Posts By: Michael Scott

Practicing Sound Money: Can the UnBanked Participate?

IMG_4608It’s shocking when you hear of someone functioning day-to-day without a bank account. But according to the Federal Deposit Insurance Corporation, this trend is not all that uncommon.

The FDIC reports that nearly 17 million Americans are unbanked, limiting them in their ability to execute financial transactions and accumulate wealth-building assets. Moreover, 51 million are referred to as underbanked, meaning that they may have to rely on options like check-cashing services and high-interest lending, just to make ends meet.

There are myriad reasons behind this lack of engagement with traditional banking systems. For starters, a growing number of Americans, particularly African-Americans, have grown leery of banks due to predatory lending and excessive fees. Others are simply unable to obtain even a basic checking or savings account, due to a tarnished financial history.

One Pew study found that a third of all households that closed their bank accounts did so because of unexpected or unexplained fees.

Then there is the case of growing numbers of young Americans who have voluntarily chosen to self-select out of financial institutions. FDIC data shows that a surprising 50% of those between the ages of 18 to 24 are unbanked or underbanked.

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11 Economic Insights on Ghana and Gold

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We live in vast world – yet in some ways, it is quite small. I was reminded of this last week when I found myself in a random conversation with a complete stranger who lives in Ghana. Oh, the wonders of Google Hangouts.

Here’s what I initially discovered about Ghana. This small nation in West Africa has a population of 25.9 million and is richly endowed with an abundance of natural resources like diamonds, manganese ore, bauxite and oil. But Ghana is better known for is it’s mother-lode of gold deposits, making it Africa’s 2nd largest gold producer, after South Africa.

Curious about this, I mined for further information about the significance of this precious metal for Ghana’s economic fortunes. Here are 11 nuggets that I was able to unearth:

  1. Ghana has consistently been ranked in the top ten of gold production worldwide.
  2. Ghana’s mining industry accounts for over 5% of the country’s GDP. Gold makes up over 90% of the total mineral exports, and it represents nearly 50% of the country’s revenue.
  3. Because of its heavy dependence on gold exports, Ghana’s economy has been tepid. This is due to the overall price decline of gold from $1,900 per troy ounce in 2011 to below $1,200 in 2015.
  4. Obuasi, a gold mine that has been in operation since 1897 after it was launched by three Ghanaian merchants, has struggled of late amid this fall in gold prices. Today, miners have to dig deeper and manage expenses more closely just to stay afloat.
  5. With gold-mining weighed down by record levels of debt as well as prices that are near a five-year low, a growing number of Ghanaian miners are fearful of having their employer merge with others just in order to survive.
  6. Many parts of Ghana remain unexplored in terms of potential gold production. This particularly holds true for the northern Upper West region of this resource-rich country.
  7. A major policy emphasis on the part of the government is ensuring that modern and environmentally-friendly extraction methods are being used so that the surrounding ecosystem doesn’t become irreparably damaged; this may lead to the closing of some mining operations and an ensuing reduction in exports.
  8. Although known as an epicenter of global gold production, Ghana (like its neighbor Nigeria) has struggled with an energy crisis, meaning that the majority of its citizens have no electricity. This is due to the nation’s lack of infrastructure capital, compounded by broken promises from the government in addressing the issue. Ghanaians affectionately call this DUMSOR (meaning ‘on’ and ‘off’), because of the highly unpredictable energy supply.
  9. In addition to the aforementioned fall in gold prices, other factors that are adversely impacting the Ghanaian economy include a sharp currency depreciation as well as rising inflation and interest rates.
  10. In 2013, Ghana deported thousands of Chinese nationals involved in the illegal mining of gold
  11. Aside from gold, Ghana is the world’s second largest producer of cocoa, behind Ivory Coast. Cocoa is Ghana’s third largest export after oil and gold.

For Peet’s Sake: Who’s Roasting Who?

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I have always been a coffee house aficionado. The cacophony of sounds emanating from caffeine-buzzed coffee drinkers and pulsating espresso machines appeals to my love for vibrant and hip locales.

Starbucks, which is largely credited with bringing specialty coffee to America, was my first orientation to this whole craze. As a young entrepreneur in Chicago back in 1993, I would indulge in an espresso at my favorite Wacker Drive location, amid a sea of boisterous traders from the Chicago Stock Exchange. Few of us at that time pondered the effect this coffee house trend would have on the culture of American society.

Many years later while on a business trip to San Francisco, my client recommended that I break rank with Starbucks and try a place called Peet’s Coffee & Tea. Amusingly, I thought my client was referring to some lowly guy named Pete who perhaps had a ramshackle vending cart on a downtown street corner nearby. Instead, I was excited to discover a Peet’s store which evoked a pleasant atmosphere and a strong coffee aroma (that can cling to your clothing if you hang around in there too long).

Earnings Stagnation: How Will People Cope?

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Since the Great Recession of 2008, the U.S. economy has struggled to regain full momentum. This is most evident when you examine the earnings of most middle-class Americans. And a recent report by the U.S. Department of Labor seems to suggest that this trend shows little sign of abating.

The findings of this employment cost index report suggest that paychecks of U.S. workers grew at a very tepid rate this summer, rising a paltry 0.6% during the July-September period, compared to the April-June period. Overall during the past 12-months, pay and benefits have risen only 2%; well below the 3.5% to 4% that most labor economists feel is indicative of a healthy economy.

What all of this signifies is that there’s still an ample supply of workers for businesses to hire at much lower pay rates; an indication that the job market has yet to return to full health. Over the past year, employers have added 2.2 million new jobs which has resulted in a decline in the unemployment rate from 5.9% to a seven-year low of 5.1%. Nevertheless, wage advancement remains sluggish.

There is also the issue of the 6.5 million (at last count) Americans working part-time who really wish to work full-time. That accounts for about 2 million more workers than prior to the recession. And it is important to keep in mind that the unemployment figures have been skewed even further because millions more Americans have ceased looking for work altogether, even though they would take a job if offered one.

Federal Reserve officials view wages and salaries as the key metric in assessing the economy’s true health, because a sustained uptick in wages would signify a leveling out of the unemployment rate. As unemployment drops, businesses are often forced to increase their pay in order to attract and retain talent.

Unfortunately, according to many economic analysts, there are no signs of this trend occurring in the foreseeable future.

Upping The Minimum Wage: Help or Hindrance?

There has been a ton of media chatter this year about efforts by several states to boost the minimum wage. And for good reason, since wages are a hot issue, particularly among those Americans working in service-related jobs.

Unfortunately, the collateral damage is starting to rear its ugly head in states that have recently boosted the legal minimum wage. Take Seattle for example, which has been a hotbed of talk on this issue. According to the St. Louis Federal Reserve, which has been monitoring this development, the Emerald City began to experience declining numbers of restaurant employees around the first of the year, when the minimum wage increased to $9.47 per hour. This represents the highest minimum wage in the nation. The reported loss of 1,300 jobs between January and June is the largest drop off since the Great Recession of 2008. Moreover, 1,000 restaurant jobs were lost in May, following the minimum wage increase in April, the largest one-month job decline since a 1,300 drop during that recessionary period. This is in contrast to a national increase in restaurant jobs to the tune of 130,700, an overall 1.2% increase in employment in the Seattle area and a 3.2% restaurant employment increase in the State of Washington (excluding Seattle) – all during this recent period.

The bottom line is that small businesses like mom-and-pop restaurants and coffee houses lack the greater profit margins needed to withstand the expenses associated with a minimum wage increase. So they resort to cutting staff and reducing hours, paying fewer workers more money. Even well-funded enterprises like McDonald’s are reportedly pondering labor-saving methods like self-checkout kiosks, robots on the food production line and robots to manage expenses, all of which would lead to an overall reduction in staff numbers.

My Winning Presidential – Double – Ticket (Except They’re Both Dead)

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Like many Americans, I’ve been immersed in the 2016 Presidential debates. Truthfully, I’m not the least bit impressed. They seem like nothing more than a series of clown shows. I’d rather curl up with a cup of fair-trade coffee and read Nietzsche. So last night, I decided to create my own Presidential ticket. I’m calling it Election Fantasy Football.

Back in the eighties when I was attending a Catholic Jesuit high school in my native Columbus, Ohio, one of the requirements for graduation was to recite all of the U.S. Presidents in order with their terms in office. My recall is good, so I jogged my memory in search of the one president most closely aligned with my libertarian bent.  

Drum roll please. My choice……………

Calvin Coolidge, the 30th U.S. President

And for his running mate, I chose Jack Kemp, former New York Congressman and Housing Secretary under George H.W. Bush.

Below, I’ll make the argument as to why Americans should support a Coolidge/Kemp Presidential ticket. But before you read this, I want to remind you not to get too far upstream with your excitement because they’re both dead.

The Case for Coolidge

I know, I know term limits – as well as Coolidge’s death – would prohibit this fantasy from occurring. But work with me here. As the 30th U.S. President, he was a modest and humble man (unlike Trump), and he is arguably the last true laissez-faire, libertarian-oriented political leader to see the Oval Office.

The Koch Brothers: Friends or Foes of Black Americans?

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Most black folks have no clue as to the identity of David and Charles Koch. The few that do are leery of this duo. Heirs to an oil business that they inherited from their father, the Koch brothers (as they are affectionately known), worked hard to transform it into a massive multi-business enterprise with gross profits in excess of $115 billion a year. Consistent with their strong Tea Partyish and quasi-libertarian leanings, the brothers have doled out millions of their own money in promoting conservative causes, leading to a spot on Time Magazine’s ‘Most Influential’ list.

The Kochs have been criticized in some circles as being racist, particularly for their role in championing laws that some critics believe have hindered the ability of black Americans to vote. Arguably, they’ve been a thorn in the side of President Obama; ankle biters who have challenged him every step of the way on issues ranging from health care reform to climate change. Liberals are generally repulsed by the brothers’ conservative ways and willingness to utilize their wealth by contributing millions to right-leaning causes. But because of their wealth and the pervasive impact their funding has on the everyday lives of all Americans, their influence must be accounted for.

Trick or Treat?

In 2014, these two billionaires sent shock waves through the world of higher education by donating $25 million to the United Negro College Fund in support of America’s struggling black colleges and universities. Many African-American leaders harshly criticized the move as nothing more than influence peddling. Yet the question still remained as to whether this offer of generosity would be accepted by the black higher education community in the context of the steady migration of black students to better funded and predominantly white institutions of higher education which decline federal government support, while some conservative lawmakers are trying to close under-performing and financially-strapped black colleges and universities.

My father worked at an HSBC, as they were known during the latter part of his career as a university administrator. For that reason, I paid attention to the Koch announcement, curious as to whether those United Negro College Fund leaders would view the financial offer as a trick or treat. As to be expected, many immediately questioned the intent of the contribution in light of their understanding of the Koch brothers. Others took a more thoughtful stance due to the perilous scenario facing many of these higher ed institutions. “