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Economic Roadkill
Economic Roadkill
Courtesy of guest author MIKE WHITNEY
Originally published at CounterPunch
If you really want to know what’s going on with the economy, you should take a look at the Fed’s Consumer Credit Report that was released on Thursday. Yes, it’s a real snoozer, but it does reveal the truth behind all the “recovery” hype. So, let’s cut to the chase: When unemployment is high and wages are stagnant, the only way the economy can grow is through credit expansion. That’s why economists pay so much attention to the credit report, because it lets them see if we’re making progress or not. Right now, we’re not making any headway at all. Of course, the cheerleading media see things differently. Here’s a clip from an article in Bloomberg that puts a positive spin on a truly dismal report:
“Credit increased $12 billion after a revised $11.3 billion rise in June, the Federal Reserve said today in Washington. Economists projected a $6 billion gain, according to the median forecast in a Bloomberg News survey. The rise in non-revolving loans was the most since November 2001.” (“U.S. Consumer Borrowing Rose by $12 Billion in July, Twice Amount Forecast”, Bloomberg)
Hooray! The US consumer is off the canvas and borrowing again. Let the celebration begin!
Not so fast. The uptick in credit spending is entirely attributable to subprime auto loans and government-backed student loans, both of which are a mere extension of the same Ponzi-finance scam that put the global economy into cardiac arrest. Every other area of credit expansion is on-the-ropes. Commercial banks, finance companies, credit unions, savings institutions, nonfinancial businesses, and pools of securitized assets are all flatlining. No progress at all. In other words, the only way to induce tightfisted consumers to spend money they don’t have is by either seducing them with “No-down, easy-pay, 60-month-no-interest” financing or by hoodwinking them about the 6-figure income they’ll net after they finish their college education at Lunkhead U.
Case in point; check out this article on subprime auto loans in Reuters:
“Lenders are making more subprime auto loans again, reversing the cautious approach they adopted after the credit crisis, an industry research firm said on Tuesday. The portion of car loans made to subprime borrowers rose to 40.8 percent in the second quarter from 37.2 percent a year earlier, according to Experian Automotive, a unit of credit bureau and research firm Experian Plc.
The data shows how keen lenders are to boost their loan books amid a sluggish economy….
Average credit scores for borrowers declined and the average term for their loans extended by one month to 63 months on new cars and 59 months on used cars, according to Experian.
“We are continuing to see growth in subprime, both new and used, and loans are becoming looser,” Melinda Zabritski, director of automotive credit for Experian, said in an interview.
Executives at Ally Financial said in May that subprime car lending had become “very attractive” because profit margins on the loans more than cover the cost of expected losses from borrowers who fail to repay what they owe. Making the loans is part of Ally’s strategy to grow by lending on more used cars….
Industry veterans have said that while the loans have been attractive recently, more lenders are entering the market and competing for business by lowering prices, a trend that could lead to higher losses in the future.” (“Lenders making more subprime car loans: report”, Reuters)
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Bigger profits off lower credit scores. Now where have we heard that load of malarkey before?
We haven’t even paid for the last subprime meltdown, and we’re on to the next? Might a little regulation be a good idea here? Maybe some standardized loans so the banksters running these loan-laundering operations don’t blow up the system again and come around begging for more bailouts?
Oh no, of course not. That would be an intrusion on the divine workings of the free market.
Bottom line: Yes, it is possible to boost credit if one is willing to lend gobs of money to anyone who can fog a mirror, but is that really an indication of “economic recovery” or just more proof that the system is staggeringly out-of-whack?
And then there’s the student loan biz, as big a fleecing operation as ever existed. This is where the real pros hang-out now, luring their prey with promises of hefty salaries after they graduate and then loading them up with enough debt to make their eyes pop out. But, hey, let’s not forget the upside of all this chicanery; all that fleecing beefs up the Fed’s Credit Report and makes it look like the economy is bouncing back. That’s got to be worth something, right? And, besides, everyone is “doing it”; fleecing college kids, that is. Here’s an excerpt from an article in The Atlantic:
“How do colleges manage it? Kenyon has erected a $70 million sports palace featuring a 20-lane olympic pool. Stanford’s professors now get paid sabbaticals every fourth year, handing them $115,000 for not teaching. Vanderbilt pays its president $2.4 million. Alumni gifts and endowment earnings help with the costs. But a major source is tuition payments, which at private schools are breaking the $40,000 barrier, more than many families earn. Sadly, there’s more to the story. Most students have to take out loans to remit what colleges demand. At colleges lacking rich endowments, budgeting is based on turning a generation of young people into debtors.
As this semester begins, college loans are nearing the $1 trillion mark, more than what all households owe on their credit cards. Fully two-thirds of our undergraduates have gone into debt, many from middle class families, who in the past paid for much of college from savings. The College Board likes to say that the average debt is “only” $27,650. What the Board doesn’t say is that when personal circumstances go wrong, as can happen in a recession, interest, late payment penalties, and other charges can bring the tab up to $100,000. Those going on to graduate school, as upwards of half will, can end up facing twice that.” (“The Debt Crisis at American Colleges,” The Atlantic)
Do you think these pillars of rectitude would ever dream of warning our kids that they might they might be getting in-over-their-heads, that they might want to reconsider what they’re doing so they don’t spend the rest of their lives trying to get out of the red?
Nah. It’s not my problem, they figure. Besides why rock the boat. If these kids ever figure out that they just flushed $100,000 down the latrine for a mid-level management job at Herfy’s that pays $22K per year with no-time-off, they might just go ape and torch our lovely new sports pavilion. We can’t have that, now can we?
Here’s more from another article in The Atlantic:
“Student loan debt has grown by 511% over this period. In the first quarter of 1999, just $90 billion in student loans were outstanding. As of the second quarter of 2011, that balance had ballooned to $550 billion.
How does the housing bubble debt compare? If you add together mortgages and revolving home equity, then from the first quarter of 1999 to when housing-related debt peaked in the third quarter of 2008, the sum increased from $3.28 trillion to $9.98 trillion. Over this period, housing-related debt had increased threefold. Meanwhile, over the entire period shown on the chart, the balance of student loans grew by more than 6x. The growth of student loans has been twice as steep — and it’s showing no signs of slowing.
Obviously the number of students didn’t grow by 511%. So why are education loans growing so rapidly? One reason could be availability. The government’s backing lets credit to students flow very freely. And as the article from yesterday noted, universities are raising tuition aggressively since students are willing to pay more through those loans.
All this college debt could put the U.S. on a slower growth path in the years to come. As Americans grapple with high student loan payments for the first few decades of their adult lives, they’ll have less money to spend and invest. All that money flowing into colleges and universities is being funneled away from other industries where it would have been spent in future years. Of course, this would be a rather unfortunate irony: higher education is supposed to enhance a nation’s growth, but with such an enormous debt burden, graduates might not be able to spend and invest enough to allow that growth to occur.” (“Chart of the Day: Student Loans Have Grown 511% Since 1999?, The Atlantic)
Young people are just the latest subset of victims in Big Capital’s endless search for roadkill. No sense getting all huffy about it. But it does help to shed a little light on underlying condition of the economy vis a vis the Fed’s Credit Report.
Indeed, credit is expanding, but only in the areas where the sinister lifting of consumer protections (deregulation) has allowed finance vultures to do their dirty work. As for the economy, it still stinks. But, then, you already knew that.
*****
See also Michael Panzner's Another Disaster in the Making
Here's a graph from Michael:
Picture credit:
Image (top) from www.michiganimaging.com
Image (bottom) from http://users.frii.com/donlight/archive/97arc.htm
Via: Worms & Germs Blog. Learn what to do when you find a dead animal on the road here. Okay, okay, here's a hint about what not to do:
Bottom line: the risk of contracting rabies from roadkill is very low. Roadkill contact has never, to my knowledge, been identified as a source of infection. Rabies transmission from dead animals has been documented, however, such as a couple cases of rabies from people preparing dead animals for food.
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I remember back in college some students getting loans to fund their entertainment like video games at the rec center. I'm pretty sure some of the student loans people get nowadays are being partially used in a similar manner.
With youth unemployment being so high, university students who were able to work before may not be able to work now. This forces them to take out more student loans.
The college/loan/job situation today is a deliberate creation of our psychopathic oligarchy.....and it sure works for THEM in every aspect.
Kinda scary that if things go against you that you can't bankrupt out of it. Let's see 1000's with huge debt that can't find a job that pays enough to pay for it. Then what happens?
My guess is inevitable collapse, these idiotic rules just allow the thieves more time to screw more people. Not only that it shows how desparate the system is to have people in debt from birth to death. And I think they know full well it will end up a disaster but since it's a guaranteed payback let's keep doing it as long as we can.
Just one facet of many in our coming demise.
Yes, but is there a CDS we can trade ahead of this bubble popping?
They're serial lenders--like serial killers--when the writing was on the wall in 2007 the banks pulled out of housing and moved onto fresh pastures to seek out new victims. The student loan racket can be succinctly compared to the fake home improvement scams run by two-bit fraudsters. The difference being that the student loan racket is a government-supported criminal enterprise.
This isn't capitalism nor is it unregulated. In fact, the key regulation spurring this is that you can't discharge student debt even in bankruptcy. Students who take loans are marks for life thanks to a government pwned by the banking industry. When there's no risk there's no proper underwriting.
The cure for this problem is to reverse the law. All unsecured debt should be treated equally in the eyes of the courts.
Reversing the law is only one solution. Young folks have time on their side. Since "the law" is mostly overlooked today anyway, why wouldn't you expect a young person to take out several student loans to play the markets and get a business degree while watching everything burn. I know of two such young people who are already up over 400% in the markets by making disaster and fear trades since 2008. One kid in our neighborhood graduated this summer and cashed out. He now owns a large track of land and apartment complex that went into foreclosure. Graduate and collecting rent from his former classmates. Looks like financial evolution to me, but what do I know, I was the fool who followed the path of science and engineering.
How many college grads are getting jobs? I've read 1 in 5. About the same number of working age adults out of work today.
There are too many worthless degrees taught by worthless professors. And why does someone going to medical school need to spend 4 years getting a worthless undergraduate degree?
This is creating a new breed of workers. In debt, making a deprciating debt currency, and scared of being axed. That is why you have no protests on campuses these days. Just a bunch of Me-Book indebted kids waiting to be churned off the conveyor belt.
These people are more valuable that many think, though. For the government has a lifetime of cheap labor ( taxes on top of debt repayment for a life time, no different that cheap third world labor) and scared Yes men and women for corporate America.
Enjoy your first Temp job graduates. If your one of those lucky 1 in 5.
Pre Cash of '08, too many banks spawned too many loans and so on and so forth. What we have now are far too many colleges for the number of jobs available. SOME entity must put a stop to the travesty of what we are doing to our young people. Is that how this nation will end it's days....by eating it's young?
GM has been selling a lot of cars through channel stuffing. They (sell) cars to the dealerships, Only the cars
are not paid for until dealers sell them to the public. The dealers are overloaded with cars and GM will soon be offering
huge discount incentives to get dealers to move cars out to make room for new models(2012).
GM has to sell a whole lot of cars and they have been at the top of the sale charts for the past year. I tell peopl it is all BS but they argue it is because they are making good cars and people really want an American product.
I say no, they are adding a lot of sales now that will all end as repos in the next few months all logged as losses to Ally financial which will get backdoor government bailouts to take care of the loss.
GM is targeting the welfare class with 80 month financing and 0 down $99 leases. All to pump up sales to pump the stock so the .gov can sell off its GM stock.
why is it that just about everything about this country is getting really f*cked up, and most of it can be traced back to actions of those criminal bastards on Wall Street? If most Americans did not have their heads firmly entrenched up their asses, I'd invest in pitchforks and rope, because if we had any sense the mobs would be descending on Wall Street and D.C. ready to lynch these bastards.
Sorry Savy, taint heads up a**es, its a nation of headless chickens. Saw the headline this morning...
Next Article?
Ya just can't make this stuff up...
exactly, we refuse to act in fear, but do so anyway. Bloody pods.
That road kill menu mascot makes me a bit nervous. I'm pedaling as fast as I can not get run over by this POS economy.
Student loan debt slaves...
Obamas new Peoples army, sworn to the ruler.
So we have to endure more tripe from Ilene in short succession. Thanks to those of you who pointed out that we do not have capitalism but crony capitalism/corporatism. The epic fail is due to the fact that we have corporatism and crony capitalism. In addition to all the other greats points you have made, to combat Ilene's typical progressive big government crusade (tirade). Bring back free markets bitchez.
Thanks to those of you who pointed out that we do not have capitalism but crony capitalism/corporatism.
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Crony capitalism? What is that? Please explain how what the US has been practising since its inception is different from crony capitalism?
US citizens know no boundaries. On this site, relentlessly bashing crony capitalism, one member posted that he had the opportunity to buy the house next door, the family is a long time friend to hs family and will offer a price 200k instead of 300k.
Is it crony capitalism?
No discontinuity between the elite and the base in the US.
Thanks to those of you who pointed out that we do not have capitalism but crony capitalism/corporatism.
//////////////////////////////////////////////////////////////////
Crony capitalism? What is that? Please explain how what the US has been practising since its inception is different from crony capitalism?
US citizens know no boundaries. On this site, relentlessly bashing crony capitalism, one member posted that he had the opportunity to buy the house next door, the family is a long time friend to hs family and will offer a price 200k instead of 300k.
Is it crony capitalism?
No discontinuity between the elite and the base in the US.
Rigged markets are the problem. Free markets are the cure. Why the hell is this being junked? Are all the late-night readers a bunch of commie-bankster Obama supporters?
For $40K a year you get a view of the Economics Professor over the heads of 340 other students. He will blandly educate you in the principles of statist economics. When you have finished your four years of drivel you can go to work for the government as an Assistant Fulfillment Section Chief in the Office of Interdisciplinary Affairs for Minority Recruiting and Affirmative Action in the Department of Education's Community Outreach Administration doing really important things.
I've followed you ilene since day one on Seeking Alpha and the only road kill i've seen has been theatrical you. it stands to reason education lending is surging because a. education never goes down in price and b. you must repay that loan or the government will become the collector. this is not a "ponzi scheme" in which "the first one in wins while the last one's out lose." this is more similar to real estate "liar loans" in which the "hope" is that with an education the earnings potential of a potential "human thingy" will be realized. i understand "the governent is the last one's" but "government get's to print money" while neither Charles Ponzi...nor Bernie Madoff...had that option. Also there is empirical evidence that educated people have far lower unemployment rates and far higher income's than non-educated people. In theory "the government could get it's money back by spending more money on health care" for example. So let us call it....another...."dog chasing his tail" scheme since you are assigning a form of intelligence in this "plan" which clearl the government no only lacks but is incabable of (nor would we want our government to have such intelligence even if it were capable of such a thing.)
Here: let's observe:
http://www.youtube.com/watch?v=ZLylhDFBqEM&feature=player_detailpage
take note of "behind the scenes laughter" and various "encouragements by said observers" thus proving my point "this is in fact what we want."
Students go into deep debt and the government steps in and says that they will forgive the debt if they serve in a government job somewhere where no one want to live or work like Iraq, Libya, Afghanistan or Yemen.
The $16 billion this semester for student loans is just more hope, extend and pretend. The billion loaned to poor kids who take online colleges/training by companies owned by the elite families is really a crime. Govt money going directly to the rich on loans signed by the poor. Same thing for "payday loans" where military, social security, disability individuals are paying 50% interest/fees on non risk loans. The rich families own these criminal enterprises.
I'm one of the profs. I teach mathematics, finance, and some econ. I challenge mystudents every semester, and have always done so. I ask them wtf they are doing in college. If they're just there to get a piece of paper, I tell them I'll help them withdraw with a full refund. If they want to learn something, to be able to think for themselves, to prepare for the upcoming collapse, they are in the right place.
Most of my colleagues don't think about this. They talk about how understanding Chaucer will make the kids more erudite. I tell the students that there is a real future in ag, but you need to know the business side. Some of us in the academic world try. We're not making Stanford money, we don't get cushy sabbaticals, and we work our asses off with students who give a shit. Those are few and far between. Our university took in 625 students this year. We'd do everyone a favor by cutting that by a factor of 5. And they want me to pass the dipshits on so that we can make more tuition money off of them next year. It's a fucking crime. I've said so, and I've been told to shut up. But there is a small minority of us who believe this...mostly in the hard sciences and in the Business School. And we'll keep on doing our thing, telling the students to shape up or go to Shipley's to get a job. Administrators everywhere, from the big banks to univiersities to the government...they're the problem. Bitchez.
I had a great biochemistry professor who washed out about half of the class every year. She refused to lower standards and many of us (who surviuved) are now leading our own ventures. The administration let her go, but she was quickly hired by Vanderbilt.
The paper pushing fucknuts in administration (in EVERY organization and every business) are indeed the problem. They add no real value, yet collect the majority of the compensation. It is indeed a rare case when you see a university actually kicking students out. Just look at the grade inflation for the last 20+ years.
Wonder how your colleagues would feel ifbthey realized they are the middle-men ... er, make that middle-persons ... In the moral equivalent of the slave trade?
I would only argue that Chaucer has a place in education. Don't denigrate a good, general education. All things are not "useful", least of which includes arcane "finance". A course of study should be balanced and original thought encouraged. Having had the benefit of both worlds I'd hate to see such erudition derided as having no function. "Erudite" means well educated. How can that be a bad thing?
Edit: I see the first rating is a -1. Somebody does not like the idea of a balanced education? Or do they just not like raccoons? Too uneducated to even know who Chaucer is? Failure to post a comment to back up your rating is a pussy move! Come on get ya some o' dis Fight Club action ya wimp.
I think we're fast approaching the time when localization and the end of debt-based money redefines what "wealth" is. The ability to efficiently apply knowlege to achieve real-world results will always be a rewarded skill, but I think it will become appreciated more by a strong community, an increased ability to live well, and respect, more than an abstract salary figure and aquired trinkets.
Having said that, some form of education, formal or otherwise, will always be a huge part of elevating one's abilities. The attitude of entitlement based upon being able to check the "degree" box on an app however, has always been nausiating - and encouraged by admissions propaganda.
Having worked, and succeeded in both the blue-collar and white-collar worlds, I have never regretted any part of obtaining my liberal arts education, trade school education, or advanced degree.
.
Welcome to Fight Club. I ran into damn few good teachers and professors during by formal learning. But what a pleasure it was to find one.
You, sir, are a rare gem. Your students are lucky indeed.
T/F - all BBQ grills are made of cast iron?
Did you learn your answer from one of the few - or one of the many?
Well, I graduated college years ago. The dipshits were holding the chalk. JMHO
Word from the wise....squeaky wheels don't get greased...they get burned. I respect what you are saying immensely....but a good job is a precious thing these days.
If you were lib arts you would have probably been shown the door already.
Preach the truth....but watch your six.
Cheers
I appreciate your remarks. I think you have the right attitude here. The country is the better for having you in your post, so if no one tells you, at least you have an anonymous guys on the internet (me) who says, "thanks."
try something a little easier on the palate than road kill! http://www.thebreakers.com/i/downloads/The_Seafood_Bar_Menu.pdf
http://www.thebreakers.com/restaurants_lounges/the_seafood_bar/
Even Del Frisco's is jealous of those prices.
Looking at the prices at the Breakers, I would say the kitchen must be an all union shop.
Lol thats great!
Or, stick with the road kill
http://www.elboroom.com/
I've eaten quite a few times at the Road Kill Grill. Pretty good fare. It's in Oregon.
Located in beautiful downtown Drain. It closed down a few years back.
Nice.
I just got home from running one of my carts all day at a local art fair.
Hug me...I smell like weiners.
Looks beautiful, but it just wouldn't make the same point.
Hey! You've been poisoned!!...Here, have some more poison.
:o(
59 months on used cars ? Why not take out a mortgage to buy the groceries ??
This is something that Incubus posted yesterday that is relevant I think.
"It's all in the sale, anyway.
People want you to smile and speak very nicely to them while you're carving them up. Who cares about any truth when you can just feel good?"
---------------------------------------------------------------------
I would suggest there is a VAST amount of truth in those words.
Stay Thirsty My Friends
You are right, the people in the banking, loan, government and stock market have lost all sense of right and wrong. The government has guaranteed their bad behavior will not be procecuted and they will get to keep the money they illicitly make no matter how agregious the behavior. I think this started in the 60's with the hip generation, drugs and don't trust anyone over thirty thinking crowd, of which I was one. Some how this all morphed into a generation of take all you can get and screw the other guy. I know this plays right into the one world government crowd's hands as they depend on the loss of family structure, lawlessness, lack of concience, lack of the knowledge of history, lack of community, sprituality and manners in general. Our government has managed to dummy down and sheeplize most of the citizens of the US. When this all falls apart I guess TPTB expect us to come crying to them to take over the world so the handout won't stop because most people can not care for themselves. It is a sad state of affairs and it will require all of us that still believe in freedom, free markets and self reliance to make herculean efforts to save this nation.
Prepare if you care, be a bastion of hope for all of those who will surely be seeking leadership.