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Guest Post: Money Down A Rathole: College, Healthcare, Housing
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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Every time the government sticks their finger dick in the pie, they fuck it up and then the taxpayers end up footing the bill for these moronic socialist program.
Really is amazing after watching good returns on everything (albeit jacked up by the gov and reckless banks) from the 80s through 2005, I really can't see how we are going to pull through the enxt 25 years with anything more than 1% GDP growth a year. Unemployment will go up, prices will go up, housing will meander, bonds will suck, equities, gold and reverse mortgages are about the only way to have a retirement. Can imagine a lot of American retirees heading to other countries like Greece which should remain cheap until they come out of the Depression.
What gets me are all the 50 and 60 year olds that think it is as easy now as it was for them. There are a lot of people roughly in their 50's and 60's now who would never have made it past assistant manager at McD's who think they are gods gift because they managed to start and grow a business in beanie babies or somethng in the 80's and 90's. Or they think they are genius investors because they maxed their 401k's and bought highly leveraged real estate in the 80's and 90's and made a killing. That misplaced smugness is hard to take sometimes.
Luckily I'm in my 40's so I don't have it quite as bad as those just a little younger, in their 20's and 30's. I really feel for them, they got the royal screw through no fault of their own.
I think you are right but there's another side to the coin. The younger generation has a sense of entitlement that we never had. They feel they shouldn't have to stoop to a minimum wage job. I'm in my forties as well - and I did take a minimum wage job and I wasn't ashamed of it. It takes a while to work your way up - it's not like the 50 - 60 year olds you mentioned started business right out of school and were instant successes. They worked their way up - and the younger generation has to be willing to do the same.
Fuck you Asshole.
Just remember this: when the system comes down, we aren't going to be satisfied serving you meals and wiping your ass. You will be gone long before that happens, and we'll still be above ground.
Fuck you, asshole.
Just remember this: When you come to my house where my family lives and you try to take my stuff, I will shoot you dead. I have weapons and ammo, because I worked thirty-five years and saved my money and bought some.
It's a simple enough calculation. It's profits vs. wages.
Bigger profits mean greater wealth-aggregation at the very top of the scale.
Better wages means a healthier society and a more productive and involved population.
If wages increase, the relative share of total global aggregated wealth will fall for the current owners of the planet, so that must be prevented by any means necessary.
Medical tourism. Cheaper to hire an unemployed neighbor to take you south of the border. Most big pharma medicine makes you sicker anyway. Most physicians are just glorified hawker snake oil salesmen for big pharma. Viva la Vioxx. The only thing that the current medical model is good for is physical trauma.
i do understand your point, but when you say "trauma" do you includen an ear-ache and/or a pregnancy?
Physical trauma and breast implants.
Academic/research jobs at top universities nearly always have large pools of competing qulified applicants. This has been true for years and years. The lack of industrial positions for scientists would be a more telling metric. On the other hand, microserf and other companies keep telling the govmnt they cannot find enough qualified applicants.
Kids these days are screwed for the most part. My net income for my first 6 months post college was equal to total educational input.
I've got a friend whose son will graduate from a E&I program that was right under two years long in December. He already has a job offer that will pay off in less than three months with the OT he will be receiving. Trade school is where it is at. My FIL owns a small HVAC company and as a one man show makes a much better living that your average desk/cubicle jockey. It is hard work though, so I think that would eliminate about 97.8% of our current youth.
Yep, gotta blame them for the problems they inherited.
Yep and blame them for their bad upbringing.
'Americans' feigning to discover 'Americanism'
Ah, yes, things are easier when you steal others' environment, those 10,000 chemistry PhDs would be welcomed to help consume the new inputs brought in by the theft.
But, hey, globalization is nearing its end, it grows harder and harder to increase inputs by theft as there are less and less people left to be stolen from.
So, yeap, those PhDs have to examplify how US citizens have overcome the requirement of an environment to sustain oneself.
Once a thief, always a liar?
.
Once a Chinese citizenism citizen talking mouth monolizer of the speeching means, always a bullshit peddler.
But hey, that's the commaunauty that you were brought up in, so it's self justifying.
At least the chemical engineer and chemist I have on staff actually know how to make something fucking REAL, unlike a Ph.D. ECONOMIST.
Probably why neither one understands eCONomics, the chemist's laws are not negotiable.
Welcome to the societal Ponzi:
With an objective detached heart, peel back the onion of media and society and you will begin to see the insanity; it starts as an inkling of juvenile consumerism with an undercurrent of maudlin sentimentalism, then the two-faced jingoistic hypocritical hyperbole of human hyenas, and finally the stark raving madness and rabid narcissistic selfishness, lust, and mania of modern humanity and society.
? Wrong thread, I guess.
The ratholes of college, healthcare, and housing are a symptom of the above.
All of the items mentioned in the headline above have one thing in common, and it is very obvious after reading the article. Can you guess what it is?
The answer is that each of the market sectors is heavily influenced by federal spending. The federal government guarantees student loans incentivizing financial institutions to originate more student loans. In healthcare, huge swaths of the population, mostly oldsters, are receiving free or subsidized health car at the expense of the taxpayer. The government also guarantees mortgages and encourages mortgages for marginal lenders pumping up demand for housing.
In each of these situations, government money is hot money. Additional demand is created by each of these programs resulting in inflation.
Government programs help in the short-term, but in the long-term people adjust and game the system. Those receiving benefits try to maximize those benefits, and the suppliers raise prices in response to maximize their revenues.
Of course, this is a losing argument. No one believes that the programs that we are deploying to help ourselves are actually the things that are hurting us.
http://dareconomics.wordpress.com/
I’ll just take on one of your points - In healthcare, huge swaths of the population, mostly oldsters, are receiving free or subsidized health care at the expense of the taxpayer.
“Here are some of the new taxes you’re going to have to pay as a current “youngster” for your future Obamacare:
“A 0.9% surtax on Medicare taxes for those making $200,000 or more ($250,000 joint). You already pay Medicare tax of 1.45%, and your employer pays another 1.45% for you (unless you’re self-employed, in which case you pay the whole 2.9% yourself). Next year, your Medicare bill will be 2.35%.”(WSJ)
So, say you’re a self employed engineering consultant making $200,000. You’ll be paying $5800+ annually, non deductible, for your future “free” Medicare.
Now say next year, you’ve become one of those retiring oldsters you mention, ready to receive your “free” Medicare. Be prepared to pay $3780 annually for your basic “free” Medicare Part B, supplemental and prescription premiums. If you’re married, double that to $7560 for your “free” healthcare. And should you live to be a reeeeally old oldster, watch out when you hit 85; after 85 the cost of your “freebie” care nearly doubles.
That’s for today, of course; not even Obama knows what it’ll be when he gets through taking care of you.
Go to college, get a job, buy a house?
That's why they call us American Suckers.
It used to be called the American Dream in the Land of Opportunity. We're Suckers for letting them take it away from us.
There is a disconnect between college coures of study and the demand for those courses. Who told the students that they had a job waiting for them with paper degrees from diploma mills which is all most os our institutes of so called higher learning have become. How many of the students are getting marketable skills? I would guess at least half wasted 4 years of their life and a small fortune for a certified attendance report.