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Middle Class Death Watch -- 33 Frightening Economic Developments

Downward mobility, homelessness spreading to the middle class, 200,000 public employees laid off? Here are some frightening trends to keep an eye on.

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Savers stumped as inflation bites

“Rising inflation means there are now just a handful of accounts that will prevent savers’ capital being eroded by the increasing cost of living. The Office for National Statistics said the cost of living, as measured by CPI, rose from 4.4% in July to 4.5% in August, meaning a basic rate taxpayer now needs to find a savings account paying 5.63% a year to beat inflation and tax, while a higher rate taxpayer needs to find an account paying at least 7.5%.”

Deflation

Median Male Worker Makes Less Now Than 43 Years Ago – Women Make 65% of what Median Male Makes

“While the fact that a record number of Americans are living in poverty should not surprise anyone at this point, what should surprise many is that according to Table P-5 of the Census report on (Lack of) Income, the median male is now worse on a gross, inflation adjusted basis, than he was in… 1968! While back then, the median income of male workers was $32,844, it has since declined to $32,137 as of 2010. And there is your lesson in inflation 101 (which we assume is driven by the CPI, which likely means that the actual inflation adjusted income decline is far worse than what is even reported). The only winner: women, whose median inflation adjusted income over the same period has increased by 188%. That said, it is still at 65% of what the median male makes. So injustice all around.”

Pension Time Bombs

California teachers’ pension system labeled “high-risk issue” by state auditors

“The California state auditor issued a report last month branding the defined benefit program of the California State Teachers Retirement System (CalSTRS) a “high-risk issue.” The pension fund is the eighth largest in the world and the largest teachers’ pension fund in the US. Teachers and administrators contribute a portion of their wages to the fund each year so as to collect pension benefits when they retire. To be considered fully funded, the defined benefit program of CalSTRS must be funded by at least 80 percent. The current funding level is 71 percent. According to financial projections, in 30 years CalSTRS will be depleted of funds.”

Analysis: $35 trillion pension funds in new crisis as deficit hole grows

“This year has been a nightmare for many in the industry — which controls $35 trillion, or a third of global financial assets — and funding deficits are posting double-digit rises. “We had a credit crisis and government bond crisis, and the third one we have is the pension crisis. This is the one where everything is going wrong and there’s no obvious way out,” said Kevin Wesbroom, UK head of global risk services at consultancy Aon Hewitt. The sharp retreat in stocks through the summer has hurt them again by weakening their asset positions and threatening to erode stock market recoveries seen since the equity collapse surrounding the 2007-2009 credit crisis. Recent data on pension deficits highlight the plight of many pension funds. In the United States, funding deficits of the 100 largest DB plans rose $68 billion to $254 billion in July, according to the Milliman Pension Fund Index. July marked the 10th largest deficit rise in the index’s 11 year history. Even if these companies were to achieve an optimistic annual return of as much as 8 percent and keep the current benchmark yield of 5.12 percent, their funding status is not estimated to improve beyond 93 percent by end-2013 from the current 83 percent.”

Healthcare