This is not the first time the state of California has had trouble paying its bills. Back in 1992, when California was hit hard by a recession and by major defense cuts, it ran into similar fiscal problems. That year, a payment from the state to AIER for an Annual Sustaining Membership “bounced.” Below is the full report from the AIER archives.  "Someone in California's state government r...

With the new stimulus package that is being planned in Washington, government spending will grow even more dramatically than it has over the last several years. More growth in the Federal government’s debt will come with it, as will a greater tax burden for the American people. In its January 7 report, the Congressional Budget Office (CBO) projected that the Federal budget deficit for the f...

For months, now, the news has been filled with reports of a huge credit crunch crushing the ability to borrow in the United States economy. The impression of a financial sector that has ground to a halt, however, is not born out by the facts. To the contrary, lending and borrowing have continued to grow in America, albeit at a lower rate of growth all through 2008. Banks have used a large portio...

The financial fraud allegedly carried out by New York investment counselor, Bernard L. Madoff is considered the largest financial swindle ever. In all, Madoff’s 30-year-long Ponzi scheme is believed to have caused least $50 billion in losses and one suicide. The founder of the hedge fund Access International Advisors was found dead December 23 after his fund lost as much as $14 billion invested...

In the third quarter of 2008, real Gross Domestic Product (GDP) decreased at an annual rate of 0.3 percent, according to the advance estimates released October 30 by the Bureau of Economic Analysis. This is the second time GDP growth turned negative in the past 12 months. The previous time was the fourth quarter of 2007, when real GDP decreased by 0.2 percent. The chart below shows the contribut...

With the current cost of gas at around $3 and falling, driving has become slightly more affordable than it was a few months ago, when gas was $4 a gallon. The price decrease also takes away some of the incentive consumers have to turn to more fuel-efficient cars. AIER’s new Comparative Fuel Efficiency Calculator shows the influence of the $1 fall in gas prices. Consider a high-priced gas-guzz...

A year ago, on October 9, 2007, the Dow Jones Industrial average reached an all-time high of 14,165.  Yesterday, on October 9, 2008, the index had fallen by 39 percent, to 8,579. As the Wall Street Journal pointed out, the plunge erased $8.4 trillion in the value of U.S. stocks, the equivalent of more than half of the nation’s total output (GDP) for 2007.  A recent government report says retir...

The Emergency Economic Stabilization Act of 2008 implements a temporary increase in deposit insurance from $100,000 to $250,000 per insured account in banks and credit unions. This increase is scheduled to expire December 31, 2009, but there might be advocates for making it permanent. This temporary increase will not be accompanied by higher premiums for the financial institutions. Nor will it re...

Treasury Secretary Hank Paulson’s guarantee plan for Money Market Mutual Funds is not intended to guarantee that fund shareholders will receive what their shares are worth.  The intention is, rather, to guarantee that shareholders will receive more than their shares are worth, when their shares are worth less than $1 each (evaluated in the usual way by dividing the fund's asset portfolio value...

Homeowners who are struggling with their mortgage payments hope that the government bailout currently being debated in Congress will bring them some relief. However, relying on the government as the only hope of avoiding foreclosure is unpleasant, to say the least. It's far better simply to avoid such a difficult situation. And  the current crisis does provide lessons that can help homeb...

Millions of Americans have wondered about the safety of their savings in the past few weeks, as some giant banks and other financial institutions have failed or gone into a kind of receivership with the federal government. The dramatic collapse on Thursday of Washington Mutual, by far the largest bank failure in U.S. history, pushes the question to the center of the stage.   As the Wa Mu failur...

When announcing the government's decision to seize control of mortgage giants Fannie Mae and Freddie Mac September 7, Secretary of the Treasury Hank Paulson said that the measure provides policymakers with time to decide the “future role and structure” of the government-sponsored enterprises. One hopes this means that there will be a policy debate about how well the two GSEs accomplis...

The price of a gallon of regular-grade gasoline has more than tripled in the past eight years, increasing from $1.29 in 2000 to over $4.00 today.  The increase has been blamed on oil producers, consumers, speculators, refiners, global political events, and even gas station owners. It’s impossible to untangle all the supply and demand forces that determine the price of gas. But according to the ...

Ever notice that box on your monthly bills that you can check to “simplify your life and save the costs of stamps and envelopes” by making your payments automatic? The suggested options are likely to include either posting the bill to your credit card for later payment or making a direct transfer from your checking account to the company. This latter option is an example of an electronic fund...

In the 1970s the banking industry, seeking to reduce the cost of processing the growing volume of paper checks, developed an electronic payments network that enabled banks to send payment information back and forth to each other electronically. Processing a payment through the ACH (Automatic Clearing House) network costs banks about one-fifth what they spend to process a paper check. The network ...

There are a number of ways today to get information about our credit card balances, transaction histories, and the like. We can set up weekly emails, use internet banking any time of day, or even get text message updates sent to our phones. But despite these and other options, most of us still rely on printed statements that appear in our mailboxes once each month to inform us of what we owe. Man...

Our recent commentary on financial fraud shed some light on what is becoming a bigger and bigger problem: With more than 468,000 reported incidents of financial fraud in 2006 and another 246,000 reported incidents of identity theft in the United States, according to Consumer Sentinel, an online complaint database, Americans need to redouble their efforts to protect their finances and financial re...

Each year the six-member Board of Trustees who oversee the financial operations of Social Security report to Congress on the actuarial status of the Old-Age, Survivors, and Disability Insurance Trust Funds. The 2008 report concludes that, “Social Security’s trust funds are projected to allow full payment of scheduled benefits until they become exhausted in 2041.” This date, which is the same...

April 15, income tax day, is upon us again, and it calls to mind to two other notable days. The first is Tax Freedom Day. Estimated each year by the Tax Foundation, this is the day of the year when Americans are "free" of the burden of taxation, assuming that every penny of income earned before that date was used to pay taxes (Federal, state, and local combined). This year Tax Freedom Day is Apr...

What would your family do if an illness affected your ability to keep your financial and legal affairs on track? Would your loved ones be able to make informed decisions about your estate if you died tomorrow? These are questions that you hope never to answer. Unfortunately, the plain fact is that we never know when decisions may have to be made on our behalf or about our estate. It can happen at...