| The term red pill and its opposite, blue pill, are pop culture terms that have become a common symbol for the choice between the blissful ignorance of illusion (blue) and embracing the sometimes painful truth of reality (red). |
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- Talk of a Greek Exit Gets Louder
- Doug Casey on Taxes and Freedom, Part II
- Is Facebook the Rusty Hinge of the Stock Market?
- Fitch Downgrades Japan
- Doug Casey on Taxes and Freedom
- Greeks Run on Banks as Euro-Confidence Wanes
- To the Class of 2012
- Hedge Funds Bail On Euro Now
- Expatriation in the Wake of the Facebook IPO
Student Loan Debt Slaves In Perpetuity – A True Story Of “Bankruptcy Hell”
The numeric implications as well as the magnitude of the student loan bubble have been discussed extensively before. Yet just like most people’s eyes gloss over when they hear billions, trillions or quadrillions, so seeing the exponential chart of Federal Student debt merely brings up memories of a math lesson from high school, or at best, makes one think of statistics. And as we all know statistics are faceless, nameless and can never apply to anyone else. It is the individual case studies that have the most impact. Which is why we would like to introduce you to Devin and Sarah Stang – student loan debt slaves in perpetuity.
First, for those who are still unfamiliar with the brush strokes, here is the big picture, courtesy of AP:
The Federal Reserve Bank of New York estimates 37 million Americans have student loan debt, totaling $870 billion. The average balance is around $23,000 (though that partly reflects a relatively small number of very large balances; the median is $12,800). Only 39 percent are paying down balances. An estimated 5.4 million borrowers have at least one student loan account past due.
Roughly 85 percent of outstanding student loan debt is owed to the federal government. The remaining 15 percent that’s counted as private student debt is owed to various non-federal lenders, ranging from banks to loan companies like Sallie Mae Corp. to non-profits and state-affiliated agencies (under the Durbin bill, loans from any government-funded entity still wouldn’t be dischargeable, only those from truly private lenders).
Generally, it’s these private loans that bring borrowers to the door of bankruptcy lawyers like Barrett. Private student loans often lack the protections of federal ones, and have rates that typically start higher and can shoot up. A recent survey of bankruptcy attorneys found 81 percent reporting more clients with student debt in recent years, and roughly half reporting a significant increase.
And, also by way of background to those unfamiliar, student debt has a very peculiar feature:
Virtually any other kind of debt — including medical bills, mortgage, credit cards and car loans, even gambling losses— can be discharged in bankruptcy, allowing the “honest but unlucky” a chance to restore their footing through an arduous restructuring overseen by a court.
But under a 2005 law passed by Congress to protect lenders, private student loans fall under the same nearly-impossible-to-clear category as child support payments and criminal fines.
“It’s a huge part of why the younger generations are here now,” said the Stangs’ bankruptcy lawyer, Matthew Barrett, whose busy office in Amherst, west of Cleveland, belies stories about the improving economy. He estimates half his clients have problems with student debt.
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The Simple Problems Of Too Much US Debt
In a succinct and chart-laden presentation, Professor Antony Davies, of Duquesne, offers a simple perspective on just how bad things are for the US (in terms of debt or obligations). Putting the interest cost in the context of war-spending, his analysis is interesting given the recent and dramatic rise in interest rates. Current interest payments, given the US Government’s lowest ever 3% interest cost, are $440 billion, or three times the annual operating expenses of the Iraq and Afghanistan wars. While his discussion of a market-set interest rate is perhaps a little off-the-mark given the extent of QE programs and their reach-around prime-dealer duration-reducing effects, it is nevertheless true that the more money the government is spending on interest, the less money is available to provide services and his punchline on what happens should rates rise even modestly from here sums the real problem the US faces (even as a currency issuer as opposed to a currency user – given the inherent instability that making totalitarian use of the reserve status would incur).
Frontline – Ten Trillion and Counting
The journey begins as FRONTLINE correspondent Forrest Sawyer takes viewers to a secret location: the Treasury’s debt auction room, where the U.S. government sells securities backed by the “full faith and credit of the United States.” On this day, the government is auctioning $67 billion of Treasury securities. The money borrowed will be used to fund services and programs that the government cannot pay for through tax revenues alone.
Observers warn that the United States’ reliance on borrowing to fund essential programs is a dangerous gamble. For the first time, investors are beginning to question the ability of federal government to meet its growing financial obligations, and fading confidence can have dire consequences. “You might have a situation where there is one day when the government says we need to sell several billion dollars of bonds, and nobody shows,” Economist reporter Greg Ip tells FRONTLINE. “No money to pay the Social Security checks, no money to give to the states for their Medicaid programs. Cut, cut, cut, cut, cut.”
Yet more borrowing is exactly what the Obama administration plans to do: hundreds of billions to bail out the banks and other financial institutions; tens of billions more for… Continue reading
50 Economic Numbers From 2011 That Are Almost Too Crazy To Believe
Even though most Americans have become very frustrated with this economy, the reality is that the vast majority of them still have no idea just how bad our economic decline has been or how much trouble we are going to be in if we don’t make dramatic changes immediately. If we do not educate the American people about how deathly ill the U.S. economy has become, then they will just keep falling for the same old lies that our politicians keep telling them. Just “tweaking” things here and there is not going to fix this economy. We truly do need a fundamental change in direction. America is consuming far more wealth than it is producing and our debt is absolutely exploding. If we stay on this current path, an economic collapse is inevitable. Hopefully the crazy economic numbers from 2011 that I have included in this article will be shocking enough to wake some people up.
At this time of the year, a lot of families get together, and in most homes the conversation usually gets around to politics at some point. Hopefully many of you will use the list below as a tool to help you share the reality… Continue reading
No federal tax expense for Bank of America
Charlotte-based bank shows loss for 2010, reports tax ‘benefit’ of almost $1 billion.
After another money-losing year, Bank of America Corp. got the upper hand with Uncle Sam in 2010.
The Charlotte-based bank had no federal income tax expense for a second straight year and actually reported a tax “benefit” of nearly $1 billion. Also, the bank’s billions in accumulated losses could reduce its taxes in future years, a tax expert said.
The bank says the reason is simple: Corporations pay taxes on their profits, and Bank of America posted a pre-tax loss of $5.4 billion in the U.S. in 2010.
“Bank of America takes its role as a corporate citizen very seriously, and pays taxes in accordance with all applicable laws and regulations,” bank spokesman Jerry Dubrowski said.
That doesn’t satisfy a group that has been staging protests at Bank of America branches around the country and crashed the bank’s New York investor conference this month. The bank is an “aggressive tax dodger,” said Ryan Clayton, a Washington-based organizer of U.S. Uncut. “We pay our taxes. Why don’t they?”
Clayton’s group suggests Bank of America and other large U.S. companies are using subsidiaries in offshore tax havens to eliminate… Continue reading
Supercommittee Isn’t Making Super Cuts In The Deficit
Budget: Given all the hoopla, you’d think the deficit Supercommittee was hacking away at the size of government without mercy. In fact, even the $1.2 trillion in hoped-for cuts will do nothing to attack our long-term deficits.
Sometimes it’s worse to pretend to be doing something about a serious problem than it is to do nothing at all. That’s where we are in our talks about our out-of-control spending.
Just as the European Union did, we’re going through two months of talks about what to do about long-term fiscal imbalances. Under the deal that kept the government from shutting down last summer, the so-called supercommittee was supposed to take politics out of the equation by making talks truly “bipartisan.”
Unfortunately, the goal behind the talks — a mere $1.2 trillion in deficit cuts over 10 years — is nothing compared to the tidal wave of red ink that’s about to hit.
The Democrats’ latest proposal — $1 trillion in new taxes in exchange for $3 trillion in total deficit reduction — shows just how unserious they are.
Not only would the economy be saddled with new taxes in the middle of the worst slump since the Depression. The massive level… Continue reading
