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Saturday, January 25, 2020

2020 is 2008

Another financial crash will likely begin later this year, and for much the same reason as 2008
It might sound like a risky strategy at a time when millions of Americans are drowning in debt: keep raising the limit on people’s credit cards, even if they don’t ask. But that’s exactly what big banks have been doing lately to turbocharge their profits, leaving customers with the potential to rack up even bigger monthly bills.

For years after the financial crisis, Capital One Financial Corp. resisted that step for customers who looked vulnerable to getting in over their heads. In internal conversations, Chief Executive Officer Richard Fairbank characterized the restraint as a radical theology, in part because it went beyond post-crisis requirements, according to a person with direct knowledge of the discussions.

But then Capital One -- known for its “What’s in Your Wallet?” slogan -- reversed course in 2018, after the bank came under pressure to keep revenue growing. The company’s revenue reached a record last year.

The same reversal is playing out across U.S. banking, as more customers get unsolicited access to additional credit, in what’s becoming a new golden age of plastic. The goal: to get consumers to borrow more. The question, just like in the heady 2000s, is how it will end for lenders and borrowers alike. Research shows many consumers turn higher limits into debt. And the greater the debt, the harder it is to dig out.... Outstanding card borrowing has surpassed its pre-crisis peak, reaching a record of $880 billion at the end of September, according to the latest data from the New York Fed’s consumer credit panel. 
Unfortunately, it's not possible to correctly compare the amount of total debt to the situation in 2008, because the series that dated back to WWII and proved so informative was significantly modified and rendered considerably less useful by serious revisions to the state and local government sector.

Even so, the modified version shows that total credit market debt outstanding is now at the same level that it was in the third quarter of 2007. The intervening 12 years have been a period of debt disinflation, essentially a period of treading water with debt growing too slowly to artificially grow the economy but also not being cleared. For the inflationistas, this was the attempt to print their way out of the situation.

As I said back in 2008, it didn't work because it can't work. You can print paper, but you cannot print debtors or debt. Sooner or later, a lot of the debt will be written off, because mathematics dictates that the interest payments will eventually become unsupportable.

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119 Comments:

Blogger Dole January 25, 2020 6:22 AM  

Make sure to not bail them out this time.

Blogger Dilbert19 January 25, 2020 6:59 AM  

" ...was significantly modified and rendered considerably less useless"

Maybe "less useful"?

Good post though.

Thanks!

Blogger roundeye January 25, 2020 7:03 AM  

This is absolutely true. In the past year my credit limit was nearly doubled...but please keep them paid off. It is simple math. A credit card is necessary (kid's dental work, fly to a funeral) but credit debt is poison.

Blogger Clay January 25, 2020 7:05 AM  

Yeah, he who says we should forgive student debt.

Blogger Brett baker January 25, 2020 7:15 AM  

Interest rate reductions? Instead of 14.99%, we'll take 10.99% in order to keep collecting? I wonder if something like that happens.

Blogger tublecane January 25, 2020 7:20 AM  

You can't print debt, no. But you can bubble up credit, and though it will eventually burst it does much mischief in the meantime.

Which reminds me of a clever little book called A Bubble that Broke the World. Subtitle: The Story of the Rape of American Credit. Published in '32, when you-know-what was happening. Written by a Saturday Evening Post editor, back when mainstream media employed literate and nonretarded people. And regular people actually read it.

In those days the gold backstop existed, and therefore had to be destroyed. The book to my memory told the story of the state's raid on privately held gold, an escapade that really ought to have sparked civil war. As such it goes little-remembered. But apparently regular folk knew about it back then.

'08 was less dramatic that way.

Blogger VD January 25, 2020 7:28 AM  

Yeah, he who says we should forgive student debt.

We should and we will. Because it will not be repaid.

Blogger Duke Norfolk January 25, 2020 7:34 AM  

Yes, we're certainly seeing the same kinds of signs as in '07. Banks are clearly easing credit requirements, and aggressively soliciting people to extend and use their credit lines.

And the housing market is apparently getting a bit bubblicious again, although I don't pay attention the way I did in '06-'07.

Also, gold is starting to perk up again. Maybe "sniffing out" a coming crisis?

It ought to get interesting.

Blogger Heian-kyo Dreams January 25, 2020 7:34 AM  

And retirement funds have been growing recently, too.

Blogger Skyler the Weird January 25, 2020 7:35 AM  

I noticed that the Big Banks are back at selling sub prime loans to Shaniqua and Jose. I think 2021 is about right for the regular interest rate to hit. No wonder the Democrats are not serious about defeating the God Emperor. The Commies are hoping Trump will take a fall for it. The Democrats only win if there is an economic downturn.

Blogger Al From Bay Shore January 25, 2020 7:36 AM  

Maybe this experience of mine is related or it is not.

A salesman for a hotel chain tried to sell me a type of timeshare on behalf of the chain. He knew I could not pay for it upfront yet he persisted. I asked "Why don't you guys sell to people who can afford to pay for the entirety of the timeshare without the need of financing?" He said, essentially, "We are not permitted to to do that." The chain for which he worked also provided the financing plan that accompanied the timeshare purchase. At that moment, I may have had an epiphany. That chain was not selling timeshares, they were selling debt. The timeshare was merely a selling point used to make the sale of debt appealing to the consumer.

Blogger Attila is my bro January 25, 2020 7:53 AM  

Make jubilees great again!

Blogger Dan in Georgia January 25, 2020 8:05 AM  

Forgiving student debt would free up a lot of income for buying assets instead of...nothing.

Blogger Clay January 25, 2020 8:05 AM  

I'm sure you won't, VD. But I will, one way or another. People who make debts, should be required to pay. Maybe we should make a "stupid" clause for those who inquire debt.

Blogger Clay January 25, 2020 8:12 AM  

Yes, yes, I know the "quire" word was incorrect. My apologies.

Blogger Lazarus January 25, 2020 8:14 AM  

Investopedia tells me that student loans are used as part of the structure of Collateralized Debt Obligations (CDO's). If the loans were written off, would this not trigger a crisis like the collapse in the housing market did?

Blogger Shane Bradman January 25, 2020 8:20 AM  

Wealth is not the natural state of man. We have become wealthy at the cost of our futures, and will return to our natural poverty before too long.

Blogger Dan in Georgia January 25, 2020 8:22 AM  

I think the plan was for it to happen in 2017-18. Of course, by mid-November of 2016 we were supposed to be in a land war against Russia, Syria, and Iran by then. War-time rationing, oil shortages, hyper-inflation, and new wind-up events, all leading to nationwide gun confiscation, along with the subsequent riots, a return of the draft (now with women!), and martial law.

But we elected Trump. Thank God.

Blogger VD January 25, 2020 8:35 AM  

People who make debts, should be required to pay.

That's both illogical and anti-Biblical, Clay. Debts that cannot be paid will not be paid. You cannot require people to repay debts they cannot pay. You cannot get blood from a stone.

Blogger David Ray Milton January 25, 2020 8:35 AM  

It’s almost as if you can’t circumvent God’s prohibition on charging money to use money.

“How dare you, sir? Without charging interest we wouldn’t have our holy smart phones!”

Perhaps God is not as interested in unrestrained economic and material “Progress” as we are.

Blogger VD January 25, 2020 8:36 AM  

At that moment, I may have had an epiphany. That chain was not selling timeshares, they were selling debt. The timeshare was merely a selling point used to make the sale of debt appealing to the consumer.

Bingo. That's exactly right.

Blogger John Regan January 25, 2020 8:40 AM  

For what it is worth, I devoted a lot of thought to all this during the last crisis. What I came up with was basically: a) a jubilee; and b) a return to the gold standard, at whatever dollar to gold ratio was feasible depending on how much gold the government had or has. Then I figured maybe the gold-dollar price should be capped. Then I thought maybe the government should be able to lend at no interest, to discourage and displace lending at interest by banks. I never really got much feedback on it all, and to be fair I probably don't know what I'm doing. But then I might know what I'm doing. In any case our political class will never consider any of it. It would have to be a populist thing and a constitutional amendment.

Blogger Leahn Novash January 25, 2020 8:52 AM  

I work in a bank and that's not how they reason. Interest rate reduction is only ever offered to attract new costumers or to recover lost ones. The bank will charge you and attempt to collect as much interest as possible until it is clear that you can no longer pay, then they will write off all the interest and offer you a deal where you only pay what's left of the principal.

Blogger Azure Amaranthine January 25, 2020 8:52 AM  

"after the bank came under pressure to keep revenue growing."

Immoral means + selfish ends = evil actions.

"Sooner or later, a lot of the debt will be written off, because mathematics dictates that the interest payments will eventually become unsupportable."

The rope can't just be played out further? They like to do that. Make a loan of "money" an order of magnitude larger or such in order to pay the interest.

"People who make debts, should be required to pay. Maybe we should make a "stupid" clause for those who inquire debt."

It shouldn't be as easy to "make debts" as it is, and it definitely shouldn't be pushed the way it is. Your argument applies equally well to your friendly neighborhood drug pusher who has no qualms about children buying. Should the kids know better? Probably. Will they? Probably not always. Do you really want to let him profit off that, or are we going to bankrupt him or disappear him?

It's even worse in our case, because a lot of the friends and parents are pushing them to use the debt drug too, for the sake of the lauded yet crummy stimulus package named college.

"You cannot get blood from a stone."

I only wish people were as hard to find alternate means of extraction for as stones are.

Blogger Clay January 25, 2020 8:53 AM  

Shoot, I understand the "biblical" sense of debt. I just don't know why you equate religion to modern day finance.

Say, some guy owes you 500K. When he tells you he can't, or won't pay, "that's OK brother, You don't have to pay, let's go have a burger and beer, on me."

I don't think so.

Blogger Leahn Novash January 25, 2020 9:00 AM  

The guidelines I received for 2020 at the bank I work certainly advocate to suggest customers to get more debt. I find advocating for a needless home equity to be particularly evil. Still, does not really matter to me as I work solely with social payments.

Blogger Leahn Novash January 25, 2020 9:09 AM  

VD, I know you don't usually answer comments directly but I'm hoping you will open an exception this time. I ask you, what can we do? You predict it to the next year so we have about an year to prepare.
It's obvious we can do nothing to prevent it but how can we prepare for it so we can lessen its effects for us and our loved ones?

Blogger Dole January 25, 2020 9:14 AM  

Good deal on student debt:
- Universities pay for the relief.
- Scam degrees are made illegal.
- Victims of the scam get money back.

Blogger Uncle John's Band January 25, 2020 9:16 AM  

"Yeah, he who says we should forgive student debt."

Grayscale is a nice transitional state between black and white and reality.

Blogger VD January 25, 2020 9:16 AM  

Say, some guy owes you 500K. When he tells you he can't, or won't pay, "that's OK brother, You don't have to pay, let's go have a burger and beer, on me."

You're a moron, Clay. You are literally too stupid to understand either the situation or the principles at stake.

Let's take your example of the guy who owes you $500,000. If he makes $25,000 per year, when is he going to repay you?

A) In 20 years
B) In 40 years
C) Never

You made the loan. You are responsible for taking the loss if the debtor is unable to repay.

Blogger RobertDWood January 25, 2020 9:18 AM  

It is clear you don't understand the biblical view of debt.

Blogger tublecane January 25, 2020 9:24 AM  

The problem with student debt in particular is that it scorns the consideration aspect of a contract. Because barely anyone benefits from college education, except credentially. But we might as well hand those out for dressing well or having a neat hairdo. Discounting fields where you're directly responsible for human life.

People go to college almost automatically, even if it's not compulsory. There's still compulsion. And state interference up the wazoo.

Student loan providers are like drug pushers or prostitutes. Pushers "step on" their product, and as the Wire put it: the worse they do the more they make. Dilute the drugs and addicts need to buy twice the product to get half as high. Unless you get undercut by a competing product. But the guys pushing those are playing the same game.

Which is my long way of saying student loans are the type of business where the worse they do the better they make out. Unless people drop or flunk out in droves, or decide to scrape by on their own. Or if prices get so ridiculously high that they drive people away. But that hasn't happened.

Not to mention the university system is a horrible monster begging to be slew, occupying enemy territory that'll have to be reconquered.

Blogger Shane Bradman January 25, 2020 9:32 AM  

Debt is the creation of fake money. Paying off a debt of fake money with real money is a destruction of value. We've been doing that for many decades and we are now poorer than our parents and our grandparents. I would gladly watch the banks burn if it meant ridding ourselves of usury.

Blogger Brick Hardslab January 25, 2020 10:03 AM  

This debt had been made non-dischargable. What's next assigning it the the heirs?

Blogger RC January 25, 2020 10:08 AM  

The universities look out for themselves but cloak it all with pablum: benefits for the community and even the nation, lifetime earnings BS, and more, all to justify the debt. One especially cruel example is the number of minority athletes who take on debt then flunk out before completing their freshman year. Those athletes are now back in the hood with $20K in debt, an 75-90 IQ, and no education at all. How's that debt going to be serviced? We all know the answer.

Blogger LiveForever January 25, 2020 10:09 AM  

The linked article says that more than two-thirds of the US economy is based on consumer spending. Let's say for the sake of argument that of that, one-third is entirely debt-fueled consumer spending (could be higher, could be lower). That is c.22% of the entire US economy based on fake demand, i.e. spending that would not (and cannot) exist without debt.

That means that all of the jobs and capital investment created by producers/importers to serve that fake demand is also entirely fake and shows why debt-driven economic collapses are so destructive and far-reaching.

Blogger Ransom Smith January 25, 2020 10:09 AM  

Good deal on student debt:
- Universities pay for the relief.

Nice in theory, but a lot of universities won't exist in a few years.
So who pays then?

Blogger Azimus January 25, 2020 10:11 AM  

So if we have essentially 1 year to prepare - is it better to dig yourself out of debt or is it better to stockpile cash and let the debt ride? I suspect the former to protect from employment volatility, but I seek counsel.

Blogger LZ January 25, 2020 10:26 AM  

GDP growth during the 1930s depression exceeded GDP growth in this depression. See it here: The Booming Depression

Blogger Bert Head January 25, 2020 10:31 AM  

@16 Lazarus; I saw an analysis of the growth of total system debt, which showed a slight decrease just before 2008, after years of steady increase since the '70s. This indicates that the system requires a constant increase, so writing a lot of debt off would precipitate a collapse. I would expect such a write off to occur after the crisis, though, not to cause it. The system is vulnerable to people or institutions being unable or unwilling to increase debt, and other debt being paid off or written off. I expect sovereign debt to step up to the challenge, until the zero/negative interest rate situation collapses.

Blogger Ska_Boss January 25, 2020 10:33 AM  

Just wait a bit longer, it will soon be a good time to buy a house.

Blogger Ominous Cowherd January 25, 2020 10:33 AM  

Clay wrote:Say, some guy owes you 500K. When he tells you he can't, or won't pay, "that's OK brother, You don't have to pay, let's go have a burger and beer, on me."

I don't think so.

You don't think at all, except perhaps in slogans.

When a bank ''lends money,'' it actually creates currency: the bank had no currency, but created it as a ledger entry, using the debt as an excuse. When the borrower defaults, the lender loses a stream of revenue, but it loses no money - it never had money, never loaned money. The bank counterfeited money when it made the loan.

To make itself whole, the bank merely has to find another sucker to take out another loan. They create more currency with another ledger entry, and it begins again. They will never run out of ledger entries.

It's not immoral to default. The immoral act is to create fake money with a ledger entry, because that defrauds everyone.

Blogger MagnusStout January 25, 2020 10:34 AM  

Was having dinner last night with a couple & we briefly talked politics—Orange Man Bad, of course. The wife’s an anthropology prof (with tenure) and was bragging about how she teaches.... sees herself as something like a secular priest (“race is a construct”, Foucault, blah-blah...). She flatly stated that it was her duty to “enlighten” as many students as possible in the age of Trump.

Lesson: While I agree 100% with Biblical Jubilees, and I like Michael Hudson, I think most Universities need to suffer because: 1) they willingly dispensed useless degrees for onerous debt, and 2) they are filled with toxic secular priests.

The dialogue on the Left (AOC, Bernie, etc) simply erases the effect (student debt), without addressing the cause (University should not be an extension of high school). Some on the Right (Peter Thiel) have done a good job of challenging the assumptions that everyone should go to college. Companies need to gut HR and re-embrace the concept of on the job training so that fewer get brainwashed by the secular priests. Otherwise, they will continue to fall prey to the Corporate Cancer that VD speaks of.

Blogger Leahn Novash January 25, 2020 10:35 AM  

Not sure. I think the first step is non-dischargeable. The second step is to allow the plundering of the inheritance after debt to pay for it as much as possible. The third step would be to assign to the heirs.

Blogger The Cooler January 25, 2020 10:39 AM  

It's interesting, y'all... prison terms for unaggravated indigence are illegal, yes; but the Prometheans get paid for aggravating indigence of the most vulnerable and to conjure the most convincing ignis fatuus of wealth and option for the plebeians.

Free-range slaves are best, turns out.

Blogger RedJack January 25, 2020 10:40 AM  

Just looked. One of mine has a limit over 20 grand. I don't remember it going up. Light manufacturing is slowing down. Heavy equipment is dead. Lots of people here are trying to join a drone manufacturing company, but I am not sure the GE is going to keep expanding the never ending war much longer.

Blogger Esmar Tuek January 25, 2020 10:43 AM  

Debt is how money is created. It is not as simple as "some guy owes you.."

Blogger Long Live The West January 25, 2020 10:53 AM  

Debt forgiveness is a biblical concept. God Himself ordered the complete absolvement of debt every SEVEN years. Everyone whines about how it wouldnt be fair because THEY had to pay it so why should someone else get off the hook? People are greedy, self centered, and would rather watch people live in poverty and misery than have life be 'unfair'.

It's pathetic.

Is their gender studies degree dumb? Hell yes. But who exactly approved a 80k loan for a degree that will pay 30k a year?

Forgive the debt and string up the predators making this happen.

Blogger Joe Smith January 25, 2020 10:58 AM  

@Ransom Smith The way those universities should stop existing is by having their endowments fully drained to pay for student loan debts, i.e., they get penalized for predatory practices. So basically the response to your comment is: first they pay, and then the stop existing.

Blogger Jake Burton January 25, 2020 10:59 AM  

Agreed. I go home and I have tons of letters about personal loans and "open a credit card with us and get $100 cash back."

I go to work at the collections firm and there's a sea of credit card debt files to be reviewed, and the call center department is expanding a lot. So many people who racked up their credit cards and then don't want to pay.

Have to keep in mind though student loan debt is really worse in both ways than credit card debt. You absolutely don't need to go open that Victoria's Secret card and rack of 5k debt.

Yet for so many jobs it seems like a bachelor's degree is a pretty vital requirement to meet. Definitely wouldn't been too awful if something big was done about reducing people's tuition debt.

Blogger RJ January 25, 2020 11:02 AM  

@Clay:

Student loan borrowers didn't borrow from you, or any other 'taxpayer'. And the mythical 'taxpayer' won't end up paying for the student loan jubilee either. That's not how it works.

I do agree that the universities need to be punished, mainly by simultaneously abolishing their source of easy money by getting FedGov out of the student loan business.

Blogger Unknownsailor January 25, 2020 11:04 AM  

I just paid off all my credit card debt. I am in my final year of school, and will be graduating owing under $10k, which I can pay off in 6 months working.

The housing crash at least had physical assets to recover from people who defaulted on their loans, not so much with a pure unsecured debt default crisis. The GDP contraction once the debt bubble detonates is going to be significant, and my only hope is that the People finally raise up and declare, "Enough!" when the government tries to bail out the banks yet again (and they will, lots of campaign contributions emanate from those banks.) Lots of people still remember that no one went to prison for the housing bubble, even though thousands should have, and if that happens again, I think there will be some directed violence.

Blogger Scuzzaman January 25, 2020 11:14 AM  

No way to convince people to accept a Fed-run cryptocurrency unless you crash the dollar first.

When the Feds run the cryptocash then they don’t need a parallel surveillance system to track all your financial activity - it’s built in. Whoever runs the blockchain knows everything about everyone.

Blogger Nate January 25, 2020 11:15 AM  

we bailed out the banks last time. they not only got away with mountains of fraud that nearly broke the economy... they literally were made far richer by the bailouts. so obviously they have decided to do the same thing again. like a child who deserves a spanking for stealing candy. not only did the kid not get the spanking.. we let them keep the candy and gave them a big bag of doritos too.

Blogger Johnny January 25, 2020 11:49 AM  

The core problem with this stuff is that when a general credit contraction occurs, a financial crash, either the public has to pick up the bill or it gets a whole lot worse. Like 1929-1932 bad. And so like it or not the public will pick up the bill. Delay it and it will only get worse until it is so worse that the public will pick up the bill regardless.

To fix it you have to fix the future so it doesn't happen again. That is what can get fixed and doesn't get fixed because people focus is on the present. Vent your spleen on the banker-Judas's goat is the usual solution, followed by no institutional fix. Wash, rinse, and repeat; every couple of decades.

Blogger bodenlose Schweinerei January 25, 2020 11:53 AM  

The repo market has already reached the crisis point, and only hundreds of billions of "free" money from the Fed has contained that overflowing hog lagoon, and that's not even the most dire debt pool (local governments probably are).


And to be clear, the 'taxpayers' have barely managed to pay the minimum monthly payments on the current levels of public debt, there's no way they can take on more. All the bailouts have been new debt to cover old debt.

Blogger jarheadljh January 25, 2020 12:06 PM  

Ska_Boss wrote:Just wait a bit longer, it will soon be a good time to buy a house.

I'm not so sure about that, because we don't know exactly what mechanism is going to be used by the GE ride out these rapids. We may just hold on tight and go through the chute, or we might paddle to shore and the carry the boat....honestly this metaphor is starting to annoy me, so will the dollar be devalued? Will the government itself begin selling off massive assets like public land and/or mineral development rights? No one is going to buy a Nimitz class aircraft carrier sort of a Saudi Prince who wants one of his palaces to be unique so the GE is going to have to do something along these lines. A debt jubilee where all debts are forgiven and anyone that was even trying to make the payments gets to keep the house/car they took out the loan for, well I don't see how that can be done with the current US dollar and especially not with whatever shape it will be in after this all happens. We're gonna need a new one.

The fact that Trump has packed the fed with goldbugs is at least a hint of what I believe is coming.

Blogger HouellebecqGurl January 25, 2020 12:11 PM  

Same, even though I'm basically exactly where I was financially in 07,my credit limit has jumped to 2002 levels.
Scary.

Blogger cecilhenry January 25, 2020 12:12 PM  

Its true.


I received a special letter from my bank offering me a drastic increase in my credit line although I've never asked for one.


Normally I never receive mail from the bank as I ask for all electronic banking.

Blogger HouellebecqGurl January 25, 2020 12:13 PM  

Should be and will are two different things. Those debts will NEVER be paid off and we need them gone, as a country. .
Everything is not all about you.
And no, neither I nor my children have outstanding student debt.

Blogger HouellebecqGurl January 25, 2020 12:16 PM  

I grew up in Alabama, and as my old great grandaddy used to say, "You can't get no blood from a turnip, gal."
This was when even poor country farmers had more sense than current year elites.

Blogger Azimus January 25, 2020 12:17 PM  

@ Shane Bradmam - ahh but you need to define wealth. Because man absolutely accumulates, that is the natural state of man. But 21st century man has been fooled into believing that "stuff" is wealth, therefore whether credit markets go up or down, he still has his stuff, and is still wealthy. That most of his stuff is worth $0.20 on the dollar he paid for it means nothing, because he doesn't measure wealth in dollars. This isn't necessarily bad unless... you are buried in debt measured in dollars and the loan is called, the illusion is wiped out, and people realize they've spent their life earnings on a heap of worthless garbage.

So its not necessarily natural for man to be impoverished, but natural for man to be fooled and robbed. At least in high trust societies such as ours.

Blogger HouellebecqGurl January 25, 2020 12:19 PM  

Hey Vox, I know you don't watch videos, but this one minute advert called Guilt Fairy where Boomers talk about taking the money and running is everything we talk about when we say selfish Boomers, in a 1 minute video.

https://youtu.be/7zdkCLhjYoA

Blogger Hammerli 280 January 25, 2020 12:25 PM  

I'm with the guy who questioned Fauxcohontas about her scheme for forgiving student loans.

Nobody seems to give a damn about the honest man who paid his debts. Worked hard, scrimped, saved...practiced all the old-fashioned middle-class virtues. And is getting robbed...AGAIN.

And I'm fed up with it.

No. Folly must be punished.

Blogger Ransom Smith January 25, 2020 12:45 PM  

So basically the response to your comment is: first they pay, and then the stop existing.
You're assuming every University is Harvard with a massive endowment.
A lot of them just aren't that financially viable once enrollment drops.
They'll bleed to death on their own.

Blogger Pathfinderlight January 25, 2020 12:48 PM  

In general, Christianity views deals that result in immorality as invalid and void. This results from the fact that it's more concerned about regulating a person's morality, rather than extracting value.

If you look at all the changes in America since about 1950, every major change has been about extracting more and more value. During the 2008 financial crisis, what did the vast majority of talking heads concern themselves with? Federal government income. They viewed everything through this lens. Gross Domestic Product? Median Household Income? All only useful if the Federal government was able to extract more taxes. That's when I found out these people are just the same as communists, only viewing people as economic units to move around on a board.

Don't let these people use our vitrue of wanting peace, fairness, and prosperity for all to fool you. These are not ends in themselves. If they lead to immorality, they need to be set aside.

Blogger peacefulposter January 25, 2020 12:52 PM  

You can print paper, but you cannot print debtors or debt.

This is bang on and explains why the Fed is far more impotent than most folks believe. The supply of money is driven by demand, i.e. borrowers. Sure, the Fed can influence demand by lowering interest rates but that game only goes so far.

And the game is in the fourth quarter.

Blogger Pathfinderlight January 25, 2020 1:01 PM  

My time working at a college showed me all their decisions are governed by wealth extraction. Regardless of what was good for the students, the school's reputation, or the society at large, the almighty largesse won out every time.

There is only one way to fix this situation. Cut all government funding to colleges. Then make them pay back all unpaid student debt for eight years to make them sell off their buildings. The financial sector will gladly help liquidate these. Then declare a surprise national debt jubilee, not just student loans. Oh, and nullify all degrees beyond high school because they are the result of corruption. Everyone gets a fresh start.

Blogger Raker_T January 25, 2020 1:20 PM  

FWIW Stansbury Digest has been saying for at least a year that while not as big, the current upside down crisis is vehicle loans. Lots of people driving vehicles they can't afford.
On a personal note, the title of this post is unsettling because I'm working construction for a friend. The last time I had to do that was 2009, same guy. This time, it's with the stipulation that I work days when I can't sell my own work. Around here, that can merely be winter, people who have money and a need will wait until spring, then everybody calls at once.
Anyway, when things get tough I do cold call sales. The last time I did that was about 6 years ago. Drove around for 6 hours to make a $250 sale. Not a good ratio. The other day, I decided to try something different. I used free software to make a business card sized layout. This wasn't the usual all writing arrangement. I scaled down a number of pictures of jobs I've done. I included my phone number.
I was going to buy a set of tires, and knew that there were a number of repair facilities on the way, who work in the same field. I stopped in one place, the repair manager wasn't in, so I took a card. The next place I stopped, the guy said that yes, a man was in that very morning needing paint work done. He gave me his number, and I went to get the tires.
After buying the tires, I sat in the lot and called the number. The man was glad to talk to me, and this led to an $1850 sale. First call. I was floored. I've been doing my own sales for 38 years, and first call? Buddy that's awesome.
Part of the job is delayed by scheduling, so I'm analyzing what happened. It's layers of targeting and using new technology. Since I can go to the copy store and use the customer service computer to make copies, I don't need to buy $25 worth of cards for each thing I want to promote. I specify color on glossy card stock, with a bunch of card sized images on each page. The pages cost about 50c each, so I get 5 made. I take them home, and with a cheapo paper cutter, cut them to size. I'll probably end up with between 5 to 10 different cards to target specific kinds of work.
I know is has gone a bit OT, but I want to explore what I can do to keep right folks employed in the doxx age.

Blogger SirHamster January 25, 2020 1:27 PM  

Clay wrote:Shoot, I understand the "biblical" sense of debt. I just don't know why you equate religion to modern day finance.
Good grief, you're gullible if you think adding the adjective "modern" exempts finance from religious practice.

Do you think setting slaves free for the Hebrew Jubilee was religious but not financial? How about not working one day every single week?

Do you currently work 7 days a week?

Clay wrote:People who make debts, should be required to pay.
Your attitude is like the unforgiving servant in the parable.

"The servant’s master took pity on him, canceled the debt and let him go.

But when that servant went out, he found one of his fellow servants who owed him a hundred silver coins. He grabbed him and began to choke him. ‘Pay back what you owe me!’ he demanded."


You are keeping an account of the (theoretical) debts owed to you, while taking for granted the debts you have been forgiven.

Your mindset will go to Hell. If every man must pay his own debts, your sins are not forgiven.

The smart move is to throw out that mindset and save your soul.
Bankruptcy law exists; not all debts are repaid. The nation is bankrupt on every level. It's time to declare bankruptcy and forgive debts.

Blogger RC January 25, 2020 1:36 PM  

"No. Folly must be punished."

I don't disagree. Let's figure out who should be punished and then put the hammer down. As far as the students are concerned, many if not most were lied into borrowing because:

1. You must go to college to be successful.
2. Lifetime earnings are 50% more for college grads.
3. With those higher earnings, you'll be able to pay back the loans.

No one tells these fresh high schools grads the truth about anything: percentage of drop-outs, vast differences in the earning power of degrees, how difficult it is to retire debt, or even an honest appraisal of a student's potential success in a worthwhile degree program. And this ignores the severe and accelerating lowering of standards in most courses of study over the past decade. Going to college outside of STEM is a complete waste of time and money.

You can spend just a few hours in a college classroom to have this brought home good and hard. I recommend sitting in on a sports business class. The uninitiated will be shocked.

Blogger Dwayne Thundergrit January 25, 2020 1:57 PM  

"I think the first step is non-dischargeable."

Would reversing that gradually take care of the problem ?

Blogger Johnny January 25, 2020 2:01 PM  

The thing that makes these student loans go is the expectation that if the student never pays the government will. All that is needed to shut it down is to take away the covert or explicit guarantee of principal by the Government. Lacking that and banks would chill out on making the loans. (Also, I have a kind of vague memory that they may have shifted the borrowing directly to a government agency. Same thing if it happened, just cutting out the middle man.)

The manner by which they do it is covert and complicated, but most real estate loans are guaranteed by the government. Freddie Mae and Fanny Mack are the agencies. Terminate that and banks would start borrowing with greater reluctance. Or at least the ones not judged to be too big to fail would.

The way to fix the too big to fail thing is to require these big banks to have way more capital. That is assets minus liabilities, or net worth. No gold coins needed and they would chill out on buying the bundles of loans that Fanny May and Freddy Mack churn out. That would cause the banks that sell (or discount I guess ??) real estate loans to the May and Mack crowd to take losses on low quality debt. Ergo, they wouldn't make the risky loans that the public now ends up paying for.

Oh they could shut it all down if they wanted to, but they don't want to.

Blogger Daniel Heneghan January 25, 2020 2:29 PM  

@30 VD

>>You made the loan. You are responsible for taking the loss if the debtor is unable to repay.

But can we stick it to the universities, make them pay the price for this? It would suck if they walk away - unpunished, undeterred - after the jubilee.

Blogger Akulkis January 25, 2020 2:38 PM  

@38

"So if we have essentially 1 year to prepare - is it better to dig yourself out of debt or is it better to stockpile cash and let the debt ride? I suspect the former to protect from employment volatility, but I seek counsel."

More than likely, this will lead to more "quantitative easing" -- codeword for "flooding the market with dollars so that, liquidity doesn't plummet, and people won't hoard cash, which would cause the economy to crash."

So, there will most likely be another round of inflation. If they see a need for "QE" then they will err on the side of more than necessary rather than less than necessary (too little is just as bad as none at all).

The interest rates on variable rate loans will go up.

If you have variable rate loans, get them locked into fixed rates. Then, let them ride for a while, because the loan is in terms of dollars, not value. The longer you wait, the less value each dollar will have when you repay it.

Inflation is good for borrowers who have fixed rate loans, and hell on lenders of fixed-rate loans (although the inflation makes it easier for their debtors to make payments, thereby keeping the lender's their books in the black, so they can stay in business).

Realize that whatever cash on hand that you have will decline in value.

Valuable lesson: In 1985, 14,000 Soviet/Russian rubles would be enough to buy you a car (However, there was not enough on dealer's lots for most people to make that purchase. People in the Soviet Union were on waiting lists for years).

By 1998, 14,000 roubles would barely buy a loaf of bread, and most certainly would not buy you a sandwich and a soft drink at even the cheapest of fast food restaurants, such as "Karolina's").

Interestingly, in 1998, the fare on the subway /tram/local bus was the same as what it had been for years upon years -- only a few kopecks (hundredths of a ruble). By 1998, that meant that a ride on local public transportation was 1/200th of a US cent ( < $ 0.00005). The intra-city public transportation in Russian cities was essentially 100% subsidized, as without that, most people would have been too immobilized to even look for work.
I remember being in a bar, out with my sketch pad, talking to a British businessman, who noted: "The unemployment rate here is around 30%, yet the subways and buses are always full of people. Where are they going? What are they doing?"

Looking back, I now realize the answer: could be anything, including just joy-riding, or going to visit friends, as the fares are even cheaper than even the cheapest of pulp-fiction novels at a used book store.

The Russians got through it by sticking together, sharing with friends and relatives what they could, when they could, knowing that the gesture would be returned without even asking if/when the tables were reversed.

Blogger Akulkis January 25, 2020 2:44 PM  

@38

"Just wait a bit longer, it will soon be a good time to buy a house."

I expect that the combination of a financial downturn prompting tens of millions of illegals to go home, and a boomer die off, that there to be such a glut that many decent homes will be sold for $1. What good is owning 3 houses after the wills are executed, if you can barely pay the property taxes on one? Therefore, the excess will be sold for whatever the buyer offers, for the simple reason that the inheritors don't want to be paying taxes on a house they aren't living in, and don't have the time, the money, or even the inclination to visit the other homes.

Blogger Akulkis January 25, 2020 3:09 PM  

@52

"Lots of people still remember that no one went to prison for the housing bubble, even though thousands should have, and if that happens again, I think there will be some directed violence."

And there wouldn't be much resistance to it, except that the banks have convinced every company that direct deposit or payroll debit card are the ONLY way to execute payroll obligations.

If people were still being paid by cash in hand from the shift manager, anybody attacking the banks would enjoy just as much, if not more, popular support than the various bank robbers of the 1920's and 30's.

John Dillinger held up many banks in the northwest quarter of Indiana, and he was downright popular with many of the same townspeople whose local bank he had just robbed.

This tells you much about the relationship between the banks and the average family in both the 1920s boom years and the 1930s depression. Even with unprecedented levels of prosperity, many families getting electrical service for the first time in their lives, and their first automobiles, they still hated their local bank.

Blogger Johnny January 25, 2020 3:46 PM  

Daniel Heneghan wrote:But can we stick it to the universities,

I am guessing that most universities don't have a lot of equity, but Harvard has an enormous trust fund. And maybe some of the other elite universities also. If you can find a way to justify to the public drawing on that fund...

Blogger Joe Smith January 25, 2020 3:52 PM  

@Ransom Smith Not at all. I didn't say each endowment should be used to pay off only the debt owed the endowed institution. I also know that all of the endowments of every university added together doesn't cover the debt owed. But that is immaterial.

Blogger SJ January 25, 2020 3:55 PM  

Should we pass the debt they can never pay along to their children? Throw them into debtors prison? Create a new class of bonded servants?

Blogger Akulkis January 25, 2020 4:26 PM  

@65

"You're assuming every University is Harvard with a massive endowment.
A lot of them just aren't that financially viable once enrollment drops.
They'll bleed to death on their own."

A natural death by starvation of funds cannot be allowed to occur. They must be financially executed, as a lesson to all in future years, that using absolutely worthless degrees as a way to entice children to take out huge loans which they and their family have no means of ever paying off will not EVER be tolerated again.

And a pox on the banks and the Department of Education for not having the slightest bit of curiosity as to what sorts of degrees the students were trying to obtain with these loans.

It's one thing to loan someone money for an engineering degree. It's quite another to loan money for a degree in underwater lesbian quadraplegic sports literature. That 2nd is the sort of luxury that should be paid for 100% out of pocket, as it no more improves the skills and workplace market value of the student than loitering around a party store while clandestinely dealing drugs. Such a degree is nothing but pure self-indulgence, and should be even less eligible for a loan than planning to throw a party.

Blogger Johnny January 25, 2020 4:35 PM  

I am going to give an example of how this bank stuff works that is useful because it is more simple than usual.

Way back when some Latin American countries were going broke. Ronald Reagan didn't want it to happen, and unofficially I think, agreed to guarantee the loans. We paid up if they didn't pay up.

The debt issues when they came out were often called Brady Bonds. All or almost all the bonds went to banks judged to be too big to fail. Because the bonds had risk, the banks got a couple percentage points of interest more than usual. And because they were in the too big to fail category, it was anticipated that if the Brady Bonds upchucked the gov would pick up the lost value. What it amounts to is private gain with public at large risk.

The most irksome thing about the deal for me was the lack of equity that some of these banks had. One bank had a net worth of less than three percent of its gross loan portfolio. Not the Brady Bond part but everything. If the value of the gross loans went down by more than three percent they were technically bankrupt, and could need a government bailout.

One can suppose on a moral level that banks should be better than this. But any bank president who is better will get let go because his bank will consistently earn less. Thus in time they all take advantage. That is why you can't get much progress by punishing an individual. The system mandates the outcome and punishing and individual accomplishes little. It is the set up, the system that has to get fixed.

Blogger God Emperor Memes January 25, 2020 4:36 PM  

Couldn't you use Instagram? I use it for my own business and it's great. It is a travelling photo gallery of my work, plus I have a widget on my website that means anything I upload to Insta automatically appears on the gallery page on my site i.e. I only have to post in one place.
And it's free.

Blogger Snidely Whiplash January 25, 2020 4:45 PM  

Hammerli 280 wrote:Nobody seems to give a damn about the honest man who paid his debts.
No. Folly must be punished.

This is envy. Nothing more.

Blogger Ransom Smith January 25, 2020 4:57 PM  

I also know that all of the endowments of every university added together doesn't cover the debt owed. But that is immaterial.
If I felt like gambling, I'd wager a lot of colleges and universities cook their books and have way less assets and endowments than they have you believe.
The dominos will start going down.
Whether the coffers are raised or not.

Blogger Matt January 25, 2020 5:15 PM  

If you loaned that money at interest with no collateral, you're committing the sin of usury and should probably not be claiming a biblical basis.

Blogger Nate January 25, 2020 5:36 PM  

"But can we stick it to the universities, make them pay the price for this? It would suck if they walk away - unpunished, undeterred - after the jubilee. "

Men of the West addressed this. The forgiveness must be tied to radical reform of the loan program... including requiring all colleges that qualify for the student loan program to maintain specific graduation rates... and repayment rates. so if to many of the students don't repay the loans.. the schools lose access to the golden goose.

This would destroy every gender studies program in the country. it would force colleges to get back to actually getting people ready to enter the professional work force.

Blogger Raker_T January 25, 2020 5:44 PM  

@83 I could try it, but I would have to adapt. Do you hold the phone and scroll through pictures? Hand them the phone? The old school way is to walk up, introduce myself, hand them the card, which is a little tangible thing. They look at the card, then at me, then back at the card, while I'm going through my routine, and the conversation progresses. Granted, the card is pretty much only part of a repertoire, 99% of the time people don't call from a card. Interesting enough, the opposite is also true, if they hand me their card and say "call me", it's almost a certain sale. I take it your site is Wordpress?

Blogger map January 25, 2020 6:48 PM  

I really wish this meme would die.

The crash in 2008 was not caused by the banks. It was not caused by "bad loans." It was not caused by fraud. There was nothing wrong with the housing market in 2008. There was nothing wrong with interest rates. Housing was correctly priced and the mortgage market was clearing.

The 2008 crash was caused by the Federal Reserve.

Remember, the Fed is a Keynesian institution and it is ruled by the Phillips Curve. The Phillips curve states that there is an inverse relationship between inflation and unemployment: if you are worried about inflation, then you have to cause unemployment (for some reason.)

Worse, the Fed has no way of measuring inflation that distinguishes between a monetary problem and simple changes in supply and demand. So, to the Fed, any increase in stock prices, wages, housing, or corporate revenue is "inflationary" and must be handled through increases in unemployment, lest "irrational exuberance" brings down the system.

The economy was doing great in Bush's second term, the Fed saw this as irrational, and it hiked the federal funds rate to over 5%. This caused the prime rate to go to 8% and the ARM's to adjust to 10% or more, causing the housing crash.

The Fed did the same with the Nasdaq in 2001, the Asian Flu in 1998 and the Crash of 1987. It's actions were the primary cause of these collapses.

We have a government agency dedicated to crashing the economy on a periodic basis and then pretending that it saved us.

Trump is the only president to call out the Fed for gross misconduct, whereas every other president allowed the Fed to do what it wants. If it wasn't for him, then the Fed would have hiked rates again to over 5% and we would have another crash.

The debt levels indicate nothing. Obviously, the cash flow is there to sustain the loans, otherwise no one would bother to lend. Furthermore, and ironically, Jamie Dimon positioned JP Morgan to bet against an interest rate increase. IOW, Dimon has hostaged JP Morgan against the Fed rate increase because, otherwise, JPM would go under. Between Jamie Dimon and Trump, the Fed cannot raise rates and the economy cannot crash.

Blogger Mauldication Bear January 25, 2020 7:22 PM  

While I think the debts should be forgiven, I can't say I wouldn't be bitter. Paid $178k on my doctorate over the last 18 months, and more to go.

Blogger Macs January 25, 2020 7:23 PM  

Debt is just a method of control. "He who can destroy the spice controls the Spice." However, if you control something you are reluctant to destroy it; thus, so long as they maintain control they are unlikely to let the system totally crash.

Blogger Hammerli 280 January 25, 2020 8:07 PM  

@84: No, it's not envy. It's anger.

I spent five years studying Aerospace Engineering, a field where the credits required are 110% of those of most other fields...and the math starts with Calculus and gets harder from there. Sold myself into service to the U.S. Government to pay for college...and that service was not in the nice places of the world.

Today, I'm shelling out 18-20% of my total pay as Federal income tax alone. I'm a Payer - the sods who get stuck with the bills EVERY DAMNED TIME.

No more. We've had enough of everybody who screwed up their life wanting us to bail them out. It's time for folly to be properly punished.

Blogger God Emperor Memes January 25, 2020 8:09 PM  

Yes, it's WordPress.
I find being able to show pics and videos of what we offer is more effective than trying to explain it. I don't use physical business cards at all; I get their phone number and send them a link to the appropriate page on my site. If they click on any of the gallery pics there, they open up Instagram automatically.

Blogger Hammerli 280 January 25, 2020 8:09 PM  

@80: No, debt should not be inheritable. Death gives the creditors possession of all assets, but no claim on the heirs.

Blogger John Regan January 25, 2020 8:47 PM  

@map

Yours is an interesting comment.

Rising interest rates. Yes. Very bad for those holding debt as "assets" at a lower interest rate. See the problem?

The debt based system is perverse largely for this reason. But that's not all there is to it.

Blogger Primus Pilus January 25, 2020 9:53 PM  

Every time this subject comes up, we get the few boomers who just absolutely seethe with hatred at the thought that anyone under 50 might be able to afford to buy a home and start a family.

Clay wrote:Shoot, I understand the "biblical" sense of debt. I just don't know why you equate religion to modern day finance.

"Shoot, I understand the "biblical" sense of sexual morality. I just don't know why you equate religion to modern day gender studies."

Blogger Joe Smith January 25, 2020 10:01 PM  

@Ransom Smith Fair enough. You’re certainly right that their financial implosion is coming regardless of what they do at this point.

Blogger sammibandit January 25, 2020 10:02 PM  

While I think the debts should be forgiven, I can't say I wouldn't be bitter. Paid $178k on my doctorate over the last 18 months, and more to go.

I'll say up front, I am not as smart or as hard working as you. However, I know that telling myself I'll be bitter at x day in the future, when the future isn't guaranteed, is a recipe for abdominal and mental indigestion. Only ruminate on things that taste good or have nice texture. Bitterness is neither of those things.

Street smarts can distill this point further: don't write cheques with your mouth that your arse can't cash.

Blogger John Regan January 25, 2020 11:05 PM  

This might help< a/>

Blogger NRx January 25, 2020 11:06 PM  

There will be no economic collapse under Trump.

Blogger John Regan January 25, 2020 11:19 PM  

I give up trying to html link from my phone. Embarrassing. Ugh.

https://strikelawyer.wordpress.com/2013/04/20/low-interest-rates-and-austerity/

Blogger Balam January 25, 2020 11:29 PM  

Hammerli and Clay are lucky! Jesus Christ's parables have rarely applied so directly to the dilemmas than are causing you so much anger. SirHamster already summarized the parable of the debtor for Clay. I encourage Hammerli to read the parable of the vineyard workers which, as Snidely already stated, ends with caution against evny.

"‘These who were hired last worked only one hour,’ they said, ‘and you have made them equal to us who have borne the burden of the work and the heat of the day.’

13 “But he answered one of them, ‘I am not being unfair to you, friend. Didn’t you agree to work for a denarius? 14 Take your pay and go. I want to give the one who was hired last the same as I gave you. 15 Don’t I have the right to do what I want with my own money? Or are you envious because I am generous?’"

Blogger Kiwi January 26, 2020 12:02 AM  

We now have a bail in policy here, Australia too. It's the boomers and the elderly here with cash in the bank. Kiss that goodbye.

Blogger CM January 26, 2020 12:04 AM  

Realize that whatever cash on hand that you have will decline in value.

We have nothing but cash.

What assets do you put that in? My inclination is land, because the stock market is going to fluctuate like crazy.

Blogger Azure Amaranthine January 26, 2020 1:17 AM  

"Free-range slaves are best, turns out."

Nah, just longer, more flexible chains.

Blogger Azimus January 26, 2020 1:30 AM  

@ Magnus Stout
"Universities Need to Suffer"

You may get your wish. Apparently there is a "Great Recession Gap" where very few children were born, 2008-2012. I was talking to a private school networking guy and he says they're talking a 25% drop in enrollment. My brother in law is a principle at a K-8 school and says his enrollment is down for those ages. Couple that with the decimated value of university paper and the soaring costs, he was saying that they think this is going to be doomsday for many small colleges and Universities. The big ones will be fine - they can just lower enrollment standards and remain fully operational - but many many colleges will get a 25%+ cut in operational budget for several years, and are not expected to survive.

It never occurred to me not to have children due to an economic downturn, and I had 3 during this time, and they're being homeschooled so I wonder if that is part of it, but enrollment is different than birth statistics of course.

Blogger Azimus January 26, 2020 1:36 AM  

@ Akulkis
"14,000 rubles would buy you a car sort of"

A Soviet citizen got a call from the people's car dealership and said he was next on the list to purchase a car, and if wanted one, he should come down to the dealership to sign the paperwork.

At the dealership, he signed the paperwork, forked over the money, and the dealer said to come back and get his car in 10 years.

The man got up to leave, but hesitated. He asked the dealer "Will that be in the morning or the afternoon?"

Incredulous, the dealer glared at him and asked "What difference does it make, its 10 years!"

Embarrassed, the man replied "Well the plumber said he was coming in the morning."

I always like this Ronald Reagan joke.

Blogger Azimus January 26, 2020 1:48 AM  

@ map
"Cause of 2008 crash was not banks but Federal Reserve/Phillips Curve"

I'm not saying you're wrong, but many, many people of many different economic schools disagree with you. Lehman Brothers were one of the "special" banks that got to leverage debt-to-assets lower than the 20% ratio. The banks sold the CDO's to everyone from public pensions to the Upper Hoboken Ladies Catholic Investment Club, socializing the risk like never before. I certainly don't disagree that the Fed was involved, but it was a race to the bottom for the banks and they happily sold off the bad debt to make their quick buck and hit their bonuses. There's blood on their hands too.

Blogger Clay January 26, 2020 3:38 AM  

Well, I suppose I am an idiot and a moron, where I don't understand how the Bible, written by mostly Jews, interpreted by who-knows-what, influences my finances today. I mean c'mon. What do the Jews know about lending money?

Blogger Duke Norfolk January 26, 2020 6:32 AM  

@109 Clay, maybe your whole premise is wrong.
https://christogenea.org/podcasts/exactly-why-jesus-christ-not-jew

Blogger Ominous Cowherd January 26, 2020 11:16 AM  

You can print paper...
But you can't print stuff for the paper to buy.
CM wrote:We have nothing but cash.

What assets do you put that in? My inclination is land, because the stock market is going to fluctuate like crazy.

After a total, civilization-altering meltdown, a gold coin is still a gold coin, an acre is still an acre, but a stock certificate or a bond or a checkbook is magically transformed into toilet paper.

Solomon recommended diversifying, and putting 1/8th into financial assets -potentially toilet paper - isn't crazy. It's also not crazy to put an eighth into gold, and an eighth in guns and ammunition, to help you hang onto the other 7/8th.

Blogger SciVo January 26, 2020 11:32 PM  

I'm coming around to the student loan forgiveness side. I still want to inflict as much pain on the colleges as possible -- even to the point of bankruptcy (feature, not bug) -- and maybe even somehow restrict it to the dropouts, the ones with college debt and no college degree.

Because I have sympathy for the working-class guys that were told a pack of lies. But not for the scions of the UMC, who knew that the real point was buying connections and access.

Blogger Akulkis January 27, 2020 1:12 AM  

@104

Clay Wrote:
I wrote:
Realize that whatever cash on hand that you have will decline in value.

We have nothing but cash.


Having 100% cash is a good position if you believe that we are headed for deflation (prices dropping).

If that happens, businesses won't be able to make payments on their loans. This leads to layoffs, and pretty soon, mortgage and car payments aren't being made.

This then causes bank collapses, triggering runs on banks, and it turns into a circle of falling dominoes.

So, the way a central bank, such as the Federal Reserve prevents this is by making sure there is always at least a little bit of inflation.

Cash is intangible. Therefore, it doesn't rust or corrode, but, on the other hand, it has no inherent value.

At the other extreme, is holding no cash. This is if you expect the price of everything to skyrocket... so you buy as much of everything as you can while it's cheap, so that you have made even next year's purchases of toilet paper at today's prices (because God knows there's never been a bank offering interest rates on savings accounts that gives even 1/2 the percentage necessary to keep up with the rate of inflation-induced price increases).

This, however, is a bad idea, because if your car breaks down tomorrow, then you have no cash on hand to pay the mechanic, so you must pay with a credit card, which rapes you with an interest rate that's at least 3x the rate of price increases.

So you seek a middle ground. Buy tangible goods. Buy land.... but don't buy land that's being bid up. Avoid stocks. The stock market is over valued by virtue of the fact that for the last 20 years, Baby Boomers have been dumping every cent they can into stock-heavy retirement portfolios, causing Price:Earnings ratios to exceed 50:1 even when the economy was booming (flipping that makes an earnings:price ratio of 1:50 = 2:100. 2% earnings in the midst of the late 1990s and early 2000s economic boom. Does that make sense? Why yes, yes it does if you realize that there was far too much money poured into stock, such that the prices were bid up beyond what they should have been. And guess what... it continues to this day.
The stock market continues to climb, as far as I can tell, on a school-of-fish like "there's always a bigger sucker" theory and everyone either believes that the market is "too strong" to crash (when in fact, the more overbid it becomes, the weaker those share prices are in the long run)... or many investors each think that he will be one of the lucky few who will cash out before the market crashes... which ain't gonna happen. The institutional investors, with trades driven by computers, will order up their sell-offs, and complete them, 15 minutes before you are even allowed to SEE it.

Blogger Akulkis January 27, 2020 1:13 AM  

Per some rules (I believe the various exchanges internal rules), brokers get the information in real time, but the the flow of information going to the general public is delayed by 15 minutes.

This including the ticker-tape crawl at the bottom of stations like financial news network, fox news, etc. and any other video feed that isn't on a network which is INTERNAL to a company with direct trading rights.

Why does anybody even execute your buy and sell bids and other market orders? Because each stock exchange also has another rule -- if you have direct trading rights, you MUST accept and execute bids and other market orders on behalf of the public.
However, you are free to charge, within some limitations, whatever fees or commission you want to give you some nominal compensation for taking you away from your real job, which is executing order on behalf of yourself and/or the brokerage house which set you up with a desk, telephone, and computer terminal. And your broker... they short a lot of their own client's stock. They borrow it (this is totally legal) and sell it. When you come in and want to sell your shares (which they already sold), then they have to buy it back, and then sell it for you. If the price has gone down, they make out. If the price goes up, they eat a loss. It's not as common now due to the over-investment in stocks, but it's a legal and accepted business practice within the stock trading community, even though it means your broker could very well be financially positioning himself directly opposite any or even all of your stock purchases. If a random broker calls you up suggesting you buy something ... RUN... he wants you to buy it so that he has shares to short, cash out at the price you purchased at, and then plans to even up the shares by cashing in at the lower price, keeping the excess from when he cashed out the same day you made the purchase.

Blogger map January 27, 2020 1:16 AM  

Azimus wrote:I'm not saying you're wrong, but many, many people of many different economic schools disagree with you. Lehman Brothers were one of the "special" banks that got to leverage debt-to-assets lower than the 20% ratio. The banks sold the CDO's to everyone from public pensions to the Upper Hoboken Ladies Catholic Investment Club, socializing the risk like never before.

Lehman Brothers, like other banks, did not go down because they sold CDO's to little old ladies in Hoboken. They sold that paper along with CDS's (credit default swaps) to the same customers. So, what you are saying is, they sold bogus paper and then insured that paper through swaps, effectively collecting insurance premiums to take the risk onto themselves.

You see where this does not make sense?

Lehman was hit so seriously because their primary losses were credit default swaps on CDO's bought by the Greek government. The US government did not buy CDO's owned by foreign governments, so Lehman went under. The gov could have saved Lehman but the gov decided Goldman Sachs should buy Lehman assets for nothing.

The different economic schools are lying about the cause of the 2008 crash, just like they lie about the cause of the Great Depression and the benefits of free trade.

To believe these schools, you have to come to the conclusion that, for one year in 2008, all the banks and insurance companies forgot how to write mortgages and insurance contracts. Some sort of "irrational exuberance" took hold of everyone, like a fevered dream, and the whole economy crashed.

It's nonsense. The financial industry operates an omerta to never criticize the Fed, probably because some of the biggest hedge funds in the world rely on inside information about the Federal Funds rate. That is how they make their money. All of these financial people are pissed off at Trump because of all the attention he has put on the Fed.

Blogger Deus Vult January 27, 2020 9:58 AM  

@34
Believe me they are working on the pre-conditioning "an incestuous elitist retard, I mean Lannister, always pays their debts"
Up in maple peso land the better than you immigrant is again leading the way towards the ever elusive socialist utopia http://homeownership.ca/house-hunting/finding-the-right-home/multi-generational-home-purchases/

Blogger OneWingedShark January 27, 2020 11:39 AM  

Dole wrote:Make sure to not bail them out this time.
This.

Shane Bradman wrote:Wealth is not the natural state of man. We have become wealthy at the cost of our futures, and will return to our natural poverty before too long.
I don't really agree; but I disagree even less: Proverbs provides clear guidance and instruction in this area, and if you listen and obey, you [generally] won't have debt problems.

bodenlose Schweinerei wrote:And to be clear, the 'taxpayers' have barely managed to pay the minimum monthly payments on the current levels of public debt, there's no way they can take on more. All the bailouts have been new debt to cover old debt.
I have a solution for that; it would be quite amusing too, as it builds off of already extant law to trap the debt-dealers in their own snares.

HouellebecqGurl wrote:Hey Vox, I know you don't watch videos, but this one minute advert called Guilt Fairy where Boomers talk about taking the money and running is everything we talk about when we say selfish Boomers, in a 1 minute video.
https://youtu.be/7zdkCLhjYoA

Thank you for sharing that infuriating ad.

RC wrote:Going to college outside of STEM is a complete waste of time and money.
Even those who did a good/prudent evaluation and went STEM are undermined by the system: how many of the jobs are really postings for H1Bs? How much has the fraud and abuse depressed STEM wages? It's obvious that with "STEM Shortage!" and "5/7/10 year required experience, ENTRY-LEVEL job" that somebody is lying.

Blogger OneWingedShark January 27, 2020 12:59 PM  

Snidely Whiplash wrote:Hammerli 280 wrote:Nobody seems to give a damn about the honest man who paid his debts.
No. Folly must be punished.

This is envy. Nothing more.

Interesting take; I would have classified it as a lack of charity… greed and/or gluttony, if you want to use the classic "Seven Deadly Sins".

map wrote:I really wish this meme would die.

The crash in 2008 was not caused by the banks. It was not caused by "bad loans." It was not caused by fraud.
[…]
The 2008 crash was caused by the Federal Reserve.

Then it was caused by fraud.

Mauldication Bear wrote:While I think the debts should be forgiven, I can't say I wouldn't be bitter. Paid $178k on my doctorate over the last 18 months, and more to go.
I understand; I, too, would be tempted to bitterness were it not for the fact that God has been teaching me empathy for my peers. While I got through university with no student loans and minimal credit-card debt ($500, IIRC) and thought rather ill of those foolish enough to get loans the aftermath of 2008 taught me a lot because of the difficulty of finding work lead to a persistent state of unemployment and underemployment for several years. God used it in at least three ways: (1) because of my lack of a solid job, I took care of my grandparents as one died of cancer; and (2) I learned how hellishly difficult it can be to get a job, regardless if it paid well; and (3) I learned what I should have already known: to trust God for my "daily bread".

Given the above, I can see more clearly the utter injustice of essentially every authority in the young man's life saying "you need a university degree!", especially conjoined with the manner in which universities and lenders push student loans. — Given the above, even though it may "go against the grain" a bit, I can approve the extension of a little mercy toward those who were caught in the debt-traps for the "heinous crime" of trusting their elders.

Primus Pilus wrote:Every time this subject comes up, we get the few boomers who just absolutely seethe with hatred at the thought that anyone under 50 might be able to afford to buy a home and start a family.
Ain't that the truth.

Blogger Akulkis January 27, 2020 3:09 PM  

"Every time this subject comes up, we get the few boomers who just absolutely seethe with hatred at the thought that anyone under 50 might be able to afford to buy a home and start a family."

Well, you know... we've had literally had droves upon droves of people dying in in the streets from starvation ever since Pauling's "Population Bomb" went off. When was the last time you were in supermarket that wasn't practically stripped bare, looking like, well, a Ukrainian market during the height of the Holodomor?

Everybody with me now: "Too many (white) people! Too many (white) people!"

---

I sincerely cannot wait until that generation's numbers are sufficiently reduced to break their selfish, "It's all about the ME ME ME Generation, screw everybody else" death-grip on American politics.

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