May 7, 2013

By: Kelly Diamond, Publisher

The irresponsibility of government policies has metastasized not only into banking but into the lives of individuals, as the borrowing seems to be as reckless as the lending these days in both higher education and housing.

Reckless lending met with reckless borrowingRemember that “best friend” that always got into some sort of trouble?  The one Mom would say, “If So-and-So jumped off a bridge, would you?”  What did you tell her?  “Sure would!”  Or did it make you think for a second: “Perhaps I wouldn’t follow them there…” I see the government in a similar light.  It’s always getting into some stupid stuff, but so many folks are still willing to follow it right off a cliff.  For what?  A few cheap thrills?  Instant gratification?  Entitlements???

There are countless problems designed and instituted by our government, and sadly, we are rather powerless against any of it.  We COULD protest our taxes and see how far that gets us.  We COULD protest our recreational drug prohibition and see where that leads.  In the end, while I’m a huge supporter of civil disobedience and activism, we can do far more for one another outside the cages than in them.

While so many of our woes can easily be traced back to government as “Patient Zero”, there are many which are either preventable or at the very least foreseeable at the individual level.  Contrary to the advice and practices of our government, debt is not good.  It’s slavery, actually.  Everything from credit card debt, to mortgages, to car loans, to student loans: ALL BAD.  Imagine a portion of your monthly wages going to this creditor… wait.  It’s kind of like taxes!  Only in the case of debt, we seek it out and actually CONSENT to this form of slavery… and to be fair, it does have a foreseeable end.

We’re sold this lie that managing debt is good for our credit score and we need that to be stellar if we ever want to do anything.  Not true.  You don’t need a credit score unless you want to take out a line of credit.  You can pay cash on the barrel or have a combination of savings and NO debt at all; and, if loans are manually underwritten rather than the typically automated method, you can get a home loan.   

This easily accessible line of credit, be it for homes or education, has led to an inevitable bubble.  What’s worse is these lending practices are not responsible in the least.  Zero percent down on a home loan?  How does that make any sense?  The borrower should have NO skin in the game then?  What’s to keep them from walking away from the debt obligation?  Not much, and we’ve seen quite a bit of that.  I see quite a few homes just in my neck of the woods alone with notices of abandonment.  Not just foreclosure or short sale… but straight up abandonment! 

And how is it any more responsible for a bank to lend nearly $100,000 to someone who wants to major in Women’s Studies and Sociology?  That person will NEVER see $100,000 with those two degrees.  If they DO see that money, it will be DESPITE the degrees and BECAUSE of the impending debt!  Whereas, if loans were qualified based on the potential income or earnings afforded by a given degree, you might see a deviation away from impractical liberal arts degrees and toward more practical or lucrative degrees like Software Engineering.  You might even see a change in course from the drawn out four-year universities toward two-year trade schools.

Too bad we have a POTUS who not only throws obscene levels of money at higher education, but he encourages the youths to reject the corporate money making careers!  Reject the corner office jobs, and get into the community!  Volunteer!  Organize!  And do this… with $100,000 worth of debt!

Look at what a small business owner has to go through just to get a small business loan!  It’s not like anyone can waltz into a bank and request a small business loan in the same amounts for the same interest rates as they do for home or school loans!  An eighteen year old know-nothing fills out a form asking for $100,000 with nothing more than a report card and an acceptance letter from a four-year institution – not even a declared major yet – and they get the money.  A 40 year old experienced individual needs the same amount so he can PRODUCE and create jobs via a specific business, and he has to give a detailed description of how every dime will be spent, how he plans to repay that debt, offer up collateral, and give full disclosure of financial statements and tax returns. 

Are we sharing a W-T-tap-dancing-F moment right now or what?  I’m not disturbed so much by the scrutiny the small business applicant undergoes as I am by the total lack of scrutiny of the student!  IF money was as readily available to small businesses, we’d suffer an inflationary storm of epic proportions.  It’s the frugality of the business owners coupled with the competition amongst vendors in the market that help to keep prices low and competitive for the average consumer. 

Conversely, the ability for an eighteen year old to get their hands on $100,000 in the blink of an eye, amounts to little less than an education bubble.  Where on earth does that money go other than to more administrators or to line the pockets of existing administrators?  It certainly isn’t going toward making more competitive graduates!  These poor kids are saddled with a worthless degree and an unforgiving debt!

Unlike any other debt, even if you file for bankruptcy, this debt doesn’t go anywhere.  So, students are now asking for “debt forgiveness”.  Before you even finish the thought, YES, there is a budding little bill in the House addressing this very thing.   H.R. 1330: The Student Loan Fairness Act.  And LOOK!  It comes complete with the word “fairness” in it!  Plus, it falls under the “higher education” umbrella, so you know only a cold blooded jerk who plucks the wings off butterflies would vote against it!  This proposes a “10-10” standard for repayment.  Borrowers pay one-tenth of their disposable income for 10 years, after which their debt would be forgiven.  A tiny snag in such a proposition: who pays the balances then?  It doesn’t just *POOF* disappear. 

Bailout in three… two… one…

You should hear the rationale coming from some of the interviewed students who think debt forgiveness is some sort of moral imperative!  One woman is recorded as saying, “Considering all that college graduates contribute to our country, the government needs to step up.”  The government DID step up.  It offered you this ridiculous line of credit without even batting a lash in trepidation.  Furthermore, how on earth does this woman feel right about riding on the coattails of contributions made by OTHER college graduates?  Because I, as a college graduate, contributed something to society, HER student loans should be forgiven?  For that alone, she deserves to be saddled with her debt and a lifetime supply of shame and ridicule. 

Do I believe the system is rigged?  Absolutely.  Is the price of higher education hyper-inflated?  You bet.  Is this the next impending bubble in our economy?  No reason to doubt that for a second.  So then WHY are these young folks still signing on the dotted line?  There is this echo chamber or void where there should be a voice of reason saying, “Look.  You aren’t going to get a job that even remotely requires a four year degree in Women’s Studies or Sociology.  In fact, the job you are going to get after you graduate, you can get now without the damn degree.  But if you insist upon having some sort of certification, may I interest you in one that could lead to a lucrative future?”

Sadly, the more money we throw at higher education, the higher the costs will be and the lower its value will be in the market place.  If everyone has a college degree, then no one has a college degree: get it?  This political nonsense that EVERYONE should go to university or own a home is asinine and totally irresponsible!  The policies instituted to back up such rubbish are totally counter-intuitive.  Unquestioningly offer thousands of dollars to someone who has no idea what they are doing?  Pushing to extend home loans to those with weaker credit?  Bailing out these feeble borrowers is unacceptable as it is just a circuitous bank bailout.  The banks are stupid to even lend the money in the first place!  They should eat the costs and collapse under their own unsustainable and predictably tragic lending policies.  But we all know banks don’t fail.  Not when they are backed by the US Government. 

Personal and private borrowing are things each individual has control over.  Same goes for welfare.  In BOTH cases, you don’t HAVE TO engage in those activities.  The ways around it are difficult, no question.  I get that the new “American Dream” has been defined as having a four year college degree and owning property.  But while the government facilitates another housing collapse or bubble, in the form of student loans, don’t we as individuals bear some responsibility for wantonly engaging in these things?  Are the kids not responsible for the debt they sought to pay for their degree?  Aren’t those who sign on the dotted line for a home loan – knowing they had crap for credit and jack to put down – accountable for going out on such a limb? 

We already know that the government and banks can’t be trusted.  We know neither of the two entities concern themselves with the well-being of the country or the individuals that comprise it.  So knowing this, should we as individuals refrain, if not discourage others, from being complicit in the destruction of our individual economies?  The US economy is on a countdown to collapse, but we as individuals don’t need to join it.