“Heirs to Claptrap” The Wasteland & Minefield of Student Debt

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student debt

“The principle of spending money to be paid by posterity,

under the name of funding,

is but swindling futurity on a large scale.”

~ President Thomas Jefferson ~

Earlier in this month of May 2015, the following straight-talking, ‘no prisoners taken’ piece was submitted by Bill Bonner, of Bonner & Partners.

It is written in the style of a hypothetical Graduation Speech, given to students.

It tackles some of the underlying issues with regard to over all debt levels and their causes, that constitute many of the reason why readers of Q Wealth Report here are as concerned as they are, about the safety of the families, as well as their assets.

Many of us have children, and perhaps grandchildren too, who we care deeply about, and so it is in many ways their future that we are often more concerned with securing, even than our own.

national student debt

The article is a thought provoking piece, that perhaps ought to help all of us to make doubly sure that we have our “legacy plans” firmly in place, so we can pass on the fruits of our hard work to our loved one, without government agencies being able to extract their “pound of flesh” or more from our efforts first!

So after you’ve read Bill’s comments, we would urge everyone who has not yet become a Member of Q Wealth to seriously consider doing so … if not for our own benefit, then at least to help safeguard the future of the student generation, that the following article speaks to; a generation it has to be remembered, from whom the governments of our generation have been borrowing from for a very long time indeed.

The implications of such concerted action by government, on the broader economy as a whole, of the Student Debt Problem, will also be the theme of an upcoming “Special Report” in the members Area, so be on the look out for that too. The risks are quite staggering, given that now Student Debt levels exceed even Credit Card debt levels, widely seen as potentially being the “next shoe to drop”.

studebt debt next financial bubble

The crack cocaine habit then, of deficit spending, has fuelled the present economy for decades, and our children, and theirs, will be paying the price for generations to come.

As Thomas Jefferson is reported to have once said …

“ … the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.”

A thought very much worth contemplating as we read the following speech.

————————————————–

Dear Diary,

Yesterday, we began our high-minded Graduation Speech to the Class of 2015.

We explained how the young graduates were not only the most heavily indebted in history, but also the least likely to be able to pay their debts.

Median wages have been going down since these graduates were about five years old…

So have economic growth rates.

Today, we continue the speech no one wants us to give…

Heirs To Claptrap

You are heirs to claptrap, nonsense, bogus theories … and trillions of dollars in debt.

The systems, programs, and institutions your parents set up, are mostly worthless scams.

Worse, they produce outcomes contrary to their stated goals.

Healthcare programs do not make them healthy; they make them dependent on the drug industry.

Defense industry spending doesn’t make us safer; it funds drones, bumbling interventions, and assassinations … and it creates more foreign enemies.

We end up not only poorer, but also less secure.

All of those assertions take more time to explain and prove than we have time for now. But here’s a little example that you will appreciate…

25 Years of Poverty

Under President Johnson, the government set up the Federal Direct Student Loan Program, to provide “low-interest loans” (back then, “low” meant 8%) to students.

Private lenders made the loans, but they received the full backing of the Feds.

The idea was to help you afford higher education … and earn larger salaries as a result. And with your increased earnings, you were supposed to be able to pay off the loan.

But, at over 11% of outstanding debt, the Student Loan Program now has the highest delinquency rate of all forms of household debt (mortgage loans, auto loans, credit cards).

And it will probably go much higher, as students take on more debt.

Total outstanding student debt is expected to bubble up to $3.3 trillion by 2025.

What do you do if you can’t pay?

Well, the Feds have a solution for you.

The trouble is, it turns you into the very thing the program was meant to avoid.

Here’s how it works…

As long as your income is low, you are allowed to make small token payments every month.

Keep this up for 300 payments, and your debt is considered satisfied, no matter how little you paid.

In other words, the Student Loan Program encourages you to live in poverty for a quarter of a century, to get rid of your student debt.

Most likely, this will be easy for you to do anyway.

First, because most college degrees do little to make you more valuable to employers.

Second, because your parents’ rigging of the economy will make it difficult to make any financial progress anyway.

The median household income – after you account for inflation – has been falling since the late 1990s. And good jobs are hard to get.

There are fewer “breadwinner” jobs today in America than there were in 1999.

And you can forget about starting your own business.

The rate of new start-ups is collapsing.

Remember from last week, that the U.S. ranks 46th on the World Bank’s list of the easiest countries in which to start a business.

You can thank your parents for that, too.

The system is designed to protect them, their Social Security benefits, their health care, their stock market portfolios, and their businesses.

Protect them against what?

Against you!

You are the future.

You are the competition.

You are the ones who should want to shake things up, and tear down the walls of bureaucracy, taxes, paperwork, and regulation that make it so difficult for you to start new businesses, get good jobs and build real wealth.

You should be talking revolution – overthrowing your parents’ multi trillion-dollar debts and pulling out of their wars on poverty, illiteracy, Iraqis, Afghans… you name it.

You need to stop these silly, pointless, and expensive programs so you can have the resources to pay for your own programs, and launch your own stupid wars!

You need to get rid of your Barents zombies – the millions of unproductive people who get money from the government – so you can afford your own families … your own pet projects … and zombies of your own.

A Suicidal System of Credit

You need to stop your Barents suicidal credit-based money system, too.

You don’t know about this, do you?

Your professors of government, politics, economics, and finance didn’t mention it, did they?

Well, the system is corrupt and self-destructive.

It works only by increasing the amount of debt in the society – including student debt.

And it works only until the debt bubble gets so big, that it blows up.

But there’s a logic to it … a sinister logic that turns you into chumps for older generations.

Spending on credit favors the existing owners of capital … and people who have existing claims on the government money.

Let me explain …

When the government borrows money, it gives the money to a zombie to spend, or it spends it directly.

Usually, the money goes to an older person – your parents or grandparents – in some form of social welfare subsidy, pension, job, contract, or support program.

When they spend the money, it goes into the coffers of corporations.

This increases profits … and share prices.

Who owns those Corporations?

Do you?

You don’t?

Then who does?

Your parents and grandparents benefit again.

They are the owners of the nation’s financial assets.

By increasing credit, they shift real wealth from the future to the present … and from you, to them.

This is the money you haven’t earned yet.

I’ll spell it out for you:

The government borrows a dollar.

It gives the dollar to one of its pet zombies.

It could be a health researcher, a drug addict, or somebody who makes bombs.

The money goes – one way or another – to a Corporation, which registers it as a sale.

If it has a 10% profit margin, 10 cents is recorded as a profit.

If it sells at a price-to-earnings ratio of 20 times, its stock price goes up $2.

This makes the owner of the stock – it could be one of your parents – $2 richer. I’m oversimplifying… but you get the point.

But the government now owes $1 more.

And who’s going to pay it?

You are!

Your parents and grandparents are retiring … and collecting their Social Security and health care benefits.

They think they will be able to sell their stocks too … and their houses … and have even more money to spend.

Time to Wipe the Slate Clean

Now, it’s up to you.

You need to get a job so you can pay for their health care benefits.

You need to pay your taxes, so they can keep their wars going.

You need to buy a house too, so they can move to Florida and retire.

You need to vote for their candidates … work for their companies … and pay their bills.

This is the test you face.

You are arriving in the economy at the tail end of a 60-year credit expansion.

Debt has boomed.

The economy has boomed.

We, your parents, enjoyed an economic expansion that began when we were born, and continued with only short interruptions, until we retired.

We got out of school with little or no student debt.

We could start businesses with fewer impediments.

We could borrow money to fund our businesses and our lives.

We could hire, fire, switch jobs … buy and sell houses… move from place to place.

We were freer – and richer – than you will be…

… unless you can wipe the slate clean of our debts … our foolish wars and dumbbell programs … and our attempts to hold back the future and prevent you from living rich, full, free lives of your own.

If you don’t rise to this challenge, you will inherit our bills, our regulations, our restrictions, our obligations, our delusions, our prejudices, and our vanities.

You will also inherit a financial crisis – worse than the crisis of 2008 – and a long and grinding economic slump.

The debt expansion of the last 60 years will turn into a dreary debt contraction, possibly dragging the economy into another Great Depression.

Either you find a way to shuck off, default on, or inflate away your Barents debts … or you’ll stagger under the weight of them for the rest of your lives.

Either you break free from the jackass things your parents have done to you … or you deserve what you get.

Congratulations, chumps.

Regards,

Bill

Article taken from…http://bonnerandpartners.com/a-generational-storm-is-coming/

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1 thought on ““Heirs to Claptrap” The Wasteland & Minefield of Student Debt”

  1. A great quote from this article:
    “Either you break free from the jackass things your parents have done to you … or you deserve what you get.”

    This call to action is a bit difficult when the students are still living with their parents and their parents are as clueless as their children.

    This downward economic spiral applies to almost every one not just the students. Almost every one except the very wealthy who are already rich in assets. This so called 1% are not the parents of the students in any sense of the word.

    Another quote says about the parents:
    “The system is designed to protect them, their Social Security benefits, their health care, their stock market portfolios, and their businesses.”

    Nonsense, the system is designed to enrich the central banks and their fellow travelers at the expense of the people. The system is corrupt because it is a fiat money system which allows the creation of money out of thin air. In fact the system they are running demands this because it is based on Keynesian economics which is more of an oxymoron than a theory of economics. More like Marx light.

    This creation of money out of thin air hurts the poorest people, people with savings and people with pensions, including the people on Social Security. The people on Social Security paid in to the program with the promise of receiving benefits in their old age and then we they finally receive the payments they find that because of the central banks currency inflation the resulting price inflation eats away at their benefits over time.

    Another quote says:
    “Your parents and grandparents benefit again…”
    “By increasing credit, they shift real wealth from the future to the present … and from you, to them.”

    More nonsense. The student credit money goes in to the pockets of the schools which are the immediate beneficiaries of the student loans not the parents of the students. If any thing the parents and grandparents are worse off because the student debt makes the students more dependent on them.

    I suggest that the author and the readers of this article should read the below book by Griffen. You will then realize how corrupt our entire financial system is. It will explain how the Federal Reserve created by a banking cartel to institutionalize the creating of money out of thin air for their benefit not yours is one of the greatest crimes of the century.
    The Creature from Jekyll Island: A Second Look at the Federal Reserve
    by G. Edward Griffin

    A final thought. If the students don’t like the rules of the game then they shouldn’t have sat down at the table in the first place. Their debt plight sounds too much like our current Greek tragedy. Sadly critical thinking and basic economics is not taught to students at an early age

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