American families have cut expenses to the bone, but stagnant wages still make keeping up with inflation impossible for the middle class. (Photo Credit: CC BY-SA/Dennis Jarvis/Flickr)

A corporate information service called American Pulse recently conducted a survey that shows how far the U.S. job market has fallen into the mire of class distinction. As the Huffington Post notes, 90 percent of U.S. workers surveyed admitted that they do not expect their stagnant wages to be able to compensate for rising gas and food prices.

‘Permanent midnight’ for the middle class

As the American middle class continues to sink beneath mountains of debt, rising prices and inadequate pay en route to a “permanent midnight” of poverty, faith in U.S. government’s economic policies has declined. Talk of rising inflation and a double-dip recession continues, and families who can ill afford to tighten the belt any more wonder where they can cut back. Provided salaries remain at low levels and prices continue to skyrocket, survey respondents said they’d undergo greater austerity measures in the following areas:

• Only buying necessities: confirmed by 70.5 percent
• Infrequent driving: 63.4 percent
• Spending less on clothes: 58.9 percent
• More bargain hunting: 53.1 percent
• Tightening the personal budget: 50.0 percent
• Buying generic: 49.9 percent
• Buying fewer groceries: 42.0 percent
• No change: 6.6 percent

Adieu, gross domestic product

Historically, consumer spending accounts for about 70 percent of the United States’ gross domestic product. Significant decreases in consumer spending retard economic growth. As the consumer spending growth rate of 2.2 percent in the first quarter of 2011 was much lower than economists had anticipated, the problem becomes obvious.

Nearly half of Americans believe a second Great Depression is rapping at the chamber door, according to a CNN poll. A June Gallup poll reflected shrinking consumer confidence, while a separate poll found that workers are currently less satisfied with their salaries and overall economic condition than they were before recession struck in 2008. Lack of career advancement was a common problem listed by respondents in nearly all recent surveys on the topic.

Breaking the link between profits and raises

Getting a raise used to have some connection to corporate profits, notes Brad Delong in Mother Jones. However, even though U.S. Department of Labor research has shown that U.S. worker productivity has surged, income has remained stagnant for most Americans. Data indicates that if the median U.S. household income had kept pace with the state of the economy since 1970, it would currently be $92,000, rather than $50,000. U.S. CEOs are making more money than they have since 2007.

How to ask for a raise, just in case

Sources

American Pulse

CNN

Economic Policy Institute

Huffington Post

Mother Jones

Paying off credit cards can save you big money long term. (Photo Credit: CC BY-ND/lemonjenny/Flickr)

A certificate of deposit is traditionally a worthwhile, low-risk investment. However, CD rates have been so low lately that many consumers have moved their money into more productive financial ventures, reports Bankrate. Paying down debt – particularly credit card debt – has taken center stage.

One-year CD rates scraping the bottom

According to Bankrate, the current average for one-year CD rates is a miniscule 0.44 percent. The highest surveyed was 1.31 percent. Considering that credit cards typically carry an APR of 20 percent or more, a paydown is attractive. U.S. consumer credit card debt still exceeds $790 billion, despite significant shrinkage since 2004, reports the Federal Reserve. That explains why CD balances have fallen to a six-year low of $839.2 billion.

This isn’t a new phenomenon. Market Rates Insight notes that such a shift was apparent in September 2010. From Jan. 1, 2010, to June 30 of the same year, the average monthly CD amount declined by about $3 million. Of the amount that was not rolled over, surveys indicate at least 15 percent was used to pay down credit cards. The rest went into liquid accounts like checking, savings and money markets.

Demand for liquid accounts is high

The Credit Union National Association’s June Credit Union Trends Report found that highly liquid accounts are desirable to consumers looking to eliminate debt. Regular share accounts, money markets and share draft accounts have all seen greater activity since April 2010: a 128-percent total savings increase. The $834 billion in total savings reflected a $35 billion (4.4 percent) increase since April 2010, writes Credit Union Times. CDs dropped 5.2 percent over the same period. These results are consistently below historical trends and suggest that the U.S. is still firmly in the grip of economic uncertainty.

Dave Colby, the chief economist at Credit Union National Association Mutual in Madison, Wis., sees the writing on the wall.

“From a member perspective, households are rational and will continue to pay down higher-cost debt obligations versus building savings, which are losing ground to inflation,” he said.

Savings vs. debt: Weighing the pros and cons

Sources

Bankrate

Credit Union Times

Credit union trends report (PDF)

Money Rates

Like the ancient Acropolis, Greece's current economy is in ruin. (Photo Credit: CC BY/*clarity*/Fotopedia)

Greece is quickly sliding toward third-world status as austerity measures drive citizens to riot. The International Monetary Fund is concerned that if Greece defaults on its multi-billion dollar debt, the cost to the Eurozone will be tremendous, sending other teetering nations over the edge, reports the Washington Post.

Europe fears Grecian formula

Flagging support for the euro and rampant unemployment has made recovery difficult for numerous Eurozone countries. Continuing to funnel billions of dollars into Greece would be a crushing financial blow to Europe, argued the IMF. In spite of austerity plans in place across the Eurozone, which include unpopular measures like cutting funding for public programs and public employees, signs of recovery have remained elusive. Similar sluggish returns in the U.S. and Japan have damaged the global economy. For Greece to receive any more aid money, the IMF is requiring that the nation follow severe cutback plans to the letter.

“We have entered into a new phase of the crisis that I would term the political phase, where hard political decisions need to be made because the window for substantial policy action is closing. Time is of the essence,” said IMF financial counselor Jose Vinals.

Papandreou hanging on by his fingernails

Amid the chaos of Greece’s slide – it has the lowest credit rating of any developed nation on Earth, according to Standard & Poor’s – Prime Minister George Papandreou attempted to assemble a new cabinet in order to maintain political control. He has announced that he will replace finance minister George Papaconstantinou, who was the face of the government’s austerity plan, with defense minister Evangelos Venizelors. Numerous sources compare such moves to shuffling the deck chairs on the Titanic.

The Wall Street Journal noted that not all the news surrounding Greece and the economy is bad news. German Chancellor Angela Merkel and French President Nicolas Sarkozy have announced their nations have reached agreement regarding a Greek bailout package that has been called the “Vienna Initiative.”

Greek riots intensify as credit collapses

Tens of thousands of protesters blocked Athens’ Syntagma Square Wednesday in effort to pressure Greek Parliament into rejecting the latest austerity measure proposal. If the plan passes, it is believed that it will only provide a short-term fix, as Greece is currently not selling long-term bonds and is depending solely upon emergency installment loans. With Greece’s CCC national credit rating, the interest rates demanded by investors are tremendous.

“There is very little way that Greece can pay back the debt,” said Jonathan Tepper of London economic research group Variant Perception.

Is the US like Greece?

Financial doomsday cultists like to say that the U.S. should watch its p’s and q’s, lest it fall into the same social welfare/entitlement trap that has nearly consumed Greece. The U.S. has a much larger, more diverse economy than Greece, which means that the fall would take much longer. Yet a weak U.S. dollar could hasten the process, resulting in a credit downgrade.

Greece’s credit rating is world’s lowest

Sources

CNN Money

Wall Street Journal

Washington Post

In 1923 Germany, inflation was so bad that burning money was cheaper than buying firewood. (Photo Credit: CC BY-ND/illuminating9_11/Flickr)

Manufacturing activity and consumer optimism took a nosedive despite a continued upward creep in national consumer prices. The creep has slowed to less than zombie-like pace, however, which indicates that the economy still needs a jolt.

The Consumer Price Index

According to Ameriprise Financial senior economist Russell Price, the decline in manufacturing plus low optimism are much ado about something nobody wants to hear.

“Both of them are reflective of the slowdown in the economy that we have experienced over the last few months,” he said.

The Consumer Price Index, according to the U.S. Department of Labor, was up 0.2 percent in May, versus 0.4 percent in April and 3.6 percent one year previous. May’s under-performance is the lowest CPI since November, according to the Bureau of Labor Statistics.

Rising food prices — up 0.4 percent — didn’t help. Strangely, one economist managed to report that the U.S. energy index fell by a percentage point last month. Within the central bud of that surprise was a 2 percent U.S. gas price decrease. Lower fuel prices didn’t seem to help skyrocketing food prices.

Clothing, shelter and cars getting more expensive

The Consumer Price Index report had more to say regarding price acceleration. According to the New York Times, clothing, residence, recreation and new automotive costs were all on the rise in May, yet demand did not falter. Airline prices, personal care items and sot-weed tobacco went down last month.

Conditions didn’t slack off – they ‘deteriorated’

The choice of words the Times uses to describe the state of manufacturing in New York is telling. According to the New York Federal Reserve, conditions for manufacturers have deteriorated so far in June, marked by a 20-point drop in the manufacturing industry’s conditions index to minus-7.8 points, the first dip below zero since November 2010. Forecasters had pegged a decline that was supposed to have settled at positive 14.

Part of the reason for the dismal manufacturing performance is tied to the decline in auto production following the Japanese earthquake, tsunami and nuclear disaster.

“It affects just about every region,” said Price. “In the manufacturing report, the component shortages were the No. 1 factor, and then the broader softening that went along with the higher gasoline prices.”

Enjoy your $20 watermelon

Sources

Consumer Price Index

New York Federal Reserve

New York Times

New American Express prepaid debit card coming next Tuesday. Image: AMERICANEXPRESSONLINE/Flickr/CC BY

American Express will start issuing a new prepaid debit card June 21. The company, previously known for aiming at higher-end, luxury buyers, is staking new ground by targeting the average consumer. Other card-issuers are expected to follow suit.

Building on the PASS card

Lat year, American Express introduced the PASS prepaid card, designed to help parents to keep their children on a financial leash. However, the company soon realized that prepaid cards had a far greater potential. Last year, According to the industry group Network Branded Prepaid Card Association, U.S. consumers spent about $37 billion on prepaid cards.  That is double the amount from last year and quadruple the figure from 2008.

Reaching a large demographic

Dan Schulman of American Express stated, “this card is for everyone. It could be for a parent who wants to give their kid a card, it could be for someone who doesn’t have access to credit. It’s a very large market that spans demographics.”

No bank is required  for the new cards, and there is a built-in safeguard against debt. A consumers can only spend what is loaded onto the card.

A promise of minimal fees

American Express promises to shave the fees normally associated with prepaid cards. The company will charge a fee of $4.95 when money is loaded onto the card, although no fee is charged if money is transferred from an existing bank account. The only other fee is a $2 charge whenever the card is used at an ATM. Card holders, however, are allowed one free ATM transaction per month.

Other benefits of the new card

The American Express card will come with online history and balance checks. In addition, card users will receive the other benefits associated with American Express cards, such as purchase protection and roadside assistance.

Other card issuers likely to follow

Given the growth in the prepaid card industry, other banks and card-issuers are expected to follow in the footsteps of American Express. Gerri Detweiler, personal finance expert at Credit.com, said, “I can’t imagine that every large issuer isn’t looking hard at prepaid cards right now.”

Not affected by credit card legislation

Consumer groups warn that prepaid cards are not covered by the CARD Act, which Congress passed last year to limit credit card fees. Prepaid cards are also exempt from the Durbin Amendment, a law soon to take effect that limits “swipe fees,” the fees that banks charge retailers when customers use debit cards. Banks may see the prepaid card as a alternative source of revenue lost from other card transactions and take advantage of the loophole.

The American Express prepaid card will be available at no cost online and will later be available in drug stores and other retail locations. The card purchase fee will be about $5.

Sources

Huffington Post
CNN
Chicago Tribune

A stronger dollar is the key to recovery, not quantitative easing, says investment manager Abigail Doolittle. (Photo Credit: CC BY/MoneyBlogNewz/Flickr)

Quantitative easing (QE) has been referred to by some economists as the last vestige of an empire in ruin. The idea is to create money, suppress rates, promote liquidity and watch inflation spread. It’s like a plumber who tries to fill a bathtub by pouring in massive amounts of water, without plugging the drain first. According to CNBC, however, the Federal Reserve is reaching toward turning off the tap, and investors have decided to cut back.

Fed sends S&P into downward slide

The S&P 500 was down by 2 percent this week and is in the middle of a 7 percent slide that began May 2. The loss in investor confidence has much to do with drops in a variety of economic indicators, the Federal Reserve turning off the tap being one of those. And the worst may be to come, suggests United-ICAP energy analyst Brian LaRose.

“If you look at what values have been rising over the course of the quantitative easing program, it has been merely commodities and equities, nothing else,” he said. “Reality is starting to take hold.”

Pop goes the golden goose

That reality may be that the gold and oil bubbles will pop, reports Bloomberg. That, in turn, would lead to a surge in the U.S. dollar, which has lost as much as 10 percent against other world currencies since the last time Ben Bernanke and the Fed boarded the QE bus.

The possibility of further bailouts for debt-ridden Greece has dragged the euro down, as has the lack of a unified financial plan between euro-zone nations. The indecision has been less than inspiring to global investors.

In the U.S., consumer worry continues to spill over into the housing market. If people aren’t spending and housing prices continue to fall, the path of disaster for the U.S. is clear, says CNBC.

Finding the bottom with both hands

While analysts like Richard Ross claim that the U.S. economic fix is only beginning to take hold and that, as investment strategist Jeffrey Saut puts it, the market is “bullishly configured” as long as the S&P holds around 1,250, the naysayers remain out in force.

“We have mountainous inflation efforts in place with historically low yields and strong demand for bonds. That’s like a rubber band that’s going to snap at some point, and somebody’s going to get hurt,” says Bill Larkin, portfolio manager at Cabot Money Management in Salem, Mass.

In order to find out where the economic slide will stop, investment firm manager Abigail Doolittle believes the Fed should do much to strengthen the dollar and allow rates to rise. The effect will be slow but lasting.

“Force investors off of the liquidity high of the last few years, and replace immediate-term gratification with the long-term satisfaction of investing in an economy with a truly solid foundation,” she said.

Quantitative easing: When failure doesn’t sound like failure. (Contains adult language)

Sources

Bloomberg

CNBC

Huffington Post

Quantitative easing Wiki

She seems happy, but the stress of dad's unemployment could be hiding behind that smile. (Photo Credit: CC BY/Vicci/Moon Stars and Paper)

According to a new interdisciplinary academic study by the National Bureau of Economic Research, the stress of unemployment hits children hard. The study, entitled “Children Left Behind: The Effect of Statewide Job Loss On Student Achievement,” finds a correlation between community job loss and decreased performance on math and reading scores, reports the Huffington Post. This applies to the children of both the unemployed and the employed.

Significant effects on academic performance

In analyzing the math and reading test scores taken from fourth- and eighth-grade sample groups compiled by the National Center for Education Statistics, the study found that the stress of unemployment had significant effects. Specifically, for every 1 percent of a state’s working age population that is unemployed, the average math test score declined by 3 percent.

Study co-author Dr. Elizabeth Ananat of Duke University’s Public Policy and Economics department sees how uncertainty can create anxiety.

“Research has found that the stress and anxiety of losing your job is actually not so much greater than the stress of worrying about losing your job,” she said. “When there is a lot of job loss going on, the community gets depressed, and anxious. … That makes it harder for kids to learn.”

Growth recession indicates no real improvement

The current state of the U.S. labor market does not indicate to economic experts that a turnaround is in store, and thus the study authors expect the negative student achievement trend to continue. As many as 13.9 million Americans are officially unemployed, and another 8.5 million pursuing full-time work have had to settle for part-time jobs. Millions more face a kind of unemployment coma that keeps them from looking because of discouragement.

“When kids are at vulnerable times in their development, the impact of events like this can have long-lasting consequences,” Ananat said.

Low test scores in particular can remain on a child’s record for years, as numerous NBER studies have shown before.

‘The tip of the iceberg’

Study co-author Dr. Anna Gassman-Pines of Duke University said actions such as lowering class size can help counteract the negative effect of unemployment somewhat. However, many schools don’t have the economic means to make such changes.

Co-author Dr. Christina Gibson-Davis suggested that while the NBER’s test-score findings imply a problem, the implications likely run deeper.

“These are just test scores — not the greatest measure of the kids’ behavior,” Gibson Davis said. “This is probably the tip of the iceberg.”

Such scenarios as parents working multiple part-time jobs and multiple families living in the same household are no doubt issues that also contribute to the general sense of stress, experts believe.

Unemployment is a family affair

Sources

Huffington Post

National Bureau of Economic Research

Another casualty of the growth recession. (Photo Credit: CC BY/khteWisconsin/Flickr)

Think it’s time to celebrate economic recovery? Don’t get cocky, suggests Investor’s Business Daily. In this job-starved economy, we’re already living a kind of double-dip recession that economists call a growth recession.

What’s a growth recession?

When economic growth is so low that it creates net unemployment, that’s growth recession. Growth recession can also suggest underachievement, or below-potential growth in such areas as job creation. Job contraction typically means that a country’s real gross domestic product is expanding, but too slowly.

Numbers in a tailspin

Here are just a few of the signs that a growth recession is here, writes Investor’s Business Daily:

• ADP Payroll Services found that 38,000 private-sector jobs were created in May 2011. That’s 100,000 short of the minimum goal economists had marked for economic growth.
• Employment consultant company Challenger, Gray & Christmas noted that 37,135 jobs were cut in May, a 2 percent increase from the previous month.
• U.S. housing prices fell 4.2 percent in the first quarter.
• The Mortgage Bankers Association’s mortgage application index fell 4 percent in May’s final week.
• The Institute for Supply Management’s factory activity index – an indicator of U.S. manufacturing health – dropped from 60.4 in April to 53.5 in May, the lowest score on the index since September 2009.

Re-enter the recession

U.S. gross domestic product growth was reported at 2.7 percent in May, which most economists believe is insufficient to create private sector jobs and beat back unemployment. Match this uninspiring growth with continued frantic borrowing by the U.S. government ($1.5 trillion estimated for 2011), and avoiding a prolonged double-dip recession seems impossible.

According to Michael Pento, senior economist at Euro Pacific Capital, the U.S. is following the wrong formula for economic health.

“Genuine government stimulus comes from low taxes, stable prices, reduced regulation and low debt,” said Pento. “Our economic policymakers have scrupulously avoided such remedies.”

Summer 2011 will bring economic déjà vu , says The Indypendent. The Federal Reserve is backpedaling; spending cuts and tax increases on the city and state level are in progress, and federal spending is pointing downward. Combine everything, and the U.S. will likely face not just a growth recession, but a full-blown return to depression.

Growth recession at teatime

Sources

Growth recession Wiki

The Indypendent

Investor’s Business Daily

Pawn loans and pawning is becoming far more high profile thanks to TV shows like "Pawn Stars." This photo of the "Pawn Stars" storefront is from Wikimedia Commons.

Television shows that feature various people who run pawn shops, offer pawn loans or buy and sell items for profit have popped up in the past couple of years. Now, wealthier customers are starting to frequent pawn businesses. The trade has suddenly gained respectability that it has not always had.

Reality television makes stars of people with a profession

A reality television show called “Pawn Stars” hit the air in summer 2009. The show, which debuted on the History channel but has since entered syndication, chronicles the goings-on at the Gold and Silver Pawn Shop in Las Vegas, Nev., according to Fox News. The main focus is the interactions between customers looking to sell items and owner/operator Rick Harrison or his father who co-owns the store. The TLC network recently debuted “Pawn Queens,” according to Reuters, about two women named Nikki and Minda who operate the Naperville Jewelry and Loan pawn shop outside of Chicago, Ill. Their store caters more toward women rather than being an all-purpose pawn store. The additional exposure has shed a little light on a somewhat mysterious profession.

New faces on old profession

Pawnbroking, according to Wikipedia, has been around for nearly 3,000 years old. Kings Henry V and Edward III of England paid for wars by pawning the Crown Jewels. Basically, a person takes a piece of property to a pawnbroker in exchange for a small personal loan. If borrowers don’t pay off the loans in time, the property is forfeited to the pawn lender. Pawn shops used to be used almost exclusively by middle and lower income people, but the wealthy have started frequenting pawn stores in recent years. Pawning has even gone online; Pawngo, according to SmartMoney, will wire someone a loan once they receive the pawned property via FedEx. Pawngo has issued loans against items like diamond rings, Cartier watches and even a genuine Picasso. Pawnbrokers have also done well in the recession, as large pawn and payday loan store chains such as EZCorp and Cash America have been reporting consistent profits throughout the past few years, according to the Salt Lake Tribune.

Gold rush has been a blessing

Over the past year or so, there has been an extensive amount of buzz about investing in gold and silver. In order for someone to cash in on those commodities, someone has to buy it, and pawn shops are doing a lot of the buying, according to MSNBC. Gold and silver have been hot commodities for some time, and pawnbrokers and precious metal recyclers are happy trade customers some cold hard cash. Some experts think it won’t last, though. For instance, economist Veronique de Rugy has observed that gold prices aren’t that high, once adjusted for inflation, and tend to fluctuate more wildly than just about any other commodity, according to Reason.com.

Sources

Fox News

Reuters

Wikipedia

Salt Lake Tribune

Smart Money

MSNBC

Reason

If your credit card statement is this frightening, take advantage of the provisions of the Credit Card Act. (Photo Credit: CC BY/Jason Rogers/Flickr)

In 2009, President Obama signed the Credit Card Act into law. One of the provisions of the law is that credit card companies, in conjunction with the National Foundation for Credit Counseling, must provide resources for consumers who have difficulty with their finances. While they’ve held up their end of the bargain, recent NFCC studies have found that consumers simply aren’t taking advantage, reports Bankrate.

Free credit counseling, fallen by the wayside

Only 150,000 U.S. consumers struggling with credit card debt have accessed the nonprofit help to which banks and the NFCC have access, said NFCC spokeswoman Gail Cunningham. The contact number is toll-free and printed on credit card statements. As credit card debit still weighs heavily on the average, recession-weary American, the lack of initiative is troubling.

“I certainly think one of the reasons for the low response rate from consumers could be attributed to a lack of prominence,” said Cunningham. “Perhaps the number is buried somewhere.”

Within the recesses of public prejudice might be where that number is buried. Experts believe that many consumers who see the toll-free Credit Card Act number on their credit card statement may think it’s yet another “service” from the big, bad credit card company to take their money. However, Cunningham has observed that the number has been absent from some statements, which would be a violation of law.

Credit card debt shrunk in 2010

A study by Credit Karma indicates that from January to December, U.S. consumer credit card debt decreased by 8 percent nationally, to an average of $7,404 per person. Eight states, including California, Colorado, Connecticut, Indiana, Oklahoma, Tennessee and Nevada, showed as much as an 11 percent improvement.Wisconsin made the biggest dent in credit card debt, slashing and burning through the credit jungle for a 31-percent improvement over 2009.

On the other side of the scale, states like Delaware, Iowa, Louisiana, Missouri, Nebraska and New Mexico grew their credit card debt by as much as 6 percent. Mississippi was the biggest loser in the Credit Karma Survey, with 8 percent growth.

Looking for credit card help?

Visit the National Foundation for Credit Counseling website at nfcc.org for the information on non-profits near you that can help. The Federal Reserve’s website also has a free calculator with which you can calculate how much you’ll owe if you only make the minimum monthly payment on your credit card. For your mobile, there’s a useful Android Market app called Personal Financial Calculator. Or, if you are looking to compare overdraft APRs of installment loans and other consumer loan products, check out our “Loan Overdraft Calculator,” linked below.

Sources

Android Market: Personal Financial Calculator

Bankrate.com

Federal Reserve

Loan overdraft calculator

National Foundation for Credit Counseling

Obama signed the Credit Card Act. Are you using its programs?

Consumers are putting out even more cash to access their own money. Image: Flickr / MoneyBlogNewz / CC-BY

The price for bank customers to access their own money appears to be going up. The federal Truth in Savings Act requires that banks disclose all fees involved with bank accounts. Two recent reports highlight the high cost of everyday financial transactions, all while the Consumer Financial Protection Bureau waits for a director.

The high cost of accessing your own money

The Pew Health Group, a subdivision of the Pew Charitable Trusts, has released a new report on the average checking account in the U.S. According to this study, the average bank checking account has four often-used fees:

• An opt-in overdraft fee of $35
• Overdraft transfer fee of $10 per occurrence
• Extended overdraft penalty of $25 per week
• A monthly fee of $8.95

Financial research service Moebs estimates that in 2011, banks will make $38 billion from overdraft revenue, 90 percent from “frequent fliers” in the overdraft system.

Lack of transparency in bank accounts

The Credit CARD Act of 2009 was written to help protect consumers from deceptive and non-transparent fee structures. The Truth in Savings Act, passed in 1991, was intended to implement the same kind of reforms in the banking system. The U.S. PRIG advocacy group recently conducted a compliance review of banks and credit unions and found that less than 60 percent of banking institutions surveyed provided the fee and cost disclosures required by the Truth in Savings Act. Full compliance with the TiSA was at about 40 percent.

Consumer Financial Protection Bureau

The Consumer Financial Protection Bureau is the federal agency charged with overseeing financial products. The CFPB, however, has yet to find a director that Republicans and Democrats agree on. Currently, House Republicans have threatened to block all nominees for head of the CFBP unless the structure and funding for the agency is changed. Many of the consumer watchdog functions of the CFPB cannot be put into effect until the agency has a director.

Avoiding fees at your bank

When you are trying to decide on a bank or credit union, there are a few things to look for to protect yourself. First, check out local and regional banks and credit unions rather than “big name” banks. You should also ask about free checking options and ask for a clear, concise disclosure about overdraft fees, fines and monthly maintenance fees. You should also sign up for alerts, so you can be informed when there are changes to your bank account.

Sources

Moebs
Washington Post
Pew Trusts
US PRIG

Gas prices are nearing $4 per gallon now, but experts see summer relief on the way. (Photo Credit: CC BY/futureatlas.com/Flickr)

The average U.S. gasoline price hovered around the $4 mark last week, but experts predict relief by summer, reports North Carolina’s High Country Radio network. A 15 percent decrease in crude oil prices may not have affected fuel costs noticeably yet, but experts like Fred Rozell of the Oil Price Information Service predict that gas prices should begin falling soon. Once they do, the decline should remain steady.

Gas prices fall along with demand

Oil investors, who managed to drive up the price of crude in the first place, see a supply-and-demand situation at work. As U.S. consumers are planning their road trips more carefully and resorting more to public transportation for their workday commutes, fuel demands have naturally decreased. Oil supplies have continued to rise, which has driven down the price. Another potential factor is that because oil is priced in U.S. dollars – and the dollar has risen of late – foreign investors have found oil less appealing. So while the price of crude oil has fallen to less than $100 per barrel for the first time in two months, the higher value of the U.S. dollar has scared away some who would normally buy with foreign currency.

Consumer gas demand has not risen with economy

Dan Kaffine, an assistant economics and business professor at the Colorado School of Mines, told NPR that he has seen research that suggests significant change in consumer behavior.

“There is a broad [base of] literature out there that says that, in the short-run, a 10 percent increase in price will lead to roughly a 1 percent decrease in consumption,” said Kaffine.

Numerous economists had predicted that gasoline demand would return to previous levels as the economy began to improve, but that trend has yet to occur.

Worldwide, oil consumption is growing at an alarming rate, particularly in high-growth areas of the world like China and India, says Aaron Brady, director of global information company IHS-CERA’s Global Oil Research Team. If this trend continues at its current pace, falling U.S. gas prices may be merely an aberration on the road to an unprecedented gas price explosion.

Big oil CEOs have seen this coming for years

In 2009, ExxonMobil CEO Rex Tillerson stated during an Economic Club of Washington speech that improved MPG standards, the rise of hybrid vehicles and increased use of ethanol have all led to lowered gasoline demand. However, an emerging factor that may be even more significant in the decline is the aging baby boomer population. According to the U.S. Census Bureau, the 65-and-older age group is the fastest-growing segment of the population. Retirement, declining vision, decreased reaction time and arthritis all tend to translate into less time behind the wheel.

Sources

GoBlueRidge.net
IHS CERA: Energy Strategy
NPR.org
U.S. Census Bureau

Will the falling gas price trend continue?

The price of silver has risen to historic heights and deflated, all within a week. Image: Flickr / sirqitous / CC-BY

In the last few days, prices on of some of the most important commodities have plunged. The effect this plunge may have on some prices may not be immediately noticeable, but it will affect most consumers.

Precipitous drop in commodity prices

In the last seven days, prices of several commodity items have dropped by huge amounts. Silver, gold, coffee, oil, gasoline and copper have all dropped by 5 percent or more. Silver is down by more than 27 percent over its high last week. On Thursday, May 5, oil fell to 13 percent below its May 2 high price. In short, almost every major commodity has fallen. Some blame this fall on dropping demand, others on reports that some very wealthy investors were making huge profits off gold and silver investments.

The effect of commodity prices

Commodity prices do have an effect on the prices everyday consumers pay. This is most easily seen in the pairing of oil and gas prices. Gasoline tends to spike in price a few months after oil prices spike; the delay is because of the time it takes to refine oil into gasoline. For most commodities, products made with those commodities increase in price when the base price increases. When the price of a commodity drops, however, the processed products usually do not also drop in price. For consumers, this means that the price of coffee and silver products will not likely drop, but those prices will not increase nearly as quickly.

Speculation causing price spikes

Commodities are usually considered a safe haven for investors who shy away from the volatility of the securities market. In the last few months, precious metals and commodity prices have been spiking as investors look for a safe place to put money. Gold recently reached a historic high, and silver has been following a similar trajectory. This has caused many investors to buy into the market, expecting that the price would continue to move up, a classic action that creates a bubble. This bubble in prices seems to be deflating, creating a bear market situation.

Sources

Sydney Morning Herald
Christian Science Monitor
Inflation Data

Credit scores are important, and can be improved. Image: Flickr / pyxopatamus / CC-BY-SA

A credit score is a number intended to indicate how risky a financial gamble a person may be. There are three big credit reporting agencies in the United States, and each one reports its own score. There are numerous factors that affect your credit score, and you can control your credit score by taking specific actions.

The history of credit scores

Credit score reporting, in its current form, has been around since 1841. Store owner Lewis Tappan started keeping files on customers and their payment history. Tappan hired thousands of correspondents to report on the credit worthiness of individuals in their communities. These reports on individuals soon had hundreds of customers, and the modern credit reporting system was born.

How credit scores are used

Credit scores were originally intended for informing decisions about extending credit to customers. Credit scores are used much more extensively now. Many lenders check credit reports on individuals applying for a credit card or loan. Landlords, potential employers and insurers may run credit reports in order to inform their decisions. There is controversy over the use of credit scores to make decisions that do not deal directly with the issuing of credit or providing of financial services, but the practice is legal and widespread.

What goes into a credit score

Each of the three credit reporting agencies has a different formula for creating a single credit score. The FICO score, developed by the Fair Isaac Corporation, is the most widely used measure of credit in the United States. The general information included in these reports has been determined to be:

• 35 percent payment history – how often you make payments on time
• 30 percent debt – what type of debt and how much debt you have
• 15 percent length of credit history – how long you have used credit
• 10 percent credit diversity – how many different types of credit you make use of
• 10 percent hard inquires – when a creditor checks your credit report

Defining good credit

The FICO credit score ranges from 300 to 850. What is considered a good credit score depends on the creditor doing the checking. However, the relative risk factor associated with each score can be estimated. In general:

• A FICO score of 770 to 850 is considered “choice”
• A FICO score of 710 to 770 is considered “good”
• A FICO score of 600 to 710 is “average” or “medium” credit
• A FICO score below 600 is considered “bad” credit or “high risk”

Taking control of your credit score

The federal government mandates that every credit reporting agency provide a free copy of its credit report on an individual once a year. These free federal reports generally do not include the numerical credit score, but they do include all the information on your report. The government-supported AnnualCreditReport.com provides access to these free reports. There are also numerous services that provide a “free” copy of a credit report in exchange for subscription to services. Once you have a copy of your credit report, check it for accuracy. Credit report errors must be disputed in writing, with a copy of any relevant documents included. The agency has 30 days to investigate the dispute and inform you of the outcome.

Improving your credit score

Once you determine the information on your credit report is accurate, you can improve your credit score by taking a few simple steps. First, pay your bills on time. Second, take a close look at the debt you are carrying and how it is being used. If your credit card balances are close to their limit, pay down that debt. You should also try to keep your debt to income ratio – the ratio that compares your total monthly debt payments to your total monthly income – below 30 percent. For an income of $2,000 per month, a 30 percent debt-to-income ratio is $600. Rebuilding your credit really is simple – make payments on what you owe on time and in full. Once you are doing that, it simply takes time.

Sources

MyFICO.com
PBS.org
FTC.gov
Investopedia
CreditScoring.com

Before you agree to relocate for a new job, do the math on the cost of living change. Flickr/MoneyBlogNewz/CC-BY-SA

Finally, businesses are starting to hire again. Many people will be faced with the choice of whether they should move in order to take on a new job. Before you accept a job and a salary offer, be sure to take into consideration the cost of living in the location you’re moving to. Also, if you must sell your home, be smart about home-staging — getting your home ready to sell for the best price.

Small businesses making new hires

Thanks in large part to small businesses, unemployment is receding and people are finding jobs. For those who have been unemployed for a long time, taking the first job and salary offer that comes along is tempting. However, when that job offer comes with the caveat that you must relocate, take careful consideration. First, check the cost of living comparison. Second, if you own a home, consider what it will cost and how long it will take to prepare it for sale.

Cost of living comparison

A great salary in Spokane, Wash., might be only enough for Ramen Noodles and a studio apartment in Portland, Ore. Any time you receive a salary offer in another area, make sure that salary will be enough to maintain your lifestyle. CNN Money has a cost of living comparison calculator (linked below) that calculates what salary you’d need to make in a different area to maintain your current expenses. It also breaks down where the extra money goes. For example, housing in Portland is 53 percent more expensive than housing in Spokane.

Selling a home in a down housing market

If you are looking to sell your home, there are plenty of inexpensive ways to spruce up the place. Replacing bathroom and kitchen hardware and new paint are common ways to make an old home look new. However, many of the most important aspects of making a home attractive are free — but easy to overlook. HGTV provides a comprehensive that covers everything from clutter cleanup to furniture arrangement. Follow the link below to a solid checklist of ways to improve your chances of selling your home.

Sources

CNN Money Cost of Living Comparison

HGTV 15 home-staging tips

Gas prices are continuing to rise, and people are starting to feel the pinch. Image from Wikimedia Commons.

Rising gas prices are beginning to take a heavy toll on Americans’ personal finances. Recent data indicates that personal incomes and gross domestic product are beginning to be affected by the rising cost of fuel, as more money has to be spent at the pump. Prices are inching ever closer to the record high price set several years ago.

Nine states and the capital hit $4 per gallon

As of Friday, April 29, nine states and Washington D.C. had an average price of $4 for a gallon of gas, according to CNN. The national average gas price reached $3.90 with an increase of 2 cents overnight. The cost of gas has been going up for the past 38 consecutive days, and shows little sign of stopping.

The continued increase in gas prices has been credited to increasing prices of crude oil and scheduled spring maintenance at many American oil refineries. The price of crude oil has increased 20 percent since the start of the year to $110 per barrel. Refineries, where oil is made into gasoline, often shut down for short periods in spring for annual maintenance.

Americans feeling the pinch

While high oil prices certainly don’t hurt speculators or oil companies, the consumer has been feeling the pinch. The Commerce Department, according to USA Today, noted that consumer spending picked up only 0.2 percent in March, and the rate of GDP growth slowed to 1.8 percent for the first quarter of 2011 compared to 3.1 percent in the last quarter of 2010. People are begrudgingly paying more at the pump, and it isn’t because they more gas. According to Reuters, the American Petroleum Institute observed that from March 2010 to March 2011, demand for gas rose by only 6.1 percent. The cost of gas, on the other hand, rose by 22 percent over the same period.

Government is not amused

In response to the rising gas prices, the government is looking into curbing subsidies and tax breaks for oil companies. Bloomberg reports that the proposed 2012 budget submitted by President Obama included cutting $46 billion in oil company subsidies, and members of Congress are beginning to chime in. Max Baucus, chair of the Senate Finance Committee, submitted a bill with similar intent. However, other members of Congress are skeptical, as they believe cutting subsidies will reduce oil company investment, and that gas prices aren’t set by oil companies such as Exxon or Shell. However, oil companies are certainly not complaining about climbing prices. Exxon, for instance, recently reported a 69 percent increase in first quarter income.

Sources

CNN

USA Today

Reuters

Bloomberg

Pending home sales, or the number of people who have signed contracts to buy homes, increased during the month of March. Image from Wikimedia Commons.

Home sales and similar statistics regarding home sales have not been encouraging for months, but are showing signs of life. Pending home sales, or contracts to buy homes, were observed during the month of March, as spring is certainly the buying season. However, that still doesn’t mean that all is well yet.

Mortgage rates dip but more people sign the dotted line

The national average rate on mortgages took a slight dip recently despite it being the busiest time of the year for real estate, according to USA Today. Freddie Mac noted that average rates on a 30-year fixed mortgage dropped 0.2 percent over the previous week, and the 15-year fixed dropped 0.5 percent during the same period. Interest rates for 30-year fixed rate mortgages have steadily held under 5 percent for months and 15-year loans have similarly held at or around 4 percent. However, pending home sales, or contracts entered into for the purchase of a home, rose by 5.1 percent during the month of March. Analysts were expecting a rise closer to 1.5 percent, according to Bloomberg.

Wait to break out the champagne

Though there are signs of life and pending home sales did beat estimates, this does not mean that it is time to break out the bubbly and toast the end of recession. Pending home sales for March 2011 are 11.5 percent lower than for March 2010. Existing home sales also increased in March, according to CNN, increasing by 3.7 percent from the end of February. However, existing home sales for March 2011 are down 6.3 percent from March of 2010. Lawrence Yun, chief economist for the National Association of Realtors, credits the uptick as being “organic recovery,” or the market working on its own. That said, Yun expects the housing market to take until 2012 to return to pre-2008 conditions. The housing market still faces some challenges.

Job security and credit availability in the way

Part of the problem facing the real estate industry, tipped as being the single biggest factor holding back economic recovery, is both feelings of financial instability and tightening credit standards. High unemployment makes people feel less apt toward buying homes, but that is slowly starting to resolve. Credit standards are definitely tighter than in the past, though. Freddie Mac, according to the National Association of Realtors, noted that the average credit score needed to secure a mortgage had risen from 720 in 2007 to 760. The average credit score needed for a Veterans Administration or Federal Housing Administration loan rose in the same period from 630 to 700. Lawrence Yun has been quoted numerous times as saying that loosening up lending requirements would speed up sales dramatically.

Sources

USA Today

Bloomberg

CNN

National Association of Realtors

Summer jobs for teens are already filling up - and are more difficult to find. Image: alovesdc / Flickr / CC-BY

Getting a summer job has long been a rite of passage for teens. For many this year, summer job hunts are proving more difficult than ever. Recent polls indicate that hiring managers plan on filling summer jobs by the end of this month.

Teen employment becoming more difficult

The U.S. Government started keeping specific statistics on teen employment in 1948. The government statistics track individuals 16 to 24 years old and their seasonal employment. During the summer of 2010, seasonal teen employment was the lowest it had ever been. The summer of 2011 is expected to show similar rates, with unemployment among young people expected to be between 25 and 30 percent over the summer months. This high unemployment rate is due to several factors – fewer available jobs, more available workers and many jobs being filled by employees that fall outside the 16-to-24 age range.

Jobs being filled earlier by those with more education

Many hiring managers in charge of filling summer positions are choosing to hire earlier than ever. In fact, one poll by teen hiring specialist website SnagAJob found that 43 percent of hiring managers planned on filling their seasonal jobs by the end of this month. Many full-time seasonal jobs are also being filled by employees hired as part-time until school lets out for the summer. Only about 33 percent of individuals with a high school diploma or less are able to find employment, while approximately 66 percent of college graduates are employed.

Improving the employment outlook

Teen or not, looking for a job nowadays is exceptionally tough. The number of applications for unemployment benefits are going down, but that may not necessarily be the result of more jobs. Underemployment and those who use up all available unemployment funds reduce the number of new applications for unemployment. For many long-term unemployed workers and teens, volunteering and other non-paid employment are both proving good paths to eventual jobs. But if you are seeking summer employment, now is the time to put your search into high gear.

Sources

Bureau of Labor Statistics
MSNBC

Starting up and running a small business can be tough, but the new Startup America Partnership aims to make it easier and less expensive. Image: Flickr / comedynose / CC BY

Being an entrepreneur is tough, but a three-month-old private entity, supported by government partnerships, is aiming to make it a little bit easier. Startup America has announced an additional $400 million in business partnerships.

The Startup America Partnership

Startup America is a privately funded association that works in partnership with the U.S. federal government. The Startup America Partnership is technically a White House initiative but is privately funded and managed. Startup America aims to provide discounts and special programs to entrepreneurs to help them start and grow a business. The partnership provides preferred pricing and discounts to members of Startup America as well as workshops, classes and business information that could otherwise cost thousands of dollars. Small businesses account for 44 percent or more of U.S. payroll and generate more than 60 percent of new jobs in the United States. The partnership is intended to help encourage more of these small businesses to grow and hire.

$400 million in new funding

On April 20, Startup America announced more than $400 million in new commitments from big-name businesses. American Express has committed $125 million in preferred pricing for Startup America companies. Google is donating $100 million of Google Ads credits. Facebook will be hosting “Startup Days” in May. HP is offering $100 million in discounts on products for startup companies. Cisco, Ernst and Young, First Data, LinkedIn, The National center for Women & Information Technology and Palindrome Advisors have also signed up to provide services and discounts. This is in addition to existing partnerships with Astia, Cisco, Mass Challenge, IBM, Artists & Instigators, the Pearson Foundation, American Association of Community Colleges, Causecast, Intel, FirstData, Google, Intuit, Microsoft and hundreds more.

Getting involved with Startup America

If you are a small business owner or have an idea for a business, you can get help from the Startup America Partnership. Either before or after you’ve gotten personal loans to start your business, it’s as simple as signing up. Register at Startupamericaparternship.org and start browsing the available deals for your business. Each company has slightly different requirements to take advantage of their Startup America Partnership programs, but they are all listed in that central place. Depending on the business you are starting, the deals with the Startup America Partnership could save you hundreds, if not thousands, of dollars.

Sources

Startup America Partnership Website
SBA.gov

Gas prices have gone up again and the gas boycott emails are going around again, and a gas boycott still will not work. Photo Credit: Fibonnaci Blue/Flickr.com/CC-BY

There have been a prodigious number of chain emails and social media campaigns over the years calling for a gas boycott. The idea is that if people everywhere don’t buy gasoline for a day, it will force gas companies to lower gas prices and stop gouging their customers. The trouble with this idea is that a gas boycott won’t do a thing.

Chain letters rile up the masses

Every time that the price of gas starts to rise, someone inexorably begins circulating an extremely old saw: the “gas boycott” chain letter. The premise is simple; it starts along the lines of “enough is enough” and “the oil companies are ripping us off” and calls for people everywhere to not buy gasoline on a certain date. If, the chain message postulates, everyone will resist buying gasoline, the evil, suit-swaddled corporate bosses of the oil companies will be so hurt by the lost revenue that they will have no choice but to stop gouging their customers and lower the price of gas.

Gas prices set by speculators

Oil companies like Exxon-Mobil, British Petroleum and Royal Dutch Shell would love to charge less for gasoline to get people to buy more. However, it does not work that way. For one, according to Snopes, a gas boycott would only cut into the revenue of gas stations who have to buy their supply from the parent company. The cost of a gallon of gas depends on numerous factors, beginning with extracting the crude oil, which accounts for about 69 percent of the price of gas, according to AOL. Refining petroleum into gas, transporting gasoline to a refueling station and state, local and federal taxes are part of the total price.

Boycott Wall Street instead

Fluctuations in the price of gas have more to do with speculators, i.e. energy investors and commodity brokers, than with actual supply. For instance, oil and gas prices began spiking when political upheaval started in earnest in the Middle East. Libya is not a major exporter of oil to the United States, and neither is Egypt, Tunisia or Syria. In fact, according to the Energy Information Administration, the country the U.S. imports most of its oil from is Canada. It has more to do with the possibility of a supply interruption rather than an actual supply interruption, which causes commodity markets to raise the price, not suppliers. The only interruption in crude oil supplies was when U.S. based refineries recently stopped importing oil when they closed for spring maintenance and cut slightly deeper into existing supplies after the maintenance cycle was over, according to Reuters.

Sources

Snopes

AOL News

Reuters

Energy Information Administration