Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
Reply to @clacy: There was no intent to start a war and I'm not sure who 'this guy' is. I thought it was an interesting set of figures. If you have a different set I'd like to see them.
Ignore the fudgies. Yeppers, this is one of the issues that will destory this country if allowed to persist. I don't believe a country can thrive and prosper without a viable middle class. This is related to why we're still in this depression - lack of aggregate demand by all those folks on the low end of the ladder. The other issue is that we'er still trapped in much of the legacy economy of yesterday - mfg, fossil fuels, autos vs. masstransit, health care for profit. Alas and alack, those dinosaur industries have the financial juice rig the game in washington to keep themselves in power. You want competition fuels? Take away ALL of the incentives and tax credits and make each and every energy company pay a flat 15% income tax and stop. Let them compete in open competition. duh. Solar and wind will crush oil, ng, coal, nukes - all of them. Because? There is no cost for the raw material and all other costs cancel out.
However, the distribution of wealth in America is worse than it was at Jamestown.
Absolutely love the video. Really well done and insightful. I remember once asking a CEO if he really thought he worked a 100 times harder than his average employee (it was a long time ago, now it sounds like the compensation difference is 400 times). He answered that his salary was competitive for CEOs...and he certainly was not going to be giving any back. I must admit that I look critically at the disparity in the corporate ladder, but certainly not on the entrepreneurial side, where folks may mortgage their homes, etc to create a new business. There, I believe sky is limit. But typical corporate disparity, not. I took note of the Swedish vote on CEO compensation this past weekend. Of course, I suspect Ayn Rand is turning in her grave. Thanks Mark!
Ok then, why stop at income/wealth distribution in the US? Why not even it out across the entire globe? Mark, would you and Rono give away 90% of your wealth and pay 85% taxes in the interest of global income/wealth "fairness"?
My point is that this type of class warfare is very dangerous. I find a lot of people who love to talk about all that is wrong with wealth distribution, but very few of them walk the walk.
"The poverty of the poor is not a call to generous relief action, but a demand that we go and build a different social order." ---Catholic priest Gustavo Gutierrez.
Reply to @clacy: You're not answering any questions. No one, especially me ever said wealth should be distributed evenly. Equitably would be nice. What I find offensive is the glutteness appetite of the uber rich to the detriment of the working class (I.e. their employees). Those that work hard deserve to be rewarded, plain and simple.
My point here was to show a glimpse of how it is distributed in the U.S.. Obviously there seems to be some huge differences between perceived, ideal and reality. It is what it is. Sweeping it under the carpet is for politicians.
The labeling of these facts as "nonsense" is actually quite accurate: the wealth distribution in the United States is indeed non-sensible.
What's "dangerous" is the annihilation of the middle class in this country. This is our country: we worry about this country. Right-wing buzz-words such as "class warfare" are a pathetic attempt at misdirection, and don't change the facts. The attempt to change the subject to "the entire globe", which the citizens of the United States have minimal control over or responsibility for, is another typical example of "let's change the subject" misdirection.
Facts are dangerous, aren't they? Best not to discuss this sort of thing in public... might lead to trouble. Alternative statistics? Alternative facts? No- let's just ridicule "this guy" and hope the whole subject gets buried in noise.
Ya, Max, I know, I know. Folks like @clacy are constitutionally unable to accept this possible version of reality, so no point in even mentioning that aspect.
Believe it or not, some of my best friends are of the same persuasion. The fascinating thing is that every damned one of them parrots exactly the same line... you have to wonder if Rush or whoever has brainwashed a cult. Ask them for actual FACTS on a subject of disagreement? Good luck! All you get is ad hominem attacks, and misdirection like "class warfare is very dangerous".
Henry Ford... hardly a "socialist" or a "left winger" or a "communist" (aren't those labels handy?) well understood that you need a viable middle class if you are going to sell the stuff that you are able to make. Who is the "you" in "able to make"? Well, typically, people who have the entrepreneurial drive and instinct.
Is that bad? Hell no! Should they be allowed to make tons of money? Hell yes!
The POINT is: without a middle class able to purchase all this stuff, the whole system falls apart.
In spite of your tone, I'm going to respond to you one time and see if you can be civil.
I doubt there is anyone on this board that thinks that wealth should be distributed equally, certainly not me. I believe that hard work should be rewarded and this is what makes the current economic system work. The problem is that for it to work folks have to be given to opportunity to get ahead. They've got to see the light at the end of the tunnel AND it has to be attainable. It's this OPPORTUNITY to get ahead that's disappearing and this is part and parcel with the extermination of the middle class.
The two prime examples of this loss of opportunity are higher paying mfg jobs - gone and not coming back; and higher education - priced out of the reach of most. These were the two most well worn paths to the middle class and alas, they're so overgrown as to be nigh impassible.
The class warfare has been going on but it's against all of us - the 99%.
I'll probably get some upset some of this, but I think what concerns me is this:
1. The gap between the haves and have nots in this country continues to get worse. I believe there's the possibility of social unrest down the road. I think Old Joe makes the perfect point - as Ford knew, if you want to sell stuff, people have to be able to buy it. This was discussed in a great thread with OJ a while back regarding technology/mobile/etc.
I'm not going to argue what's "fair" and the specifics, but I think two "broader" things: a:) "you need a viable middle class if you are going to sell the stuff that you are able to make"." and b:) The underlying problems such as what is occurring with the middle class are not getting any better, and I see that leading to real issues down the road.
2. You have a government that acts as if the difference between the haves and have nots is a concern on one hand and yet has not only not done anything to help it but in ways has made it worse. This administration and the administration before it clearly are more concerned with the needs of corporations.
3. As for higher education, it's insane how expensive college has gotten. When anyone can get a loan, costs just continue to ramp to a nutty degree because of the easy access to funds. The student loan situation isn't going to be subprime, but it's clearly not going to end well.
Reply to @scott: "3. As for higher education, it's insane how expensive college has gotten. When anyone can get a loan, costs just continue to ramp to a nutty degree because of the easy access to funds. The student loan situation isn't going to be subprime, but it's clearly not going to end well."
I guess I focused on this because it was key in my own life. This is just a question that I have that I don't know any way of actually answering with personal research.
We have gone from a manufacturing economy to a "services" economy. Perhaps the most important "service" is financial. We have also seen a large rise in the number of financial service products offered and the ease of availing oneself of these. My question is: Does the shift from paying for college with savings and/or work study with a small loan to expensive loans and high costs have anything to do with supporting the financial services share of the US economy? In other words, the higher the borrowed amount, the greater the revenue collected from interest. So college is the new house but, as a bubble that has no representation in the financial world, has no way to burst.
I think Anna has a solid point in connecting the finanicial services industry with rising college costs. The tie is student loans that are not subject to bankruptcy relief.
I've seen a chart over time of rising tuition vs. increased student borrowing and the case being made was that as gov't and student loans have increased so has college tuition.
If we want to make this viable, the Top 5000 corporations should have to pay off the entire student loan debt gratis. Sounds idiotic but think of it this way. Who is reaping the benefit of a college educated person? Corporate america. Same/same with our Defense Budget - the multinational should have to pay for it because they are the ones that are benefitting.
After all, they keep telling us that we shouldn't tax them because they create jobs.
Reply to @Anna: In terms of representation in the financial world, do you mean loans as an an asset class that can be invested in? I definitely think the financial industry is using student loans as yet another support.
"The reinvented stock market is now redefining the market for student loan-backed securities. SecondMarket, which provides products and services to enable companies to raise capital, manage liquidity and communicate with stakeholders, announced today a new suite of products and services for student loan issuers. These issuers will now be able to access new pools of institutional capital, distribute reports to their bondholders, as well as utilize SecondMarket’s unparalleled secondary market expertise to purchase student loan-backed securities. "
"SLM Corporation, through its subsidiaries, originates, acquires, finances, and services private education loans in the United States. It offers processing capabilities to educational institutions, 529 college-savings plan program management services, and a consumer savings network. The company also provides servicing, loan default aversion, and defaulted loan collection services for loans owned by the Department of Education (ED), Guarantors of FFELP Loans, and other institutions. In addition, SLM Corporation offers campus solutions, which comprise electronic billing, collection, payment and refund, and tuition payment plan administration services. The company promotes its products through the financial aid offices on campuses, as well as through direct marketing to students and their families. SLM Corporation was founded in 1972 and is headquartered in Newark, Delaware."
There are other assets, as well.
There are a number of colleges who are continually building, building, building - new dorms, buying up real estate. There are a number of colleges who got caught up in the real estate boom and now enrollment is trickling down.
I know one particular arts college that symbolizes this issue and I think it's practically a case study - build, build, build, buy buy buy and then oh wait, enrollment is starting to trickle lower and all this real estate we bought (because, much like tuition, it was going to keep going up) isn't worth nearly as much and...
Will it be a bubble that pops? I don't know - student loans cannot be avoided, but do those who invest in student loans believing that they are "safe" suddenly start to back away a little bit, believing that the 'safety' aspect may somehow not be sustainable? I dunno.
Maybe it's better classified as a bubble in tuition cost than a "student loan" bubble. However that plays out, student loan debt and the rising cost of colleges is causing a considerable drag and there are more and more defaults. I think a number of schools will continue to see declining enrollment and that will cause considerable issues - they took on too much debt, believed that costs and enrollment could go up forever and ever, and many got caught in a game of trying to "one-up" other schools.
I completely agree with Mark Cuban:
"You would think traditional university educators would take notice. Beyond allowing some of their classes to be offered online, they haven’t. They won’t. Its the ultimate Innovators Dilemma. They don’t believe they should change and they won’t. Until its too late. Just as CEOs push for that one more penny per share in EPS, University Presidents care about nothing but getting their endowments and revenues up. If it means saddling an entire generation with obscene amounts of school debt, they could care less. This is how they get their long term contracts and raises.
It’s just a matter of time until we see the same meltdown in traditional college education. Like the real estate industry, prices will rise until the market revolts. Then it will be too late. Students will stop taking out the loans traditional Universities expect them to. And when they do tuition will come down. And when prices come down Universities will have to cut costs beyond what they are able to. They will have so many legacy costs, from tenured professors to construction projects to research they will be saddled with legacy costs and debt in much the same way the newspaper industry was. Which will all lead to a de-levering and a de-stabilization of the University system as we know it."
Reply to @Anna: A little perspective but you already knew this - "Student loans now total over $1 Trillion as our public and private universities and colleges took advantage of the easy money available to students for education. At UW Madison for example, resident undergraduate tuition in 1980 was $769, today it is $8592 or a 11-fold increase. Sadly, it was reported recently that a new retiree was having their Social Security check garnished to repay student loans over 30 years old."
I'm in agreement with all the points Rono has made. It also disturbs me greatly that our Gov't is doing its best to create the most divisive environment I can recall in my lifetime and corporate america is not helping much either. What a shame that kids are coming out of college with a mountain of debt, and for most degrees can only get meanial wages, if they can get a job at all.
I'm sorry that you think I wasn't civil. I see nothing in my response that was uncivil, but maybe your feelings were hurt that I didn't agree with your point of view. Don't be surprised when someone posts a link with a very politically charged message elicits some differing views.
I asked the question why we should stop at the US borders. Why can we not try to even things out across the globe? Are those in Mexico or India less worthy of wealth/income fairness than those in the US? If we decide that it's too big of problem to take on wealth distribution across the globe, then is it too big of a problem to handle in the US? Should we attack it at the state level instead?
You said "no one here thinks it should be distributed equally", so the next question is how evenly should it be distributed, or who should be in charge of determining that?
What specific methods will we employ to help "even the playing field"?
In your later post you talked about the top 5,000 corporations paying all of the student loans. Do you realize that those corporations may benefit from college educations in varying amounts? So how would you determine the shares that each company paid? Surely McDonald's or WalMart benefit less from higher education than BOA or J&J. Also, I would bet that these companies would just pass on that cost directly to their end customers with higher prices, and to their workers with lower wages.
I propose that Rono takes out 50% of his assets and gives it to "middle class scholarships". See how easy it is for me to spend other people's money?
Reply to @Charles: Yep, that's sustainable - lol. Health care is terrible too. Geez.
I'd really like the people who continually act like there's no inflation to go to a grocery store in a major city and explain to customers that they are not seeing prices ramp across the board for necessities. I'd love to see these people go try to convince the average person on the street that inflation is very low.
It looks like what happened to me just doesn't happen today. (The school, upon learning I would need to quit and go back to work and save some more money provided work on research grants and came up with some small scholarship money to support me. Now, that would not fit in with the goals of the company university CEO.)
It really chills me because the kids coming into the workplace have been increasingly awesome. What a waste of this talent and intelligence.
Reply to @Anna: Thanks - I think his blog offers some very interesting takes on a number of things.
I think we live in a time period where there's a lot of changes in a lot of fields and you're going to see those who move forward with more strength and stability and those who get left behind. You see it in tech with companies that, several years ago, no one would ever think would become "dinosaurs". I think you're going to see it in retail and you're going to see it in other places, including colleges. There are going to be people who innovate, remain flexible and have the foresight to see how things are going to evolve and there are going to be others (companies, schools, whatever) that get caught in old ways and don't embrace change.
As for the "case study" I mentioned, I was looking for a particular article so that I could highlight details. Found it:
"It doesn't help that during its years of go-go growth, Columbia was an eager player (my thought: lol, again, gotta compete with other colleges and enrollment - much like real estate, is going to go up forever and ever - oops, maybe it wasn't a good idea to be in the real estate biz and buying at the top) in the then-hot real estate market, expanding its campus to 22 buildings, and becoming the South Loop's largest nongovernmental property owner. Now that enrollment is going in the other direction, "we can't close these buildings," Carter told the students. "We've got the same basic [operating] expenses."
" Columbia, which is 97 percent dependent on tuition income, has seen enrollment drop from 12,500 in 2008 to 11,600 now, he said. With tuition set to rise from $20,000 this year to $21,000 in the fall, Carter noted, every 50 students lost means a million-dollar drop in the budget. This year, he added, "$17 million had to be cut from the budget," and "if our enrollment drops next year as projected, we will [then] have $31 million less.""
The article has a lot more highlights and I think if the situation with higher education gets worse, that college really highlights the whole situation.
Again, as Cuban said in his post: "Students will stop taking out the loans traditional Universities expect them to. And when they do tuition will come down. And when prices come down Universities will have to cut costs beyond what they are able to. They will have so many legacy costs, from tenured professors to construction projects to research they will be saddled with legacy costs and debt in much the same way the newspaper industry was."
I can say with, for use of a better word, "uber-certainty" that this is not the only college out there in this very same situation.
My feelings don't get hurt easily. It was your tone that I considered to be uncivil and probably mine as well in response.
That said, I fail to see why it is our concern about how other folks govern themselves. I don't believe that the US has some sort of manifest destiny nor should we be the world's policeman. Can't afford it. I believe you gain more in leading by example and that's not something america is good at.
The example that we're presently setting for others is that of a middle ages peasant/lord society - a 21st century fiefdom, if you will. This is because the entire tax code is skewed to favor the most wealthy. Should it favor the poor? No, it should just be fair.
What I'd do would be to have a flat tax of 15% for everyone including corporations and eliminate ALL deductions for everything - mortgages, kids, capex, EVERYTHING. For the poor, have a personal exemption of $20K. So, yeah, I'm the great socialist!?!
What everyone really needs to understand is the myth of Supply Side or trickle down economics. . . cause it's all BS that doesn't work in most economies. It doesn't work because there is not sufficient demand stimulation to encourage people to consume. Better 50 chevies than one Mercedes. This was why the Bush tax cuts never created a single job - not enough demand stimulation at the lower end of the income ladder where the Marginal Propensity to Consumer is around 100%. The benefits went to the upper levels where the MPC is closer to 0%. The reason why demand is so crucial is that even if you let me write off my CapEx spending AND money is almost free AND money is readily available (as it is now for all major corporations), I am NOT going to build a new factory is my others are operating at >75%.
No hard feelings and I was probably a bit touchy. I could easily get behind your tax proposal.
I don't believe that Bush or for that matter Obama are to blame as much as demographics for our current malaise and other global economic imbalances.
I also think the manufacturing advantage that we had from WWII through the 70's is gone and not coming back. People around the word simply aren't going to pay us to make things for them that they can make for themselves for much less money.
I do agree that we need to maintain some sort of middle class if we want to continue being the "Land of Opportunity". The question is how do we accomplish that?
I don't blame either party - Clinton created a lot of this mess, particularly with Wall St.
Indeed, auto industry peaked in Michigan in 1973. That's a huge part of the issue at hand - how do we evolve from an industrial based economy to an information based one? And, just to make things interesting, allow that all the industrial age giants are spending every dime to resist any change whatsoFever. Our gov't isn't broken, it works very well, it's just bought.
Frankly, if we could cut gov't back to a simple focus on education, protecting the environment and building infrastructure - everything else will take care of itself. Oh, and at the Federal level, bring the declare victory and bring the troops home and just defend the shores. Hell, they could vastly improve the quality of our natdef and cut their budget by $200B per year.
Reply to @scott: The inflation in College Tuition and Medical care is extremely high if you are user of those services. But, in particular, the college inflation it is nothing got to do with monetary or fiscal policy. It has everything got to do with greed and Real Estate expansion (buildings, nice facilities, gyms, football stadiums etc) that college build that is really secondary to the cost of providing core educational services. This is how we got 1000+% cost ramp up in college.
So, on CPI level since not everyone is a consumer of college and medical services it does not show up that much. It has a low weight at that level. Probably that weight is right for the totality of the population where CPI is concerned. Individual inflation levels are going to be very different.
Now trying to craft a solution to this problem by say increasing interest rates will not curb the inflation on college costs because monetary policy is not the reason for this type of inflation. You cannot solve this by monetary policy.
Reply to @Charles: Buddy you have to stop cluttering up this board with this inflation nonsense. In arriving at inflation data the government has determined it's not as bad as your eyes, and more importantly your pocketbook, would have you believe because the stuff your paying more for is so vastly improved over the stuff you used to buy.
Take that can of beans on your shelf for example. It probably comes in a can made with better steel than 30 years ago. Instead of just saying 'beans' on the can it has a much prettier label chock full of all sorts of nutritional info and maybe some recipes for those who don't know what to do with a can of beans. No doubt there's also a phone number to call if you want to get into an endless loop of menu options none of which pertain to your question or problem, to say nothing of the possible contents which are most likely genetically engineered to keep away the varmints unlike what you did after eating the contents which served the same purpose. I feel fuller already don't you? However, possibly inflated too....
Comments
Ignore the fudgies. Yeppers, this is one of the issues that will destory this country if allowed to persist. I don't believe a country can thrive and prosper without a viable middle class. This is related to why we're still in this depression - lack of aggregate demand by all those folks on the low end of the ladder. The other issue is that we'er still trapped in much of the legacy economy of yesterday - mfg, fossil fuels, autos vs. masstransit, health care for profit. Alas and alack, those dinosaur industries have the financial juice rig the game in washington to keep themselves in power. You want competition fuels? Take away ALL of the incentives and tax credits and make each and every energy company pay a flat 15% income tax and stop. Let them compete in open competition. duh. Solar and wind will crush oil, ng, coal, nukes - all of them. Because? There is no cost for the raw material and all other costs cancel out.
However, the distribution of wealth in America is worse than it was at Jamestown.
not good,
peace,
rono
My point is that this type of class warfare is very dangerous. I find a lot of people who love to talk about all that is wrong with wealth distribution, but very few of them walk the walk.
My point here was to show a glimpse of how it is distributed in the U.S.. Obviously there seems to be some huge differences between perceived, ideal and reality. It is what it is. Sweeping it under the carpet is for politicians.
What's "dangerous" is the annihilation of the middle class in this country. This is our country: we worry about this country. Right-wing buzz-words such as "class warfare" are a pathetic attempt at misdirection, and don't change the facts. The attempt to change the subject to "the entire globe", which the citizens of the United States have minimal control over or responsibility for, is another typical example of "let's change the subject" misdirection.
Facts are dangerous, aren't they? Best not to discuss this sort of thing in public... might lead to trouble. Alternative statistics? Alternative facts? No- let's just ridicule "this guy" and hope the whole subject gets buried in noise.
Believe it or not, some of my best friends are of the same persuasion. The fascinating thing is that every damned one of them parrots exactly the same line... you have to wonder if Rush or whoever has brainwashed a cult. Ask them for actual FACTS on a subject of disagreement? Good luck! All you get is ad hominem attacks, and misdirection like "class warfare is very dangerous".
Henry Ford... hardly a "socialist" or a "left winger" or a "communist" (aren't those labels handy?) well understood that you need a viable middle class if you are going to sell the stuff that you are able to make. Who is the "you" in "able to make"? Well, typically, people who have the entrepreneurial drive and instinct.
Is that bad? Hell no! Should they be allowed to make tons of money? Hell yes!
The POINT is: without a middle class able to purchase all this stuff, the whole system falls apart.
In spite of your tone, I'm going to respond to you one time and see if you can be civil.
I doubt there is anyone on this board that thinks that wealth should be distributed equally, certainly not me. I believe that hard work should be rewarded and this is what makes the current economic system work. The problem is that for it to work folks have to be given to opportunity to get ahead. They've got to see the light at the end of the tunnel AND it has to be attainable. It's this OPPORTUNITY to get ahead that's disappearing and this is part and parcel with the extermination of the middle class.
The two prime examples of this loss of opportunity are higher paying mfg jobs - gone and not coming back; and higher education - priced out of the reach of most. These were the two most well worn paths to the middle class and alas, they're so overgrown as to be nigh impassible.
The class warfare has been going on but it's against all of us - the 99%.
peace,
rono
1. The gap between the haves and have nots in this country continues to get worse. I believe there's the possibility of social unrest down the road. I think Old Joe makes the perfect point - as Ford knew, if you want to sell stuff, people have to be able to buy it. This was discussed in a great thread with OJ a while back regarding technology/mobile/etc.
I'm not going to argue what's "fair" and the specifics, but I think two "broader" things: a:) "you need a viable middle class if you are going to sell the stuff that you are able to make"." and b:) The underlying problems such as what is occurring with the middle class are not getting any better, and I see that leading to real issues down the road.
2. You have a government that acts as if the difference between the haves and have nots is a concern on one hand and yet has not only not done anything to help it but in ways has made it worse. This administration and the administration before it clearly are more concerned with the needs of corporations.
3. As for higher education, it's insane how expensive college has gotten. When anyone can get a loan, costs just continue to ramp to a nutty degree because of the easy access to funds. The student loan situation isn't going to be subprime, but it's clearly not going to end well.
Mark Cuban: The Coming Meltdown in College Education - http://blogmaverick.com/2012/05/13/the-coming-meltdown-in-college-education-why-the-economy-wont-get-better-any-time-soon/
More recently: http://blogmaverick.com/2013/01/26/will-your-college-go-out-of-business-before-you-graduate/
I guess I focused on this because it was key in my own life. This is just a question that I have that I don't know any way of actually answering with personal research.
We have gone from a manufacturing economy to a "services" economy. Perhaps the most important "service" is financial. We have also seen a large rise in the number of financial service products offered and the ease of availing oneself of these. My question is: Does the shift from paying for college with savings and/or work study with a small loan to expensive loans and high costs have anything to do with supporting the financial services share of the US economy? In other words, the higher the borrowed amount, the greater the revenue collected from interest. So college is the new house but, as a bubble that has no representation in the financial world, has no way to burst.
I think Anna has a solid point in connecting the finanicial services industry with rising college costs. The tie is student loans that are not subject to bankruptcy relief.
I've seen a chart over time of rising tuition vs. increased student borrowing and the case being made was that as gov't and student loans have increased so has college tuition.
If we want to make this viable, the Top 5000 corporations should have to pay off the entire student loan debt gratis. Sounds idiotic but think of it this way. Who is reaping the benefit of a college educated person? Corporate america. Same/same with our Defense Budget - the multinational should have to pay for it because they are the ones that are benefitting.
After all, they keep telling us that we shouldn't tax them because they create jobs.
peace,
rono
In terms of assets, they include
http://en.wikipedia.org/wiki/Asset-backed_security#Student_loans
"The reinvented stock market is now redefining the market for student loan-backed securities. SecondMarket, which provides products and services to enable companies to raise capital, manage liquidity and communicate with stakeholders, announced today a new suite of products and services for student loan issuers. These issuers will now be able to access new pools of institutional capital, distribute reports to their bondholders, as well as utilize SecondMarket’s unparalleled secondary market expertise to purchase student loan-backed securities. "
http://www.timesunion.com/business/press-releases/article/SecondMarket-Unveils-New-Solutions-for-Student-4326142.php
SallieMae (er, I mean SLM):
"SLM Corporation, through its subsidiaries, originates, acquires, finances, and services private education loans in the United States. It offers processing capabilities to educational institutions, 529 college-savings plan program management services, and a consumer savings network. The company also provides servicing, loan default aversion, and defaulted loan collection services for loans owned by the Department of Education (ED), Guarantors of FFELP Loans, and other institutions. In addition, SLM Corporation offers campus solutions, which comprise electronic billing, collection, payment and refund, and tuition payment plan administration services. The company promotes its products through the financial aid offices on campuses, as well as through direct marketing to students and their families. SLM Corporation was founded in 1972 and is headquartered in Newark, Delaware."
There are other assets, as well.
There are a number of colleges who are continually building, building, building - new dorms, buying up real estate. There are a number of colleges who got caught up in the real estate boom and now enrollment is trickling down.
I know one particular arts college that symbolizes this issue and I think it's practically a case study - build, build, build, buy buy buy and then oh wait, enrollment is starting to trickle lower and all this real estate we bought (because, much like tuition, it was going to keep going up) isn't worth nearly as much and...
Will it be a bubble that pops? I don't know - student loans cannot be avoided, but do those who invest in student loans believing that they are "safe" suddenly start to back away a little bit, believing that the 'safety' aspect may somehow not be sustainable? I dunno.
Maybe it's better classified as a bubble in tuition cost than a "student loan" bubble. However that plays out, student loan debt and the rising cost of colleges is causing a considerable drag and there are more and more defaults. I think a number of schools will continue to see declining enrollment and that will cause considerable issues - they took on too much debt, believed that costs and enrollment could go up forever and ever, and many got caught in a game of trying to "one-up" other schools.
I completely agree with Mark Cuban:
"You would think traditional university educators would take notice. Beyond allowing some of their classes to be offered online, they haven’t. They won’t. Its the ultimate Innovators Dilemma. They don’t believe they should change and they won’t. Until its too late. Just as CEOs push for that one more penny per share in EPS, University Presidents care about nothing but getting their endowments and revenues up. If it means saddling an entire generation with obscene amounts of school debt, they could care less. This is how they get their long term contracts and raises.
It’s just a matter of time until we see the same meltdown in traditional college education. Like the real estate industry, prices will rise until the market revolts. Then it will be too late. Students will stop taking out the loans traditional Universities expect them to. And when they do tuition will come down. And when prices come down Universities will have to cut costs beyond what they are able to. They will have so many legacy costs, from tenured professors to construction projects to research they will be saddled with legacy costs and debt in much the same way the newspaper industry was. Which will all lead to a de-levering and a de-stabilization of the University system as we know it."
http://blogmaverick.com/2012/05/13/the-coming-meltdown-in-college-education-why-the-economy-wont-get-better-any-time-soon/
Additionally, a couple of other links (and there are plenty more)
http://www.bloomberg.com/news/2013-01-29/overdue-student-loans-reach-unsustainable-15-fair-isaac-says.html
http://www.huffingtonpost.com/2013/02/05/universities-sue-students-loans_n_2625457.html
It's an economy where pushing more and more debt on people is viewed as a wonderful thing, but it doesn't end well.
I'm sorry that you think I wasn't civil. I see nothing in my response that was uncivil, but maybe your feelings were hurt that I didn't agree with your point of view. Don't be surprised when someone posts a link with a very politically charged message elicits some differing views.
I asked the question why we should stop at the US borders. Why can we not try to even things out across the globe? Are those in Mexico or India less worthy of wealth/income fairness than those in the US? If we decide that it's too big of problem to take on wealth distribution across the globe, then is it too big of a problem to handle in the US? Should we attack it at the state level instead?
You said "no one here thinks it should be distributed equally", so the next question is how evenly should it be distributed, or who should be in charge of determining that?
What specific methods will we employ to help "even the playing field"?
In your later post you talked about the top 5,000 corporations paying all of the student loans. Do you realize that those corporations may benefit from college educations in varying amounts? So how would you determine the shares that each company paid? Surely McDonald's or WalMart benefit less from higher education than BOA or J&J. Also, I would bet that these companies would just pass on that cost directly to their end customers with higher prices, and to their workers with lower wages.
I propose that Rono takes out 50% of his assets and gives it to "middle class scholarships". See how easy it is for me to spend other people's money?
I'd really like the people who continually act like there's no inflation to go to a grocery store in a major city and explain to customers that they are not seeing prices ramp across the board for necessities. I'd love to see these people go try to convince the average person on the street that inflation is very low.
WOW. Thanks for the education.
Scott, that Cuban write up is really good.
It looks like what happened to me just doesn't happen today. (The school, upon learning I would need to quit and go back to work and save some more money provided work on research grants and came up with some small scholarship money to support me. Now, that would not fit in with the goals of the
companyuniversity CEO.)It really chills me because the kids coming into the workplace have been increasingly awesome. What a waste of this talent and intelligence.
I think we live in a time period where there's a lot of changes in a lot of fields and you're going to see those who move forward with more strength and stability and those who get left behind. You see it in tech with companies that, several years ago, no one would ever think would become "dinosaurs". I think you're going to see it in retail and you're going to see it in other places, including colleges. There are going to be people who innovate, remain flexible and have the foresight to see how things are going to evolve and there are going to be others (companies, schools, whatever) that get caught in old ways and don't embrace change.
As for the "case study" I mentioned, I was looking for a particular article so that I could highlight details. Found it:
http://www.chicagoreader.com/chicago/columbia-college-president-to-student-shut-up/Content?oid=5900767
"It doesn't help that during its years of go-go growth, Columbia was an eager player (my thought: lol, again, gotta compete with other colleges and enrollment - much like real estate, is going to go up forever and ever - oops, maybe it wasn't a good idea to be in the real estate biz and buying at the top) in the then-hot real estate market, expanding its campus to 22 buildings, and becoming the South Loop's largest nongovernmental property owner. Now that enrollment is going in the other direction, "we can't close these buildings," Carter told the students. "We've got the same basic [operating] expenses."
" Columbia, which is 97 percent dependent on tuition income, has seen enrollment drop from 12,500 in 2008 to 11,600 now, he said. With tuition set to rise from $20,000 this year to $21,000 in the fall, Carter noted, every 50 students lost means a million-dollar drop in the budget. This year, he added, "$17 million had to be cut from the budget," and "if our enrollment drops next year as projected, we will [then] have $31 million less.""
The article has a lot more highlights and I think if the situation with higher education gets worse, that college really highlights the whole situation.
Again, as Cuban said in his post: "Students will stop taking out the loans traditional Universities expect them to. And when they do tuition will come down. And when prices come down Universities will have to cut costs beyond what they are able to. They will have so many legacy costs, from tenured professors to construction projects to research they will be saddled with legacy costs and debt in much the same way the newspaper industry was."
I can say with, for use of a better word, "uber-certainty" that this is not the only college out there in this very same situation.
Not that long after the link above:
http://www.chicagoreader.com/Bleader/archives/2012/05/08/columbia-college-prez-moves-up-his-retirement-date
My feelings don't get hurt easily. It was your tone that I considered to be uncivil and probably mine as well in response.
That said, I fail to see why it is our concern about how other folks govern themselves. I don't believe that the US has some sort of manifest destiny nor should we be the world's policeman. Can't afford it. I believe you gain more in leading by example and that's not something america is good at.
The example that we're presently setting for others is that of a middle ages peasant/lord society - a 21st century fiefdom, if you will. This is because the entire tax code is skewed to favor the most wealthy. Should it favor the poor? No, it should just be fair.
What I'd do would be to have a flat tax of 15% for everyone including corporations and eliminate ALL deductions for everything - mortgages, kids, capex, EVERYTHING. For the poor, have a personal exemption of $20K. So, yeah, I'm the great socialist!?!
What everyone really needs to understand is the myth of Supply Side or trickle down economics. . . cause it's all BS that doesn't work in most economies. It doesn't work because there is not sufficient demand stimulation to encourage people to consume. Better 50 chevies than one Mercedes. This was why the Bush tax cuts never created a single job - not enough demand stimulation at the lower end of the income ladder where the Marginal Propensity to Consumer is around 100%. The benefits went to the upper levels where the MPC is closer to 0%. The reason why demand is so crucial is that even if you let me write off my CapEx spending AND money is almost free AND money is readily available (as it is now for all major corporations), I am NOT going to build a new factory is my others are operating at >75%.
peace,
rono
rono,
No hard feelings and I was probably a bit touchy. I could easily get behind your tax proposal.
I don't believe that Bush or for that matter Obama are to blame as much as demographics for our current malaise and other global economic imbalances.
I also think the manufacturing advantage that we had from WWII through the 70's is gone and not coming back. People around the word simply aren't going to pay us to make things for them that they can make for themselves for much less money.
I do agree that we need to maintain some sort of middle class if we want to continue being the "Land of Opportunity". The question is how do we accomplish that?
And I too was a bit snippish.
I don't blame either party - Clinton created a lot of this mess, particularly with Wall St.
Indeed, auto industry peaked in Michigan in 1973. That's a huge part of the issue at hand - how do we evolve from an industrial based economy to an information based one? And, just to make things interesting, allow that all the industrial age giants are spending every dime to resist any change whatsoFever. Our gov't isn't broken, it works very well, it's just bought.
Frankly, if we could cut gov't back to a simple focus on education, protecting the environment and building infrastructure - everything else will take care of itself. Oh, and at the Federal level, bring the declare victory and bring the troops home and just defend the shores. Hell, they could vastly improve the quality of our natdef and cut their budget by $200B per year.
And so it goes,
peace,
rono
So, on CPI level since not everyone is a consumer of college and medical services it does not show up that much. It has a low weight at that level. Probably that weight is right for the totality of the population where CPI is concerned. Individual inflation levels are going to be very different.
Now trying to craft a solution to this problem by say increasing interest rates will not curb the inflation on college costs because monetary policy is not the reason for this type of inflation. You cannot solve this by monetary policy.
Take that can of beans on your shelf for example. It probably comes in a can made with better steel than 30 years ago. Instead of just saying 'beans' on the can it has a much prettier label chock full of all sorts of nutritional info and maybe some recipes for those who don't know what to do with a can of beans. No doubt there's also a phone number to call if you want to get into an endless loop of menu options none of which pertain to your question or problem, to say nothing of the possible contents which are most likely genetically engineered to keep away the varmints unlike what you did after eating the contents which served the same purpose. I feel fuller already don't you? However, possibly inflated too....