Archive for the Economics Category

After hitting a rock bottom of 106 (below 100, and average families can't afford average homes at all), the affordability index has headed back up again.

Yes, the housing crisis is hurting many middle class families. Many are not only losing their homes to foreclosure, but are also seeing the key component of their net worth—home equity—vanish into thin air.

There is, however, a bright side to the housing “bust.” Home prices are plummeting from the stratosphere and returning to earth. This means that once the crisis is over, housing will again be affordable to middle class first-time homebuyers.
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Student loans have traditionally been middle income kids’ ticket to higher education.

With incomes too high to qualify for “means-based” scholarships and too low to simply pay skyrocketing tuition and other costs out of their own pockets, students in middle-incomes families could at least borrow their way through school. Yes, they were saddled with a burdensome debt load during the first years of their careers. But the increased job and income opportunities available to those with college degrees generally made the investment in an education—even if it was financed with borrowed money and had to be paid back plus interest—worth while.

Unfortunately, student loans are becoming much more difficult to obtain.

The primary culprit is the subprime credit crunch that has rippled through virtually all loan markets. According to Kevin Walker, CEO of SimpleTuition.com, the number of companies offering student loans on his site has dropped by more than two thirds, from about 77 at this time last year to 22 now.

One can only hope that once the mess is sorted out, lenders will tiptoe back into the student loan market. Until then, one of the major ways in which middle class kids can hope to live as well as their parents did will be closed off to all too many.

It’s a sign of the times: not only lower-income, but also middle class families are struggling to pay their bills.

Connecticut Governor M. Jodi Rell is to be commended for recognizing this fact, and being willing to do something about it. Gov. Rell has said that she wants to use some of her state’s budget surplus to help “middle-income families who don’t qualify for state assistance and normally would fall through the cracks without some type of assistance.”

Specifically, the money is to be used to help families cope with skyrocketing fuel costs, which will result in increasing heating bills when winter comes. The state will work together with a nonprofit charitable organization, Operation Fuel, to distribute the assistance.

As the country teeters into recession, many businesses, like individuals, are feeling the pinch. But not Accenture. As Barron’s reports, Accenture is poised to maintain double-digit growth:

The company, a leader in management consulting and technology outsourcing, profits handsomely by helping big corporations change continually to meet the demands of their markets.

Lately, the change that’s often required is downsizing — layoffs and other cost cutting. Grim as that may be for the companies and their workers, it’s hardly bad news for Accenture: It has been posting double-digit growth in revenues and earnings ever since the credit crunch began last year.

There’s only one fly in the ointment for the company: it can’t seem to get enough publicity for its “achievements” despite high-profile TV ads featuring Tiger Woods. This means its stock is undervalued.

To Barron’s, this represents an investment opportunity. “[T]he transformational quality of Accenture’s work,” the journal writes, “should go a long way toward transforming its stock price ever higher.”

They’re probably right. And if the average laid-off American worker only had a few million lying around, he could buy Accenture stock, and the profits would more than make up for the lost wages.

As usual, Rep. Paul is right on the money. Check out this YouTube video:

Paul is pretty much alone in addressing the increase in the cost of living caused by runaway government deficit spending (which is essentially the same thing as printing money and spending it). How sad that he didn’t get very far in his bid for the Presidential candidacy. But then again, the last thing the powers-that-be want is someone who speaks the kinds of truths that Paul does!who speaks the kinds of truths that Paul does!