FedUpUSA

Archive for the ‘loans’ Category

The catastrophe of our economy for the young American worker.  Average college debt higher than typical new automobile cost, annihilation of pensions, and younger Americans moving back home because of financial necessity.

The economy for young Americans might as well be in a parallel universe to the stock market run since early 2009.  Talks of recovery must fall on confused ears as many young college graduates compete for fewer jobs with higher amounts of student debt.  In the last decade college graduates have encountered the highest tuition increases ever while getting a lower return on their investment once they enter into the workforce.  The economy is still a mess if we dig into the data and look outside of the stock market gains.  Many of the S&P 500 companies added jobs globally but outsourced many domestic jobs to foreign markets to save money.  So profits increase but how does this help the domestic job market?  It doesn’t and that is why this recovery is one of low wage capitalism and banking handouts.  For the millions of young Americans that are entering the workforce with tens of thousands of dollars in student debt, what can they expect from the current economic structure?

The old and the new

The cost of living has soared across many sectors with food, healthcare, college tuition, and energy all outpacing the growth in the typical paycheck.  For these reasons including fewer jobs, young Americans are facing harder times when it comes to saving money:

Source:  CNN Money

“Ultimately we are pumping out hundreds of thousands of graduates each year that are starting with a negative net worth.”

Contrary to what is being spouted on the media, the employment market is still very weak:

Source:  Census

You have nearly two million job openings less than we did before the recession gained full steam.  Yet our population is expanding and recent graduates are entering the workforce in higher numbers.  The recent job growth is positive but the underlying data shows that many of the jobs are coming from low wage fields.  Many companies, like those in the S&P 500, are exporting jobs to other countries where they can push for lower labor costs.  The question remains, how does this benefit domestic workers?  To the point, this is more momentum when it comes to squeezing out the middle class.

Read the rest at: My Budget 360

Is college worth the money and debt?  The cost of college has increased by 11x since 1980 while inflation overall has increased by 3x.  Diluting education with for-profits. and saddling millions with debt.

Is a college degree worth it?  Since the debt bubble burst spectacularly in 2007 many more prospective students are questioning the worth of a college degree.  For so many decades it was simply taken at face value that getting a college degree, any college degree would be worth it.  Slowly this perception has morphed when annual tuition is running at $20,000 or more at for-profit institutions and $50,000 for private institutions.  More to the point, most of the recent educational growth has been financed with large wallet crushing student loans.  This financing of the college dream is turning out story after gut-wrenching story of college education nightmares.  When a college education becomes this expensive it is important that potential students become savvy consumers.  The financial sector certainly isn’t going to offer any advice on navigating the minefield of higher education since they largely have their greedy hands on this sector of the economy as well.

The soaring cost of college

In hindsight everyone seems to now agree that the housing bubble was rather obvious to spot since it far outstripped every measure of inflation and even rose while incomes fell.  You would think this lesson would be learned but the cost of a college education is much deeper into bubble territory even beyond the metrics of the housing market at its peak:

Source:  Cluster Stock

While housing at the peak rose by a factor of 4 (400 on the chart) college tuition has soared by a factor of 10 (it hasn’t stopped going up so it is now likely up in the 11x or 12x range).  It is a downright startling figure especially when the incomes of recent college graduates has gone in the complete opposite  direction:

Source:  BusinessWeek

Since 2000 real earnings for college graduates has fallen while tuition costs continue to soar and put students into further student loan debt.  I was hearing a few stories about states with record applicants to public universities yet with state budgets hurting, these schools are unable to meet the demand.  So students are left with the option of $50,000 a year for private institutions or going to for-profits that are a step above paper mills.  For this reason we have seen a giant increase in for-profit enrollments:

Read the rest at My Budget 360

For a moment, imagine that there is a privately-owned organization in the United States that can create U.S. dollars out of thin air whenever it wants and can loan that money to whoever it wants to.  Imagine that this organization is able to act with the full power of the U.S. government behind it, but that nobody in the organization is ever elected by the American people, and that for all practical purposes the organization is not accountable to the president or to Congress.  Imagine that the organization is able to make trillions of dollars of secret loans to banks, to foreign governments and even to their close friends without ever having to face a comprehensive audit.  Does that sound preposterous?  Well, such an organization actually exists.  It is called the Federal Reserve, and today we found out that once again the Fed is going to be taking huge piles of your money and loaning it to commercial banks in Europe.  The Congress cannot overrule this decision.  Neither can Barack Obama.  Because it has so much power, many refer to the Federal Reserve as “the fourth branch of government”, but unlike the other three branches of government, there are basically no significant “checks and balances” on the Federal Reserve.  If you don’t like the fact that the Federal Reserve is racing in to help big foreign banks survive the European debt crisis that is just too bad.  The Federal Reserve pretty much gets to do whatever it wants to do, and the folks over at the Fed simply do not care whether you like that or not.

So what in the world just happened today?  The following is how an article on CNBC explained it….

Just ahead of the Wall Street open Thursday, the European Central Bank, along with the U.S. Federal Reserve, Bank of England, Bank of Japan and Swiss National Bank announced they would offer three-month dollar loans to Europe’s commercial banks, easing dollar funding constraints.

It must be nice to do whatever you want without having to get the approval of anyone else.

What do you think Barack Obama would give for such power right about now?

The Federal Reserve and other major central banks around the world decided that lending big European banks gigantic piles of dollars would be a good idea, so they are just doing it.

No debate, no votes and no democracy – they just tell us how things are going to be and that is that.

It is a bit ironic that all of this happened on the third anniversary of the collapse of Lehman Brothers.  It is almost as if the central bankers of the world are trying to send some sort of a message.

So how much money is going to be loaned out?

Well, according to an article in The Daily Mail, big European banks are going to be able to borrow an “unlimited” amount of money….

The deal announced yesterday means banks will be able to borrow ‘any amount’ of money in three separate auctions in October, November and December.  Banks will have to put up collateral, or security, to tap the emergency funds.

Wow – I wish someone would offer to lend me an “unlimited” amount of money.

But of course this really is not going to solve anything in the long run.  You can’t solve a raging debt problem with more debt.

Yes, it will help the big European banks with their short-term liquidity problems, but it will do nothing to fix the long-term structural problems that are tearing Europe to pieces.

Win Thin, a senior currency strategist at Brown Brothers Harriman, said essentially the same thing to CNBC today….

“They’re taking care of the symptoms, but the underlying illness is still out there. On the margin, it’s positive. Until Greece defaults and we clear this whole thing up, they’re still treading water”

So, no, the financial problems of Europe have not been solved.

Just think of this latest move as a temporary band-aid.

So why get upset about it?

Well, what all of this shows is just how arrogant the Federal Reserve is.

The Federal Reserve gets to throw around trillions of dollars without any accountability to the American people.

As I have written about previously, the Federal Reserve made $16.1 trillion in secret loans to their friends during the last financial crisis.

This was revealed in a GAO report, and members of Congress such as Ron Paul and Bernie Sanders tried to get people to pay attention to this.  The following is a statement about this report that was taken from the official website of Senator Sanders….

“As a result of this audit, we now know that the Federal Reserve provided more than $16 trillion in total financial assistance to some of the largest financial institutions and corporations in the United States and throughout the world”

So how much of that money went overseas?  Well, it turns out that approximately $3.08 trillion of that money was loaned to big banks and major financial institutions in Europe and Asia.

Barack Obama can’t lend trillions of dollars to foreign banks.

So why does the Federal Reserve get to do it?

Sadly, most Americans know very little about the Federal Reserve.  In the United States today, most Americans graduate from high school without ever learning much of anything about the Fed.

But if you really want to understand what is going on with our economy, it is absolutely critical that you understand the Federal Reserve.

The following are some more reasons why you should be upset about what the Federal Reserve has been doing….

*The Federal Reserve is a perpetual debt machine.  Today, the U.S. national debt is 4700 times larger than it was when the Federal Reserve was created back in 1913.

*The Federal Reserve has recently been actually paying banks not to make loans.  Right now banks can park money at the Federal Reserve and make risk-free income without having to make loans to the American people.

*Current Federal Reserve Chairman Ben Bernanke has a track record of failure that is legendary, and yet George W. Bush and Barack Obama both backed him 100%.

*The Federal Reserve system is designed to create inflation.  The truth is that the United States has only had a persistent, ongoing problem with inflation since the Federal Reserve was created back in 1913.

*Since 2008, what the Federal Reserve has been doing to our money supply has been absolutely insane.  Eventually this is going to have very serious consequences for us.

*The U.S. government has handed over the task of “centrally planning” our economy to the Federal Reserve.  The Fed decides what the target rate of inflation should be, what the target rate of unemployment should be, what interest rates are going to be and what the size of the money supply is going to be.  This is quite similar to the “central planning” that goes on in communist nations, but very few people in our government seem upset by this.

*The Federal Reserve picks “winners” and “losers” in the financial system.  For example, when the last financial crisis hit, the Fed bent over backwards to help out the big Wall Street banks, but hordes of small banks were left out in the cold.

*As mentioned above, the Federal Reserve has become way, way too powerful.  The Fed is able to do a lot of things that the three branches of government are simply not able to do.  Fortunately, there are a few of our leaders that are alarmed by this.  For example, Ron Paul once told MSNBC that he believes that the Federal Reserve is now more powerful than Congress…..

“The regulations should be on the Federal Reserve. We should have transparency of the Federal Reserve. They can create trillions of dollars to bail out their friends, and we don’t even have any transparency of this. They’re more powerful than the Congress.”

As long as we continue to use a debt-based currency that is controlled by a privately-owned central bank, we are going to continue to have permanent inflation and government debt that expands at an exponential pace.

The “central planning” done by the Federal Reserve has created bubble after bubble after bubble.  Our dollars is on the verge of dying and our financial system is about to collapse.

The Federal Reserve system simply does not work.

Hopefully we can start sending more politicians to Washington D.C. that will be willing to stand up to the Federal Reserve.

But for now, the Federal Reserve is going to keep running around doing whatever it wants to do whether we like it or not.

The Economic Collapse

We here at FedUpUSA just love Mr. Black.  If we have any hope of our economy recovering, those responsible for the massive fraud and the looting of Americans must be prosecuted.  It really is that simple.

The idiocy of the day comes from Finnish Finance Minister Jutta Urpilainen regarding loan guarantees for the bailout of Greece.

Please consider Finland and Greece agree on loan guarantees

Finance Minister Jutta Urpilainen said in a Tuesday press conference that Finland and Greece have reached common ground on loan guarantees demanded by Finland for its participation in the Greek bailout package. The agreement still requires approval from other eurozone states.

The Finnish and Greek Finance Ministries have agreed that the Greek state will transfer a sum to the Finnish state, which, together with interest on that sum, will serve to guarantee Finland’s share in the bailout loan to the troubled southern state.

The guarantee sum would, however, be only a fraction of the money that Finland is contributing to the rescue package.

Urpilainen has not divulged a concrete sum, because that is still being negotiated.

Got That?

If not, let me explain by an two-point analogy.

• You agree to give a homeless drug addict on skid row $10.
• In return, he immediately hands back to you $1 as a “guarantee” he will pay back the other $9, with interest, at an agreed upon rate.

Clearly there is no guarantee of anything. Rather the initial effective loan amount is reduced by the amount of the alleged guarantee.

Urpilainen is looking for approval of her nonsensical proposal from the rest of Eurozone states. I hope they have enough sense to laugh in her face. However, the proposal is so stupid, EU officials just might seriously debate it

Mike  “Mish”  Shedlock

Global Economic Analysis

The theory behind the higher education bubble says that while the cost of an education increases, the ability to pay back student loans decreases.

The theory has its roots in the late 1980s when Secretary of Education William Bennett, Jr. suggested student loans could be leading to drastic tuition increases and a coming education bubble.

The following chart offers some perspective on the rate of tuition increases compared to the consumer price index and home prices.

Business Insider