Thursday, May 31, 2012

The Next Bubble to Pop

Thanks to Andrew Groff for bring this one to my attention.

By now, the bubble in student loans is becoming more widely understood. The absolute level continues to rise significantly and growth is accelerating with 8% YoY growth just reported, via the WSJ. Of course the reasons are anathema but attending college on the back of hope of a better-paying job when everyone else is also attending college in that hope (thanks to endless student-loan funding from your helpful government) seems to be self-defeating as the supply of supposedly better-qualified workers into a stagnant economy will do nothing but reduce higher-end wages further?
This is an issue with dire consequences for young people, many of whom have a great deal of student debt, not a lot of job prospects, and no ability to declare bankruptcy to escape the crushing burden of that taxpayer-backed debt.  They will pay eventually, and the taxpayers will shoulder the burden until they do.  This is no way to run a railroad.  Bankruptcy is an integral part of the credit process as it protects borrowers from predatory lenders and encourages lenders to take less risk.  Bailouts and government subsidies interrupt this process to the detriment of the government's budget and the nation's economy.

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