Things in the market and economy have been a little unsettled lately, as pundits debate whether the U.S. is on a clear path to recovery, or on the precipice of a second dip into recession. The news this past week as reflected as much, as it continued to add both positive and negative news items in the mix. Read on for some stories that made headlines this past week. (Miss last week's news? Catch up with Water Cooler Finance: Mergers, Hostile Bids And SEC Probes.)
IN PICTURES: 8 Ways To Survive A Market Downturn
The economic recession left many pinching pennies through 2009, and now the statistical impact of the recession has been released. According to a new report from the U.S. Census Bureau, poverty rates in the U.S. rose by 14.3% in 2009 over the year before. This represented more than four million additional people below the poverty line; the overall number of people in poverty was the highest in 51 years.
According to a New York Times article on the census release, experts are predicting that poverty numbers will continue to rise in 2010, based on the continuing rise in food stamp recipients and increases in demand at charity food banks. (For related reading, check out Standard Of Living Vs. Quality Of Life.)
Millionaire Households Also Up
Despite the increase in the poverty rate, the census report also stated that the median household income remained roughly the same in 2009. One reason for this might be a tempered resurgence in income among wealthier Americans. According to the World Wealth Report, which was released in July by Merrill Lynch Global Wealth Management, and a report release by Spectrem Group in March, the number of U.S. households with a net worth of $1 million actually rose in 2009. The Spectrem group recorded a jump of 16% in the number of households with a net worth of $1 million or more; this following a 27% decline in the same population the year before.
The latest survey from Phoenix Marketing International's Affluent Market Practice suggests the trend is only continuing, as the number of millionaire households rose more than 8% in the 12 months ended in June. (Discover some of the inaccurate preconceptions about people with a seven-figure net work in 7 Millionaire Myths.)
The U.S Gets Tough on China ... Sort Of
China has long been criticized for "dumping" cheap goods into the U.S. and other global markets, putting major pressure on domestic producers that compete with China. Part of what makes this possible is China's market-defying ability of keeping its currency undervalued. Now, the U.S. has begun pressing China to boost the value of its currency. According to the Wall Street Journal, U.S. Treasury Secretary Timothy Geithner told the Senate Banking Committee in a Senate hearing September 16 that he was looking for "a sustained period of appreciation" at a pace that would cut down the Chinese yuan's undervaluation.
But while exactly what will be done about China's trade policies is still up in the air, both Republicans and Democrats agree that current trade policies are damaging to American companies. By keeping their currency undervalued, China is able to keep its exports less expensive than they otherwise would be, and make imports more expensive. The Obama Administration has set a goal of doubling U.S. exports over the next five years, creating millions of new jobs in the process. However, while enforcing a level playing field will probably determine whether this goal is met, China's interconnectedness with the U.S. as a major trade partner raises the risk that if the U.S. takes a swing at China, it might be the one to feel the punch. (To learn more about this debate, read Do Cheap Imported Goods Cost Americans Jobs?)
Consumer Financial Protection Bureau Launched
As part of the Dodd-Frank financial overhaul law enacted in July, the Obama administration is creating a new government agency with broad powers to write and enforce rules on credit cards and mortgages. Currently, these powers fall under several agencies, including the Federal Reserve. The Treasury Department announced that it expected the new bureau to operational by July 2011, and chose Elizabeth Warren, a Harvard Law professor and bailout watchdog, as a special advisor to assemble the bureau. The new agency's goal is to target practices that take advantage of consumers and act as a watchdog when it comes to financial products such as mortgages and credit cards.
Supporters of the new bureau praised its championing of consumer protection, while critics argued it adds unnecessary layers of government oversight and regulation, and could even lead to less innovation in the financial industry. (For more on the Dodd-Frank Act, read The Wall Street Reform Act: What You Need To Know.)
The Bottom Line
While the U.S. government struggles to get the economy going again - and gain the public's confidence in its abilities to protect consumers and their jobs, it's not clear whether the economy is approaching some sort of dramatic tipping point, or just fumbling its way along. Either way, as summer draws to a close and the U.S. government kicks into high gear as it approaches the second half of the current administration's term, things are bound to get a lot more interesting. (Protect your portfolio: Check out 5 Stock Sectors To Hold If The Market Crashes.)