Guest Post: Money Down A Rathole: College, Healthcare, Housing

Tyler Durden's picture

Submitted by Charles Hugh Smith from Of Two Minds

Money Down A Rathole: College, Healthcare, Housing

Households are dumping trillions in hard-earned income down ratholes with marginal returns: costly higher education, healthcare and housing.

What happens when households dump huge percentages of their stagnant incomes down marginal-return ratholes? They get less wealthy, which is exactly what we're seeing. The average American household has been persuaded that pouring money into costly higher education, healthcare and housing are all "investments" that offer high yields.

Sadly, the opposite is true: the returns on these stupendously costly investments is marginal or negative. Let's start with higher education, a topic I have discussed at length numerous times.

In essence, a college degree has lost its scarcity value, and in an era of labor arbitrage (a.k.a. offshoring and international competition), automation and relentless pressure to lower costs, even advanced degrees in law, science and business management that once were perceived as guarantees of secure high-paying employment no longer have scarcity value: the number of people with advanced degrees far exceeds the number of open positions.

Meanwhile, the education cartel has raised prices at a rate that is three times the rate of inflation. The credulous "buyers" of expensive higher education continue to pay absurdly inflated prices for degrees that have marginal value in the real-world marketplace.

We can see the trend in the following chart: wages for college-educated workers have stagnated even as the costs of college have skyrocketed.

Banks that build lavish headquarters soon perish. There is something about erecting monuments of self-glorification and excess that exudes a fatal hubris. Please consider the lavish buildings universities have constructed in the supreme confidence that millions of debt-serfs will continue to willingly dump tens of thousands of dollars in hard-earned cash and crushing loans for degrees with increasingly marginal returns.

Sickcare, a.k.a. "healthcare," is another rathole of waste, fraud and malinvestment. I have covered the sickcare cartel in depth; the key metric of this rathole's depth is that we spend roughly twice as much per capita (per person) as competing developed democracies on healthcare and get questionable returns on the trillions spent.

Buying a house was sold as a "can't miss" avenue to build middle class wealth. Instead, it became a $10 trillion rathole that either loses nominal value or stumbles along, unable to keep pace with the rising costs of ownership (property taxes, special assessments, etc.).

When owners finally give up the idea that the housing bubble can be reinflated, the house is sold for less than the mortgage to an investor who offers to rent the home to the previous owner for half the cost of the mortgage he was paying.

As higher education and sickcare costs rise, labor's share of the national income is declining. Households are earning less when measured in purchasing power, and the costs of college and sickcare skyrocket even as the returns on those "investments" become ever more marginal.

With income stagnant and trillions being dumped into the ratholes of higher education, sickcare and housing, it's little wonder that median net worth has plummeted. Americans saw wealth plummet 40 percent from 2007 to 2010: The Federal Reserve said the median net worth of families plunged by 39 percent in just three years, from $126,400 in 2007 to $77,300 in 2010. That puts Americans roughly on par with where they were in 1992.

I am sickened by the vast sums I see households squandering on hopelessly marginal "investments" in expensive higher education, healthcare and housing. I too am caught in the crony-capitalist/State cartel web of waste, skimming and fraud: we have paid tens of thousands of dollars on no-frills healthcare insurance (no eyewear, no dental, no meds, $50 co-pay) in the past decade, and received perhaps 3% of this sum in care.

But to not have health insurance in America is to invite financial ruin should we suffer some serious illness. The same "must-have" argument supports the conventional wisdom about education: a young person "must have" a college degree if they hope to escape a lifetime of poverty. The issue isn't education per se, it's the ever-rising cost of an education that has arguably lost value in a global job market that faces a vast surplus of educated workers and a scarcity of secure, high-paying jobs.

Simply put, minting 10,000 PhD chemists (for example) does not magically create 10,000 jobs for PhD chemists.

I see family after family making enormous sacrifices to send their children to costly colleges or make bloated mortgage payments with little hope of positive return; I see families who did not have health insurance struggling to pay off crushing bills for hospital care. I personally know people with science PhDs and post-doctoral experience at top universities competing for scarce academic/research jobs against fields of 60 or more other qualified candidates.

Yes, education and healthcare are necessary, but cartels have leveraged this necessity into vast skimming operations that yield marginal returns even as their costs balloon without limit.

Housing is also a necessity, but it does not follow that it is a high-yield investment. Rather, it has become a sinkhole for hard-earned, scarce cash.

Ratholes are not investments, regardless of what the cartels profiting from the Status Quo claim.

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Hype Alert's picture

So, who wants to hold some of this stock over the weekend? 

Precious's picture

Do your patriotic duty.  Refuse Health Insurance.

engineertheeconomy's picture

On the other side of that "Rathole" are some very, very FAT rats...

neilhorn's picture

Healthcare is not an investment. It is an expense. Keep your premiums and save for your medical expenses. Doctors will discount their fees if you don't have insurance. Hospitals will take a promise to pay as long as you agree to pay something periodically. You don't need to pay the insurance company 300X your annual medical cost to protect yourself.

The American people have been conditioned by fear to believe that a medical catastrophe will bankrupt them, so they bankrupt themselves by paying exhorbitant medical premiums that have very little return. When we stop playing the establishment's game they will run out of volume and have to concede that they have been cheating us out of our livelihood. There will be a day for each of us when we will meet the ultimate medical demise. The insurance company can't stop it, nor will they want to pay for it.

northerngirl's picture

It is my understanding that the Amish do not carry any type of insurance because it is against their religion.  They seem to do just fine.  However, I like my car and indoor plumbing.  I guess there is a trade off for everything.

RafterManFMJ's picture

I knew didn't going to school was the right choice for me and me missus.  We May not have much, but we have a toranado resistent trailer and each otter.

granolageek's picture

Where are the trolls? Surely Obama is solely to blame for all these trends that started back when he was smoking dope in the choomwagon.

Meesohaawnee's picture

no, but sure to be known in the history books as "the great enabler"

old naughty's picture

Or, hole-filler. There are simply too many holes to fill, rabbit-; rat-; sink-; ass-; black-...

Jack Burton's picture

Things were on the right track under George Bush, American jobs flourished and American power was world class.

Once Obama was elected he tanked the economy, enabled outsourcing and helped kill off a vibrante housing market.

Clearly Obama has destroyed America in three short years of socialism and muslim extremism.

Now, we have the change to replace a Muslim president with a good honest white Christian who has years of experience as a jobs creator. Under the new Christian leader, jobs will come back, housing will come back and America will conquer Syria and Iran and put in troops to enforce a free market and democracy.

I think a Kenyan president with the Muslim religion was a bad choice for an America that is looking for Christian leadership like America is used to. Romney will, I feel, be elected as honest Americans react to the socialism and anti christan values of a foreign born Muslim who really has no business in America let alone in the White House. Clearly massive voter fraud put him there with all black people and criminals going from polling place to polling place claiming to be resident voters. With no need for photo ID, these voter cheats added millions of votes to a foreign born imposter.

The new laws that require fully honest voting will eliminate millions of fraudsters trying to vote for a welfare provider and muslim extremist. This means honest white American's vote will put Romney over the top and finally begin the resurgent American dream.

There is no question Romeny will be good for America and he is a christian job creator, that is what America needs. Plus he will invade Iran and restore American rule over them to pay them back for throwing out Shah and becoming an enemy of America/Israel.

Good times are coming soon. Unemployed Americans now have hope of good paying jobs and our military will be turned loose to restore freedom around the world.

HardAssets's picture

Tea Partiers are such Islamo-phobes, and easily manipulated.

Look up who is supporting Al Qaeda actions in Syria.

http://www.cfr.org/syria/al-qaedas-specter-syria/p28782?cid=soc-Facebook-in-syria-al_qaeda_specter-080612

Youve been had.

 

'right' versus 'left' , 'dem' versus 'repub' is just an illusion . . . designed to keep your attention off being robbed

Buckaroo Banzai's picture

Well, considering that the Muslim "religion" is not a religion, but a political system-- and a bloodthirsty one at that-- yeah, we're right to hate Muslims. Intolerance, war, and hatred of infidels are fundamental precepts of the Muslim, as fully documented in the Koran.

Ever stop and wonder why the US under both "W" and Obama have been busy destroying secular arab governments (Iraq, Egypt, and now Syria) and replacing those secular governments with Islamic fundamentalists? Its a little alarming, to say the least.

HardAssets's picture

It has been going on a lot longer than this presidency, and is designed to bring instability into the region. F. William Engdahl has written a great deal on this and how it fits into intl geo power politics.

You hate 'Muslims' ?  Just in general ?  And you read Arabic ?  Have you ever met a Muslim, did they do harm to you ?

A couple of nut cases recently hurt and killed a lot of innocent people in America. Are people to imagine that all Americans are raving lunatic killers ?   Do they believe this if they read it somewhere, or heard it on their radios and t.v.s ?

BTW - - - personally, I think O has been a disaster as a president and I usually can't bring myself to even spell out his whole name, but that is another issue.

engineertheeconomy's picture

Jews hate the Muslims because the Muslims are honest, hard working people. Makes it hard for the Jews to steal, makes Jews look like the dishonest sons of bitches that they are

HardAssets's picture

Hmmmmm - - - 'Can't we just all get along ?"

rbg81's picture

Wow--going full retard, are we?  So, Jews don't work hard, huh?  How many Nobel prizes do Jews have vs. Muslims?  Or pick any category of individual achievement or success.  Whatever the category, Jews dominate Muslims.  It isn't even close in raw numbers, despite the fact that Muslims outnumber Jews by like 200:1.  If it wasn't for oil, the GDP of most Middle Eastern nations would be indistinguishable from that of war torn African nations.  And when was the last time Jews killed each other in large numbers?  How about never. Face it, almost all Muslim nations are epic failures.

Bringin It's picture

Dude, if you are going to try a rebuttal, try to rebut something he said/wrote. 

He did not say Jews don't work hard did he?

You're only hope with the strawman approach is if it's not so obvious.

rbg81's picture

Jews hate the Muslims because the Muslims are honest, hard working people. Makes it hard for the Jews to steal, makes Jews look like the dishonest sons of bitches that they are

Uh, not a strawman at all.  He clearly made the implication that the Muslims are honest & hardworking, but the Jews are dishonest theives who hate the Muslims for their virtuous qualities.  Again, any objective review of the facts shows the opposite is true.  Take away oil and almost all Muslim countries are economic and social basketcases.  Only exception is Indonesia.  The only endeavor that Muslims seem motivated to do is waging Jihad though terror.  The person who claims that XXX country or people is successful because of deceit or dishonesty is always wrong.   

Anusocracy's picture

Productive Jews very good. They are very intelligent and capable.

Psychopathic Jews very bad. They are very intelligent and evil.

See how that works.

rbg81's picture

Gee, I guess that's true of ALL people.

Anusocracy's picture

Not to the extent of the Jewish.

Ghordius's picture

Christianity and Judaism have their political, social and cultural elements, too, in Islam they are just codified in a bit more orderly fashion (it is just younger) but, note, not enough that all thousand million muslim follow them to the same degree. Even if there were 300m war-loving intolerant hater of infidels, a silly notion at best, this would still leave two thirds of them not warranting the epitheth of "bloodthirsty".

In fact, if you look at their history it's the Christian Crusaders and the Zionist that were more often "naughty".

Egypt? First British Protectorate (a brief flirt with other things, including Russia), then US Protectorate (since the US called an Anglo-French invasion back) directly under the aegis of the Pentagon.

Iraq? Was a friend as long as it did what it was told, including a war with Iran. It even knocked at the door before invading Kuwait.

Syria? Still a satellite of Russia, with the key Russian Med Fleet Base.

But the trend away from secularism and toward fundamentalism has started in the 60's, W&O can't be blamed for that.

I do wonder a bit how the US can be at war so often in this region without at least five comments of this kind, here.

------

ah, HardAssets, same time. +1

Omen IV's picture

since i am a christian can i get a job first?

Henry Hub's picture

Hay Jocko, I think you forgot the /sarc tag. At least I hope that's what it is.

smiler03's picture

That's what I was thinking. I thought he was imitating MDB.

Hurdy Gurdy Man's picture

It's like a rapist asking you which mask you'd prefer

STONEHILLADY's picture

I think your not getting it, it has taken a lot longer then Obama's short intervention to wreck this economy. It's been in decline of over consumption for way too long. The 80's was the top of the game....Greed really excelarated from that point on.... In 1968 Cornell only cost $4800. for a year, my room & board was $300 month including food which averaged $25 a week... worked as a waitress up at school & made $250 a week...life was smooth, see the difference.?
Graduated with NO Debt which today is impossible... You young will NEVER see that even in 50 years from now unless the system does 180....!

STONEHILLADY's picture

I think your not getting it, it has taken a lot longer then Obama's short intervention to wreck this economy. It's been in decline of over consumption for way too long. The 80's was the top of the game....Greed really excelarated from that point on.... In 1968 Cornell only cost $4800. for a year, my room & board was $300 month including food which averaged $25 a week... worked as a waitress up at school & made $250 a week...life was smooth, see the difference.?
Graduated with NO Debt which today is impossible... You young will NEVER see that even in 50 years from now unless the system does 180....!

STONEHILLADY's picture

I think your not getting it, it has taken a lot longer then Obama's short intervention to wreck this economy. It's been in decline of over consumption for way too long. The 80's was the top of the game....Greed really excelarated from that point on.... In 1968 Cornell only cost $4800. for a year, my room & board was $300 month including food which averaged $25 a week... worked as a waitress up at school & made $250 a week...life was smooth, see the difference.?
Graduated with NO Debt which today is impossible... You young will NEVER see that even in 50 years from now unless the system does 180....!

potlatch's picture

meh.  fair rant, horrible troll.  come on.  no spelling errors.  it's a trap.

Unbezahlbar's picture

define "worse"

 

My house is down 32% but my GLD and SLV and USO are up substantially more. So I'm ok. Bagholders and houseowners are hurting with sinking prices and loss of purchasing power esp if they only had CDs.  Don't forget, the Fed expanded the balance sheet (printing) over 230% since 2008.

The Wizard of Oz's picture

LOOK HOW BIG THAT PIE CHART IS! BULLISH ALL THE WAY!

dark pools of soros's picture

"the house is sold for less than the mortgage to an investor who offers to rent the home to the previous owner for half the cost of the mortgage he was paying."

 

HA!!! you mean the house is taken by the bank and rent tripled!!!

 

besodemuerte's picture

Yep, so what do we do about it?

A Lunatic's picture

Just keep bitching about it...........I think it's working..................

partimer1's picture

yeah, I feel the same....   

Overfed's picture

Elect more politicians who are promising to pass even more laws to fix it! /s

Dollar Bill Hiccup's picture

Just look back at the tuition costs when you were in school. Over 4 years, they expanded dramatically. And the building boom was in its infancy.

New cafeteria, a Scandal!

It's not about education, it's about OVER CONSUMPTION.

Americans are actually under educated, semi literate and prone to go hook line and sinker for subtle and not so subtle propaganda.

Leverage is fueled by labor arb, productivity gains, debt and high fructose corn syrup. They facilitate the disease of OVER CONSUMPTION.

 

sdmjake's picture

Their conclusion is we need more government intervention to equalize the incomes of the various workers... No thanks.

assembler's picture

Last Paragraph of cited paper:

In their paper posted on the Web site of the National Bureau of Economic Research, Levy and Temin conclude, “No rebalancing of the labor force can restore a more equal distribution of productivity gains without government intervention and changes in private sector behavior.”

Henry Hub's picture

I have a neighbor who is a professor of woman's studies at the local college. Her salary is well into six figures. Last year she taught one class a semester. She way so exhausted from this that she had to go on sabbatical this year. Her benefits and pension are fantastic. This is one of the reasons for out of control higher education costs.

FEDbuster's picture

Bingo!

Your story is just another sign that the end is near.  This bullshit cannot continue forever, but it will most likely last longer than we think it will.

cynicalskeptic's picture

Sadly that is NOT the typical experience of those seeking a career in academia these days. The few, the tenured, live high on the hog while more and more associate priofessors teach one or two classes, are paid a pittance to do so - and get NO benefits.  Then you've got Grad students teaching undregrad classes for professors - at close to indentured servitude levels of compensation.  Yet senior administratrs seem to do well along with the elite tenured full professors.  Just TRY to get one of those positions though........   I've seen some astoundingly well qualified people teacihing part time at community colleges and in summer programs - doing whatever they can to make a living because good paying professorships are rarer and rarer these days.  Some full professor retires and they replace them with a couple part time associates.

Seems like higher education is - overall - following the general ternd of paying LESS and LESS to those actually doing the work - with more and more part time professors and less tenured full time professors.  

The example cited is even more of an anamoly as otherwise 'non-employable' degrees - 'Women's Studies, 18th cnetury French Literature, History, Philosophy, (and the list goes on) where 'advanced degrees' are of no use whatsoever except for teaching (or the abstract love of arcane and not particularly useful knowledge).  Technical degrees are in demand - though you see fewer and fewer Americans pursuing MS. or PhD's in Science and Engineering - even back whe I got out most grad students were foreign (though ther was substantial demand for advanced tech degrees).   The problem si that too many Americans do NOT consider whether or not their chosen degree will make them more employable (and employable enough to offset the costs they incur in getting that degreee).  Of course a BA from a top tier school can still open doors but I suspect family  connections count for more in getting that Harvard Philosohpy degree a spot as an analyst on Wall Street than their actual degree.  However simply getting inoto top teir schools distinguishes you as having skill levels beyond the average.

For Joe average, even a basic Busioness or Accounting degree from Mediocre U will not count for much - especially if they've learned little in gettin git.  I'm astounded at how bad cover letters and even resumes from supposed college graduaates can be.   In too many cases, 'college' isn''t even providing the skills someone SHOULD have getting out of high school.   But even as basic High School educatiosn degrade further we push 'college' on everyone, not even offering other choices anymore.  'Tech' - things like Auto Shop, Carpentry, Metal Shop are gone.   Too bad because many kids would do far better as tradesmen than going to a useless college.

Marigold's picture

The way this is written is the best example of just how bad American education is with it's content of ramblings and misspellings.