Did your personal net worth increase by more than $300 million in the last 12 months ending August 31, 2007? No? Then you’re probably no longer eligible for the Forbes list of the 400 richest Americans! Indeed, if your net worth is not greater than $1.3 billion, forget it! The collective net worth of America’s 400 richest people rose $290 billion, to $1.54 trillion from $1.25 trillion last year, or a 23.2% increase. What’s that you say? You didn’t even get a 23% raise in the last year?
Wall Street led the charge for wealth creation, despite the stock market problems of recent months. Nearly half of the 45 new members of the list of 400 made their new fortunes in hedge funds and private equity. The youngest member of the Forbes 400 this year is 33-year-old John Arnold, a former Enron trader who now runs hedge fund Centaurus Energy and has now amassed a $1.5 billion fortune. And private equity got a nice bail out this past week, when the Fed lowered interest rates by an unexpected half point, allowing the stock markets to deliver major increases for the week. What’s that you say? You’re on a fixed income that depends heavily on higher interest rates? Too bad for you, pal!
Just more data points that prove the assertion regarding the last six years … the rich are definitely getting richer.
Meanwhile the overall US economy for the rest of us is in trouble.
US Job growth has been lackluster for the last six years, after averaging a robust 240,000 new jobs a month from 1993 to 2000. But August 2007 was far below expectations. US employers actually sliced payrolls in August 2007, by 4000 jobs, the worst record in four years. Job gains reported for June and July also turned out to be smaller. The US economy added only 68,000 new jobs in July compared with 92,000 reported a month ago. For June, 69,000 new jobs were created, far fewer than the 126,000 previously reported. This brings average monthly job growth for the past three months to less than a third of what’s needed simply to absorb new people entering the job market!
The sub-prime mortgage crisis, brought on by the relentless absence of US federal regulation of the lending industry, also worsened this past week, despite the Fed’s actions. Construction of new homes fell in August 2007 to the slowest pace in 12 years. The Commerce Department reported September 19, 2007 that construction of new homes fell by 2.6% in August 2007. The housing industry is experiencing its steepest downturn in 16 years with analysts forecasting weak prices and further declines in sales for months to come, especially given rising mortgage defaults which are dumping even more homes on the market. On September 18, 2007, the National Association of Home Builders reported that its index of builder confidence fell during September 2007 to “20”, tying the lowest recorded level ever.
The US dollar took another fall on currency markets on September 20, 2007, descending to one-to-one parity against the Canadian dollar for the first time in 30 years and falling to a new low against the 13-nation European Euro currency. Gasoline prices are heading higher, spelling even more trouble for consumers. The price of crude oil reached an all time record this last week, closing at $83.20 per barrel on September 20, 2007.
In other news this week, we learned from new satellite images that Arctic ice has shrunk to the lowest level on record, raising the possibility that the Northwest Passage that eluded famous explorers for centuries will become an open shipping lane. Oh, great!
In his just-released new book, former Federal Reserve Chairman Alan Greenspan bashed George W. Bush for not responsibly handling the nation’s spending and racking up big budget deficits. Like, this is new news? “My biggest frustration remained Bush’s unwillingness to wield his veto against out-of-control spending,” Greenspan wrote. Bush took office in 2001, the last time the Clinton’s policies produced a budget surplus. Every year after that, the US government has been in the red. In 2004, the deficit swelled to a record $413 billion. “The Republicans in Congress lost their way,” Greenspan wrote. “They swapped principle for power. They ended up with neither. They deserved to lose (in 2006).”
It was just reported in a study released September 18, 2007 by the Kaiser Family Foundation, that the cost of health insurance premiums paid by US employers and workers rose 6.1% over the last year, making coverage increasingly unaffordable for American families and businesses. That increase for employer-sponsored medical coverage was almost double the year’s growth in workers' earnings, the survey found.
Meanwhile, Bush is threatening to veto an increase in the Children's Health Insurance Program, a state-federal program that subsidizes health coverage for low-income people, mostly children. It expires September 30, 2007. A bipartisan group of lawmakers announced a proposal on September 21, 2007 that would add $35 billion over five years to the program, adding 4 million people to the 6.6 million already participating. Raising the federal cigarette tax would finance it by upping the tax from 61 cents to $1 per pack. Congress’ majority Democrats, who scheduled it for a vote September 25, 2007 in the House, overwhelmingly supports the idea. It has substantial Republican support as well.
At the same time, the war in Iraq is costing Americans $12.5 billion per month. No wonder, when Bush has 182,000 contractors in Iraq along with 160,000 US troops. The war in Iraq has already far outlasted the time it took the US to defeat multiple formidable enemies in Europe and Asia in WWII, yet there is no end in sight in Iraq, especially with the recent administration decision to once again “stay the course”. Despite the fact that two-thirds of Americans want the US out of Iraq, the Congress is impotent in the face of the veto pen. And now of course Iran is in the neocons’ crosshairs.
But we’re a lot safer now. What’s that you say? In late August 2007, the US Air Force mistakenly flew six nuclear-armed cruise missiles across the United States, each missile containing the destructive power of up to 10 Hiroshima bombs. Further, the incident escaped notice for a full 36 hours. It was the first known flight by a nuclear-armed bomber over US airspace, without special high-level authorization, in nearly 40 years. Could it be that the government’s military focus is currently elsewhere?
A forecast released September 17, 2007 by the National Association for Business Economics estimates the growth of US gross domestic product (GDP) will be a meager 2% for 2007. If this latest prediction proves correct, growth would be the weakest since 2002. You recall 2002: the US economy then was barely emerging from W’s first recession and grew by just 1.6%.
Indeed, many economists believe the US economy is now headed for another recession. That would give W two (2) recessions during his tenure, outdoing his daddy who managed only one.