout, Italy, point in the wrong direction. This was bound to happen. That’s because bailing out the banks in each European country individually is a fool’s errand. Experts often note — wrongly — that TARP, the Troubled Asset Relief Program that pumped $700 billion into the banking system in the United States, arrested the financial crisis in 2008. TARP, to some degree, has become the model for Europe.
But we forget history: TARP was only one component of the bailout. Perhaps more important was the government’s unilateral move to raise the amount of money the Federal Deposit Insurance Corporation could insure, increasing the account limit to $250,000 from $100,000 and fully backstopping the entire money-market industry.
3 New education ends rote, cursive (San Francisco Chronicle) Like fashion, trends in public education come and go. With the threat of Soviet innovation and Sputnik, old math became new math in the 1960s and then back to old arithmetic about 10 years later. "Is it still necessary for kids to learn their times table when they can pick up their iPhone and ask Siri what is 20 times 2?" asked Dan Domenech, executive director of the American Association of School Administrators.
This vast loss of wealth was compounded by a loss of income, as the earnings of the median family fell 7.7% in the same period. Figures are reported in 2010 dollars. Despite these setbacks, consumers have continued to spend surprising amounts of money in recent years, helping to keep the economy growing at a modest pace. The survey underscores where the money is coming from: Americans are saving less for future needs and making little progress in repaying debts.
The share of families saving anything over the previous year fell to 52% in 2010 from 56.4% in 2007. Other statistics show that total savings have increased since 2007, suggesting that a smaller group of families is saving more money, while a growing number manage to save nothing. And the report highlighted the fact that households made limited progress in reducing the amount they owed to lenders. The share of households reporting debt declined by 2.1 percentage points in the past three years, but 74.9% of households still owe something. The median amount of debt didn't change.
2 Why Spanish bailout won't work (Andrew Ross Sorkin in The New York Times) The euro zone’s offer of $125 billion to bail out Spanish banks over the weekend was hailed by finance ministers and officials across Europe as a masterstroke. Germany’s finance minister, Wolfgang Schäuble, suggested no further bailouts would be needed, saying, "Spain is on the right track." On Sunday, some analysts and investors even applauded, with David R. Kotok, co-founder and chief investment officer of Cumberland Advisors, proclaiming: "Euro zone leaders rose to the occasion." How wrong they were.
By now, it should be apparent that the bailout has failed — or is at least on its way to failing. Indeed, it now appears that the bailout could make things in Spain worse, not better. And market indicators for the next domino in line for a bailout, Italy, point in the wrong direction. This was bound to happen. That’s because bailing out the banks in each European country individually is a fool’s errand. Experts often note — wrongly — that TARP, the Troubled Asset Relief Program that pumped $700 billion into the banking system in the United States, arrested the financial crisis in 2008. TARP, to some degree, has become the model for Europe.
But we forget history: TARP was only one component of the bailout. Perhaps more important was the government’s unilateral move to raise the amount of money the Federal Deposit Insurance Corporation could insure, increasing the account limit to $250,000 from $100,000 and fully backstopping the entire money-market industry.
3 New education ends rote, cursive (San Francisco Chronicle) Like fashion, trends in public education come and go. With the threat of Soviet innovation and Sputnik, old math became new math in the 1960s and then back to old arithmetic about 10 years later. "Is it still necessary for kids to learn their times table when they can pick up their iPhone and ask Siri what is 20 times 2?" asked Dan Domenech, executive director of the American Association of School Administrators.
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