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That is the nature of all bubbles. If folks could just endlessly borrow they would continue. If banks were endlessly granting, extending, and re-financing ARMs, and Interest Only loans the Real Estate party would just keep going.
Every unbalanced system reaches its terminal limits. GW's tax cuts and massive spending have about wiped out the Treasury and the nation's capacity to go further into debt. The folks that have outstanding student loans cannot pay them when they have lost their jobs and cannot even keep their house.
Between no new fresh money, and bad old money is where the bubbles bust.
That equals party over. Not saying that it will happen, it just fits the profile of bubbles and is line with the OP's starting concept.
I see what you mean, but let me explain my position. The nature of a speculative bubble is a increase in prices based on speculation by players in that market. That is what happened in the financial markets in the 90s, thats what happened in the north east housing market in the 90s, thats what happened with the telecom and tech bubble of 2001, and thats what happened with this housing bubble.
That is not what is going on with education and rising tuition prices. There was a great article on higher education and why prices are rising. I don't remember where I read it though. I think it was the wall street journal. If I find it, I will post it.
If anything happens to student loans, it will be defaults by the public. Which doesn't indicated a bubble in and of itself. The reason this will happen is because of a bad economy, which prevents people from paying. I also highly doubt that money is going to dry up for people to go to school. Sally mae will see to that, also many schools assure funding to students. Also many top universities which are research universities get tons of corporate, organization, individual and government money for research. Now I can see universities who are not heavily researched based, getting in trouble, maybe universities will consolidate (this is a wild theory on my part). Also, if people stop paying, that doesn't mean anything. They will have their wages garnished, students loans are secured debt unlike credit cards.
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I agree the content of what passes for education is now dim and getting more irrelevant quickly. The sorry mis-information and myths that the typical MBA walks out the door with is a major cause of current state of the US economy.
I suppose that Jefferson Davis' eulogy for the Confederacy will fit the tombstone of the US economy -- Died of a Theory.
That's not what I meant, though I agree.
Let me explain, for example at the Uni I work at, the school of computer science is doing bad. Its not because the information being taught is bad, its because people no longer go into Computer Science as heavily as they did before 2001. So year over year enrollment has been going down. That is what I was referring too.
I see what you are saying about limiting the "bubbles" concept to speculative investments. South Sea, Tulip Bulbs, on and on.
You are correct about CS not doing so hot. Now days, most folks chasing money in the computer realm chase Information Technology which is generally under the Business College domain, as opposed to Computer Science/Engineering which includes conceptual design and architecture and sits in the Engineering realm.
My mental link (or stretch) is that kids go to school with expectation of return on their money and time. If that belief system fails, the schools fail. If the schools could operate at real lower costs to the kids it would make the school, itself more viable.
If the folks with student loans are personally broke, there is no way to repay those loans despite claims against (non-existent) paychecks, property, or bank accounts. There is simply no way to recover such a debt.
Back towards bubbles and bursting, I am sort of expecting energy to hit that soon. Oil, electricity, etc. While most may consider that a welcome break, I suspect it will come at higher cost than the housing bubble bursting. A very major recession (or big D-word) will drop energy demand, and that market will fall, as well. However, it will be of no real benefit to anyone, as normal folks still will not be able to afford it on diminished real incomes.
I see what you are saying about limiting the "bubbles" concept to speculative investments. South Sea, Tulip Bulbs, on and on.
You are correct about CS not doing so hot. Now days, most folks chasing money in the computer realm chase Information Technology which is generally under the Business College domain, as opposed to Computer Science/Engineering which includes conceptual design and architecture and sits in the Engineering realm.
My mental link (or stretch) is that kids go to school with expectation of return on their money and time. If that belief system fails, the schools fail. If the schools could operate at real lower costs to the kids it would make the school, itself more viable.
If the folks with student loans are personally broke, there is no way to repay those loans despite claims against (non-existent) paychecks, property, or bank accounts. There is simply no way to recover such a debt.
Back towards bubbles and bursting, I am sort of expecting energy to hit that soon. Oil, electricity, etc. While most may consider that a welcome break, I suspect it will come at higher cost than the housing bubble bursting. A very major recession (or big D-word) will drop energy demand, and that market will fall, as well. However, it will be of no real benefit to anyone, as normal folks still will not be able to afford it on diminished real incomes.
Couldn't agree more. I think part of the problem with schools is expectation. People want to go to schools and live the cool college life. So they have to add stuff to their campuses to support what students want. If I told you about some of these projects a lot of these schools are under taking you would laugh. Some of it is beyond unnecessary.
I agree with you on the student loan stuff. But the thing is, even when things get better (which they eventually will) you still owe on the loan. You can't escape them unless you leave the country forever.
Oh and you and I are eye to eye with energy. I think renewable energy is the next bubble we will see. I also want to throw in mass transit into that mix. I heard some govt official say they want to build out mass transit across the country with the help of private sector. This will be interesting to see unfold.
For U.S. farmland, signs of a property bubble? | U.S. | Reuters (http://www.reuters.com/article/newsOne/idUSN2843884320080330?pageNumber=3&virtualBrandCha nnel=0 - broken link)
I don't know if student loans qualify for bubble status, but it has that same feeling of being out of control. Kids borrowing too much money with no regard to the future. The belief that you have to go to college at any cost or you're a loser. The "I'll worry about that later" philosophy. The behind the scenes manipulations by the industry. The expectations of what will happen in the future that don't happen. The big impact on low and middle class families who thought they were doing the right thing and living the America dream, yet no impact on the upper class. It all sounds familiar.
You need a education in something to make a decent living, thats a fact. I don't care if it is auto mechanics or physics. You however do NOT need a house, that is a luxury item. So no comparison there. Also, not all schools cost the same, some are cheaper than others, just depends on where you want to go for school. I do think some people go to far with the loans though. I met a woman who was 150,000 deep, that was astonishing to hear. You can blame America's adversity to socialism for that though, not a bubble. I think some are throwing that word around to easily with not really understanding what a bubble really is. No one is speculating on education, creating faux wealth and then the natural market correction. Student loans have nothing in common with any of this. Not to mention, as stated before, student loans are not unsecured debt, so it MUST be paid back. If you don't have a job thats one thing, but when you do have a job, you will pay or have your wages garnished.
Education isn't quite a bubble but people tend to overvalue it. Alot of people are studying degrees that won't help them earn any more money to pay off their student loan debts.
And it absolutely isn't true you can't make alot of money without a college degree. People do it all the time. Making alot of money seems to come down to acquired skills, networking, ambition, and alot of luck. You might make a safe income through an education, but there are many, many educated people who will never be rich doing what they learned in college.
You need a bachelors degree just to make it in the door for an interview in most large corps. But that said, you don't have to work for a big corp. Since they cater to "offshoring" these days - those jobs are not as "golden" as they used to be. Benefits are being slashed and some have a hard time attracting good candidates these days.
You can always open up your own business and make money for yourself. This is the future of the the united states - small biz - I am convinced of it.
At least you can write off the interest now. When we were paying off ours, 1985-199?? you could not deduct.
I went to my accountant on Friday for taxes. She told us she had a staff of 14 and now she is down to a staff of 1. She then told us, she had four BIG corporate accounts. All of those closed their doors and the owners went back to their country of origin (UK), one went to Malaysia and opened up another business. He know makes more money because of cheaper labor. She said all her mom and pop shop clients have closed up shop and left the state for greener pastures. She then went on to tell us, mechanics, plumbers and the like are making more money than her customers with degrees. So you are damn right, real wages have decreased dramatically, especially for those with degrees. Its the season of the blue collar worker now. People are keeping their cars longer which mens more repair, and no more house hoping, gotta up keep what you got, so its payola for plumbers. It is definitely a new day in America.
It's always been my understanding that federally backed student loans MUST be paid back and are not subject to bankruptcy protection. That wages will be garnished if the debtor does not pay.
Is this not the case?
I'm, with you. That's always what I've heard as well. You can't include student loans in a bankruptcy.
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