Daily chart: More pain than gain

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How the financial crisis made everyone poorer

THE financial crisis tore through economies and shattered lives. Only now are we starting to see the full extent of the damage. The economic hardship fell disproportionately on the poorest, according to figures released today by the OECD. An insightful metric is the extra spending-money people have (officially known as household disposable income). Between 2007 and 2011, the poorest in society saw their money either fall more during the crisis, or gain less during the recovery, than the wealthier people.

In Spain, for example, the richest in society suffered a modest decline in disposable income, while the poorest were heavily stung. By contrast, in egalitarian Germany, everyone’s spending money increased slightly. In the US and France, the rich got richer and the poor got poorer—which may explain recent unrest, from the “Occupy” movement exclaiming “We are the 99 percent” to demonstrations across France. And the data leans in favour of Thomas Piketty’s thesis that wealth inequality is increasing: certainly the period of the financial crisis upholds that depressing view.

bampbs Jun 19th 2014 18:46 GMT

A very sad waste; people not working and businesses going under. It didn't have to be so bad if governments had run fiscal policies whose primary objective was to keep up economic activity. When times are bad, you borrow. When times are good, you pay back the loans.

But politicians don't want to hear about pay-back time. Poor Keynes, who wanted a balanced operating budget over the cycle, gets blamed for the sins of the ridiculously misnamed "Keynesians" and gutless pols.

Nuijel Jun 19th 2014 16:10 GMT

The chart is hard to interpret. By and large, it seems that the poor are the hardest hit by the crisis, but also the first to benefit when the economy picks up.

Moreover, countries with big safety nets (say Greece, Italy, Spain versus Ireland, Britain, Japan) do not seem particularly efficient at cushioning the effects of crisis on the poor. Maybe because social benefits are cut significantly to balance budgets.

Its another ridiculous argument as always from TE when it comes to so called inequality.
Household income is nonsense precisely because households differ in time in size and vary from one income level. And neither do people stay in the same income brackets. Many of the people in the bottom 20% are the offspring of the top 20%, people move in and out of income brackets all the time.
Succinctly put, we are looking at abstract categories here, not individuals. What is fundamentally assumed is that the top 10% and the bottom 10% are the same groups or even number of people, when they are not.

In France the 5 mn civil servants (plus dependants), thanks to the SFIO Govt, got richer. Their level of life increased as they only enjoy preferential tariffs on any kind of insurance, cars, houses, travel, including health complements. Same remark for Obamian civil servants in the US, probably.
Same remark also applies for Sweden: The Swedish Socialist families turned crypto-capitalist, like the French ones, still enjoy leftist parapublic orgs’priviledges; their children go to vacation places in islands -in France, in castles confiscated from the wealthy by the fisc and then reserved to the political clan-. All those public and parapublic employees received automatically indexed i.e. adjusted wages, in both countries. Most riots in Paris streets are a political fake show, with gentle accompaniement by police, as a compliment to the government after it gave them the increases.
Poor South Europeans and Mexicans may at least enjoy what cannot be degraded by the recession: Free pleasue on their numerous beaches. Greek girls learn there the ABC of prostitution trade (Do you need photos as proof?), and boys learn how to become pimps or gang drug leaders. Mexican parents, tired to fear for life for their grown-up children in the street of the unsecure cities, send them to emigrate in Canada, thanks to the money of their parents - required by CDN government -. Poor ones try the desert on the Texas border.
Piketty, whose book on inequality has been financed and reviewed before edition by the party in power, forgot to tell those infos - le “fumier”!-.

Southern European welfare states are pretty much rudimentary welfare systems, which still emphasize the protection of "insiders" in the job market (pensions attached to individual contributions, etc) versus more across the table redistribution. Taking the four "legs" of welfare states (education, healthcare, pensions, and social services), Southern Europeans suffer from:

- Universal but low-quality education systems (with lots of disparities in school quality),
- Decent universal healthcare services (but with long-term moderate inefficiencies and exponentially growing pharmaceutical bill due to market oligopolies and weak internal controls),
- Pensions attached to individual contributions (i.e. previous wages), which reinforces inequality. In addition, non-contributive (taxpayer-provided) pensions (for the very poor) are comparatively low, and job unstability hit hard the poorest, affecting their future pensions and making inequality persistent over time,
- Social policies and social services are still in its infancy, in comparison with other parts of Europe. Very underdeveloped, politically opportunistic (cash for babies programs, etc), under-evaluated (probably often ineffective).

If you want examples of fully operational welfare states, look to the North of Europe (Netherlands, Denmark, Sweden and the like...).

Unfortunately, unlike Mexico or Chile, Brazil is still not an OECD country. That's why Brazil is not in this list.

However, in 2007 Brazil and the other BRICS were invited to participate in "enhanced engagement", which could make it easier full membership in the short run. More: http://www.oecd.org/brazil/brazilandtheoecd.htm

Daily chart: Fine times

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THE French bank BNP Paribas was smacked with a record fine of almost $9 billion for violating American sanctions this week, for processing transactions with clients in Cuba, Iran and Sudan. The amount is almost $2 billion more than its total profits last year—and a staggering sum compared with the relatively meagre $667m that Standard Chartered, a British bank, paid in 2012 for similar offenses, albeit on a smaller scale. Yet BNP's hefty fine isn’t the largest amount that a bank has had to cough up for misdeeds. That title goes to JPMorgan Chase, which paid $13 billion last October for shoddy mortgage-backed securities that it sold prior to the financial crisis. But the most expensive string of sanctions and settlements goes to Bank of America, which not only appears four times on the top-ten league table for its mortgage-related practises, but has been stung by a long-tail of other fines, like LIBOR rigging. Since the financial crisis American authorities have collected more than $120 billion, according to data compiled by the Financial Times. Read our leader and article on BNP's woes.

Keep going with the fines that are small chumps for failing global bank models who want to be global conduits of trade and investments and at the same time gaming the systems that sustain them.

Banksters that capture the US/EC financial economies do not go unnoticed by other major creditor economies or the global investors. Only their naive shareholders and clients believe that these models are sustainable and get hoodwinked by their global footprints, etc while desperately gaming markets and systems to compensate themselves.

In 1999, in the immediate aftermath of the Asian Crisis at the end of the 20th century The Economist wrote that Banks may well be regarded as a Public Menace, because Banks seem to be in the middle of every financial crisis and not as innocent bystanders, but as perpetrators. But, The Economist went on saying, its not really the banks fault, but the bankers inside whose incentives drive them to behave that way. That was the beginning of financial integration and globalization and what happened however horrid can be corrected as it mostly has been, with stronger oversight and hefty penalties, But the crisis facing banks today is much more difficult because it compromises the lien of economic growth—debt repayment—and sound money. Its expensive energy. The World cannot grow with oil costing over >$100.00 a barril and if growth cant occur debts cant be paid and all financial stability falls apart, unless government steps in as they have wisely done. The ship of cheap oil (prices<$50bb) has sunk and importing nations are hanging on to life boats until a new source of affordable, safe, renewable, vast and environmentally tolerable source of energy comes along. The good news is that it will happen, that bad news is that it is not soon….The OECD just released a report that predicts low growth scenarios and bigger inequality till the year 2060. I will be 100 years old by then……read The Energy Within Economics and the Bubble Envelope Theory for Human Prosperity.