We had the dot.com bubble and then the real estate bubble, and now we are looking at the student loan bubble. All over the country, tuition is going up, and students are turning to public and private loans in order to finance the cost of their education. Not only does this mean that many students will graduate with huge debts that will take them years to pay off, but the student demand for credit is resulting in a huge gold rush for banks and other private corporations.
One of the main reasons why the United States has to keep coming up with new bubbles is that there are trillions of dollars of investment money sloshing around the globe desperately looking for a "safe" place to land. A few years, ago it looked like real estate was the stable area for investment because people need homes and credit was freely available. Moreover, the constant inflation of home prices seemed to guarantee a fixed market for financial speculation; however, once people started to foreclose on their mortgages at record rates, the whole pyramid started to collapse.
To prevent a total global financial meltdown, the Obama administration poured trillions of dollars into the banks, and they guaranteed most of the financial institutions' loans with taxpayers' funds. The banks in turn started to buy U.S. treasury bonds and to horde their money because it was safer and easier to earn interest off the money they got from the government than to lend it to small businesses or new homeowners. However, we are now seeing the return to our favorite financial instruments, credit default swaps, collatorized debt obligations, and various exotic securities.
The trillions of dollars of global debt and credit needs to find a bubble so investors can work their magic and turn hard-earned debt into a new source of profit and speculation, and here is where student loans come in. Looking at the American market for college loans, bankers and investors have found a large pool of debt that can be easily increased, leveraged, and sliced and diced. While the Obama administration says that it wants to start taking over most of these loans, it has also said that it wants to regulate derivatives, but it looks like neither of these two things will happen.
We must remember that what has turned the United States into a debtor nation is that real wages for the vast majority of Americans has stagnated for thirty years, while the cost of health care, education, housing, and energy have continued to go up. Besides the top 15% of the American earners, most Americans have been forced to take on debt to pay for the essential things that no one can do without. This constant need for loans and credit has created the debt pool for global capital to invest public and private funds. So don't be surprised if a country like Ireland or Italy goes into a depression if American college students stop paying back their loans.
The global debt and credit market has functioned to hide the growing economic inequality in the United States. Simply put, because Americans have been able to borrow so much money to pay for their homes, health care, and education, most people have not noticed that their jobs do not pay enough to support their basic necessities. Moreover, due to the constant availability of credit, health care corporations, real estate sellers, and universities have been able to charge whatever they want, and they have little incentive to cut costs or reign in executive pay.
From this perspective, the free market is really a giant Ponzi scheme where companies hold down workers wages so that the employees are forced to live on debt, and then this debt is bought and sold on a global market. In this structure, the only way to make money is to be an executive or to be an investor who knows when to leave or enter the market at the right time.
It would be great if the tea partiers understood that while they are protesting against the government and yelling "take your hands of my social security," the real cause for their lost income and homes is the fact that their jobs do not pay enough, and the health care, housing, energy, and education industries have not been regulated. Furthermore, it is because workers have not been unionized, and the laws have been stacked against organized labor, that workers have not been able to increase their income. Without a collective, unionized voice, there is no way that employees can fight for a fair share of their company's or institution's profits.
The basic solution to all of these problems is to unionize all employees, regulate the cost of health care, education, and housing, and outlaw destructive financial instruments. In other words, we should become a lot like France, Germany, and Sweden. Of course, most Americans will respond by saying that we do not want to pay 40% of our income into taxes, but without higher taxes, we all will be paying more for everything else, while we go deeper and deeper into debt. Why didn't they teach us this in college?
This allowed many colleges to inflate their tuition rates beyond those compatible with civilized behavior.
it may mean less than it used to. Still, a bachelors degree from a decent college denotes a certain level of basic literacy, analytical ability, decent work habits and passing familiarity with an area of academic inquiry.
Only those who failed to graduate from a college proclaim that a degree " doesn't mean anything." Usually in an attempt to justify their life's choices, eh seawolf ;-)
They figured out that the only thing better than an HOURLY WAGE SLAVE was a SALARIED INDENTURED SERVANT.
THUS ENTER THE STUDENT LOAN.
These unconscionable instruments require young Americans to waste their PRIME EARNING YEARS rerouting their income to line the pockets of monopolistic lenders at usurious rates. Why the he|| would the government allow private companies to charge ANY interest, much less 8.25%, for loans they guarantee 100%?
Reward is supposed to be commensurate with risk. If no risk, they why the reward? Oh yeah...the banks have better lobbyists than the American people.
You have to carve your own path - one that includes little to no DEBT because:
DEBT = SLAVERY
However, the politicians and their corporate masters will never allow reform.
I'm a business owner and I'm playing the game. Big business had taught me well during my years as their employee "slave".
I opened my eyes years ago and studied their behavior and the legal loopholes.
I enjoy being a business owner. I have learned to make money and preserve my wealth.
I'm also working hard to get a second citizenship in a country with excellent social benefits.
Bwahahaha, Unionized industries are doing such a bang up job right now.
Get an education Creeker.
I have a friend who got laid off his job when he was 52 and he was hired by another company for a similar job with higher salary and benefits. So have a little hope.
Why is housing so expensive? See government-sponsored Fannie Mae, who exist to "expand affordable housing", offers loans up to 940k (hardly affordable) and bought billions$ in subprime loans from anyone who would originate them.
Why is education so expensive? See Federal Student Aid Program, an agency of over a 1000 people who exist to "reduce program costs", now boasts a studen loan portfolio of over $560 billion. (yes that's what students OWE)
Why is health care so expensive? See government enablement of private cartels in insurance, providers, hospitals and pharmaceuticals. With many thousands of lobbyists and billions in campaign financing they will ALWAYS get their way on Capitol Hill.
Now, about the "trillions in investment money sloshing around"?? You can thank the Federal Reserve for creating all that green and spreading around the globe (with no restraint and no transparency.)
Of course this is just my opinion. Don't do any research yourself. Keep blaming the "free market".
Yes, much of the money demanding these crazy investment schemes was created by the Fed, but it and productivity gains went to only the hands of the rich because of incentives and legal abilty to offshoe manufacturing, drive down wages, and create a debt bubble for the former middle class to live off of. A lot of this happened because of laws and regulations were eliminated that used to institute tarrifs, progressive taxes, ecourage unionization, ect...but other laws like the monetary power of the Fed to create a inflation tax that takes most from lower classes were kept in place.
After seeing this experience of a goverment that seems to create laws that will create conditions that favor the rich and harm the rest of us, I think that I can understand why many believe, like you seem to, that a free market is a better solution. And we could have a conversation about if a economy starting from scatch would work without goverment interference (as a student of history, it's hard for me to personally think it could or we'd still have a lot more empires that have crumbled). But with the backdrop of harmful goverment regulations allowing damaging market powers all over the FIRE economy, with the current obscene levels of income inequality that are only growing more (all the gains of the last 30 years went to the top earning few while the rest saw their wages stagnate and costs of living rise; now the rest are falling directly into poverty as our income is sinking and the wealthy still gain) it's hard to see that a free market from this point forward would create anything other then a complete collapse of society into poor masses with a plurocratic rule.
Education for education's sake is fine (if you can afford it) but we are producing too many people with too many useless degrees. Too many lower level colleges are simply con jobs - providing less than a high school diploma used to provide years ago. It's horrifying to read job applications supposedly completed by college graduates who cannot compose a coherent cover letter.
As the US continues with 'globalization' - eg; the endless pursuit of the cheapest possible labor - we see systems and programming jobs off shored to India and Pakistan, engineering jobs offshored or filled with H1B visa holders (even when US grads are available) and even basic accounting work offshored.
Meanwhile the US has abandoned 'blue collar' America completely. Millions of jobs that used to pay middle class wages (WITH benefits) WITHOUT requiring college are gone. We've shipped the industrial base that created our blue collar middle class overseas - or filled the remaining jobs with cheap illegal labor (look at meat packing plants).
The jobs that can't be offshored or filled with cheap labor are often beyond the skill set possessed by most Americans. Being an auto mechanic now requires more skills than most college graduates possess - and more continuing ed than an accountant.
Actually it does mean a better job. Heck a college degree is seperates those with a job and those without a job. The unemployment rate for college graduates is around 5%, while the unemployment rate of those without college degree is at 15%. Even a person with a BA in philosophy is a thousand times more marketable than someone without.
Increase in college grads = increase in productivity. In productive cities like San Francisco and Boston, 30-40% of its residents have a college degree. In slumping cities like Detroit or Buffalo, around 10%. The fastest growing cities in the US are college towns.
It is not a "con" to get a college degree, it is an actual investment, despite what the financial costs are. It is in our economic interest to make college as affordable.
Don't knock on these H1B visa holders. Silicon Valley would not be Silicon Valley without them. Many of these companies were founded by H1B visa holders. They have created more jobs than they have taken.
I hate to say it, but the days when one can build a decent life with just a high school diploma are over. The 1970's are over. College may not be for everyone, I get that, but a post-high school education is necessary to survive. We need to make education and job training more affordable and more available in order to produce more productive people.
You make it almost sound that having just a high school diploma is something to be proud of these