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Student Debt Accounts For Nearly Half Of US Government "Assets"
On Friday we asked if the student debt bubble was about to witness its 2007 moment. In July of that year, all three ratings agencies turned aggressively negative on subprime-related MBS and their collective actions triggered a pre-crisis crisis in Canada where billions of asset-backed commercial paper stopped rolling in August, offering those who were inclined to take notice a window into what the financial would look like just one year later. Earlier this month, Moody’s put some $3 billion in student loan-backed ABS on review for downgrade citing a risk of default in some tranches. As a reminder, here’s the rationale:
The reviews for downgrade are a result of the increased risk that the tranches will not fully pay down by their respective final maturity dates. Failure to repay a note on the final maturity date represents an event of default under the trust documents.
Voluntary prepayment rates in FFELP loan pools remain historically low as a result of sluggish economic growth and high unemployment rates among recent graduates. Although prepayments rose to 2%-3% of the loans in repayment in 2014, partly as a result of borrowers refinancing their FFELP loans through private student loans and Federal Direct consolidation loans, prepayments remain low relative to historical levels. Deferment and forbearance levels remain high throughout the life of the collateral pools.
The collateral backing the paper is FFELP student loans — that is, it’s guaranteed for 97% of principal by the US government. With nearly one in three loans in repayment delinquent by 30 days or more, and with $1.3 trillion in student debt outstanding, we’ve suggested the situation could deteriorate materially going forward and we’ve also noted that it won’t be long before this trillion-dollar mountain of liabilities ends up being socialized because as Bill Ackman says “there’s no way students are going to pay it back.”
Having set the stage, we bring you the following three charts from Bloomberg which show the extent of the problem and the extent to which that problem will become a public, rather than a private issue.
More from Bloomberg:
Student debt now comprises 45 percent of federally owned financial assets. Of course, that doesn’t include assets owned by the Federal Reserve, and it doesn’t include real assets like land. Still, it’s a startling figure.
This trend worries me. Why? Because when the government owns student loans, it has every incentive not to fix the country’s student-debt problem.
Consider the sheer size of the revenue that the government earns from student-loan interest payments. In 2013, it was $51 billion -- almost 2 percent of total federal revenue for that year. That’s more than two-thirds of the lifetime cost of the entire F-22 fighter jet program!
With that kind of money on the table, it’s going to be hard to get the government to take strong action for debt relief. A whole generation of millennials has been economically scarred by the financial crisis -- they borrowed to pay for school just like their older siblings did, but the capricious power of the business cycle left them with fewer jobs and lower wages even as they were saddled with record amounts of debt. It’s no wonder that delinquency rates on student loans havesoared.
One way to bring that unlucky generation some relief would be to permit student debt to be expunged in bankruptcy. Democrats in the Senate are trying to allow that. But with Republicans in control of both chambers of Congress, this probably won't happen.
Instead, what we’ve gotten is President Barack Obama’s “Student Aid Bill of Rights.” The list of “rights” emphasizes students’ right to go to college, to take out loans and to pay those loans back quickly and easily. In other words, it’s exactly what you’d expect from a government interested in maximizing the revenue it collects from indebted college graduates.
If you think this sounds unencouraging, you’re not alone.
So what would happen if the Senate Democrats’ plan were to become law? Well, a lot of young people would file for bankruptcy. The federal government would lose some of its revenue, but not so much that it would appreciably change the long-term ratio of debt to gross domestic product. The gap would be made up with future tax hikes and/or cuts in spending. Those future taxes would be paid by successful millennials and their descendants, letting unsuccessful millennials off the hook. So it would have a redistributive effect, part of which would go toward canceling out bad macroeconomic luck.
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The ratings agencies have probably already gotten a stern warning about it.
No central banker anywhre will let that debt get discharged. Ever.
Should be against the law to use humans as collateral for debt
slavery is against the law... debt is the loophole
I know you'll hate me for saying this, but debt can be useful (bring it on downvoters). It can lead to a far more efficient economy. It just shouldn't be on steroids like it currently is. There is an inflection point somewhere between "useful levels of debt" and "economic doom machine".
The real issue with debt, is it needs true growth prospects to be sustainable (or I suppose you could think of this as a relatively high marginal product of debt). I seriously doubt the US has seen something like that any time after the 1970s. The ending of Bretton-Woods initiated the beginning of a government debt cycle which was entirely unbacked by collateral. The accelerated financial deregulation in the 1980s seems to be the last vestiges of a (somewhat) virtuous financial system.
This crazy financialized world is going to end so badly. So, so badly.
There's a significant amount of semantics to be argued here. Personally, I view debt as wrong, but investment as good.
Unfortunately for us, they're two sides of the same coin. Debt is what people get into in order to live a certain way. Investment is what someone with excess wealth/assets gives out in the hopes that greater things will come. Consumers without a productive idea/industry should not be allowed to get into debt. Entrepreneurs should undoubtedly be allowed to receive assets from those wishing to invest in their production.
Debt is useful to accelerate investment, and increase capital stock as well as aggregate technology levels. It is, however, a proverbial sword of damocles, in the sense that it can also ruin an economy if it isn't very tightly monitored and constrained.
The single biggest debt mismanagement machine is the government right now. They are blowing trillion dollar debt bubbles (way beyond the point of subprimedom) into multiple industries. The subprime crisis was a walk in the park, wait until the student loan bubble contracts.
The reason why government is able to blow these bubbles is because they are not constrained by anything. During Bretton-Woods they had real tangible restraints (gold reserves), since then they have had no restraints. This is an (accidental? or maybe intentional?) Ponzi Scheme.
Government is dangerous in this phase of expansion because, unlike the private sector, which must transfer ownership of assets to more competent management, government can tax, inflate, seize wealth etc. and they will.
The "real issue" with debt is using humans as collateral. That is a human rights violation-especially when governments do it to "their' citizens.
"slavery is against the law... debt is the loophole"
“While boasting of our noble deeds were careful to conceal the ugly fact that by an iniquitous money system we have nationalized a system of oppression which, though more refined, is not less cruel than the old system of chattel slavery.”
— Horace Greeley Editor, New York Tribune - Member of the U.S. House of Representatives from New York's 6th district
In office December 4, 1848 – March 3, 1849
"Should be against the law to use humans as collateral for debt "
Mortgages don't pay themselves.
Oil does not pump itself out of the earth.
Ore doesn't mine itself. Iron does not smelt itself. Steel does not form itself into beams. Etc....
THERE IS ONLY ONE COLLATERAL IN THE WORLD: HUMAN PRODUCTIVITY.
The problem is not one of designation of the collateral; the probem is that the Governments are using debt-based fiat systems to rob the citizenry of their productivity via pyramided interest ponzis that are mathmatically unstable and ultimately have terminal saturaton points which onced reached result in total systemic failures.
The oppressive imposition of the extractive/destructive debt-based ponzi monetary/financial systems is the problem.
IF people want to borrow money privately the only constraint should be their personal productivity.
IF the system ceased to differentiate between those with access to newly genreated debt-fiats and financial engineering largess and those who are restricted from access to newly generated debt-fiats and financial engineering largess the system would function in a somwhat more balanced manner.
The land-shark capitalists are no more productive than ditch diggers ( maybe less ); but, due to their access to vast sums of newly and effortlessly generated ponzi-finance debt-fiats & to financial engineering largess via .GOV tax loopholes and corporate welfare and fraudulent accounting treatments of their debts as assets they aggregate vast real assets/wealth very rapidly -and to the detriment of the rest of the citienry.
Other forsaken/suspended but important feature sets of the debt-fiat system are the mechanisms for re-organizing and purging bad/un-payable debts. Were these mechanisms allowed to function the system would function much more smoothly and -in a moral relativistic sense- 'fairly'.
Bail-outs, subordination of one debt to another contrary to contract terms and governing contract laws, and the government/bureaucracy funding via debt ponzis stifle and damage the proper function of the debt-fiat system. This is not merely highly irresponsible from a systemic and social stabilities perspective; but, effectively divides the populace into rigid classes of easily discernble as an Oligarchy of Rentiers, serivcers/praetorians/bureaucrats under the implicit control of the Oligarchy of Rentiers, and serfs.
The insolvent require declarations of bankruptcy, immediate orderly disgorgements of property associated with the failure and/or reorganization sans the failed management if there is anything left to the senior creditors.
Governments should not be gouging the citizenry by forced placed insurance and education schemes at exorbitiant usurous rates of interest vis-a-vis those it has engineered via the central banks on it's own unsustainable debts, and should not be funnelling profit streams to crony/fascist corporate pseudo-utilities...
I would argue that the 100 million+ income tax donkeys that the Feds have all over the globe are a collective financial asset that clearly dwarfs these student debt interest donkeys.
I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... www.globe-report.com
Video of globe-report trainee working online .....
http://www.youtube.com/watch?v=nfPDmkswoR4
https://www.youtube.com/watch?feature=player_detailpage&v=zUpTJg2EBpw
Classic!
https://www.youtube.com/watch?v=X1q0LNb8irA
I want everybody to step back and look at how perverse our monetary/accounting systems are. If you loan somebody FRNs, you get to put that loan down on your books as and asset. If you transfer that loan to another entity, say, the government, then that other entity gets to list that loan as an asset. Being owed FRNs is an asset. However, if somebody deposits FRNs at a bank, it is a liability. Having the cash is considered a liability and being owed the cash is an asset in today's world.
This is perverse.
Slavery is a perverse institution.
And I get shocked looks when I say that I wouldn't mind if everybody maxed out their credit cards to purchase tangible goods, then defaulted en masse. The entire monetary system is corrupt to its very core and it should be cheated. Unless you are on top, it is cheating you.
But people have been conditioned to pay their debts "because its the right thing to do" without ever considering just what consideration they have been getting for that debt.
All debt is odious debt in this rotten world.
"All debt is odious debt in this rotten world. "
This is pretty much true.
There is NO reason to run a debt-based fiat system other than to extract wealth from the vig.
When a loan is originated the principal is conjured out of thin air, and the interest is not.
The interest payments can only be made via a negative sum transfer of human productivity to the loan originator that is vast in contrast to the ease of generating the loan.
Intergenerational debt is taxation without representation
The future are the best Tax Livestock of all. They cannot complain, and cannot vote themselves out of their predicament. By the time they can complain/vote, those who enslaved them are dead and/or long gone from public life.
An interesting case study in risk/reward imbalances in public orifice.
"Intergenerational debt is taxation without representation "
I fully agree.
IMHO, the sale of US treasury debt that is not liquidated/paid off without rolling new debt is effectively the sale of children into slavery.
By all means if you can evade prosecution.
Consider the creation of a corporation using a stolen identity.
It wouldn't be criminal prosecution. But what I'm talking about would require millions to do it at the same time. A mass protest, so to speak. Alas, that would require that people understand that they are being scammed, which isn't going to happen.
There are more people then you think who max out their cards for hard assets (like gold coins or a house in Florida) and then default and move to a Debtor paradise state like Florida where your house and some of your property are protected from creditors and repossession and most judgment liens.
I used to read about it all the time during the last Bust in the 1980's and have heard it's quite common again this last decade, but trickier this time around since cc companies are a tad wiser to their scam.
My dad bought a house from an Oil Man back then who had gone bankrupt. I remember men comin gto our door looking for the previous owner wanting to break his legs. Scamming can be a dangerous business.
That's why it would have to be many millions of people who do it. The banks' power goes away if people stop playing the game with their corrupt scrip. As it stands now, more than enough people play the game, and it generally forces people who want to opt out into the system.
I like the idea, but it's a hell of a lot easier to fool someone then it is to convince them they have been fooled.
I saw it on television and YouTube, so it has already been done, but not on a mass scale.
100 lone wolves acting independently to achieve a common end.
Rather than 100 members of any one group acting in concert to achieve a similar objective.
Use your lack of resources to optimal utility.
Scatter the resources of your pursuer.
Damn, the Chinese make excellent strategists when they aren't thinking like communists.
And speaking of perverse logic in Kiki's evil voodoo dollhouse if pretend since that is the only way to be fair in the most unfair of ways for her bullheadedness to be everything to everyone as for everyone to have nothing but her torture.....
It ain't so perverse to the innocent is it? When the devilish details between the words of free is gonna cost u everything for the bullshit of ur heart held on yoyo strings by those robbing ur back pockets is better than one living a better life!
It is totally fucked up.
From there it takes on another innovative life that I think is called rehypothecation. That "asset" can then be "sold" multiple times all stemming from a loan that never gets paid back. Now that fraud is a commodity hidden in plain sight, loans that don't get paid back are worth more than loans that do.
That's what they call "synergy" these days. Since people won't be making as much money as they used to, it has to be given to them in a form of a loan. It's not only a creative way of stealing from the future, it also at the same time steals money from people who don't even have it yet.
For the older people that like to bash the millenials...remember this ...they'll also be getting the bill for your unfunded liabilities.
"Synergy," I fucking hate that fucking word. I know, it's irrational to hate a word, but it is so often used in a meaningless nothing-burger way to justify corruption. I would say that your point should be hammered on, but too few people would understand that shadow banking is just taking the idea of a loan being an asset to the extreme for it to make a difference.
As for the mellinials, I doubt that most of them will make the connection that it is the past generations who spent their futures away. Most people don't ever stop to consider why FRNs are "valuable," but they sure as hell will seek them out. Of course, if getting your paycheck involves not understanding why, in an honest world, your paycheck should not have any value, you're not going to understand that your paycheck should be worthless.
I also don't think that the older generations realized exactly what they were being duped into. Go dig up the picture of a protester holding a sign that said something along the lines of "Keep The Government's Hands Off Of My Medicare!" to see what I mean.
That word was used to describe how great the Kraft/Heinz merger is going to be. I think it means that a lot of the people that work there are going to find their cheese is about to get moved.
I don't like the generational wars but it seems there is more vitriol aimed at the younger generation, who I think as a group has long since given up on politics and gov as fraudulent and utterly corrupt. The millenials don't vote but the boomers do. ANd I'd go further in that the millenials didn't have much say in the BK laws getting changed to specifically target this bubble/pop. If BK laws get changed back it won't be because it's unfair or one generation complains.
It will be because the financialization cronies (dimon, greenspan, bernake, etc) want to get moar rich on loans they and their friends made out of thin air that didn't get paid back by bailouts and other sneaky tricks. Everything tangible of value got stolen a long time ago, so the only thing left to steal is debt. Just like the housing...prices went through the roof before it popped. Education cost has soared and milleniums can't afford houses with crappy jobs so they'll get nailed with this.
Yeah I know nobody put a gun to their heads...I still think it's pure evil...and was planned out a long time ago.
*I'm a gen-xer with millenial kids with zero school debt.
In a way, a gun was figuratively put to their heads. There are few decent jobs for a basic HS graduate to get, so they were all sold a load of BS telling them that they needed college to get by, and they had a choice between taking on student debt or slaving away as waiters/waitresses. What else were they to do? The public education system failed most of them and they didn't come out of HS with the requisite critical thinking skills to say "You know what? This is bullshit!" To make it worse, we've sold them the college degree is as good as gold meme for so long that a lot of kids don't realize that, for it to be useful, you actually need to learn useful knowledge. A lot of them are there for a magic job granting little piece of paper called a diploma, not for knowledge. Now, they're in debt and there still are very few good jobs for them. Now, they owe the government, and that is one creditor who you do not want on your ass.
A few of them are going to be jolted into figuring that critical thinking thingy on their own because of this.
As for the intergenerational warfare, maybe that's dependent on region. I just don't see it here, but where you are, it may very well be different. Of course, a lot of people here view familial relationships a bit different than in the rest of the country, so that could have something to do with it.
And owning precious metals is downright criminal.
And or cut spending.........that's a good one!
And or cut spending.........that's a good one!
Welcome to double entry accounting -
When you loan someone FRNs (cash) you make two entries on your balance sheet not one.
You also reduce cash on your balance sheet for the loan you made.
So the debtor adds the cash balance as an asset - books the loan as a liability.
The creditor subtracts cash and books the loan as an asset.
When you put FRNs in the bank - same type thing - the bank
Books the cash as an increase to their assets - and books the liability because they owe the person that made the deposit this amount.
You are only looking at 1/2 of each transaction.
Surprised no one really talks about WHY those charts exploded in 2009.
Student Aid and Fiscal Responsibility Act (you really have to love the names they come up with)
http://en.wikipedia.org/wiki/Student_Aid_and_Fiscal_Responsibility_Act
This ended all Federal garauntees of private student loans, effectively killing private student financing
This same act vastly expanded the Direct Loan Program
http://en.wikipedia.org/wiki/Federal_Direct_Student_Loan_Program
This article here in the field of erasures past the yellow bricks of gold road before witch Hillary's castle of delete buttons is the mommy dearest and daddy big dicks Münchausen syndrome solution in Kiki's evil voodoo dollhouse!
fiscal responsibiliyt act... fiscally irresponsible
affordable care act... health care less affordable than ever
the list goes on and on... just flip in the words with opposite meaning and the true intent is revealed
Tell the IRS to halt cash payments to foreign rulers and monarchs.
Invest US cash in US businesses.
Create American jobs.
Some one I know died with an upside down reverse mortgage
100% guaranteed by the feds
The bank got their money back
But the estate got 1099'd by the bank.
How fucked up is that!
I would have burned it to the ground and salted the earth it stood on... fuck those guys
I hope the family gutted the copper plumbing and marble.
The UN only cares about the real estate.
Perhaps irradiating the land is a solution to UN encroachment?
Contaminate the land with Mercury, Radon, and Uranium.
Scorch and burn.
I think they underestimate the number of people who would take advantage of the discharge of student loan debt. In typical fashion the more you subsidize something the more you get of it, we will have record numbers of students filing bankruptcy if they move to allow for it. And further, it creates a model for what people will do in the future, borrow, go to school and then just plan on a default at the end of it all. Hell why not just default during your last year and get it out of the way?
And then there are the ones who paid their loans back, how can you justify the inequity that results when some get to discharge and others not? Why again are they picking winners and losers?
This is a recipe for disaster which should shock no one, it's the same result over and over. Get the .gov involved and it all turns to shit in short order. There's no way we didn't know this would happen when .gov took over the student loan market when the depression started in 07.
You're subsidizing a ruling class currently.
And you don't want to see it.
You're insane.
Why subsidize anyone? Oh, I know, that would be unfair to the poor who don't have the cash of the ruling class.
So instead we put the poor into debt and make them more poor? And I do hope you realize that part of that ruling class is the academic elite that gets all that government money.
How about the way the things were? You earned your way and paid your way. If you couldn't afford it, then you took another career path. Cut the government money to universities and make them actually compete and earn the income.
And please don't tell me a college education is a right just like Obama Care!
I think it's too late to even debate anymore.
America is a colony again.
We export raw materials, and import finished goods.
And most farmland is owned by big Agro.
Young people don't have many options today.
Join the military and die in a huge false flag?
The Chinese need breathing spaces in North America.
The next 5,000 years belongs to them, I suppose.
<< I think they underestimate the number of people who would take advantage of the discharge of student loan debt.>>
free shit = infinite demand
That's what my Econ 101 Prof used to say. Then he would draw one of those econ charts with curves and lines to illustrate for those students who were 'learning impaired' ... like me.
free shit = slavery
University is currently holding up the financial system. When it crashes all falls down.
The monetary system is corrupt. Fuck it. I hope people do take advantage of it. Explain why FRNs are valuable and then get back to us on the morality of defaulting on FRN denominated debts.
Don't to mention we peeps don't have the right to any of our intellectual property the dicklick gov beltway can't steal with their cronies in the gov dime in order that we stick our heads up puppet Hillary's ass so that she must represent us cause they need the 24/7 eyeballs on them being the next big thing as the passion assassins steal all u are just to sell it right back to u in he most hypocritical ways in the endless echoing hole to hell with their slaves held captive in 2 way mirrored glass boxes call war lord liberators as lover pâténted crawls into everyone's bed as lover did mine so many decades ago.
They just want to steal the good shit with their bitter hearts from their victims before hypocritical judgement day to quench their jealous hearts in the inky economy they like for the criminal competition.
Quench their god complex ...
Spot on..!!
The moral hazard by allowing debt forgiveness in bankruptcy would virtually ensure that huge numbers of new graduates default immediately. Most college grads have zero assets and a pile of debt. They can take the credit hickey out of the gate and spend first years of career rebuilding.
The only way this would have a shot of working is if the borrowers are prohibited from defaulting for a good length of time (10, 15 years?).
So you're saying QEINFINITY?
It has to. Until a world war or currency collapse (and the two are not exclusive)
My guess is that the sum of the future cash flows from taxes and the real property (land and buildings) that the Federal Government owns far exceed the student loan assets ...
50% my ass.
I keep posting this... make the interest deductible. You have to keep the debtors in the system or it's the housing crash all over again.
And why do you keep posting that? Interest from my loans were deductible.
http://www.irs.gov/publications/p970/ch04.html#en_US_2014_publink1000178272
Example 1.
During 2014, Josh paid $600 interest on his qualified student loan. Only he is legally obligated to make the payments. No one claimed an exemption for Josh for 2014. Assuming all other requirements are met, Josh can deduct the $600 of interest he paid on his 2014 Form 1040 or 1040A.
it's capped at 2500 per year... as i have posted before. And most don't take the deduction because they don't itemize... because they can;t afford to buy a house.
i hope you're not doing your own taxes. line 18 of 1040A is where student loans interest is deducted, WITHOUT ITEMIZING.
So, out of $1000 interest you get $100 dollars off your taxes. Wow!
Partttyyyy Time!
if there's no incentive to lessen defaults then a large number of defaults will definitely happen...
Unless the intended victims be short the market then ? In pretend land till the rigged marketplace gets off their leash out of their control ..... Monsters will be monsters must be the capitalist fault.... More government
on one side you have the libs who want to pay people to go to school... then you have the tea party types that won't allow a nickel to the deficit so they don't want to allow the deduction... or any other incentive to keep folks in the system... paying. Lost to everone is that tweaking the system to help the borrowers will mitigate the losses from over 50% to under 20%... dynamic scoring... rememeber that.
Boonngggg!
The Tea Party hasn't seen a military expenditure they don't love.
They want a small government and a huge military. The two are not compatible.
Not true, we are mostly isolationists. As far as I am concerned cut the army 75%. It is just another social program anyway.
That assumes there is something to deduct it from.
Calm down, just a normal Pension Ponzi. Young pay money in, old get money out.
Keep going to the movies.
Play your video games.
Your birthright has been stolen.
Lovely. Ugly, stupid, crazy cat women passed over on the marriage market and unemployable at any work not involving wearing a name tag will be able to stick the men who correctly avoided them like the plague with the bill for "following their dreams" for four years, if Senate Democrats have their way.
Why is it there's never money to give hard-working men pay rises or lower taxes, but there's always plenty to shield women from the consequences of bad life decisions amd bad attitudes?
No. Men have to work for what they want. Make women do likewise. They want out of their student loans, the bitches need to lose the attitude and go on the game, the only trade where women earn more than men honestly. Everything else a woman can do, a man or a computer can do better. If they're serious, in five years the debt will be cleared and in ten they'll have enough to retire on. $200 an hour is a wage rate most men can only dream of.
I look forward to that happy day when feminism, banksterism's ugly daughter, is thrown alive on her evil father's funeral pyre. A big reason Russian women look better than American women? Russian feminism died with communism and is now about as well-regarded as anthrax.
I'll repeat what I always say when you post this stuff:
This is not an economic signal nor an indictment of traditional colleges.
It is largely a trillion-dollar theft over the last twenty years by "private universities" either overcharging for basically blue-collar "degrees", or totally fraudulent enrollments by non-existent individuals who then disappear.
Give them all EBT cards. Problem solved.
The cost of college has risen over 1000% since 1975. Compared to homes at 400% and CPI at about 360%. http://www.mymoneyblog.com/charts-college-tuition-vs-housing-bubble-vs-m...
The loans have a lot to do with this as it increases demand, which increases salaries across the board in the education system, which increases the demand for loans. Similar to health care, the root of the problem lies in the cost increases. When we guarantee everyone something, be it healthcare or education, we're adopting a socialist model and this model breaks when it's integrated with a free market offering to cover the costs via loans and health insurance. If society wants to guarantee these things it might be better for all concerned,with the execption of those sacred cows within the industry - nurses, doctors, teachers, administrators etc. - to just accept it for what it is and provide it for free, no loans necessary. It introduces incentives to keep costs down within the institutions. There are none right now.
Gotta love this shit.
First the Social Security Fund was robbed by the MIC (and still is) and it's Grandma's fault. 'Die Grandma they say'
Now it's educational institutions robbing the treasury via Student Loans and it's those wascally 'students' fault. "Get a yob and pay up MF they say'. Course they know there not enough yobs but that doesn't matter.
Wouldn't it be better if someone said "Stop the shit government"!Bring our military and production back. They say thats impossible. Course wasn't 'impossible' when they sent them away.
To hell with small, medium or large government,,,, We need responsible government,,, course they say that's impossible too.
Anything sensible is apparently impossible,,, anything nonsensical is not only possible but probably already done.
"Those future taxes would be paid by successful millennials and their descendants, letting unsuccessful millennials off the hook. So it would have a redistributive effect, part of which would go toward canceling out bad macroeconomic luck."
That's not bad macroeconomic luck, for those who are loading up on debt without any idea of how they'll repay it. That's a total scam just like everything else. Just because somebody decided that they wanted to get a $200K loan to pay for a lesbian studies degree at a private womens college, doesn't qualify them for special treatment. Same applies for getting suckered into Devry, or University of Pheonix.
The loans should be curtailed and distributed based on ability to pay back, dependent on what the job market is for the students major. There should also be a minimum GPA requirement that must be held.
There is a minimum GPA of 2.5. The problem is, your GPA is also like your credits, non-transferrable. New school new GPA. I have a friend who has over 80,000 in studend loan debt with no degree because she tranfered to other schools repeatadly in several states and continues to do so with no intention of ever paying back the loans which she continues to take out.
She tells me she is "Getting back at older generations for the financial mess and terrible job market we are left with."
So what?
General Motors did exactly the same thing, and emerged as the "New GM", while the "Old GM" defaulted on its debts, some of which included bonds bought by retirement systems of teachers, firefighters and other public entities.
In that case, the public was the one what got robbed. Your friend isn't doing anything that the corporations have already done, so why is it all of a sudden "immoral" for her to do whate the corporations have been doing for years?
Oh, I forgot. Little people have no rights.
You really are a Pitiful little retard.
Always with the insulting. You have a valid point up until the last two lines when you decide to spew that kind of rhetoric . And that was her. Not me, so why the hostility.
Just wait until they send Guido to collect
Is that why the USA is ranked dead last HERE??
https://www.cia.gov/library/publications/the-world-factbook/rankorder/21...
Wait a minute.
Why is it all of a sudden immoral and "unfair" for a recent graduate who has no assets, no job, and no prospect of currently ever paying back a student loan, but it is perfectly ok for General Motors to go through bankruptcy, put its debt into the "Old GM", and come out debt free?
Where is the fucking moral hazard in that? You're telling me there is no moral hazard there?
Yeah, right. The only difference between an unemployed student and General Motors is that the latter can afford to hire lobbists, or has them hired by the unions who allegedly represent the workers.
Why is it that moral standards are not applied to corporations, but only people? Aren't corporations people too and don't they have rights? Rights come with responsibilities. Oh, I forgot. The fucking cunt licking Supreme Court didn't give corporations responsibilties, just bought-and-paid-for rights.
Fuck that shit.
Don't forget limited liability. If GM shareholders had been responsible for money owed to the firm's creditors, they would have thought twice before letting management make promises to employees management had no intention of keeping.
Wow, da gum'ment makin' $51 billion with a total debt of ca. 18 TRILLION dollars. On da other hand, da gum'ment found a way to make some dough...along with da institutions of higher "learning".
“It won’t be long before this trillion-dollar mountain of liabilities ends up being socialized”.
If “socialized” means laid on taxpayers, it was done about six years ago.
At that time the Federal Reserve began purchasing several kinds of bad paper from banks: student loans, car lot loans credit card loans, SBA loans.
Yes, all were examples of bad paper, delinquent paper; for, banks certainly wouldn’t sell good paper to the Federal Reserve.
This development was revealed in statistical and news releases by the FR.
It doesn’t take much for a debt system to shift away from 1:1 ratio. That is the conceit behind its impossible mathematics.
At moment of hypothecation debt instrument and its credit money are at 1:1. Very soon, the debt instrument is growing with usury and demanding more credit back than what was originally created. Eventually, ratio will go to much higher, making it impossible to pay off debts. A long house loan may take 3X credit money to pay the mortgage debt. Debts can also be paid off by swapping real productive assets; this is why large companies are the body parts of smaller companies. This is why large agribusiness replaced small farmers.
Credit as money has a time element to it, where it can spin in the economy settling many transactions, but it will be recalled, as the loans must be paid. They have to be paid on schedule, never mind what the real economy is doing.
Positive unwanted feedback is another characteristic of debt money systems, where credit channels against certain assets, driving them up in price and creating hysteria. This then causes more credit to be directed at the asset. Eventually the bubble pops, and credit goes the other way, with no loans being made, yet the drain of money supply continues. This drain includes the principle of the loan being destroyed as it enters ledger and decrements the numbers. A positive number meets a negative number, and the credit as money disappears from existence, in the same way it came into existence. So credit bubbles up, and then collapses down rapidly in a sawtooth shape. Recent housing bubble is an example of this action.
Usury on credit ports to banker on front end of the loan, and he gets to hold it. This usury function on credit rewards banker with high value money on front of loan cycle. Additionally, this credit as money pyramids to finance, as finance has money (credit) creation privilege.
Most of the money supply is used for transactions. This component of the money supply should be floating money, not credit. This floating money ideally should enter money supply as spent on the commons. In this way, it improves the productivity and living standards of all, leaving wealth in its wake, and then goes on to become savings. Once in savings it is not under drain pressure to return to a ledger.
Bankers do not want this type of money in the supply because they will be bypassed, and hence they become useless – which they should be anyway. The only function a banker should have is storing our money and transferring our funds.
Canada, 1938 to 1974 had a very successful debt free money system. In this system, college was free and so was health care. There was plenty of economic overhead to pay for this, as their surplus overhead did not fund financial Oligarchy and rentiers via a corrupt credit money system.
Rents and usury on credit money add at least 40% losses to the real economy. Credit as money takes for its right to exist and its costs are hidden in prices and damage to the real economy.
Re-hypothecations will not necessarily create more credit as money. Sometimes they spawn new debts, as that would be a debt upon a debt. MBS are an example. The new debt instrument wants to recall even more from supply, so ratio of debt to money (credit) climbs rapidly.
It’s the height of stupidity to saddle students with debts. If they cannot be productive, they cannot form households and renew civilization. Society will implode; it must implode when the young are harvested to pay creditors.
Wow. That's a really great essay. Can you write that up and put it on a blog somewhere? I would link to it.
Where does the inflation come from? It is cost push. The cost of the usury and inefficiency of the money makes producers add costs to their goods. Rental overhead adds costs which shows up in prices.
Asset bubbles are a monetary phenomenon, where too much credit chases a fixed asset in a short period of time. Housing bubble, stock market bubbles are examples.
Student bubble is due to real economy not producing jobs, as jobs have been off-shored or replaced with technology.
And yes, finance is again responsible for the off-shoring. In 91 after Soviet Collapse, Wall Street told Main Street Industry we want to make wage arbitrage from China. Move your industry, and if you don’t we will buy you out. China’s state banks helped out by targeting loans to collect Western Industry they wanted.
U.S. government allowed China to recycle dollars into TBills thus keeping dollar high and Yuan low. This allowed (allows) U.S. Govt to spend on MIC and unemployment. This is why there are 800 U.S. military bases overseas, yet middle class main street jobs are disappearing.
U.S government in turn is under thrall to MIC, Wall Street, Extraction Industries, and AIPAC.
Data shows that capital investment comes from savings. Few companies borrow to invest in improved productivity.
The textbooks are wrong. It is myth that credit is used for investment cycles. This myth gets repeated so often people take it as fact. If investment does come from credit, the usury demands are time based, and hence banker/creditor will seldom let debtor have grace. This goes against ancient injunctions of uneven contracts, where creditor has excess power over debtor.
Today companies are in a debt cycle where they are buying their stock. This makes stock prices go up, so captains of industry can then take rental gains in the form of stock options. Real producity is not reflected in price discovery, instead it is financial gamesmanship.
Companies buy their stock by taking out new loans, witness the recent behavior of Apple and General Motors.
That said, the right kind of credit could be used to front load the supply chain. Credit could be useful if it is formed correctly. Also, credit would be a useful drain knob to prevent inflation. We don't use credit properly because credit means are privately owned and used to profit privateers.
Private Bank Credit almost never channels into productivity, and using it as 97% of the supply is a grave mistake. Having credit as money means the credit matches debt instruments, not the transaction needs of a real economy.
Here is a Hudson comment on savings and investment cycles:
"Nearly all new investment in capital goods and buildings comes from retained business earnings, not from savings that pass through financial intermediaries. Under these conditions, higher personal saving rates are reflected in higher indebtedness."
Don't take my word for it. I have no reason to spew bullshit. Sometimes the truth hurts because one has to re-evaluate their worldview.
http://michael-hudson.com/2004/06/saving-asset-price-inflation-and-debt-...