36 years until median Afrikan wealth in the US reaches zero!

The Navig8or Newsletter

October 2017 (6253)

For those who are prepared to think

Greetings Readers

It’s October and that means Black History Month here in the UK. However, I am not celebrating. As far as I am aware there are no activities worth mentioning  being run in my home town of Nottingham, which is probably fitting for a generally comatosed Afrikan population. Anyway, I have written extensively in the past  about the co-option and corruption of Afrikan History Month in the UK so we will leave that corpse to rot without disturbance.

In this issue:

  • The Road to Zero Wealth
 
  1. The Road to Zero Wealth
While households of color are projected to reach majority status by 2043, if the racial wealth divide is left unaddressed, median Black household wealth is on a path to hit zero by 2053…”
The Road to Zero Wealth: How the Racial Wealth Divide is Hollowing Out America’s Middle Class (September 11 2017 by the Institute for Policy Studies and Prosperity Now)
 
Two very interesting reports came out in the United States during September, which may not have come to your attention. They were published within a day of each other and highlight some of the key themes, relating to income poverty and wealth that I have consistently highlighted since the days when I had a full head of hair. Despite visits to the barber being but a distant memory, I am still banging the same drum and hoping that someone will like the tune.
I have reproduced highlights from each of the reports below with my usual commentary, however to preface this section of the newsletter I want to encourage you to think about the following four points:
  • There is no inevitability about economic progress. Things can always get worse
  • Income and wealth are very different and can move in opposite directions at the same time for a particular group or individual
  • Doing nothing or doing what we have always done will guarantee that things get worse
  • As Bill Clinton said during his Presidential race against George Bush Snr, “It’s the economy stupid”.
The first report I am going to review came out a day after the second report I will look at, however I think that it provides a useful context for understanding the findings of the second report.
The first report we will consider was published by the United States Census Bureau and is entitled

Income and Poverty in the United States: 2016’ September 12, 2017 Report Number: P60-259 Jessica L. Semega, Kayla R. Fontenot, and Melissa A. Kollar

Some of the highlights from this report include:
 

Income:

  • Median household income was $59,039 in 2016, an increase in real terms of 3.2 percent from the 2015 median of $57,230. This is the second consecutive annual increase in median household income.
  • The real median income of non-Hispanic White, Black, and Hispanic-origin households increased 2.0 percent, 5.7 percent, and 4.3 percent, respectively, between 2015 and 2016.  This is the second annual increase in median household income for non-Hispanic White, Black and Hispanic-origin households. For Asian households, the 2015 to 2016 percentage change in real median income was not statistically significant.  (The differences between the 2015-2016 percentage changes in median income for non-Hispanic White, Black, Hispanic, and Asian households were not statistically significant.)
  • For White non-Hispanic households, household income was approximately $65000. For African-Americans $39400 and for Hispanic households $47000.
  • Between 2000-2016 household median income fell by 2.3% overall and 5% for the non-elderly population. Since 2000 White income fell by 1% and African-American household income fell by 7.5%.
 

Earnings:

  • The 2016 real median earnings of men and women who worked full-time, year-round was $51,640 and $41,554, respectively, not statistically different from their 2015 estimates.
  • The 2016 female-to-male earnings ratio was 0.805, a 1.1 percent increase from the 2015 ratio. This is the first time the female-to-male earnings ratio had experienced an annual increase since 2007
 
Poverty:
  • The official poverty rate in 2016 was 12.7 percent, down 0.8 percentage points from 13.5 percent in 2015.  This is the second consecutive annual decline in poverty. Since 2014, the poverty rate has fallen 2.1 percentage points from 14.8 percent to 12.7 percent.
  • The poverty rate for non-Hispanic Whites was 8.8%, for Hispanics 19.8% and for African-Americans 22%.
You can read the full report at the following link:
https://www.census.gov/content/dam/Census/library/publications/2017/demo/P60-259.pdf

Ok, so what are some of key points you should have initially gleaned from these statistics. Well, my take would be:
  • Between 2015-2016 Black income grew significantly more than White income and more than Hispanic income. However this is in the context of a significant overall fall in Black income between 2000-2016 which was far greater than that for Whites.
  • African-American household income in 2016 of $39,400 was 60.62% of that of White household income ($65,000), which as a percentage is pretty much where it has been stuck since the 1950s. Also, when I did this calculation I immediately thought about the compromise between European-Americans in the South and those in the North of the United States: about whether the enslaved Afrikans, who were mainly held in the South, would be counted towards the population when they were establishing the number of electoral college votes that would be given to each state in Presidential elections. The compromise agreed was that each enslaved Afrikan wold be counted as 3/5ths of a person and as you know 3/5ths is the same as 60%!
  • There is a notable absence of significant data or commentary on Asians in the US; in the statistics highlighted in both this and the later report that I will review. This may well be because Asians have a higher median household income than Europeans, outperform all other groups in the US academically and are fast bridging the wealth gap between them and Whites. Asians also have the highest rate of business ownership in the US which is a point I want you to remember as you proceed through this newsletter. 
Now let’s go on to look at Wealth in the US in order to contextualise the foregoing data. I obtained the statistics used for this part of the article from a YouTube video featuring Professor Richard Wollf which you can watch here:
https://www.youtube.com/watch?v=LnjYK87S5fc
Professor Wollf mentions the above report in his lecture and talks about the wealth statistics for the United States from around 24 minutes into the video. He cites Professor Edward Wollf (no relation) of New York University as the leading authority on gathering data on wealth distribution in the US. The most recent data from Professor Edward Wollf relates to 2013 and indicates that when looking at wealth in terms of Non-durable goods (liquid assets) the median household wealth for different racial groups in the US is as follows (data for Asians were not mentioned):

White $116000 ($134,000)
Latinos $2000  ($14,000)
Afrikans  $1700 ($11,000)

So, you can see that whilst Afrikan household income was around 60% that of Whites in 2016 they only had 1.47% of the wealth of white households or put another way White households had 68.24 times as much wealth in terms of non-durable goods!
N.B. The figures in brackets are the wealth figures when durable goods are included)
 
 

 
 As the diagram above shows; in 2001 median household wealth for Afrikans peaked in terms of non-durable goods and was $14,000 and for Hispanics the figure was $3,900 so we have seen a precipitous fall in Afrikan wealth in the US during this century, from an already very low starting point.
 
The Road to Zero Wealth: How the Racial Wealth Divide is Hollowing Out America’s Middle Class (September 11 2017 by the Institute for Policy Studies and Prosperity Now)

This is the second important report that we are going to review and it makes fascinating if somewhat depressing reading. I have once again detailed below some of the headlines from this report.

Key Findings:
  • While households of color are projected to reach majority status by 2043, if the racial wealth divide is left unaddressed, median Black household wealth is on a path to hit zero by 2053 and median Latino household wealth is projected to hit zero twenty years later. In sharp contrast, median White household wealth would climb to $137,000 by 2053.
  • If current trends continue, by 2020 median Black and Latino households stand to lose nearly 18% and 12% of the wealth they held in 2013, respectively, while median White household wealth increases 3%. At that point–just three years from now–White households are projected to own 85 times more wealth than Black households and 68 times more wealth than Latino households. …………….
  • This disconnect in income and wealth is visible across every socioeconomic level. The report found that on average, only Black and Latino households with an advanced degree have middle-class wealth or higher, while White households, on average, need only a high school diploma to attain that same level of wealth.


 
If you study the diagram above you will see that for White families whose head of household holds a high school diploma their median wealth is nearly enough, at $64,200, to be considered middle class. However, for the equivalent Black and Latino families the wealth figure is a paltry $100 and $1720 respectively. Relatively, education brings a huge payoff in terms of wealth for Black families, however it is only when the head of household has an advanced degree that the median wealth for Afrikan families is considered ‘middle class’.  
https://inequality.org/research/zerowealth/
You can read and download the full report from the following link:
https://inequality.org/wp-content/uploads/2017/09/The-Road-to-Zero-Wealth_FINAL.pdf
 
OK, so this report which utilises the research of Professor Edward Wollf, which was cited earlier, puts the wealth patterns in the US into stark relief. Just as I have previously cited data from 2013 which indicated that single Afrikan-American women had a median wealth of around $100 (which may be less than zero by now) we see that the entire Afrikan community in the US is projected to have a median wealth of $0 by 2053.
I think now it should be clear to all of my readers why I prefaced my analysis of these two reports with those four points.  Poverty kills and as I have said repeatedly there is no dignity in poverty and the meek shall inherit exactly what the powerful want them to, which appears to be absolutely nothing. There will be no justice for Afrikan people in the US or anywhere else without Power and the foundation of Power is Economic.      
 
Welfare for Whites (Europeans)
The Road to Zero Wealth  report has a very important section entitled ‘How Government Policies Built and Preserve The Racial Wealth Divide’ which I summarise as welfare for whites. The report notes that:

“While the racial wealth divide can be largely attributed to the effects of discriminatory and exclusionary policies and practices put in place in the years after the Great Depression and World War II, the foundation for this divide had been forged long before we reached either of these points in our history. From the earliest days of our country’s infancy through the late 19th century, a range of policies and practices laid the foundation for this divide including.“ (page 15)

I would recommend you read this section of the report which starts on page 14 as it demonstrates that European wealth in the US was built on the backs, literally, of Afrikans, as well as an endless flow of financial and material resources and policies from government designed to advantage European Americans economically.


I will just list the headline titles of the strategies and policies highlighted in this report:
  • African Chattel Slavery and Wage Theft
  • Racially Exclusive Land Redistribution:
  • Denying Access to the Asset of Citizenship
  • Denial of Social Security to Farmworkers and Domestic Workers:
  • Federally Sanctioned Housing Discrimination:
  • Denial of Economic Opportunities for Service members of Color
  • The Punishment of Our Most Vulnerable for Trying to Get Ahead
  • The Perpetuation of Financial Insecurity by the Criminal Justice System:
  • An Upside-Down U.S. Tax Code That Overwhelmingly Favors Wealth-Building for Wealthy—Mostly White—Households Over Everyone Else
 
Solutions
For some of you this section will be the boring part because you will have heard most of my prescriptions before, however I feel duty bound to recapitulate what needs to be done for two reasons:
  1. New readers may not have read my books or back issues of this newsletter. New readers include people who may come across my work in five, ten fifteen years’ time and beyond and who unfortunately, may be as confused as most Afrikans are today.
  2. Most Afrikans are not implementing these solutions and sometimes people have to be told the same thing over and over again before the penny drops. That’s how advertising works, bombard the subject with the message and associated imagery until they do what you want them to do!
Are you with Team Afrikan?
I am going to contextualise my proposed solutions by saying that they are all predicated and based upon the idea that in order to work, beyond the individual level, you have to commit to Team Afrikan. That is to say your primary allegiance has to be towards Afrikan people; before your religion, nationality, gender etc. etc. Otherwise, ultimately we will be divided and split asunder by our so-called ‘friends’ and ‘allies’ as well as by our ‘enemies’. Of course, as I have also said on countless occasions; this is what makes it so difficult for us to climb out of the ditch. Most Afrikans don’t want to be on Team Afrikan, except when they are in a serious fix. Then and only then do they see themselves clearly in the mirror. So, this section constitutes the lyrics to a song for the Afrikan choir to sing.

I should also note that there are political moves that need to be made in order to economically stabilise and protect Afrikan communities around the globe, which I am not going to speak to today. These political moves go hand in glove with the economic steps we have to make and indeed are dependent upon those economic steps, since you need money to be able buy or lease politicians’ fealty to your cause, whether it be in the US, UK, Afrika or anywhere else.

 
Some Context
This is a crisis that needs an immediate and sustained response. I chose the US because it is relatively easy to obtain data on racial disparities compared to other countries, however there is nothing unusual about the plight of Afrikans in the US. I also chose the US because of the myth that Afrikans in the US are doing so well which was only reinforced by eight years of Obamamania.

The context for what we need to do is based around the following realities:
  • For the majority of people wages are stagnating
  • The true rate of inflation in most rich countries is far higher than the official statistics suggest (see www.shadowstats.com) which means that most people’s purchasing power is actually falling
  • Afrikan land ownership has plummeted in the US and in Afrika vast tracts of land are being sold to non-Afrikans
  • Business ownership rates are falling as multiples take over the high street and wider economic landscape whilst subsistence self-employment (the Uber economy) rises.
  • The pension outlook for most people (particularly those under) 50 is dire, as life expectancy increases and pension provision deteriorates
The solutions proposed are primarily focused upon the individual and small group activity, given that at present most Afrikans seem to lack the propensity to engage in larger scale economic activity.

My favourite stool
Yes, we are going back to an old favourite, my economic stool. I really should make it pentagonal by introducing a fifth leg for Income Development. However, let’s work our way through each leg.







Debt Reduction
  • Get advice. There are lots of advice agencies offering free support so use them. Examples include the charity Step Change or the CAB (Citizens Advice Bureau).
  • Draw up a survival budget. There are lots of templates available on the internet. Check our bank statements to ensure you capture your actual level of expenditure. Work out what you can spend less on and implement the new budget.
  • Reduce the interest rate you are paying on debt. You can do this by moving debt e.g. by moving credit card debt to another company offering balance transfers. Or if you can’t access one of these offers you could try an initiative such as www.Quidcycle.com  which is a peer to peer lending platform that brings borrowers and lenders together. A more radical step, for those of you who are really struggling is to obtain an Individual Voluntary Agreement (IVA) with your creditors. An Individual Voluntary Arrangement (IVA) is an agreement with your creditors to pay all or part of your debts. You agree to make regular payments to an insolvency practitioner, who will divide this money between your creditors. Such a step gives you peace of mind and certainty in terms of how much you have to pay to creditors each month and for how long. The interest on the debt I also frozen. The downside is that your credit score will take a severe hammering. You can also undertake this process yourself by contacting your creditors individually and asking them to freeze the interest on your debt due to financial hardship. If you provide a letter (which the Citizens Advice Bureau can help you draft) and an income and expenditure budget demonstrating your hardship they will almost certainly agree to your proposal. Another downside with the formal or informal IVA option is that you end up with virtually no money to save to to cover emergencies, however there are ways to get around this. Of course there are also other options you can pursue, such as seeking a debt relief order or bankruptcy, if your debt burden is overwhelming.
  • Pay off debt or save? Generally, it’s better to pay off debt than save because the interest on your debts is likely to be a lot higher than the interest you receive from savings. However, if you have a poor credit history you need to accumulate a little rainy-day money given that you will have difficulty borrowing to pay for expensive emergencies.
  • Form a financial recovery club. They say birds of a feather flock together so the chances are that if you are broke so are many of your friends. You can use this unfortunate circumstance to our advantage by forming a financial recovery club. The first thing to say is that you will need a high level of trust in order to pursue this idea. I have based this idea on the concept of Alcoholics Anonymous and other similar support groups. The philosophical basis of such groups is first, that in order to address a problem, you have to consciously and openly acknowledge it, and secondly, that a problem shared is a problem solved. My concept for a financial recovery club is a small group of friends in a similar financial predicament who meet monthly to support each in getting their individual finances in order. Trust is required because you need share with each other your financial problems. The club would commence with each person discussing their financial situation. The next step would be for each person to create a financial recovery plan. The monthly meetings would be support meetings where members would discuss their progress towards achieving the goals in their plan. Members could share money saving tips and ideas. Eventually, if things go to plan this group could transform into a savings club as members’ finances improve and the emphasis shifts from debt reduction to savings.
 
Savings
  • Draw up a budget. This is vital, whatever your financial situation. Once you have addressed your debts you can really focus on saving.
  • Set yourself a monthly and annual savings goal.
  • Don’t initially save in your current account. It’s a bit of a paradox that in the current low interest rate environment you can actually get better rates of interest on your money in some current accounts than in most savings account. Despite this when you first start saving seriously it is better to separate your savings from your current account. It is sensible to set up different saving accounts such as: emergency fund, holiday fund, birthdays, Christmas (if you really must) and special occasions fund, investment fund etc. You feed money from your current account into these accounts via standing orders. Psychologically you will get a boost as you see these funds grow.
  • Transform the Financial Recovery Club into a Savings Club.
 
Investment
  • Revise your budget.
  • Get advice.
  • Do as much reading and research as you can.
  • Set yourself a monthly and annual investment goal.
  • Never invest more than you can afford to lose.
  • Identify your risk appetite. The older you get the lower the proportion of risky investments you should make regardless of your risk appetite.
  • Invest for the long term. Investment is generally about time not timing. Ideally your investment horizon should be at least 5-10 years as historically there is a recession every 3-7 years in the rich world.
  • Transform the Savings Club into an Investment Club.
 
Below are some examples of investments in  a rough order of descending risk:
 
  • Precious Metals (Gold, silver etc.)
  • Venture Capital Trust (VCT) min investment normally £3-6K
  • Peer to peer lending e.g. Quidcycle
  • Buying shares in individual companies
  • Investment Trusts/Unit Trusts and Open Ended Investment Companies (OEICs)
  • Exchange Traded Funds (ETFs)
  • Bonds
  • Property
  • Self Invested Personal Pension (SIPP)
I won’t explain what all of the above investment opportunities are as this is already a very long newsletter and it is very easy to use the internet to get information on them all.
 
A cautionary note on the stock market
I want to offer a word of caution for those of you who; seduced by the stock markets in the UK and US being at or near record levels, think that the only way is up and that share prices will never fall.    
I came across some research by Nobel-Prize-winning economist, Robert Shiller in which he notes that: on average…
  • Markets fall by at least 10% about once every 11 months…
  • They drop 20% about once every four years…
  • And they nosedive 30% or more about once every decade.
This research is based on data that Shiller collected on the S&P 500 (a US stock exchange) however given how closely the U.S. and UK stock markets are linked to one another even a modest selloff in the U.S. markets could send shockwaves through those here in Britain.

So where are we now relative to the aforementioned timeframes for downturns in the stock market?
Well, it’s been 10 years 2 months since the last time the S&P 500 dropped 30% or more.
(That already surpasses Shiller’s decade benchmark for a crash.)
Perhaps even more concerning from the potential investors viewpoint is that it’s been just short of 8-and-a-half years since the last downturn of 20% or more, which by Shiller’s calculations means we’re actually a full four years overdue for a 20% drop in stock exchange value!
What’s more, in an interview with Bloomberg a few months back, Shiller was quoted saying that this market “is like the dot-com bubble again.”

From my perspective, the foregoing does not mean that you should not invest in the stock market. What it does mean is that you should understand the cyclical nature of share prices and the underlying economy. Historically there has been a recession (two successive quarters of negative growth) approximately every 3-7 years in the rich industrialised world over the past 100 years and a few of these recessions have turned into depressions. Therefore it is likely that the UK, US etc. stock markets (given their near record levels and significant growth since the crash of 2008) are likely to fall significantly before they rise significantly, however if you invest for the long-term you have a good chance of making money.



I took the above screenshot on 3rd October 2017 whilst putting the finishing touches to this issue. It shows you the performance of the FTSE 100 index (the main UK stock exchange of the largest [by market capitalisation] 100 companies in the UK) over the past five years. I calculated that over this period the index has risen by 27.20%, but within that period you can see there has been a large degree of volatility. For example if you had invested in around April 2015 and divested in early 2016 you would have lost a significant proportion of your investment. Your minimum timeframe for stock market investment should be five years and ideally at least ten years. As I said it is about time not timing and remember never invest what you cannot afford to lose!
 
 Of course you also need consider whether you are happy with the ethical conduct of many of the companies that you could make money from investing in.
  
From my perspective we should be developing our own venture capital funds (which is in effect what we were doing with the ABDF, which is sadly in the process of winding up). Us Lifting US www.usliftingus.com are doing a similar thing in the US and are currently working on opening their first coffee bar. However, in my experience it is very difficult to mobilise large numbers of our people which is why I am advocating the creation of lots of small investment clubs as a vehicle to build financial literacy and wealth through close knit groups where trust is already well established. 
 
Production
Essentially, the production of goods and services is going to flow from the creation of investment capital which can be used by entrepreneurs to set up companies across a range of sectors. Obviously, banks and other financial institutions such as credit unions can be the source of this capital, however Afrikans are also going to need to up our financial game and become the financial well that our entrepreneurs can draw from.
 
Increase your Income
Income should really be the fifth leg of the stool. Although have we have seen from the reports we reviewed, income does not automatically translate into wealth, however if you can increase your income and hold down your expenditure you can use the added surplus for saving, investment and ultimately production. Obvious ways to increase your income include:
  • Get an additional part-time job
  • Work overtime (if available)
  • Get a promotion
  • Get a new better paid job
  • Start a side-line business e.g. cake making, fixing cars, dress making, that you can do in your spare time
 
Leaving a Legacy
It is a cliché (but not one without substance) that African parents from the Caribbean leave their children proverbs and parables but precious little in terms of a financial legacy. I am going to guess it is similar amongst Afrikans in many other parts of the world. Because of the way government policy has been subverted to serve the rich and large corporations, it is probably harder now for young people to get a good start in life, even if they do well educationally, than it has been for several generations. It is therefore incumbent upon older generations to both teach financial literacy to young people and leave the younger members of our family tangible assets to build upon.   
 

As usual let me know your thoughts on this issue. Use your critical thinking skills to weigh up what I have shared with you. Share the newsletter it if you think it contains useful information and of course; and most importantly, implement the proposed solutions where relevant to your situation. If you have examples of wealth building success, individual or group based please share and I will include them in the next issue.

Finally, thanks again to all my loyal readers who have been so supportive this year and all the years gone by and who have helped to lift my spirits and given me renewed impetus to keep on keeping on. I appreciate you.
 
Stay Blessed
 
Ifayomi
‘It’s time to win’


http://houseofknowledge.org.uk  
http://blackfinancialfitness.com
 
Disclaimer – Nothing in this newsletter constitutes financial advice. It is general information for readers to consider when making decisions; taking into account their own unique circumstances.  You should consult a qualified debt counsellor, financial advisor or accountant for advice on financial matters.

 

 





 

 

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