Does personal finance still work in our changing economy?

Does personal finance still work in our changing economy?

Don’t buy a car you can’t afford. Save 10 percent of your income for retirement. And, for crying out loud, stop throwing away money on lattes.

We’ve heard it all before.

Traditional personal finance advice is often tossed around in blanket statements. While the advice is sound in theory, the way we actually deal with money is much more complicated.

Our changing economy has made this a more common reality. Consumer spending is increasing and unemployment rates are low, but wage growth has been slow, some people have given up the job search and income inequality is still very much a thing. With a financial system so drastically changing — and seemingly for the worse — what can we do about money?

“I’m interested in the causes and consequences of inequality, particularly from a labor market perspective,” said Kate Bahn, director of labor market policy and an economist at the Washington Center for Equitable Growth, a research organization. Dr. Bahn argued there’s not enough emphasis on the larger structural barriers that make people’s financial lives difficult. Personal finance might further de-emphasize these barriers, she said. “Maybe that’s why I’m so frustrated.”

There is, for example, a concept called labor monopsony, which is what happens when a single hiring entity controls the work force. “So employers will take advantage and pay workers less because there’s nowhere else to go,” Dr. Bahn said. “It’s geographically remote areas where there may be only one big employer, and there’s no other company to work for, so that company can pay whatever they want because workers can’t say, ‘Screw this,’ and go somewhere else.”

Dr. Bahn’s argument is that personal finance is necessary, but not sufficient. It’s put forth as a solution when policy is what’s really needed, she said, and places priority on personal choice over issues that are, unfortunately, out of most people’s control.

Others say that personal finance remains helpful because it is a way to share information that people are often discouraged from seeking. “People have criticized financial education, saying it doesn’t work because people are still making mistakes,” said Billy Hensley, president and C.E.O. at National Endowment for Financial Education, a private nonprofit. “Education can’t help access jobs, but it can help people navigate the system as it exists.”

But it’s hard to measure the effectiveness of personal finance because so much of it is, well, personal. Rachel Schneider, a researcher and co-author of “The Financial Diaries: How American Families Cope in a World of Uncertainty,” wanted to look at how people handle money in the real world. She and her co-author, Jonathan Morduch, a researcher and professor at N.Y.U., worked with over 200 families for a year, gathering information on every dollar that went in and out of their homes.

“A huge finding was the level of volatility people experience in their financial lives over the course of a year,” Ms. Schneider said. Although she expected to find income volatility year to year, it was surprising to see how widely income varied within the year, too. A subject could be above the poverty line for the year over all, but that same person could fall below the poverty line in any given month.

“This has a huge impact on how people deal with money,” Ms. Schneider said. “The economy has been growing and the unemployment rate is relatively low and declining, yet we’re not seeing that growth and prosperity getting distributed down to the bottom.” While Ms. Schneider agrees that financial education is necessary and can be useful, she also worries that overemphasizing it as a solution to financial challenges shifts responsibility away from our economy’s major players, like banks that offer subprime predatory loans or companies that take advantage of workers.

One thing proponents and critics of financial education seem to agree on, however, is that if we’re going to help people navigate this existing system, the way we talk about money has to evolve. With that in mind, here are some new ways we can think about personal finance.

Saving is a habit, not an objective

“If your budget is dramatically different one month to the next, then a whole bunch of standard financial advice does not apply to you,” Ms. Schneider said. Most financial advice starts with making a monthly budget, but many people manage their money on a daily basis, asking what they can afford today. This makes traditional savings approaches difficult.

Traditional personal finance advice focuses on saving a lump sum, like eight months’ worth of living expenses, or $1,000 for an emergency fund. But that can be hard to plan when you have an income that fluctuates wildly. It’s better to think of saving as a habit rather than an objective, especially when you have a variable income.

“It’s very easy to fixate on a savings amount as a goal,” Ms. Schneider said. “Those benchmarks give you a goal to work toward, but it’s like trying to get in 10,000 steps on your Fitbit. You’re supposed to walk every day, it’s not like you reach 10,000 steps and then you stop walking.” For example, instead of thinking of your savings as a $5,000 goal, approach it as a habit of saving $100 a week.

Ms. Schneider’s research also found that once some savers reached their objective, they did everything they could to keep that amount intact — which sounds great, but can backfire. Even if savers had an emergency, they would pay for it with a loan or put the expense on a high-interest credit card just to maintain their savings. “It’s demoralizing for people when they have to break their savings,” Ms. Schneider said. “The data supports that people are more likely to continue saving if they think of their savings as an ongoing behavior rather than a one-time objective.”

Debt relief options are more important than ever

“The rising debt burden is a problem we should pay close attention to,” Ms. Schneider said. And it’s not just student loans, but also credit card debt, car loans, mortgage debt and, of course, medical debt. In 2018, Americans borrowed $88 billion to pay for health care.

Traditional personal finance advises people to pay off debt before making any other major financial decisions, sometimes even including investing for their retirement, but that may not be realistic for many people who are faced with years of paying off a student loan. This is why some experts now follow the 5 percent rule: If the interest rate on your debt is 5 percent or higher, focus on paying it off; but if it’s lower, invest while you pay it off because you’ll get a better return over time.

Debtors should also be familiar with opportunities for relief. Federal student loan borrowers, for example, may have forgiveness options. There are also income-driven repaymentplans, with which you can extend the life of your loan in exchange for a smaller monthly payment. Keep in mind, you’ll pay more over time, but for those who struggle to afford rent, the relief may be just what they need to get back on their feet. Some private student lenders and credit card companies also offer relief options. You can call and ask if they have any hardship payment plans. Typically, you have to qualify for these plans, and qualifications might include job loss, unemployment, divorce or family emergencies. The lender or issuer may lower your monthly payment and may also agree to a smaller interest rate or to waive your fees over a short time.

There’s also deferment and forbearance, which is sort of like hitting the pause button on your loan. With deferment and forbearance, you take a break from your monthly loan payments, and your interest is deferred or accumulated during that period. Refinancing or consolidation can also help people lower their debt, but be careful because many companies take advantage of consumers.

Refinancing is when you pay off one loan with another loan, and consolidation works the same way, but groups all of your debt into one, new loan. Either option can make sense if the new loan has better terms — namely, a lower interest rate. The Department of Education offers federal loan consolidation, but the interest rate won’t be lower. Keep in mind, if you refinance your public student loan or consolidate with a private lender, you lose those federal relief options. To see if refinancing makes financial sense, plug your numbers into a refinancing calculator. NerdWallet’s calculators are easy to use and the company has both a mortgage refinancing calculator and a student loan refinancing calculator.

The 10 percent rule is too much — And not enough

Traditional personal finance advises people to save 10 percent of their income for retirement. The problem is that it’s both unrealistic for many people but also not enough to fully fund a retirement.

People are living longer, fewer of them have access to a 401(k) and Social Security benefits are decreasing. This is why most experts now agree that 10 percent is not enough. Retirement calculatorscan be a helpful way to figure out how much you need to save based on these factors, but it can also be discouraging to see how much you should have saved, depending on your age.

Most Americans don’t have nearly the amount they should for emergencies or for retirement, and it would be easy to believe this is because they just don’t know the importance of retirement savings. But that’s not true — according to Ms. Schneider and Mr. Morduch’s data, people are very aware of how much they need to save for retirement. They simply need that money now.

“What we’re seeing when people cash out their retirement plans, or borrow from them, or fail to save for an emergency is not a lack of knowledge or awareness, but the result of people genuinely needing to spend the money today,” Ms. Schneider said.

The other issue is 401(k) leakage. Many people cash out their retirement plans or borrow from them to make ends meet. At a personal finance workshop, I once met an attendee who saved as much as she could to get a 401(k) match, but then stretched her finances so thin she couldn’t pay her bills or make her debt payments. Her intentions were good — she was only following traditional finance advice she had read. But this resulted in accrued interest and late payments, and she became discouraged from saving at all.

One way to combat this problem, Ms. Schneider said, is to encourage people to save for an emergency while they save for retirement. It can be helpful to remember that while your 401(k) match is an outstanding perk, you need a financial safety net, too. Retirement advice varies, depending on your age, but treating it as a habit and looking into individual retirement account options if you don’t have an employer 401(k) is a good place to start.

Beware of predatory financial services

Predatory financial services often operate under the guise of giving people solid financial advice. For example, I was recently driving around a different city and tuned in to a radio show dispensing financial advice. The host told listeners to cut back on retirement savings and instead invest in real estate. I couldn’t believe what I was hearing — most people don’t have nearly enough saved for retirement, and this personal finance expert was asking them to save less and put more of their eggs in one basket. It didn’t take long for me to realize this wasn’t a financial advice show at all, but a long commercial for a real estate investing course. After that spot, another show advised listeners to take out a reverse mortgage on their home. Again, the show was publicized as financial advice, not a commercial.

Dr. Bahn said that the best policies for change are the ones that give more power to workers and consumers. “We need to audit banks and employers and small business lenders to make sure they’re not engaging in discriminatory practices,” she said. Pay transparency and recent bans on asking about salary history are other policies that are meant to empower workers and tear down longstanding structural barriers.

In an era when banks and corporations seem to have more protection than people have, it’s difficult to offer practical advice on how to navigate the system and sometimes seems unfair to do so. Dr. Hensley said that policymakers and advocacy organizations are part of the solution, but contends that education is, too. In a system in which so much is seemingly out of our hands, it can take a lot of effort to feel financially empowered. The financial shame that’s implied in so much blanket money advice makes the process only more overwhelming.

“Financial education should not be, ‘Do it this exact way, or you’re a failure,’” Dr. Hensley said. “We need to humanize the topic.”

c.2020 The New York Times Company

At the Capitol: Tight finances result in low-key start to W.Va. Legislature session

CHARLESTON — A combination of an election year and tight state finances has resulted in the 2020 regular session of the state Legislature getting off to a fairly low-key start.

The 60-day regular session got underway Wednesday, featuring Gov. Jim Justice’s fourth State of the State address.

Unlike his earlier addresses, which featured multiple props and folksy references to the Frankenstein monster and 18-carat dog messes, Justice’s latest State of the State address was unusually long (running about 82 minutes) and more conventional than in the past.

Justice offered a particularly rosy view of the state’s outlook, touting efforts in his first three years to improve state roads, public schools, and economic opportunities.

“We have changed ourselves from a state that was backwards, and having a tough time, dingy and dark,” he said.

Justice endorsed proposals to rollback the state personal property tax on business equipment and inventory, and to establish an intermediate appeals court — two concepts backed by state business interests.

However, Justice was low-key on both issues, mentioning the intermediate appeals court almost as an afterthought in the closing moments of the long address, and saying of the inventory tax, “I don’t want anyone to doubt that I would like it gone — at least, gone in time.”

He also announced plans to invest an additional $26.4 million into the Department of Health and Human Resources to enhance Child Protective Services and foster care programs overstressed by families shattered by the state opioid crisis, while pledging to set up a Narcotics Intelligence Service to combat the flow of illegal drugs into the state.

Addressing would-be drug dealers, Justice warned, “We are going to bust your ass. That’s all there is to it.”

While Justice toned down the use of props and folksy stories in his 2020 address, he didn’t eliminate them entirely.

While touting his Roads to Prosperity road bond program, and increased state spending for highways maintenance, Justice had Division of Highways’ employees come through the aisles of House chambers handing out reflective vests for legislators to wear — while making clear that they were loaners and not gifts, and needed to be returned after the speech.

The address may be most remembered for an impromptu appearance by World War II veteran and Medal of Honor recipient Woody Williams, to whom Justice yielded the podium so that he could make a pitch for the final $12,000 of funding needed to erect a monument to Gold Star families on the Capitol grounds.

Two years removed from a record year for state revenue that provided some $500 million of budget surplus, the Justice administration is facing a contracting state economy as it puts together a 2020-21 state budget bill.

As a result, Justice is proposing a “flat” $4.58 billion general revenue budget that includes no pay raises for public school or state employees. That plan is $108.64 million less than the current state budget — and Justice is proposing closing that budget gap by taking that amount out of unused state funding for Medicaid, the state-managed health plan for the state’s poor, disabled and elderly.

Meanwhile, a six-year financial outlook prepared by the administration shows that 2020-21 is likely to be the first of five straight years where state spending will exceed state revenues — as plunging natural gas prices, and dropping coal prices and production put a damper on state tax collections.

Deputy Revenue Secretary Mark Muchow told legislators that a warm winter to date isn’t helping coal or natural gas prices in the short-term, noting, “This weekend, the forecast is for temperatures in the 70s. That’s not good for tax collections. What we need is minus–10 degrees.”

Meanwhile, the first bill moving in the House of Delegates would require November run-off elections for state Supreme Court justices, if no candidate receives at least 40 percent of the vote in the nonpartisan election during May primary elections (HB2008).

Advocates of the bill contend that the new one-off Supreme Court elections could result in individuals being elected to the court with a relatively small percentage of the vote in races with a number of candidates.

That follows 2018 elections where Tim Armstead and Evan Jenkins won election to the high court without either receiving 40 percent of the vote in separate multi-candidates races.

The Financial Sector in the 2020s: Building a More Inclusive System in the New Decade

By Kristalina Georgieva, Managing Director, IMFPeterson Institute for International Economics, Washington, D.C.

January 17, 2020

As prepared for delivery

I. Introduction

Thank you, Adam, for welcoming me today. I am so pleased to deliver my first speech of 2020 at the Peterson Institute.

The year is only two weeks old, but already a series of events have highlighted the shared challenges we face.

In Australia, the brush fires blazing across the country are a reminder of the toll on life climate change exacts.

In the Middle East, conflict and growing tensions have put an entire region on edge.

On trade, an important agreement was announced this week, but much more work is ahead to heal the fractures between the world’s two largest economies. Beyond the US and China, the global trading system is in need of a significant upgrade.

If I had to identify a theme at the outset of the new decade it would be increasing uncertainty.

Uncertainty that geopolitical tensions will ease and peace will prevail. Uncertainty that a trade truce will translate into lasting peace and trade reform. Uncertainty that public policy can address the frustrations and growing unrest in many countries.

We know this uncertainty harms business confidence, investment, and growth.

But this is not the uncertainty millions of people think about every day. They think about the uncertainty of being able to pay a bill at the end of the month. The uncertainty of their families’ future health and well-being. The constant fear of falling behind.

So this morning I would like to focus on one particular driver of uncertainty — inequality —and share with you the results of our new research on the role of the financial sector in this area.

II. Rising Inequality and the Tools to Address it

First, the good news. Income inequality between countries has declined sharply over the past two decades — led by the rise of key emerging markets in Asia. While there are certainly regions of concern, it is important to note this is the first decline in global inequality since the Industrial Revolution. [1]

However, the reality is that over the same period, within many countries, inequality has been on the rise. In the United Kingdom, for example, the top 10 percent now control nearly as much wealth as the bottom 50 percent. [2] This situation is mirrored across much of the OECD where income and wealth inequality have reached or are near record highs. [3]

In some ways, this troubling trend is reminiscent of the early part of the 20th century — when the twin forces of technology and integration led to the first Gilded Age, the Roaring Twenties, and, ultimately, financial disaster.

One issue which we did not face in the 1920s but which we face urgently today is climate change. It is often the poor and most vulnerable populations who bear the brunt of this unfolding existential challenge. The World Bank estimates that unless we alter the current climate path an additional 100 million people may be living in extreme poverty by 2030. [4]

So we have to learn the lessons of history while adapting them for our times. We know that excessive inequality hinders growth and hollows out a country’s foundations. It erodes trust within society and institutions. It can fuel populism and political upheaval.

To address inequality, many governments first turn to fiscal policies. These are, and will remain, critical tools.

But too often we overlook the financial sector, which can also have a profound and long-lasting positive or negative effect on inequality.

Our new staff research, launched today, shows how a well-functioning financial sector can create new opportunities for all in the decade ahead. But it also shows how a poorly managed financial sector can amplify inequality.

These findings present both a warning and a call to action.

If we act, and act together, we can avoid repeating the mistakes of the 1920s in the 2020s.

III. Three Dimensions of How the Financial Sector Impacts Inequality

There are three major dimensions to consider when it comes to the financial sector and inequality.

a) Financial Deepening

First, financial deepening — the size of the financial sector relative to a country’s entire economy.

We know that it has a significant effect on a country’s economic performance.

In China and India, for example, sustained financial sector growth throughout the 1990s paved the way for enormous economic gains in the 2000s. This in turn helped in lifting a billion people out of poverty. [5]

But that is not the full story.

Our new research shows there is a point at which financial deepening is associated with exacerbated inequality and less inclusive growth. [6]

Many factors drive inequality — corruption, regressive taxes, intergenerational wealth — but the connection between excessive financial deepening and inequality holds across countries. [7]

Why do we see this reversal in the impact of financial deepening on inequality? Our thinking is that while poorer individuals benefit in the early stages of deepening, over time, the growing size and complexity of the financial sector ends up primarily helping the wealthy.

The negative impact is especially visible where financial sectors are already very deep. Here, complicated financial instruments, influential lobbyists, and excessive compensation in the banking industry can lead to a system that serves itself as much as it serves others.

We do not have to go far for examples. The US has one of the most diversified economies in the world. And yet, in 2006, financial services firms comprised nearly 25 percent of the S&P 500 and generated almost 40 percent of all profits. This made the financial sector the single largest and most profitable sector of the entire S&P. [8]

What happened next — the Great Recession — brings me to the second dimension of how the financial sector impacts inequality: financial stability.

b) Financial Stability

Financial stability, and the economic damage inflicted from financial crises, was a defining issue of the last decade.

We know that on average a financial crisis leads to a permanent output loss of 10%. [9] This can change the entire direction of a country’s future and leave too many behind permanently.

Stability will remain a challenge in the decade ahead. In the 2020s, the financial sector will have to grapple with preventing the traditional type of crisis, and handle newer ones, including climate related shocks. Think of how stranded assets can trigger unexpected loss. Some estimates suggest the potential costs of devaluing these assets range from $4 trillion to $20 trillion. [10]

So we all have a vested interest in focusing our efforts on financial stability.

Our new research shows that inequality tends to increase before a financial crisis, signaling a strong link between inequality and financial stability. [11]

Why does this happen? One reason is that greater inequality can create political pressure for a quick fix that actually makes the problem worse.

Look at the US housing market in the 2000s. A drive to help more Americans own a home led to an overzealous mortgage industry enabled by lax lending regulations. On paper, many low-income individuals became wealthier, but their gains were outpaced by those at the top.

Then the housing bubble burst in 2007. The subsequent Global Financial Crisis (GFC) dealt a devasting blow to millions across the world and over the long-term worsened inequality.

Just one example. Today, as a result of the crisis, 1 in 4 young people in Europe are at-risk of living in poverty. [12]

For them, and many others, the crisis has never ended.

This connection between financial stability and inequality is not limited to the GFC or even the Great Depression. A survey of 17 advanced economies looked at every financial crisis between 1870 through 2013. The results confirm what our research shows: widening income inequality is consistently a strong predictor of a financial crisis and can be a lasting effect after one. [13]

As Mark Twain said, “History does not repeat itself, but it does often rhyme.”

What lessons do our historical rhymes teach us?

One is that financial services are primarily a good thing. Developing economies need more finance to give everyone a chance to succeed. Think of deeper domestic bond markets that finance a new business or investment opportunities that help people save for retirement.

It’s just that too much of a good thing can turn into a bad thing. Excessive financial deepening and financial crisis can fuel inequality.

So, we need to find the right balance between too much and too little.

This brings me to the third dimension of how the financial sector can impact inequality: financial inclusion.

c) Financial Inclusion

Financial inclusion simply means more people and companies having cheaper and easier access to financial services.

Research by IMF staff and others shows a strong association between increasing access to bank accounts and reducing income inequality.

The data also shows that while both men and women gain from inclusion, the largest reduction in income inequality comes when women are given increased access to finance. [14]

Interestingly, the relationship between access to finance and inequality is consistent across nations with different income levels.

For example, in Sweden, a country with one of the most even income distributions, the share of people having a bank account is the same for the rich and the poor.

By contrast, in Indonesia, a country with high income inequality, the richest 20 percent are about twice as likely to have a bank account compared to the poorest 20 percent.

Fintech is playing a major role all over the world by giving people access to banking services and delivering a chance for a better life. [15]

Think of Cambodia where mobile finance helped generate 2 million new borrowers over the past decade, representing nearly 20 percent of the adult population. Many of these borrowers never had a bank account before. [16]

While these changes may not immediately reduce income inequality, they create opportunity — and give people a chance to save, start a small business, and improve educational options for their children.

What does this mean for the broader economy? IMF staff research shows there is a 2-to-3 percentage point GDP growth difference over the long-term between financially inclusive countries and their less inclusive peers. [17]

So, we know that financial inclusion can be an economic game changer. It can help break down the barriers presented by gender, race, geography, and unequal starting positions in life.

…

In each of the dimensions I have raised — from deepening to stability to inclusion — there are trade-offs when it comes to the financial sector and inequality.

We want a financial sector that is robust, but not overly complex. We want financial inclusion to bring new opportunities and credit, but not create heavy debt burdens and put an entire system at risk.

So, what policies do we need to build a more inclusive system in the decade ahead?

IV. Policies to Build a More Inclusive System in the Next Decade – Safer, Stable, Smarter

There are three policy areas to match the three main ways the financial sector impacts inequality.

First, a safer system. There is no substitute for high-quality regulation and supervision. Financial deepening is a worthy goal for all economies, but like a city, a financial system should grow sustainably and intentionally.

Positive steps were taken to implement the regulatory reform agenda in the aftermath of the crisis. These efforts demonstrated that in an interconnected global economy strong financial sector reforms require strong international cooperation.

Today, banks have higher capital and liquidity requirements. Winding down troubled banks has become easier. Transparency and accountability have improved.

We are safer, but not safe enough . Rolling back these achievements — as has already begun in some places — would be a profound mistake.

Instead, countries should follow through on the reform agenda and complement it with new efforts. Safe growth of financial markets requires increasing financial literacy, so people fully understand what they are being offered and what it means for their family.

And this brings me to my second point, building a more stable system.

The private sector and banking industry have a critical role to play here.

That is certainly the case when it comes to climate and stability, an area where we will unveil new research in the spring. The financial sector can play a crucial role in moving the world to net zero carbon emissions and reach the targets of the Paris Agreement.

To get there, firms will need to better price climate change impacts in their loans. This is where thinking about the decade ahead as opposed to just the year ahead makes a difference. A longer-term horizon will crystallize the opportunities and risks. Last year climate change claimed its first bankruptcy of an S&P 500 company. [18] It is clear investors are looking for ways to adapt.

Stronger disclosure standards can help financial institutions see the full picture. If the price of a loan for an at-risk project increases, companies may simply decide the money for the project could be better spent elsewhere.

This is not the only area where more information can bring more stability.

Right now, many banks require excessively high levels of collateral for mortgages or business credit.

Not everyone owns a home, nor should they have to in order to start a business.

How can these risk assessments change?

Financial institutions could base more lending decisions on future cash flows. This would return the financial services industry to what it is supposed to be — an industry that serves people.

When banks better assess risk, they will likely increase lending to smaller firms. This is key for stability.

Our research shows that lending to small firms increases financial stability and reduces risk compared to lending to large firms. [19]

When risk is spread across hundreds of companies, instead of a few conglomerates, a more inclusive and healthier economy emerges.

And how can a healthier economy be put to best use?

This brings me to my third and final point,create a smarter system.

Broadening financial access to low-incomes households and small businesses is one of the most effective ways to reduce inequality.

But too much too fast can backfire.

Looking forward, the myriad of new fintech companies offering credit around the world presents a unique challenge. Governments can work with firms to unlock the full potential of fintech, while managing the risks.

That is the goal of the Bali Fintech Agenda launched by the IMF and World Bank in 2018. It provides key principles — including on promoting competition, enhancing consumer protection, and fighting money laundering. These principles can help guide policymakers, reduce risks for banks, and deliver new jobs.

In fact, a World Bank study which looked at 135,000 firms across 140 counties showed that lending to smaller firms is directly connected to improvements in income inequality. [20] That’s because these companies are often hiring people who need work the most.

A good example is M-Pesa. M-Pesa started as a peer-to-peer mobile payment service in Kenya at the beginning of the last decade.

Starting in 2020, the company will become a pan-African financial platform. There are still significant challenges ahead for M-Pesa, but the goal is right: bring millions of unbanked and underbanked online.

Of course, it did not happen overnight. It was the result of years of work by entrepreneurs, government officials, and, most importantly, citizens who were searching for new opportunities. It is a good model to learn from.

V. Conclusion

The last several decades have sent us a clear signal — increasing inequality is a problem that will only get worse if left unaddressed.

While fiscal policy remains a potent tool, we cannot overlook financial sector policies. If we do, we may find that the 2020s are all too similar to the 1920s.

However, if we learn the lessons of history, and adapt them for our time, we can build an even stronger system fit for the future.

So, let me end by borrowing a line from the man who captured the spirit of the 1920s in America better than any other writer, F. Scott Fitzgerald. He once wrote, “Action is character.”

Fitzgerald’s work was famously underappreciated in his own time, and his advice went unheeded.

Let us not make the same mistake twice.

Let us make the year ahead a year of action, and, in turn, the 2020s a decade of prosperity for all.

Thank you very much.

[6] Martin Čihák, Ratna Sahay, in collaboration with others, 2020, “Finance and Inequality,” IMF Staff Discussion Note, SDN/20/01.

[11] Martin Čihák, Ratna Sahay, in collaboration with others, 2020, “Finance and Inequality,” IMF Staff Discussion Note, SDN/20/01.

[12] Tingyun Chen, Jean-Jacques Hallaert, Alexander Pitt, Haonan Qu, Maximilien Queyranne, Alaina Rhee, Anna Shabunina, Jérôme Vandenbussche, and Irene Yackovlev, 2018, “ Inequality and Poverty Across Generations in the European Union,” IMF Staff Discussion Note, SDN/18/01.

[17] Ratna Sahay, Martin Čihák, Papa N’Diaye, Adolfo Barajas, Srobona Mitra, Annette Kyobe, Yen Nian Mooi, and Seyed Reza Yousefi, 2015, “ Financial Inclusion: Can It Meet Multiple Macroeconomic Goals?,” IMF Staff Discussion Note, SDN/15/17.

[18] See Mark Carney, “ A New Horizon,” Bank of England, March 21, 2019. Citing PG&E Corp. example.

[19] Martin Čihák, Ratna Sahay, in collaboration with others, 2020, “Finance and Inequality,” IMF Staff Discussion Note, SDN/20/01.

[20] Id. citing 2018 World Bank Enterprise Survey Data.

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