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Canada Middle-Class Dreams A ‘Myth’ In Troubled Economy: Internal Gov’t Report

Canada Middle-Class Dreams A ‘Myth’ In Troubled Economy: Internal Gov’t Report.

OTTAWA – Canada’s middle-class is mortgaging its future to stay afloat, making the Canadian dream “a myth more than a reality.”

That’s the blunt assessment of an internal Conservative government report, an unvarnished account of the plight of middle-income families that’s in contrast to the rosier economic picture in this month’s budget.

The document was prepared last October by experts in Employment and Social Development Canada, the department that runs the employment insurance fund and other income-support programs. The Canadian Press obtained the report under the Access to Information Act.

“The wages of middle income workers have stagnated,” it says, referring to the period from 1993 to 2007.

“Middle-income families are increasingly vulnerable to financial shocks.”

The document, drawing on three years of “internal research,” was prepared for the department’s deputy minister, Ian Shugart, shortly before the resumption of Parliament last fall.

“In Canada, political parties are making the middle class a central piece of their agendas,” notes the presentation.

A department spokesman, Jordan Sinclair, said in an email that the research “was not linked to the parliamentary schedule or topics raised within the House of Commons.”

The authors say middle-income families have seen their earnings rise by an average of only 1.7 per cent a year over the 15 years ending 2007.

“The market does not reward middle-income families so well,” says the report. “As a result, they get an increasingly smaller share of the earning’s pie” compared with higher-income families.

Shugart was also told middle-class workers “get lesser government support for their work transitions,” referring to a sharp fall-off in employment-insurance benefits compared with other economic groups.

The analysis stops short of the 2008 global recession, though other analysts have noted the economic crisis wiped out many well-paid manufacturing jobs in central Canada that have supported middle-class prosperity.

The report also refers to debt, saying “many in the middle spend more than they earn, mortgaging their future to sustain their current consumption.”

“Over the medium term, middle-income Canadians are unlikely to move to higher income brackets, i.e., the ‘Canadian dream’ is a myth more than a reality.”

Current Conservative messaging emphasizes a million new jobs created since the recession; Canada’s relative economic stability compared with other industrialized countries; and various tax cuts provided to “average” families since 2006.

Sinclair repeated those talking points when asked for comment on the report.

“Today, the Canadian economy is remarkably strong, setting the conditions for Canadians and their families to succeed and enjoy a high quality of life,” he said. “Middle-income Canadians receive proportionately greater (tax) relief.”

This month’s budget acknowledged the need to create jobs and provide workplace training, but the budget documents never refer explicitly to the “middle class.” The term “middle income” occurs just three times in the main budget, and once in a news release.

Since becoming Liberal leader in April last year, Justin Trudeau has frequently cited the plight of the middle class, a theme repeated at the party’s weekend convention in Montreal.

Research from the Library of Parliament shows that since Jan. 1, 2013, Trudeau has used the phrase “middle class” 52 times in the House of Commons, compared with twice for Prime Minister Stephen Harper and nine times for NDP Leader Tom Mulcair. None of them used “middle income.”

Toronto Liberal MP Chrystia Freeland commended the public servants who produced the report, saying that for the Liberals “it was like getting a good grade on your homework.”

“This is a very strong, non-partisan, data-driven report, focused on Canada, which confirms our assertion, which is at the centre of our policy, that the middle class in Canada is being squeezed and that we have to do something about it,” she said in an interview from Montreal.

“The public discourse has been lagging — we’ve been in denial.”

Freeland, who won a November byelection and now is the party’s trade critic, is author of the 2012 book Plutocrats, which argues that wealth distribution has favoured the ultra-rich and left everybody else behind.

Follow @DeanBeeby on Twitter

Oxfam: 85 richest people as wealthy as poorest half of the world | Business | theguardian.com

Oxfam: 85 richest people as wealthy as poorest half of the world | Business | theguardian.com.

The InterContinental Davos luxury hotel in the Swiss mountain resort of Davos

The InterContinental Davos luxury hotel in the Swiss mountain resort of Davos. Oxfam report found people in countries around the world believe that the rich have too much influence over the direction their country is heading. Photograph: Arnd Wiegmann/REUTERS

The world’s wealthiest people aren’t known for travelling by bus, but if they fancied a change of scene then the richest 85 people on the globe – who between them control as much wealth as the poorest half of the global population put together – could squeeze onto a single double-decker.

The extent to which so much global wealth has become corralled by a virtual handful of the so-called ‘global elite’ is exposed in a new report from Oxfam on Monday. It warned that those richest 85 people across the globe share a combined wealth of £1tn, as much as the poorest 3.5 billion of the world’s population.

Working for the Few - Oxfam reportSource: F. Alvaredo, A. B. Atkinson, T. Piketty and E. Saez, (2013) ‘The World Top Incomes Database’, http://topincomes.g-mond.parisschoolofeconomics.eu/ Only includes countries with data in 1980 and later than 2008. Photograph: OxfamThe wealth of the 1% richest people in the world amounts to $110tn (£60.88tn), or 65 times as much as the poorest half of the world, added the development charity, which fears this concentration of economic resources is threatening political stability and driving up social tensions.

It’s a chilling reminder of the depths of wealth inequality as political leaders and top business people head to the snowy peaks of Davos for this week’s World Economic Forum. Few, if any, will be arriving on anything as common as a bus, with private jets and helicoptors pressed into service as many of the world’s most powerful people convene to discuss the state of the global economy over four hectic days of meetings, seminars and parties in the exclusive ski resort.

Winnie Byanyima, the Oxfam executive director who will attend the Davos meetings, said: “It is staggering that in the 21st Century, half of the world’s population – that’s three and a half billion people – own no more than a tiny elite whose numbers could all fit comfortably on a double-decker bus.”

Oxfam also argues that this is no accident either, saying growing inequality has been driven by a “power grab” by wealthy elites, who have co-opted the political process to rig the rules of the economic system in their favour.

In the report, entitled Working For The Few (summary here), Oxfam warned that the fight against poverty cannot be won until wealth inequality has been tackled.

“Widening inequality is creating a vicious circle where wealth and power are increasingly concentrated in the hands of a few, leaving the rest of us to fight over crumbs from the top table,” Byanyima said.

Oxfam called on attendees at this week’s World Economic Forum to take a personal pledge to tackle the problem by refraining from dodging taxes or using their wealth to seek political favours.

As well as being morally dubious, economic inequality can also exacerbate other social problems such as gender inequality, Oxfam warned. Davos itself is also struggling in this area, with the number of female delegates actually dropping from 17% in 2013 to 15% this year.

How richest use their wealth to capture opportunites

Polling for Oxfam’s report found people in countries around the world – including two-thirds of those questioned in Britain – believe that the rich have too much influence over the direction their country is heading.

Byanyima explained:

“In developed and developing countries alike we are increasingly living in a world where the lowest tax rates, the best health and education and the opportunity to influence are being given not just to the rich but also to their children.

“Without a concerted effort to tackle inequality, the cascade of privilege and of disadvantage will continue down the generations. We will soon live in a world where equality of opportunity is just a dream. In too many countries economic growth already amounts to little more than a ‘winner takes all’ windfall for the richest.”

Working for the Few - Oxfam reportSource: F. Alvaredo, A. B. Atkinson, T. Piketty and E. Saez, (2013) ‘The World Top Incomes Database’, http://topincomes.g-mond.parisschoolofeconomics.eu/ Only includes countries with data in 1980 and later than 2008. Photograph: OxfamThe Oxfam report found that over the past few decades, the rich have successfully wielded political influence to skew policies in their favour on issues ranging from financial deregulation, tax havens, anti-competitive business practices to lower tax rates on high incomes and cuts in public services for the majority. Since the late 1970s, tax rates for the richest have fallen in 29 out of 30 countries for which data are available, said the report.

This “capture of opportunities” by the rich at the expense of the poor and middle classes has led to a situation where 70% of the world’s population live in countries where inequality has increased since the 1980s and 1% of families own 46% of global wealth – almost £70tn.

Opinion polls in Spain, Brazil, India, South Africa, the US, UK and Netherlands found that a majority in each country believe that wealthy people exert too much influence. Concern was strongest in Spain, followed by Brazil and India and least marked in the Netherlands.

In the UK, some 67% agreed that “the rich have too much influence over where this country is headed” – 37% saying that they agreed “strongly” with the statement – against just 10% who disagreed, 2% of them strongly.

The WEF’s own Global Risks report recently identified widening income disparities as one of the biggest threats to the world community.

Oxfam is calling on those gathered at WEF to pledge: to support progressive taxation and not dodge their own taxes; refrain from using their wealth to seek political favours that undermine the democratic will of their fellow citizens; make public all investments in companies and trusts for which they are the ultimate beneficial owners; challenge governments to use tax revenue to provide universal healthcare, education and social protection; demand a living wage in all companies they own or control; and challenge other members of the economic elite to join them in these pledges.

• Research Now questioned 1,166 adults in the UK for Oxfam between October 1 and 14 2013.

“The Biggest Redistribution Of Wealth From The Middle Class And Poor To The Rich Ever” Explained… | Zero Hedge

“The Biggest Redistribution Of Wealth From The Middle Class And Poor To The Rich Ever” Explained… | Zero Hedge.

While the growth of inequality in America has been heavily discussed here, it was Stan Druckenmiller’s outbursts (and warnings that “from beginning to end – once markets adjust from these subsidized prices – that the wealth effect of QE will have been negative not positive”) that brought it more broadly into the average American’s mind. QE, taxes, income disparity, and entitlements are four major means by which wealth is transferred from the poor and the middle class to the richThe following simple chart explains it all…

Via Shane Obata-Marusic ( @sobata416)

A – “the rich hold assets, the poor have debt” is how Citi’s Matt King described the distribution of wealth in the US.

B – QE has resulted in a loss of purchasing power for the US dollar. Faced with this problem, consumers in the middle class are taking on more non-housing debt in order to maintain the same standard of living. In addition, the US government – which continues to run a deficit year after year – continues to accumulate debt. Due to these facts, total debt outstanding – aka credit market instruments for all sectors – is at all time highs. More debt means more interest payments and lower savings rates. These trends do not bode well for the middle class consumer.

C – On the other hand, QE has been great for the rich. QE has inflated the prices of assets such as property, bonds, stocks, and non-home real estate:

Home prices in Detroit are going up despite the fact that the city is bankrupt. The “housing occupancy” table is meant to show what appears to be a higher than average amount of speculative demand i.e. lower than average owner occupancy rates.

The rich have most of the assets which is why the average family income of the top 0.01% increased by 76.2% from 2002 to 2012. In contrast, the average family income of the bottom 90% decreased by 10.7% over that same period.

D – Taxes as a percentage of real disposable income have more than doubled since 1980. This trend has not been kind to the bottom 90%.

Conversely, favourable tax rates on dividends and capital gains have allowed the rich to become wealthier over time.

E – Median household income has been in a downtrend since the late 90s.

In opposition, corporate profits are at all-time highs.

F – The entitlement problem is only going to get worse as more baby boomers leave the work force. Future generations will have to pay for the debt that the old and rich continue to take on.

Growing benefits and sympathetic tax rates on investments enabled the old to increase consumption by 164% from 1960-1991 .

G – In conclusion, QE, taxes, income disparity, and entitlements are contributing to “the biggest redistribution of wealth from the middle class and the poor to the rich ever” If things continue the way they are going, then millennials and future generations will pay the price:

Despite the fact that inequality in the US is nothing new:

Today, it might be worse than it ever has been:

Unless the distribution of wealth in America begins to change for the better, assets will continue to benefit the rich and debt will continue to burden the middle class and the poor.

For an economy that’s largely based on consumption, excess debt only serves to reduce expenditures and to slow economic growth over time.

Quality of life for the median American household is only going to get better if the issues associated monetary policy, entitlements, taxes, and income are addressed and dealt with.

For now, the best thing that you can do is to discuss these issues with your friends, family and colleagues and try to come up with solutions.

How the Federal Reserve Steals from the Middle Class

How the Federal Reserve Steals from the Middle Class.

On December 23, just five days from now, we “celebrate” 100 years of a currency system controlled by a select few private corporations.
In 1913, a bill passed through a poorly attended Senate session… and was rushed to the White House, where Woodrow Wilson signed it into law that same night.
It established the Federal Reserve… which is not technically owned by the federal government, nor does it have any actual reserves.
Today, the Federal Reserve is a fixture in our economy. It controls the quantity and frequency of currency issued by the United States. Take a dollar bill out of your wallet and notice what it says on the top, “Federal Reserve Note.” That currency is what we use to transact business in our lives. It is also what we get paid in when we work hard or take risks.
The Federal Reserve enjoys a great reputation. Every few months, the chairman visits Congress. He gives a speech on the condition of the nation’s economy. Markets wait patiently for his statements and hang on his every word when the Fed issues policies. (This afternoon, you’ll see the chairman’s latest pronouncement.)
When it comes to the Fed, people assume that the experts are handling things.They forget that the Fed is a cartel, and the purpose of forming a cartel is to protect its members
The Fed primarily relies on two tools to drive its monetary policy. First, it can adjust the “federal-funds rate,” which is the short-term rate banks pay to borrow funds from each other overnight. Nearly all interest rates – mortgages, corporate debt, etc. – are linked either explicitly or implicitly to the federal-funds rate. So when the Fed lowers rates, the cost of borrowing drops for everyone. When rates are low, folks build more cars, buy bigger houses, and start new businesses.
The Fed can also manipulate the economy by purchasing or selling Treasury bonds. The Fed has to create new money to pay for Treasury purchases. And conversely, when the Fed sells these bonds, it essentially takes currency out of the system.
Recently, the Fed has been buying Treasury debt like crazy… about $85 billion worth a month. To fund these purchases, it is creating vast sums of money out of thin air. The Fed doesn’t like the phrase “creating vast sums of money out of thin air”… It sounds reckless and irresponsible. “Quantitative easing” has a much more academic ring to it. But don’t be fooled… When the Fed announces quantitative easing, it’s about to print money out of thin air and drop it on the economy.
Money for nothing might sound like a good idea. But both of the Fed “tools” are inflationary. They make every one of your dollars less valuable…
When the Fed lowers interest rates, it is essentially bribing people to spend more money. When more people have more money to spend on the same goods and services… they will inevitably bid prices higher.
This is what happened with the recent housing crisis. With rates low, banks were encouraged to lend at a record pace. Suddenly, everyone could borrow money for record-low rates and buy “more house.” Real estate prices soared around the entire country. Of course, we later learned the banks had been loaning to folks who couldn’t repay. The inevitable slew of defaults drove home prices down and sent our country into a deep recession.
Since December 2008, the Fed’s nominal interest rate has effectively been 0%. Since the Fed can’t lower nominal interest rates below zero, the only tool it has left to manipulate the currency is “quantitative easing.” So for the past several years, the Fed has been printing money in an effort to “ease” our way to prosperity.
Has it worked? As we explained in October, quantitative easing has been a godsend for some:
[Federal Reserve Chairman Ben] Bernanke permitted and encouraged the largest housing bubble in history. Its inevitable collapse allowed me to buy rental real estate paying yields in excess of 20% and trophy properties in Miami Beach for prices last seen 15 years ago…
And for the very, very rich… Bernanke did even more, God bless him. Bernanke dropped real interest rates well into negative territory. That allowed the world’s wealthiest capitalists – like renowned investor Warren Buffett and Stephen Schwartzman, head of the private-equity firm Blackstone Group – access to unprecedented amounts of capital at rates of interest that literally paid them to borrow.
They did the only logical thing… they responded with a wave of leveraged buyouts that dwarfed every other private-capital cycle in history… This was a massive aggregation of wealth. Almost none of these deals would have been possible without Ben Bernanke’s policies…

Yes, for rich people all around the world, Ben has been a living saint. Thank you, Ben! We couldn’t have done it without you! None of us ever thought we’d be quite this rich… or end up owning all of those incredible assets.

Newly printed Fed money tends to find its way into the pockets of those who need it least…
The same thing is happening with businesses. People like to debate whether quantitative easing has helped small businesses. But it has clearly helped the “too big to fail” banks get even bigger. Last month, Forbes made a list of 29 banks that were “too big to fail.” And topping the list… JPMorgan, the namesake bank of the man who helped drive the Federal Reserve’s creation 100 years ago.
Along with Citigroup, Goldman Sachs, and other big banks, JPMorgan is one of the Fed’s “primary dealers.” These dealers act as the Fed’s agent at Treasury auctions and in other markets. Under the current system, once the dealers buy the government bonds, they sell them to the Fed – for a slight profit, of course.
Not only do they profit from every Treasury bill the Fed purchases… but many people believe that their “seat at the table” offers the Fed’s primary dealers insights into – and even influence over – our nation’s monetary policies. The Fed has become a cartel with membership privileges.
Quantitative easing has re-inflated the entire banking system. The chart below tracks the balance sheets of the Federal Reserve. Notice that assets (the black line) have ballooned from around $900 billion to nearly $4 trillion.
Meanwhile, JPMorgan has seen its assets grow from $1.6 trillion in 2007 to $2.5 trillion today. That is 58% in just a little more than five years. It has also seen earnings per share (the gray line) grow by 43% over the same period.
fed's total assets
Meanwhile, Federal Reserve manipulation of the dollar has undermined the lives of millions of Americans. It has driven down the standard of living for the average American in two key ways. First, the average household is earning less money at a time when prices are increasing.
u.s. median household income
Second, it’s nearly impossible for people to protect the value of any extra cash they can save. The cash that is left in bank accounts will buy less next year than it does today.
The Fed has set interest rates so low, it’s impossible to earn a decent return. Remember, all interest rates are tied – either directly or indirectly – to rates set by the Fed. This is great for the banks that own the Fed. They get to borrow for 0% and lend to the rest of us at 4% or 5%. But it’s terrible if you’re trying to hang onto your savings for retirement 15 or 20 years down the road.
In short, the Federal Reserve has changed the markets. It has also changed how we invest. There are considerations today that we would never have imagined 20 years ago. It is no longer enough to study business cycles and company fundamentals. We have to consider the unintended consequences of quantitative easing…
Tomorrow, I’ll show you the results of a study we just conducted on what will happen when the Federal Reserve begins to rein in its quantitative-easing bond-buying policies. This is what people refer to as “tapering.”
We looked at how the Fed’s previous exits from the bond market have influenced every sector of the stock market – and how “tapering” could affect our recommended stocks.
Specifically, we studied more than 2,000 stocks across 39 industry segments. We spent dozens of hours on this analysis (which we’ve seen nowhere else, by the way).
We found there wasn’t a single sector of the stock market that had gone up, on average, during the last three Federal Reserve “taper” periods.
But we did find a “window” of opportunity. I’ll show you exactly where in my next essay…
Regards,
Porter Stansberry

 

Goodbye Full-Time Jobs, Hello Part-Time Jobs, R.I.P. Middle Class

Goodbye Full-Time Jobs, Hello Part-Time Jobs, R.I.P. Middle Class.

 

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