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I appreciated Peter Schiff standing up to the "there is no crisis" punditry who were literally laughing out loud at him in 2004 and 2005 on news shows.
Another "bubble" up for discussion is the college loan bubble, which Peter Schiff talks about with his own opinions, starting at 3:04.
Here's a link to the opening of a TIME Magazine article entitled "I Owe U," which pictures a young man with $67,000 in student debt, but he has a B.A. in "Special Studies" to show for it. It's one thing to give up your house and move on, but student loan debts are like taxes - inescapable. Should we call those who loaned this student the money "irresponsible lenders?"
Friday, October 28, 2011
Northern Virginia Bits Bucket 10/28/2011
Posted by Harriet at 10:00 AM
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26 comments:
Harriet-
I thought the video was interesting, but I do have to say that I strongly disagree with a lot of what Peter Schiff has to say. He really thinks capitalism is a perfect system with no downfalls. In reality people only look into their own interest, rather than looking at external costs to society. There is no way that corporations wouldn't pollute or sell bad food/drugs with out the EPA/FDA...
I also find it funny that he is bragging about being right on the housing problems in 2004, but he didn't mention his inflation arguments. He has been claiming the government will cause massive inflation for many many years without realizing his economic models are wrong.
I can't view the video due to an annoying firewall, but I saw Peter Schiff on Andersen Cooper last night, opposite Cornel West. Peter embarrassed himself.
He insisted that Government was completely to blame for the banking crisis. When it was pointed-out that banks leveraged themselves forty times over, engaged in reckless speculation via CDOs and synthetic CDOs and sought and won the repeal of Glass–Steagall Act, he again blamed the Government for “creating an environment where these things occurred.” He didn't stop blathering long enough to consider that perhaps a lack of Government regulation in these areas created the subject environment.
He also emphatically denied that unions played a role in bringing-about the 5 day work week or the concept of overtime. The man is living in his own world.
Shiff earned alot of cred yelling fire in 2005 while the "everythings fine" crowd was laughing at him at the time.
I thought he was the golden boy til some old video surfaced of him calling for a "historical crash" sometime around 1994 or so. Oops...
Its a tough gig being in the extreme prediction game. Meredith Whitney was the golden child calling the housing bust, and the bank rebound. She eventually bit off more than she could chew in the "hundreds of billions of muni default in 2011" call. She is still getting killed for that one.
My favorite thus far is still Tom Lawler. He created the "flipchart of doom" when he was with Fannie & Freddie in 2004-2005. He also showed the capacity for bullishness calling for DC housing market to rebound in 2009 (much to the chagrin of our bears at the time). Bill McBride of Calculated Risk (another good one) cites Lawler's stuff from time to time.
None of these guys are perfect, but at least the ones that show the capacity for bearishness AND bullishness at various times seem the most credible.
I'll comment on the student loan debt. Full disclosure: my parents paid for my undergrad education (at a State School within an Ivy League university). I applied only to State Schools.
My husband worked 40hrs a week while at this high cost University (not in a State division). His parents were unable to contribute one cent. He worked 70hrs per week over the summers. Between grants, scholarships and working, he was able to graduate with only a 6K debt.
2 yrs after graduation I entered Law School. I had one choice - George Mason. We had no help from family whatsoever. I went to night school and worked full-time. I attended summer school in order to graduate in 3 yrs. We practically lived on ramen's (or the equivalent).
I have zero sympathy for these students who feel entitled to a high paying job. I question that they even possess the intelligence to attend school - they clearly lack common sense.
My neighbor made his 3 kids go to NoVa and live at home for the first 2 yrs. They then transferred to a STATE SCHOOL.
The young woman who is waitressing spends her days "occupying". I would suggest that she obtain a second job during her free time.
There is a huge difference between college tuition today in state and private universities than college tution say 20 years ago. Of all things that have experienced a high inflation, college tuition has increased by far the most outpacing the growth of wages, housing and health care.
So while it was difficult to work and pay for college 20 years or so ago, today is significantly more difficult if not twice or three times more expensive adjusted for inflation. I don't have the data in front of me to prove, but when I find it I will post it.
The curve of college tution is the steepest.
This link includes graphs showing the high growth of a college education vs. housing, etc. http://www.mymoneyblog.com/charts-college-tuition-vs-housing-bubble-vs-medical-costs.html
More graphs: http://money.cnn.com/2008/08/20/pf/college/college_price.moneymag/
This is a huge problem. I would say bigger than the housing bubble.
http://articles.businessinsider.com/2011-03-09/news/30078492_1_medical-costs-household-incomes-real-growth
"The next chart shows the real growth of medical costs over the same time frame. The top 5% of households saw their real incomes increase by 71.5%. But real medical costs grew by a stunning 241%.
"But the growth in medical costs pales in comparison to the growth of college tuition and fees, up 596% since 1980. Mind you, that's 596% above the core rate of inflation, which increased by a "mere" 160.4% over the same time frame."
This one is the best graph showing the proble of tuition cost:
http://advisorperspectives.com/dshort/charts/census/household-income-and-expenses.html?household-incomes-growth-real-plus-medical-college-since-1980.gif
I do not know what is the solution to this problem. I beleive colleges are on the driving seat and as long as people are willing to pay they will continue raising tuition. This is pretty bad for society as a whole.
interesting
all the home starts are in MFDU, which is apartments.
sounds like people want apartments.
cheryl
University of Michigan is now $40K/year if you are out of state.
Is that really something you can pay for working full time?
it used to be a Pell Grant a small student loan or a 20 hour a week job would get you through.
now, it's just crazy.
dc2,
First off,
I will concede that tuition increases have been off the charts. And I don't see any justification for it.
I must aslo admit that I was on a rant yesterday on the heels of Obamas's new plan to reduce repayments and ultimately forgive huge somes, but there has to be some personal accountablity. The taxpayers (the 53%, will end up paying for this). Students do not need to attend expensive schools when they can't afford it and alternatives exist.
The financial aid packages vary from school to school and that is why there is a trend to eliminate early admission. It gives an unfair advantage to the students that can afford to pay full boat.
I have neices and nephews who spent countless hours applying for grants, scholarships, etc. and couldn't attend their first choices do to the aid packages offered. A few schools now guarantee that no grad will graduate with student debt.
My issue is the students who decide to attend a school regardless of how much debt they will acrue. The organizing waitress was, in some ways, the last straw for me.
I also have an issue with parents who do not plan. I clearly understand that some have no extra money to set aside and this is where needs based grants usually come in. Kids whose parents have assets or high enough income to contribute are required to. It may not be fun or cool to attend a community college and live at home for a couple of years. Virginia guarantee's acceptance for it's grads into a Va. 4 yr school.
There were (are?) state programs to pre-pay tuition when children are young. This locks in tuition at that dtae in time. Also, relately modest contributions to a "college" savings plan when a child is born can amount to some serious dough when the time comes.
Part of the incease in tuition (and I make no excuses for the ridiculous increases we have seen) is to make those that can afford it subsidize those who require aid.
Any parent who fails to counsel their kids on the ramifications of incurring huge debt is failing in their duty as a parent.
It's also a fairness issue. Obama's plan only applies to those currently in school.
pat moved to Dc in part to take advantage of low tuition at UDC - he is not going to Georgetown or AU or GW. It boils down to commom sense. No one is arm-twisting these kids to go to expensive schools. Some state schools rank very high and 2 yrs of community college is not the worst thing that can happen.
Perhaps occupying collegs is a better alternative than camping out in various cities.
I am the 53%.
pat,
Why attend Michigan State if you live out of state?
Further:
Undergrad Tuition at George Mason:
$8,484
Undergrad Tuition at Georgetown:
$41,000
VA Investor,
So now if you want your kids to attend college, you need to save 4 to five times more that you needed to save 20 or 30 years ago on an income which has not kept at all with the cost of colleges. See how there is a huge disconnect. This is an impossibility for a lot of families, even those at the top of the income bracket, not the 1 or 2percent of course.
Also there is a reason Harvard costs more than George Mason. Although a decent school getting a degree from George Mason is not the same as getting a degree from Harvard. I also atteded state colleges and I am all for them. But the reality is that employers do pay a premium for students coming from Ivy League schools. Friends who are lawyers tell me that if you do not get a degree from such school your chances of being a partner at such law firms are virtually null. So, I guess you can open your own law firm. There are things you can do. But all of this plays a role.
The bottom line is that college tuition has increased more than 600 percent, with income going up by only 70 percent for the top 5 percent in the income bracket. How in heavens are you going to be able to save to pay for college?
dc2,
What percent of the population has the brains to attend Harvard and possibly become a partner at an elite law firm. How many mediocre schools cost close to what Harvard costs?
btw, Isn't Harvard one of the schools that now promises kids will graduate with no debt? And aren't kids from elite schools the ones that are suing because they believe they were promised high-paying jobs?
There are untold success stories of people who attended state schools and newsweek is now ranking schools on the relative value of the education. I wanted to go to Princeton and my parents said no way. For grad school, I went with what I could afford. I realized that I wasn't going to end up on K Street and the best Fairfax firms seemed to be peppered with graduates of UVA (and Episcopal HS). I took what job I could get and the pay was pathetic. I then did some things that got me in a good situation 3 yrs later.
Perhaps if you want to become a partner at a top-notch law firm, you should take on the debt to make that happen. Otherwise, a cost/benefit analysis is needed.
cheryl
For most kids, the traditional college experience is dying.
4 years off at dorms, partying, having sex, is a dying experience.
Killed by rising costs.
Now, I think most kids should look at a 2 year stint at community college,
grab an AA, then look at a 2 year stint at a Bachlors granting school.
The Value proposition for Physics 101 or Econ 101, is dying.
But even places like HBS are pricing themselves out. The only
jobs for their grads are the big consulting firms.
fundamentally, our society is swimming in debt, and it's got to be changed. In the 70's you could put yourself through college without debt, then in the 80's with a 6 month income level, now it's up to 3 years income.
That's a mortgage, add in another mortgage and taxes, and wow you are broke.
When state funding for state colleges and universities is cut by more than half over a thirty year time period, tuition is bound to go up faster than inflation.
"Why attend Michigan when you live out of state?"
Because Michigan might offer programs, or at least better programs, than are offered in your state?
NoVAWatcher,
Different or better programs?
specious
Specious? In what way?
Better: Michigan Engineering (for example).
Different (i.e. not available in VA): Michigan Cognitive Neuroscience.
Hey Novawatcher - long time no talk.
Say, since you are here, I was curious about what you said 1 full year after the bottom had passed.
To wit, the issue was (as was often the case) Arlington. Pat was basically insisting it (the big implosion) just hadnt happened yet.
Likewise, 3/4 of the way down the thread, you reiterated that view - "it hasnt happened yet".
http://novabubblefallout.blogspot.com/2010/03/northern-virginia-bits-bucket-3122010.html
Now the irony of course is you thought it "hadnt happened yet" when in reality it (a) had already happened and (b) had been over for a year.
So out of curiosity, when did you realize this? When did you realize you were wrong about the fate of Arlington?
I ask in part because Pat (whom you are talking to in that post) is still here and hasnt come to grips with that fact yet (2.5 years after Arlington bottomed). I wanted to see when you had your epiphany so I can better gauge when he will finally do the same.
I want to know the date of your epiphany to see how much longer Pat can continue to deny reality.
Thanks.
Anon
2 times the march numbers have flirted within 7% of the March 09 current bottom.
165 3 09 vs 177 3/11 isn't a lot of headroom.
Given Bernanke has done 2 rounds of QE and now Operation Twist, i wouldn't be all thrilled about the prospects of real estate market growth.
seriously, do you really believe prices won't be affected by a rise in interest rates?
The Anonymous : you are completely mischaracterizing my statement.
"Pat said...Given Bernanke has done 2 rounds of QE and now Operation Twist, i wouldn't be all thrilled about the prospects of real estate market growth."
Pat -- who said anything about "growth". I have said little to nothing about "growth", and have in fact gone out of my way to suggest that we will stagnate along for quite some time.
The issue, is and was whether early 2009 was the bottom -- nothing more. Why must you continue to conflate the issue?
"NoVAwatcher said...
The Anonymous : you are completely mischaracterizing my statement."
OK, then here is your chance to set the record straight.
http://www.blogger.com/comment.g?blogID=4787878578920468587&postID=1256549039054990434
1. To start the thread, I come out and in the first comment remark how stupid it was to suggest that PWC has bottomed, but Arlington "hasnt even started" and was getting ready to "nose dive"
2. Later, at the 20th comment, Pat opines on the Arlington issue saying (in part) Will Arlington remain immune? I dont think so.
3. Later, at the 31st comment, I respond to Pat about the Arlington issue, telling him his argument is basically "it just hasnt happened yet".
4. Finally, at the 52nd comment, you weigh in on the Arlington issue, citing my words, and reciting, verbatim "it hasn't happened, yet".
Am I mischaracterizing the argument? If so, how? You were a well known arlington skeptic. That was the one and only comment that you made in that entire 74 comment thread. There is no question it was related to me (and my discussion with Pat about Arlington). What were you trying to say that I have apparently mischaracterized?
Novawatcher -- nothing further to say? Didnt think so.
As an aside, given my obviously dickish move of calling you out, you should assume that a feeble response such as "you are completely mischaracterizing my statement", with no follow up is not much of a defense. A better move to save face would have been to not respond at all -- as if you never saw my question.
In any event, I dont mean to be overly harsh of you. On the whole you were a much better than average poster. Overall, I very much listened and normally respected what you had to say.
Still, it should be patently obvious now, even to you, that you had a massive blindspot when it came to the outcome of Arlington.
Going forward, let this be a lesson for you (and really all of us). Years from now, when the next big bubble manifests and bursts, understand that not all of those who claim some area is "different" are unreasonable in doing so -- especially in light of the game changing demographic data that Cara had presented us with at in the 2009 timeframe. Next time, dont be so glibly certain about what must/will happen when history may show, you in fact had no idea what you were talking about.
Cheers.
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