Monday, April 16, 2012

The Next Bubble - Student Loans

The Next Bubble - Student Loans

Well, it looks like we know what the next bubble that will burst, and it's all about student loans.
Back in 2006, contrary to conventional wisdom, many financial professionals were well aware of the subprime bubble, and that the trajectory of home prices was unsustainable. However, because there was no way to know just when it would pop, few if any dared to bet against the herd (those who did, and did so early despite all odds, made greater than 100-1 returns). Fast forward to today, when the most comparable to subprime, cheap credit-induced bubble, is that of student loans (for extended literature on why the non-dischargeable student loan bubble will "create a generation of wage slavery" read this and much of the easily accessible literature on the topic elsewhere) which have now surpassed $1 trillion in notional. Yet oddly enough, just like in the case of the subprime bubble, so in the ongoing expansion of the credit bubble manifested in this case by student loans, we have an early warning that the party is almost over, coming from the most unexpected of sources: JPMorgan.


And with all private players stepping out very actively, it only leaves the government, with its extensive system of 'checks and balances', to hand out loans to America's ever more destitute students, with the reckless abandon of a Wells Fargo NINJA-specialized loan officer in 2005. What will be hilarious in 2014, when taxpayers are fuming at the latest multi-trillion bailout, now that we know that $270 billion in student loans are at least 30 days delinquent which can only have one very sad ending, is that the government will have no evil banker scapegoats to blame loose lending standards on. And why would they: after all it is this administration's sworn Keynesian duty to make every student a debt slave in perpetuity, but only after they buy a lifetime supply of iPads. Then again by 2014 we will have far greater problems (and for most in the administration, it will be "someone else's problem").

For now, our advice - just do what Jamie Dimon is doing: duck and hide for cover.

Oh, and if there is a cheap student loan synthetic short out there, which has the same upside potential as the ABX did in late 2006, please advise.

Welp, what do you know. 270 billion dollars in loans that are at least 30 days past due? I know a few people who have tens of thousands of dollars in student loans, graduate students can now no longer defer repayment on their loans and they have uncapped interest rates all thanks to Obama.

So basically they're fucked. To be honest, their game plan seems like a solid one. In that they plan on instead of paying it back, they're just going to finish their education and then leave the country. Again, that sounds pretty solid of a plan.

The only other viable option for those who are in massive student loan debt is to never try to repay it and just take the wage garnishment until they retire, as garnishment is capped at 25% of take home income... Well, as defined as gross income minus fed poverty line. But I guess the response to that would be to dramatically raise the garnishment cap. Just imagine, Doctors and teachers and engineers eating cat food to survive.. oh wait, teachers wouldn't even have enough cash to afford that cat food.

A lot of the people stuck in this mess don't even really know how much they owe and have lost track of all this shit as the loans have been handed off between so many different organizations at this point and have wide ranges of interest rates. But yeah, maybe it'll get to the point like the health billing in America, where the actual value of what you owe gets so detached from reality that if you so much as imply you're willing to pay off some part of your loans, they'll stop bothering you. Which sounds like a good thing in a really perverted way.

I mean, it's already a situation where they made it so that it ignores bankruptcy forever. So try getting out of that student loan that way, I dare you. Now maybe I'm just a simple, old-fashioned country lumber baron's suite, but it still strikes me as odd that these groups refer to finance options as "products".

Student loans are pretty much robbery in my mind. It's the signifying way that capitalism keeps the poor under-educated and poor. The fact that you have to pay thousands upon thousands of dollars just to learn. More people should read massive amounts of books. And fuck text books, it's all about E-books. Pirate all books. Textbooks, fiction, nonfiction, everything. Just pirate it all.

Because God is capitalism, the fruit of knowledge is education and Satan is communism - that provides free education to all. And in this case, Satan is correct. Satan is always correct. ALL HAIL SATAN!

Because seriously, if you think most of these people will ever make enough to pay off their student loans, ha! Good fuckin' luck with that bullshit. They may as well just waive student loan debt. At least that would do more to stimulate the economy and job growth than anything since WW2.

Till that happens, perhaps you shouldn't get anymore student loans. In fact, make sure you don't have anyone cosign your loans with you. It's just a mistake no matter what way you look at it. Besides that, it makes it a little trickier to skip out of the country when your folks are going to lose their house if you do.

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