A lesson in college debt – Student loan debt increasing at a rate of $170,000 per minute. Student loan debt will hit $1 trillion in 2012. For-profit schools take the place of subprime mortgages.
College loosely defined is an educational institution or as we are now seeing in the US a place where young people go to dive into a pool of debt. A college education was never a guarantee to a lucrative and well paying career. In a time when the middle class was more robust college was a major bonus for those who had the desire to attend. Affordable state colleges and non-impacted community colleges allowed virtually anyone with a desire to learn an avenue to educational growth. If your desire was to transfer to a four year university the path was easily accessible. Vocational programs did not require multiple year waiting lists like many nursing programs do today for example. A college degree certainly offered a solid advantage and more importantly did not put students into life altering debt. That is the major difference in this modern era of mega debt. In the past college cost more in time than it did in money. Today you have it costing more with student loan debt passing the $880 billion mark and far outpacing the $796 billion in outstanding revolving debt that includes credit card debt. Many parts of higher education are now in a bubble similar to the housing market.
FDIC and US banking industry continued insolvency – 11 percent of US banks are labeled as troubled financial institutions. CEO on the record of exporting American middle class.
The US banking system is largely a system based on consumer confidence. You would require the confidence of Zeus if you had $13.3 trillion in assets backed by an FDIC Deposit Insurance Fund (DIF) that is practically insolvent. Even as the stock market solidly recovers to the green the state of the average American’s financial health is in jeopardy. 1 out of 3 Americans has zero in retirement savings so the hope is that somehow Social Security will be around or maybe there is no longer term strategy since they are merely struggling with daily financial existence. There seems to be this premature joy about the preliminary jobs report but much of this was based on low wage temporary retail hiring for the holidays. Not much a surprise there and did they not get the memo that 14 million Americans are still unemployed? However the banking industry is still in serious problems. Over 11 percent of all US banks are considered “troubled financial institutions” based on the optimistic FDIC quarterly report. The numbers are of course a lot worse but thanks to the suspension of mark to market banks can pretend empty shopping malls in the barren desert or flailing condos are somehow valuable assets. The FDIC just like much of the big banking industry players is performing a dance of economic delusion.
Federal Reserve welcomes a Brave New Economy – how the Fed is robbing the public in open daylight. Maiden Lane Special Purpose Vehicles purchased toxic mortgages like option ARMs and commercial real estate.
The global economy seems to be facing a Brave New World envisioned by Aldous Huxley where the world is operating under a command economy and all citizens are psychologically conditioned from to birth to value consumption. The Federal Reserve is the ultimate spend more than you earn machine. It is amazing that a few hours after the US national public debt crossed the $14 trillion threshold (yes, we crossed this line on the last day of the year) that this euphoria is setting in only because people spent money during the holiday season. “Ending is better than mending” is a platitude repeated in Brave New World. It would seem that with credit cards burning holes in wallets many went ahead and spent money they did not have this holiday season. The conditioning has been strong and has provided substantial distraction from the bigger heist committed by the Federal Reserve.
Credit card withdrawal – Banks pull the plug on consumer revolving debt. Credit card debt outstanding contracts from nearly $1 trillion to $800 billion. Bankruptcies on the rise even with tougher bankruptcy laws.
When people talk about the credit bubble they typically refer to the housing bubble and the trillions of dollars of debt secured by real estate. Yet the credit bubble also applies to student loans, government debt, and those pesky wallet hugging credit cards. The American economy has embraced credit cards as quickly as apple pie or a weekend picnic at the park. During this holiday season many people pulled out the plastic and loaded up on debt to face a hefty bill come 2011. While banks have generously gorged at the taxpayer bailout trough, they have slowly put a tourniquet on the amount of credit Americans can access. In other words banks have applied standards to American consumers that they are not willing to adhere to themselves. The total amount of credit card debt outstanding has contracted vigorously since the debt crisis emerged.
Retirement account fantasy and middle class erosion – 1 out of 3 Americans has zero dollars in a retirement account. From 1950 to 1989 top 1 percent earned roughly 7 to 8 percent of nationwide income. Today it is inching closer to 20 percent resembling pre-Great Depression levels.
Many Americans live precariously close to the edge of financial insolvency flirting with economic disaster daily. If you casually browse mainstream articles and watch any amount of television you would think that the US still had a vibrant and strong middle class. When we pull back the covers on the current financial situation we realize that many Americans are merely getting by and many would like to live in some 1984 Orwellian fantasy world where suddenly things are back to financial equilibrium. 43 million Americans are depending on government food assistance to get by. But many more millions are merely living paycheck to paycheck hidden in the cellar of the headlines. 1 out of 3 Americans has zero in any retirement account (not one slowly eroding dollar). Half of Americans have $2,000 or less which puts them one month away from needing government assistance. With the volatile job market and turbulent Wall Street middle class Americans are feeling the once prided stability being slowly washed away. Let us examine how retirement is now becoming more of a fantasy for many Americans.
Las Vegas is to the real estate bubble what Detroit was to the US automobile industry – Empty condo projects, apartments poorly built to face the desert sun, and the collapse of commercial real estate.
If Wall Street is the hub of American finance then Las Vegas was the manifestation of credit dreams going viral. Las Vegas, the beating heart of Nevada had a tremendous boom with the real estate bubble because it played into the narrative of making it big. Where else can unknowns strike it big and have their name put up in lights? With Wall Street feeding the frenzy Las Vegas seemed to be an endless playground of free flowing capital. During the boom it was hard not to notice the high end Rodeo Drive like stores of Gucci, DKNY, and Prada covering the floors of many casinos. The stores were full and money seemed to flow like the exhaust of Maserati’s cruising up and down Las Vegas Blvd. If heaven on Earth for kids is Disneyland Las Vegas was the heaven of debt. What once seemed as an endless dream has burst into a barren desert nightmare. Las Vegas once boasting some of the fastest growth rates now has largely led Nevada into having the highest unemployment rate of all states in the country. If Michigan was the result of the offshoring of American manufacturing and the demise of the US auto industry Nevada is the exclamation mark at the end of the credit bubble era.
Federal Reserve is the primary tool of the new financial oligarchy – The ultimate banking clearing house with zero oversight from the people still holds over $2 trillion on its balance sheet.
The Federal Reserve system (the Fed for short) is the US central banking system. The Fed was created in 1913 with the enactment of the Federal Reserve Act. In the beginning the Fed had limited powers and its mission was limited. According to the Fed its mission today is to conduct monetary policy, supervise and regulate banking institutions, and maintain stability in the financial system. If this is the mission of the Fed, it has radically failed and the American people should audit the Fed to see what went wrong. The problem with the Fed is that it is independent within the government since it does not need to seek legislation for actions. Yet the authority of the Federal Reserve is derived from the US Congress. Yet we have recently seen when a push to audit the Fed was issued in Congress a major backlash hit from the Fed and we have yet to conduct a full audit of the Federal Reserve. The Fed has conducted and put at risk the US currency to protect the banking interests of its member banks. The unstated mission of the Fed is to protect its banking allies even if it means destroying the economic structure of its host nation so long as wealth is stabilized in the new financial oligarchy.