Is going to college worth it? College tuition has increased at a faster rate than housing, energy, food, and medical care costs over the last decade.
For an entire generation it was an easy question to answer. Is college worth it? Absolutely. There was little debate regarding the “worth” of a college education. Of course this question was usually asked during more affordable times and not when $1.2 trillion in student debt was out sloshing about in the economy. I think most people agree that moving your knowledge forward is a good thing. Learning about a broad range of categories is useful in creating well rounded citizens. Yet is this worth $25,000 per year? $50,000 per year? When costs soar to these levels, you need to examine the question of worth. Families are struggling to get by since the per capita wage is $28,000 in the United States. With families being unable to pay the college bill, students are taking the next logical step. They are taking on massive levels of student debt. With easy access to debt, the cost of a college education has outpaced practically every other sector of our economy.
Working for peanuts: Half of American workers earn less than $28,031 per year and household income now back to levels last seen two decades ago.
Every fall, two pieces of data are released reflecting the earning potential of American families and workers. The low wage economy has certainly taken a toll on how much Americans earn. Social Security data was recently released and shows that 50 percent of the country earns less than $28,031. This is the per capita wage. Given the high cost of living in many metro areas this is barely enough to get by. The assumption is that with the stock market doing so well, workers would also be sharing in the spoils of the recovery. Yet much of the growth in jobs have come in low wage opportunities that usually come with smaller benefits and shrinking paychecks. Adjusting for inflation households are earning what they once did nearly two decades ago. Is this truly an economic recovery? It all depends on how you define a recovery.
One-third of working Americans support two-thirds of the population: The hidden figures of those not in the labor force and transfer payments.
There still seems to be little acknowledgement of the massive army of people now falling into the category labeled as not in the labor force. Some of this growth is predictable like many older Americans hitting retirement age. But this only explains a small portion of the change since many older Americans are needing to work much longer since they have paltry retirement savings. The unemployment rate dropping dramatically has largely been driven by this category expanding and labor force participation is at generational lows. You also have spending growing in the form of military, Medicare, and Social Security that are now eating up a larger portion of the budget. Deficit spending continues to occur in the face of a booming economy. Why? The math shows that one-third of private sector workers are supporting two-thirds of the population. We have over 92 million Americans that are now part of the not in the labor force category. Let us dig into the numbers even further since some tend to think this is only happening because of older baby boomers.
How Americans go poor by spending money on housing and related expenses: Americans spend 33 percent of their income on housing-related items.
People tend to think that buying a home means only paying principal and interest. Most conveniently forget the other myriad of expenses associated with being a homeowner. As Americans find less disposable income in their bank account each month, less Americans are becoming homeowners. The middle class is moving away from the American dream because of the slow process of inflation. Beyond the principal and interest, people spend money on taxes, utilities, furniture, repairs, insurance and other costs that come with being a homeowner. Even non-homeowners spend an inordinate amount of money on housing. Overall Americans spend 33 percent of their income on housing-related items. This is probably why Wall Street has an insatiable appetite to buy up properties to convert them into rentals. Americans are now seeing a large share of their income going into the housing pipeline.
The stock market correction has arrived: Massive global volatility, central bank wizardry, geo-political instability, and people finally realizing how overvalued the market has become.
The stock market is finally reflecting the true nature of the global economy. There is massive geo-political instability, central bank double-speak, and a growing trend of low wage labor. In the US, it is no surprise that subprime auto debt has grown at an outstanding pace simply because people are too broke to finance a car via traditional means. The S&P 500 has essentially given back any gains of 2014 within a couple of weeks. Volatility is now apparent as market participants realize that the free world cannot be controlled by plutocrat central bankers and their banking wizards. The market has turned into a deep capture casino where politicians serve as mouthpieces to placate the public and keep the wheels turning so people can remain calm when many real issues are obviously present. This isn’t merely a US issue. Worldwide countries are taking a piece out of the easy money playbook and the ramifications are being felt. There is no free banking lunch. The stock market correction is now here.
The stock market is finally recognizing severe global volatility: Stock market has worst performance in two years.
Volatility in the market came roaring back this week. Stocks had their worst weekly performance in two years. It was hard to understand given the interconnected nature of the markets how little of an impact was being had in US stocks when global markets and governments are facing dramatic challenges. The markets are slowly coming to the realization that the Federal Reserve simply does not have all the answers to every crisis that arises. A low interest rate is not going to stall geo-political risk or the spread of infectious diseases. There are more complicated forces at work here especially when the biggest consumer economy in the US is seeing those exact consumers lose purchasing power with inflation. There wasn’t any significant news that set the markets off this week aside from trends that have been ongoing for some time now. It just appears that the markets are reflecting a more realistic position of what is happening around the world.
The new subprime is in auto loans: One third of all new auto loans are of the subprime variety. Repossession are up 70 percent.
Leave it to Wall Street to resurrect the subprime loan. This time, subprime has found a comfortable home in the automotive industry. In the car addicted US culture, subprime debt is back in a massive way. Subprime auto debt is the new risky debt product. This is a big deal. $924 billion in total auto debt is rummaging around the economy. What is even more disturbing is that delinquencies on auto debt are surging. Repossessions are up 70 percent because people simply can’t make their auto payments. What do you expect when you are pumping out subprime debt trying to churn more sales on marginal buyers? Most Americans are living paycheck to paycheck so taking on another debt payment isn’t necessarily a wise move. How big is this market? The latest data shows that a stunning one third of new auto loans are in the form of subprime debt. This is telling given that FICO is planning on being more lax with credit scores. Also, it should tell you about the underlying health of the economy when a large portion of your borrowers have marginal credit.