The State of America’s Debt Slaves, Q3 2019
Pay the University-Business-Financial Complex and the large junction.
Student loan balances jumped 5.1% in the third quarter from the third quarter of last year, or $ 80 billion, to a horrific new high of $ 1.64 trillion, after climbing by 120% in the 10 years since the third quarter of 2009, according to Federal Reserve data released Thursday afternoon. Over the same 10-year period, when student loans climbed 120%, the Consumer Price Index rose 19%. Student loan balances represent 7.6% of GDP, compared to 5.1% in 2009.
But the explosion in student debt is not due to an explosion in higher education enrollments. On the contrary: according to the latest data from the National Center for Education Statistics, registration decreased by 7% between 2010 and 2017. But these fewer and fewer students are borrowing more and more to pay for tuition, transport, electronic devices and other things that the University-Business-Finance Complex is enriching.
This includes ‘student housing’, which has become a very popular asset class with its own Commercial Mortgage Backed Securities where delinquency rates are now skyrocketing.
Everyone is trying to make money with the proceeds of these government guaranteed loans. Students are just the taxpayer’s money conduit for:
- Universities try to develop their empires
- Companies like Apple selling their products to students
- Textbook publishers with monopoly scam strategies.
- Homeowners looking for a high return on their investment and Wall Street looking for a fee for securitizing it all.
- Ticket sellers, grocery stores, bars, restaurants, car dealerships, airlines and more.
A whole sub-economy has sprung up to take this money out of the educational process, and taxpayers, through student loans, are funding some of it – but not all of it. Students who work finance part of it. Parents finance part of it. The savings fund is one of them. It is a huge undertaking. But the most glaring part is the increase in student debt.
Auto loans and rentals.
Total automotive loans and leases for new and used vehicles in the third quarter increased 4.3% from a year ago, by $ 50 billion, to a record 1 , $ 19 trillion:
Over the past 10 years, since the third quarter of 2009, auto loan balances have jumped 62%, compared to the consumer price index increase of 19% and population growth of 8%. . Thus, on a per capita basis corrected for inflation, the weight of these loans has increased. In terms of the size of the economy as a whole, auto loan balances have increased from 5.1% of GDP in 2009 to 5.6% of GDP today.
This 4.3% increase in outstanding auto loans occurred despite unit sales of new vehicles down 1.6% so far this year and despite the lack of sparkle used vehicle unit sales. This is the result of many factors, including:
Credit cards and other revolving credits
Overdue balances on credit cards and other revolving credits, such as personal lines of credit – but not home-guaranteed loans, such as HELOCs – increased 3.6% in the third quarter from the third quarter from last year, to $ 1.04 trillion (unadjusted for seasonal variations). It was a record for a third quarter and the highest second quarter on record, below the borrowing vacation frenzy until you failed last year’s fourth quarter.
But overall, on a national average, consumers have been fairly cautious by American standards, compared to the pre-Great Recession era, much to the dismay of lenders who are making huge profits from debt. credit card where interest rates can exceed 20%.
In the past 11 years since the third quarter of 2008, just before everything collapsed, credit card balances have only grown by 5.8%. During those 11 years, the consumer price index increased by 22% and the population increased by about 9%. Thus adjusted for inflation and per capita, consumers reduced their credit card debt.
In terms of the size of the economy: In the third quarter of 2008, revolving credit amounted to 6.8% of GDP. Today it has fallen to 4.8% of GDP. So, in terms of credit cards, overall national average consumers have become more cautious.
The big bifurcation.
On the one hand, there are consumers who use their credit cards only as a payment system and to get cash back, miles, and all loyalty rewards, but they pay their cards every month and don’t have to. no balance and pay no interest or fees. Since they have no interest-bearing credit card debt, their activities are not included in consumer credit.
On the other side, there are consumers with max credit cards or large balances, and they have personal loans, payday loans, and so on. their noses, swing from one paycheck to another and, if something goes wrong, become delinquent. These are the people who owe the lion’s share of that $ 1.04 trillion in revolving credit – which is why credit card debt plummets so quickly during a recession.
Total consumer loans Excluding Housing.
Student loans, auto loans and revolving credit combined in total consumer credit – which excludes housing-related credits such as mortgages – jumped $ 193 billion in the third quarter from a year ago year, or 4.9%, to $ 4.13 trillion, another record:
This $ 193 billion increase in consumer debt over the past 12 months – whether it’s student loans, car loans, or credit cards – has been spent and has increased consumer spending ( approximately $ 14.5 trillion) by 1.3%. And that boosted the GDP by about 0.9%. That’s why economists want consumers to borrow and spend.
Students are playing an increasingly important role in this formula for increasing GDP. That’s why economists and politicians don’t want to tackle the problem where it really is: cracking down on costs.
Instead, they’re trying to reshuffle as to who pays for it – and they’re not the two beneficiaries of this process, namely the students who get an education and the university-business-finance complex that gets away with it.
And they found taxpayers to whom this money is owed. The blanket cancellation of student loans is also grossly unfair to former students who have paid off their loans and are now expected to pay off other student loans; to parents who have sacrificed a lot to finance their children’s education and who should now finance the education of other children; and to many students themselves, who tried to avoid getting into debt, worked like maniacs and skimped on everything to pay for their university studies, who went to the cheapest schools and prolonged their studies, and who obtained less sophisticated jobs because of that, and now they have to pay off the debt of other students who got into debt and maybe got better jobs.
The real issue that needs to be addressed in terms of student loans is the cost of education – not who pays for it – and the costs are driven by the primary beneficiary of it all, the university-business-finance complex.
UPDATE November 9th: Dear readers, great comments and discussions below. You’re missing out if you don’t venture below the line. And you can also intervene.
Used vehicle sales are down again, after increasing for years. Wholesale prices are falling year over year for the first time in 33 months. But “cars” still dominate “trucks”. Read… What Happens in Used Cars and Trucks v. Carmageddon?
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