Walk With Money » Economy

State of the Economy: Q&A with Austan Goolsbee

Robert Wilkinson — Tue, 01 Feb 2011 15:04:05 +0000

Two days after President Obama’s State of the Union last week, the White House invited new-media outlets to ask questions of Austan Goolsbee, Chairman of President Obama’s Council of Economic Advisors.

For nearly 40 minutes, the administration fielded questions crowdsourced from Mint.com, Examiner.com, and MSN Money readers. The emphasis on social media was evident in the State of the Union itself, which namechecked both Google and Facebook, a first for a U.S. administration. Below is a recap of the issues discussed, and above is a video of the event.

Social Security concerns

Goolsbee opened by echoing the theme of the State of the Union — winning the future by out-innovating, out-educating, out-building and bringing rationality and thought to the economy. While he emphasized the U.S. was the richest country in the world, and with the most productive workers, he acknowledged the concerns of Mint.com readers like Ana Marina Soriano who face an uncertain economic future in a time of high unemployment, threats to social security, and a lack of incentives for long-term saving.

Soriano asked, “”I don’t really have much faith in social security benefits for my generation. What is in place to keep the system up and running?”

“We’ve known for decades about the fiscal challenge associated with the aging of the population and rising healthcare costs,” said Goolsbee, but “the deficit size is not primarily due to discretionary spending.” Going on to say that the forthcoming Obama budget will bring discretionary spending to levels that “have not existed since Dwight Eisenhower was president,” he expressed a willingness on the part of the administration to consider any plan for social security that ensured its survival and prevented it from being privatized. “It’s the most popular government program that has ever been and it has helped assure the safe and secure retirement for millions and millions of people.” Goolsbee stressed that social security is something that requires long-term solutions not short-term fixes.

Unemployment fears

On jobs, Goolsbee said we need to get the job engine running and must now move out of what he called a “rescue phase” and into a growth phase. “It isn’t the case that all the jobs are growing internationally. There were 1.3 million new private sector jobs in the U.S. in the last year. That’s a good start, not near enough but we’re coming into 2011 with a little bit of momentum.”

Still Mint.com readers like John Harvey are concerned with the spending freeze. He asked: “How will spending freeze not result in massive jump in unemployment as in 1937?” While Goolsbee cautioned against comparisons to 1937, he did say that it was important to proceed with more caution than the administration did at that time.

“At this moment, you want to be careful yanking the rug out from what is a fragile recovery. The reason the deficit is large last year and this year is not from the long-run fiscal challenges facing the country, it’s because we just went through the worst recession in virtually all of our lifetimes. When that happens, the automatic stabilizers such as tax revenues go down, spending on unemployment benefits, on a variety of cyclical factors, go up. That’s the main thing driving the business cycle in the short run. The spending freeze on discretionary non-security that the president outlined is over the next five years.”

Still not all of the adminstration’s efforts are aimed at long-term fiscal policy alone. “The president’s tax deal at the end of last year was specifically designed to get more activity in the here and now,” said Goolsbee, “as you look out over the next five years, we’ve got to make tough choices to keep the fiscal situation from deteriorating. It’s a bit of a balancing act. Your reader is exactly right. We want to be mindful not to do things that drive up the unemployment rate in the immediate term. It’s 9.4 percent. It’s way too high. We’ve got to do everything we can to get that down.”

Retirement saving questions

On retirement saving, user “phillip24″ (no full name disclosed) wanted to know, “Will the administration be announcing new initiatives related to retirement saving?”

“We have tried over this period to reduce taxes and give incentives for people to save,” said Goolsbee, “Most of the new programs and incentives we have now are about trying to encourage the private sector to get their employees to save.” One such program encourages companies to make automatic 401(k) enrollment the default option so that even busy people will get the benefit of 401(k) savings plans without too much effort.

Rebuilding Haiti’s economy

Robert Wilkinson — Tue, 25 Jan 2011 11:04:43 +0000

A year after the devastating earthquake, the island nation of Haiti is still in rubble. Majority of the population are still trying to recover. Over 1 million people are still living in tent cities and a large portion of work offered to the people is concentrated on relief work – a temporary solution to Haiti’s economic progress.

Despite the influx of pledges to help the country rise, developing a sustainable economy through a home grown industry is still the goal of the Haitian government. Key to this plan of action is the sectors of the Haitian economy that proved success in the past.

Haiti’s garment industry, for example, was able to ensure over 100,000 jobs. Today, about 28,000 workers are engaged in the industry. And standing orders from major brands, such as Gap, Hanes, Levis, New Balance, Wal-Mart, JC Penny, and Cintas, keep garment factories busy.

Former US President Bill Clinton, together with the members of the Interim Haitian Recovery Commission, other representatives of the US government, Haitian business leaders, and the chairman of the South Korean company Sae-A, also signed an agreement pursuing to build a new industrial park in the North of Haiti. This project projects around 20,000 jobs in the garment industry alone, not counting the additional tens of thousands of indirect jobs that will sprout as more and more companies come on line.

The United Nations and other international donor nations say that rebuilding Haiti will take years, even decades. But this development underway is one leap forward.

Source: CNN Money

Lemonade: It’s Not A Pink Slip, It’s a Blank Page

Robert Wilkinson — Fri, 19 Feb 2010 11:20:47 +0000

The first thing I thought of when I watched Lemonade was – “Wow, I’m surprised no one else has made a movie like this before.” The economy is slowly recovering, job losses are slowing, but we’re living in a world where 10%+ of the people who want to have a job, can’t get one and it was only until today, this morning actually, that I saw an uplifting and powerful movie about how being fired isn’t always a bad thing.

The movie itself is a mere 35 minutes and is beautifully done, with interviews of recent fired people (from advertising) who took what was an otherwise horrible experience (I’ve been fired before, though not as jarring as any of their stories) and made it a very powerful one. Some started new businesses, either in an unrelated field or as freelancers. Some focused on other endeavors like charitable and philanthropic work, painting, yoga, … you name it.

Lemonade is a very appropriate title. If you have the time, you ...

Deflation? Hyperinflation? What Do I Do?

Robert Wilkinson — Sun, 14 Feb 2010 01:20:25 +0000

I completely adore tuning into talk radio stations. It’s hucksterism at its most entertaining – the promoting of fear is palpable and the line in between content and commerical is so blurry I can’t tell if the host is on an economic rant or attempting to sell me on a gold broker.

Regardless of whether you think this kind of talk display hosts are the scourge of the earth or a vital supply of talking reality to energy (I’m not in both camp, really), there is one reality that you can get away from all of it: no one knows for sure what’s heading to occur subsequent in terms of the economic system.

One can make a reasoned, rational situation that we’re on the verge of a golden age because of emerging technological advances and the opening of new markets. One can make a reasoned, rational situation that we’re on the verge of economic collapse that will arrive in the type of a deflationary spiral (decrease prices lead to decrease production which leads to fewer jobs which leads to decrease prices…). One can make a reasoned, rational situation that we’re on the verge of economic collapse that will arrive in the type of hyperinflation (prices escalating, the dollar dropping compared to other world currencies, etc.).

We just don’t know.

If you think a boom time is coming, it probably makes sense to invest in stocks, particularly in technology and in emerging markets. Invest in issues that will grow like crazy when issues start to get off.

If you think deflation is coming, it probably makes sense to start hoarding money, because every dollar will improve in value. Purchase CDs and maintain your cash in the highest-yield savings accounts you can find.

If you think hyperinflation ...

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Avoiding Late Fees

Robert Wilkinson — Mon, 08 Feb 2010 15:20:26 +0000

The absolute last thing that we need right now considering the economy is unnecessary late fees. The average fee that is charged for a late payment by a credit card company is a surprising $39 dollars. But when you are literally living from one paycheck to the next and trying to juggle the due dates for so many different bills, sometimes these painful late fees can seem completely unavoidable. Not only do late fees add to your mounding debt, but they also put you at risk of an increase in your credit card interest rates, because falling late on your payments makes you appear as if you are a larger risk to lenders.

Understand your Deadlines

It is important for you to get to know the policies for the lender you are working with. If payments are initially due on the first of the month but the late fee is charged after the 15th, you should not assume that your real deadline is the 15th. Your mortgage company may actually assess a late fee even if your check arrives even only a few hours late. If you are looking for wiggle room, take the time to do enough research that you know for sure how much time you have before a late fee is going to be assessed.

Read the fine print on the back of one of your bills and give the company a call to confirm that you have the right understanding regarding your bills. This way, you can make sure that you know how much wiggle room you actually have, and you do not improperly estimate how much time you have to pay a bill.

To make sure that you do not accidentally miss one of your payments, you should write down the due dates for the bills on the envelopes that you receive, and then you should stack all of your bills in order based on due date. You should also write the dates down on your calendar in a red pen, checking your calendar often to make sure that you do not have any bills that get overlooked or missed.

Spreading Out Due Dates

Another tactic for eliminating late fees is to spread out your due dates. If all of your bills are due right around the same time, then consider changing the dates on some of them to take better control of the situation. Most lenders are going to be willing to accommodate you by moving your due dates if it means helping you make your payments on time. If you start spreading all of your bills out over the span of the month, you will be able to manage your cash flow more easily because you are not becoming overwhelmed by all of your bills at one time. If you let the credit unions, credit card companies and other lenders know this fact, they should be accommodating for you.

Photo Credits: Gemma Grace

Originally posted 2009-10-07 03:35:52. Republished by Blog Post Promoter

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Only You Can Create New Jobs For This Country

Robert Wilkinson — Sat, 06 Feb 2010 11:20:16 +0000

2 Comments

If you’ve been following the financial news today, then you saw articles like this one from Yahoo Finance about the unemployment rate falling to 9.7%, which is a five-month low. That sounds like good news, and it could be, but when you look deeper into the numbers and throw some logic into the equation, it doesn’t make sense that the unemployment rate would fall that much. Does this mean the numbers are cooked? Are we on the road to recovery for job loss? I really hope so, because it’s the single most glaring eye sore to our economy right now. It’s the one road block that will keep our economy from heading in the right direction. Here’s a quote from the article I referenced above.

Beneath the headlines, the government reported the U.S. economy has lost 8.4 million jobs since the recession officially began in December 2007, a sharp upward revision from 7.2 million previously reported; that includes 930,000 jobs more than previously estimated in the 12 months ended March 2009.

and here is another quote from a financial analyst trying to explain the discrepancy in the numbers:

Tips To Survive The Credit Crunch

Robert Wilkinson — Fri, 05 Feb 2010 09:20:26 +0000

Today's article is written by guest blogger Trisha Wagner.

Does the economy have you feeling down? It takes a boat load of positive attitude to look at the current credit crunch and not feel a bit of apprehension regarding your finances. So if you find yourself worrying about what the next several months may have in store, you might find some relief by following these simple tips to help survive during a recession.

Diversify- Take this tip from top investors. Whenever the economy becomes unstable it is best to not have all your eggs in one basket. Your portfolio is not the only thing that should be diversified. You should never count on just one stream of income, especially when the economy goes south. The rate of unemployment is rising each day and to believe you are immune is nonsensical. If you investigate alternative forms of income now you can be better prepared for the worst if it should happen.

Budget- Since having a budget is one of the most commonly mentioned tips for staying solvent in any economy you may wonder why it is being mentioned here. As often as this tip is mentioned there remains a number of people who simply don't do it. For those of you not on a budget, start one today. Know from where and how much income you have to work with. Track your expenses to ensure you know where your money is going. When your budget is in place (which may take several weeks to get the hang of it) you will have an easier time cutting expenses.

Get rid of debt- Whether you have a small amount of debt or a large amount you should immediately work on eliminating the balance. If you think you need help on reducing debt use the vast amount of information available on the internet to help research your options- there are several of them- to find the process that will work best for you.

Unload the unnecessary- Some people are finding that the years of unabashed spending has lead to their current financial mess. Many of these same people can look around their home and find many items that they do not need or even use. You can sell items on ebay, have a garage sale or sell items in your local newspaper. This can simplify your life in addition to bringing extra money into the home. A few people may be able to take this a step farther. Do you have two or more cars? Do you need each of them? By downsizing your lifestyle you can infuse money into your budget while getting rid of non-necessities.

Emergency fund- Don't forget to contribute to your emergency fund. This is similar to having a budget, people know they should but often fail to follow through with contributing to this fund. Emergencies will happen at some point in your future and having money set aside to cover or at least offset the financial burden you are more likely to make it through a financial emergency.

Trisha Wagner is a freelance writer for DestroyDebt.com, a debt community featuring debt forums. Trisha writes regularly on the topics of getting out of debt and personal finance.

Photo Credits: 1

Originally posted 2009-02-02 05:25:58. Republished by Blog Post Promoter

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The New Frugality: Consume Less, Save More, Live Better

Robert Wilkinson — Thu, 28 Jan 2010 19:20:27 +0000

By Lynn Truong

Last week on Patt Morrison I heard Chris Farrell talking about "The New Frugality" and the trend towards a sustainable lifestyle. (I actually called in and mentioned Wise Bread -- you can hear me on the segment.) I was stoked that he was familiar with Wise Bread (really, we're on his blog roll!). After the show, I read his new book, The New Frugality: How to Consume Less, Save More, and Live Better, and reached out to Chris about doing an interview.

I felt this topic was extremely relevant for us at Wise Bread. When we started three years ago, frugal was a dirty word. Frugal meant cheap. It meant denying yourself pleasures. It meant sacrifice.

But from the beginning, Wise Bread sought to change this idea. We wanted to show that spending wisely meant getting more. Spending thoughtfully meant adding value and quality to purchases. And being able to get what you want for less meant, well, that was just cool.

Chris Farrell's book goes into this concept of a New Frugality (totally different than the Old one) and shows how it works and why it's here to stay. He emphasizes that we now have a greater focus on community, the environment, and living sustainably. And he explains how the economy will shift to accommodate our new attitude towards spending.

Here is my interview with him. Please check out his book, The New Frugality: How to Consume Less, Save More, and Live Better.

Lynn
What was your inspiration for writing the book?

Chris
It was a couple things. Part of it was just the impact of the Great Recession and the problems that it caused people. But also I just noticed that a lot of people I knew were being frugal and green.

One of the things that always had gotten to me was that the conversation about frugality was always about what we can't do. That had always troubled me. Then I noticed that the new frugal trend was based on sustainability. I realized this could be a big deal. The thing about sustainability is that it's really an optimistic act. You believe that you're going to make a difference. So now frugality isn't you're being cheap or denying yourself, but you're helping your community and at the same time helping your pocketbook.

Lynn
Is this why you call it the New Frugality, because the old frugality is just about saving money for money sake but this is more of a mindful and value added lifestyle?

Chris
Yes, very much so. Thinking about my parents, I used to roll my eyes at my dad who unplugged all the outlets and the hand me down clothes and all that. My parents did that because we didn't have much money. Now, a lot of these things people are just doing because it's going to make the world a better place. So it's a very different mindset, and financially you kind of end up in the same place, but the motivation is very different.

Lynn
You're right. On Wise Bread, we talk about things like how much electricity your electronics are taking when they're plugged in and sewing your own clothes. These are things that our grandparents did, but now we're doing it for completely different reasons. Now, frugality is not just about spending less money. We might buy local and organic which can cost more than conventional, but it's just as frugal as buying used or repairing things instead of replacing them. What is the cause of this shift from cost to value?

Chris
I think there's a number of trends going on. It seems that everyone's had this experience during the recession of sort of looking in the apartment, looking around house and saying, why do I have all this stuff? So in one sense, and this may sound bizarre because we're just coming out this recession with a 10% unemployment rate, we're a really wealthy society. And I think we increasingly value things like education and health, because that's what wealthy societies do. And what downturns do is they often accelerate social trends that were gathering momentum. My sense is that's partially what happened in the Great Recession.

I did an event in Pasadena and a young woman there was saying that among her friends, being frugal was kind of cool. And that there's a little bit of keeping up with the Joneses. I said I think that's true, but you know what, that's a good keeping up with the Joneses. There's a lot of benefit to that. It's sustainable and it's sort of fun. Communities like Wise Bread create a very fun aspect to frugality. It's a community of ideas, and not all of them will work for you -- it depends on your lifestyle, your temperament, stage of your life -- but it's really neat to have all the ideas out there, and to experiment to see which ones are going to work for you.

Lynn
When people started to save more and spend less, there was kind of a backlash against that. People argued that because our economy is based on consumerism, we all were supposed to do our part for the economy.

Chris
It drives me crazy. First, you're not responsible to the economy. You're responsible to your own household finances and your own values and the values that you share with other people in the community. But you're not responsible to this abstract thing called the economy. And so it drives me a little crazy because people were saving more because they needed to. They had borrowed too much and were at risk. And people were losing their jobs.

I think more importantly though, is that the American entrepreneur is endlessly inventive. And if people aren't spending money on certain things, they might spend their money on other things. They'll spend it on experiences or within the community. For example, 20 years ago I tried yoga and failed miserably. There was yoga back then but it wasn't such a big deal. Now yoga's really a career. People really take it seriously. Same thing with massages. 20 years ago there ...

Top 10 Financial Blogs To Follow In 2010 By Category

Robert Wilkinson — Mon, 04 Jan 2010 23:20:07 +0000

Today, I’d like to share with everyone blogs that I read and think you should check out. For each blog, I will provide details on what is great about it so that you can understand better which blogs might be best for you. I hope that the following blog recommendations will help you find additional helpful resources on the web. I also hope that you will add your own recommendations in the comments. Without further ado…

Photo by dalequetepego via Flickr

Best Economic & Financial Insight Blog

Zero hedge is truly an amazing blog with some serious insight into the economy and the financial sector. While much of the information might be over the head of your regular personal finance blog reader, I believe it is good for individuals to expand their knowledge and read about some more complex topics. Additionally, one of my favorite aspects of zero hedge is the informed readership; as such, you can learn as much from the many comments for each post as you can from the post itself in many cases.

Who should read zero hedge:

Individuals looking for in depth analysis on the markets, the economy and monetary policy

Individuals who want to be a part of a well informed community of readers

Best Investing & Trading Blog

My favorite blog on trading and investing is Fund My Mutual Fund. While trades and investments are done through a model mutual fund, the analysis is excellent. The author Mark presents in depth analysis on many individual companies as well as broad stock market insight. He details every trade and documents his performance, which is insanely good.

Who should read Fund My Mutual Fund

Individuals looking to learn about active investing & trading

Individuals looking for companies to invest in outside the large, well known companies

Individuals who want to learn some basic technical analysis

Best Frugality Blog

Early Retirement Extreme is the journey of an individual who “retired” very early in life by slashing his expenses down to the bare minimum and living on the money he saved while working. The author discusses his journey to financial independence which included saving the majority of his income over several years and exchanging a materialistic lifestyle for one of frugality and freedom. He provides great advice on how to save money in various areas of life and a great perspective on living a very frugal life.

Who should read Early Retirement Extreme:

Individuals looking to embrace a more frugal lifestyle

Individuals who want to retire early

Best Blog For Young People

20smoney is my blog. It’s purpose is to educate young people to take the financial situation to the next level. 20smoney.com is more than a personal finance blog; rather, it assumes you have the basics down and focuses on the “next level” topics with regards to increasing income, generating better returns on investments and other economic related topics.

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The Return of Retail: Holiday Spending 2009

Robert Wilkinson — Sat, 12 Dec 2009 03:20:06 +0000

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Tired of all the doom and gloom over the economy? How about some good news for a change? In our followup to our infographic on Black Friday, the biggest retail shopping day of the year, we take a post Black Friday look at the stores that are leading a resurgence in retail to see how they fared on the big day itself. As predicted, November results show favorable trends for general, clothing and electronics retailers. Although select ...