The financial gouging of the American college student: Tuition is up 300 percent from 1990 and total outstanding student debt has grown by over 1 trillion dollars since 2000.
Inflation is such an insidious standard of living destroyer. Little by little those dollars in your wallet get worth less and you suddenly find yourself needing to go into large levels of debt to purchase cornerstones of the American Dream. Going to college has been the dream for many Americans after the G.I. Bill was signed into law in 1944. Even in the early part of our country, going to college was a privilege largely reserved for the elite and wealthy. It wasn’t viewed as a public good until World War II. The heyday of the US middle class was after World War II and slowly this has been chipped away starting in the 1970s. As of today, going to college is fraught with so many financial landmines. Working class areas are targeted by predatory for-profit colleges. Many others go to quality schools but come out with too much debt relative to what they can earn in an environment littered by lower wage jobs. This is the future of higher education. But think of this jaw dropping stat: since 1990 tuition has gone up 300 percent. You can rest assured wages have not kept up.
Millennials that are thriving in this economy are those with links to rich parents: The vast majority of other Millennials are mired in debt and unable to purchase homes.
Most young Americans are still living in an economy that feels like it is in a recession. Yet there are Millennials that are doing well and are thriving in this economy. How are they escaping mountains of student debt? How are they gaining access to down payments to purchase more expensive homes? The short answer is that they have rich parents. This isn’t some Trumpism. This is merely facts that are coming out of research from the Fed, Census, and Zillow. For the vast majority of young Americans the last decade has been one of low wage labor and a market mired with very expensive colleges. Despite the disappearing middle class many of those Millennials that are thriving are doing so thanks to familial wealth transfers. We tend to romanticize the “self-made†person in the United States but it is increasingly becoming more difficult. More wealth is accumulated in fewer hands and it is staying there.
The oncoming disaster in public pensions: The $4 trillion retirement savings deficit and the bill of payouts for pensioners.
Americans have done a very poor job saving for retirement. In many cases, families simply have very little left over each month to save after monthly expenses chomp away at their net take home pay. Pensions used to be common. In 1975 you had 88 percent of private sector workers and 98 percent of state and local sector workers covered by defined benefit plans (that is a pension). By 2011 only 1 in 5 private sector workers had access to a pension. Public sector workers still have access to pensions for the large part but the math is not working out. Glorious stock market gains have not made up for big pension shortfalls as retirees start pulling in payouts. The numbers just don’t work. Greece is an extreme example of public spending gone awry and pensions are a part of the math. You have weak tax collection and massive payouts. How does that math work? It isn’t a question of pensions being bad but the underlying assumptions that are flawed. If you want healthy pensions, expect to pay. Yet people want it all with little coming in and politicians promise the world leaving future problems to predecessors to deal with. In the US, many pensions are relying on future stock market gains that seem very optimistic to meet their liabilities.
China lost the equivalent of 14 Greeces over the last month: Why the actions of banning short selling and punishing the market taken by the Chinese government will backfire.
The market has been fixated on the actions of Greece, a country with 11 million people or the equivalent of Los Angeles County. However, the bigger action is taking place in the gambling obsessed Chinese economy. For those of you not following global news the Chinese stock markets, primarily the Shanghai Composite, Shenzhen, and Hang Seng have been on a ridiculous tear. The ChiNext which tracks China’s small-cap board had a trailing PE ratio of 90, twice that of the NASDAQ back in America’s dotcom bubble in 2000. In other words China is in one massive bubble. They are following the path of Japan in the sense that they had (still have) an absurd real estate bubble that has now popped and people then flooded their money into the stock market. The recent actions in China carry an underlying feeling of fear. They loved capitalism when the stock market was soaring and farm workers and hairdressers suddenly became mini Warren Buffets. But with the bust, all of a sudden it is communist central and people are being punished for selling. This doesn’t bode well especially considering at the latest trough, $3.3 trillion in wealth evaporated. This is the equivalent of losing 14 Greeces.