Sunday, July 29, 2012

Robert Oak — Student Loan Debt Time Bomb

Student loan debt is now the next great bubble, threatening the U.S. economy as the mortgage crisis did. The NACBA [National Association of Consumer Bankruptcy Attorneys] released a study and calls student loan debt the next financial crisis, on the level of the mortgage crisis.
Read it The Economic Populist
Student Loan Debt Time Bomb
Robert Oak

Another rent bomb ticking. Who needs terrorists when we are hell-bent on blowing ourselves up.

8 comments:

Major_Freedom said...

Student loan bubble, bond bubble, bubbles galore. All because the Fed refuses to allow correction.

Unforgiven said...

Hmmm? Bubbles have been around for quite some time. Long, long before the Fed showed up.

Major_Freedom said...

Unforgiven:

Hmmm? Bubbles have been around for quite some time. Long, long before the Fed showed up.

That the Fed causes bubbles does not imply that ONLY the Fed causes bubbles.

It would be like challenging my claim that the democratic state enforces laws. I could say "Enforcing laws has been around for quite some time. Long, long before the democratic state showed up."

Leverage said...

How do you fix this Major Freedom?

You can't and you just let hell unravel after each bubble implosion? You just don't act?

Related to the other thing you say: so you don't enforce rules/laws based on the rule of the majority (not really what we have in most nations anyway, including USA, but let's pretend it is), what happens when there is conflict between two parties (which can't be arbitraged by prices)? How do we solve these conflicts?

You can create conflicts by simply ownership, for example when there are 10 dogs chasing 8 bones, conflict will arise, what then? It's just 'fairness' if a dog is left without nothing ('work harder'/'prostitute yourself harder'), 'natural order'? But in natural order there aren't arbitrary rules like 'property' and 'non-violence' which are all human constructs...

It looks like these claims are all made-up by subjective preference of individuals. I mean all these 'worldviews' and 'system preferences'.

Coming back to the bubbles, again there ain't right or wrong way to solve post-bubble wreckage, it's a subjective preference. Unless, off course, you appeal to some ideal 'efficiency' concept, right?

Leverage said...

BTW I'm not defending the FED here, IMO central banks shouldn't expand their balance sheets to 'bail out' the private sector. I don't think central banks should exists and sovereign governments had to issue debt securities either, nor should exist legal tender laws etc.

But it's this the 'right' or 'wrong' idea? I don't know, it's a subjective preference based on my perception of how things could 'work better', but I don't know if that's the truth.

Matt Franko said...

Major,
Bond bubble?

The natural rate of interest IS zero. The Fed keeps the rate above this level.

You do not yet understand things.... rsp

Major_Freedom said...

Matt Franko:

Bond bubble?

The natural rate of interest IS zero.

I disagree. The natural rate of interest is not the interest rate on loans (corrected for price inflation).

The natural interest rate is the difference in valuation that people place on present consumption as compared to future consumption. This rate is always positive, ceteris paribus.

The rates on loans is but a narrow manifestation of the phenomenon of time preference.

The Fed keeps the rate above this level.

The Fed actually brings loan rates down by inflation, by continuously increasing inflation so that the increase in the rates of profit won't pull the loan rates up.

Of course they can't do this forever, which is why at some point, they'll have to reduce inflation, which will raise loan rates, and expose malinvestments.

You do not understand the effects of central banks on the economy.

What does "rsp" mean? You type in almost every one of your posts.

Major_Freedom said...

Leverage:

How do you fix this Major Freedom?

You can't. Once the inflation has taken place, correction is inevitable. The only way to stop the problems is to prevent inflation. You prevent inflation by demonopolizing money production.

You can't and you just let hell unravel after each bubble implosion? You just don't act?

No, we let the people voluntarily act to fix the problems. Calling for no state action does not mean that there will be no actions.

Civilians act.

Related to the other thing you say: so you don't enforce rules/laws based on the rule of the majority (not really what we have in most nations anyway, including USA, but let's pretend it is), what happens when there is conflict between two parties (which can't be arbitraged by prices)? How do we solve these conflicts?

Decentralize security and protection.

Notice a pattern?

You can create conflicts by simply ownership, for example when there are 10 dogs chasing 8 bones, conflict will arise, what then?

Since resources are scarce, conflict is inevitable unless there are rules of property that individuals respect. These rules for property are the only way to stop conflict over scarce resources.

It's just 'fairness' if a dog is left without nothing ('work harder'/'prostitute yourself harder'), 'natural order'? But in natural order there aren't arbitrary rules like 'property' and 'non-violence' which are all human constructs...

Human constructs are natural. Humans are a part of the natural order.

It looks like these claims are all made-up by subjective preference of individuals. I mean all these 'worldviews' and 'system preferences'.

You could not even make that claim unless you are using a standard of objectivity.

Coming back to the bubbles, again there ain't right or wrong way to solve post-bubble wreckage, it's a subjective preference.

Subjective preference of whom? Certainly not the millions of unemployed.

Unless, off course, you appeal to some ideal 'efficiency' concept, right?

It's actually in the name of "efficiency", which replaced "rights", that Fed induced bubbles have inadvertently arisen.