These Debt Slaves are the Government’s Largest Asset Class

Written on June 19th, 2016 in politics Comments Off

… and It Will Haunt the Economy for Years – Wolf Richter – Published on naked capitalism (first on Wolf Street),  June 16, 2016.

Richter’s post confirms what Matt Stoller foresaw in 2010 in A Debtcropper Society: a lot of people forget that having debt you can’t pay back really sucks. Debt is not just a credit instrument, it is an instrument of political and economic control … //

… In this system, the seller sets the price based on what third parties can pay. That third party includes the deep pockets of the federal government, which enable these enormous price increases.

Customers are told they must have an education in order to succeed in life. So they can’t easily walk away.

What is lacking is market discipline — the threat that a large number of students (say, 50%) will simply refuse to buy this product unless prices come down. Suddenly, universities would see their “revenues” collapse. They would have to compete based on the cost of tuition and fees. They would have to become more efficient. They would have to produce more with less to bring their costs down. And if they fail to lower their prices enough, year after year, as is happening with TVs and smartphones, their customers would simply not buy.

But that discipline is not built into the system. Instead, tuition and fees get inflated year after year without market resistance. Sure, there are some student protests and the like. And after the police-strength pepper spray dissipates, tuition and fees are raised again.

Universities bear none of the risks. If former students cannot find employment with enough income to pay for this debt, and if they then default, or if this debt is forgiven in some manner, then lenders (mostly the government, and therefore taxpayers) eat the losses, while the university smiles all the way to the bank — when it should be the universities that eat the losses on loans of their former students.

This is inflation of the most pernicious kind that will haunt the US economy for years, and the Fed is blissfully blind to it.

So who is the most impacted? Ah yes, the Millennials. Read The Revolt of the Debt Slaves Has Started.

(full text, 3 charts).

Related Links:

Other Links:

Why Did 51 American State Department Officials ‘Dissent’ Against Obama and Call for Bombing Syria? on AlterNet.org, by Vijay Prashad, June 18, 2016: a troubling internal cable signed by a host of U.S. diplomats blames Obama for not striking Syria earlier. Close to half a million people are dead in Syria, as the country falls further and further into oblivion. Data on the suffering of the Syrians is bewildering, but most startling is that the Syrian life expectancy has declined by over 15 years since the civil war started;

Hillary’s Agenda Here and Abroad Intertwined: Full Spectrum Dominance Around the Globe, a Swelling Precariat at Home, on Counterpunch, by ALAN NASSER, June 17, 2016;

51 U.S. Diplomats Urge Strikes Against Assad in Syria, on The NYT, by MARK LANDLER, June 16, 2016;

Creating full employment, on RWER Blog, by Asad Zaman, June 16, 2016;

Scotland and the Referendum, Fears of the Exit after Brexit, on Spiegel Online International, by Vera Kämper in Glasgow and Edinburgh, June 16, 2016 (Photo Gallery – Working Class Neighborhood Easterhouse): the Scots would clearly prefer to stay in the EU, but even here, there are pockets of voters who may support Britain’s withdrawal. If the UK does leave, will it increase prospects for a renewed Scottish independence vote?

Singapore: Knotty issue of income inequality, on Straits Times, June 14, 2016;

Singapore: Don’t write off the benefits of universal social policies, on Today Online, by NG KOK HOE, June 14, 2016;

India: Lot of sovereign wealth funds looking into India and flows are going to increase - Sunil Singhania, Reliance MF, on The Economic Times, by ETnow, June 13, 2016;

France: EELV soutient sans réserve le mouvement social anti-loi Travail, dans FranceTVinfo, le 13 juin 2016;

Suisse – Genève: lier sécurité et droits humains – Didier Burkhalter, dans Le Courrier.ch, le 13 juin 2016: à l’occasion des 10 ans du Conseil des droits de l’homme, le conseiller fédéral veut améliorer la coopération entre Genève et New York au sein de l’ONU pour prévenir les conflits;

Dubai: Middle East sovereign funds sell assets as low oil bites -study, on Reuters, by Tom Arnold, June 13, 2016;

ONU Genève: La Suisse appelle à lier sécurité et droits de l’homme, dans 24heures.ch, le 13 juin 2016: pour les 10 ans du Conseil des droits de l’homme, Didier Burkhalter a lancé un appel lundi à Genève;

Technological Change and the Inevitability of Unconditional Basic Income – Robert B. Reich, 30.10 min, uploaded by NEOPOLIS.network, May 7, 2016 … Future of Work, Gottlieb Duttweiler Institute, Switzerland;

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