European

Austerity

Arrives to American Shores!

Millennials will be crushed under debt: Non-housing debt now reaches $4+ trillion in the United States.

Millennials continue to face the struggles of living in a world where they are deep in debt and the idea of buying a home is becoming more of a farfetched pipe dream.  As recently as 2009 non-housing debt stood at $2.5 trillion.  Today it is over $4 trillion, a 60 percent increase in 10 years.  Of course, it is no surprise that 2009 is the official end of the Great Recession and much of the recovery has come at the expense of going into massive debt.  

Millennials continue to face struggles in purchasing homes because they are saddled with $1.46 trillion in student debt. 

Non-housing debt is already creating deep pressures on the balance books of Millennial households.

The chart above continues to highlight a story of where the middle class continues to be squeezed. Why did non-housing debt go up by $1.5 trillion from 2009 to 2019 but remained stagnant from 2004 to 2009?  The reality is, younger households are having to go into large amounts of debt to finance college degrees, buy cars, and spend on daily living.  Buying a home just doesn’t fit into this equation for many.

Now we hear about proposals to wipe student debt out and to make public higher education free.  We also have $22 trillion in U.S. National Debt but who is counting.  We are going to have some tough choices moving forward but creating a system entirely addicted to debt is going to cause some major withdrawal symptoms when the inevitable day of reckoning hits.

DYI:  Don’t believe a word that Congress is going to have taxpayer student loan forgiveness, along with 100% tax supported higher education.  What has been floated in Congress is for automatic garnishment of wages for the payment of student loans.  The percentage withdrawn will be on a graduated scale depending upon the individuals earnings with a maximum of 25%.  Simply put, if this legislation is passed, garnishment will be automatic and on a sliding scale.

Why is the cost of education so high?  When you have a third party payer [student loans] willing and able to shovel ever larger sums the money never stayed with the student but went into the schools.  From the day these loans – that CANNOT be wiped clear though bankruptcy – universities and colleges went on a building boom expansion all competing to soak up as much loans as possible.

Before student loans were freely available students could work part time at a basic entry level job and graduate debt free. 

By doing away with non dischargeable loans the cost of higher education will drop significantly.

If this were to happen the higher education complex will scream to the rooftop claiming all sorts of false calamities falling upon our society.  Of course just like any other industry that has become reliant upon subsidies they will scream just as loud when their free lunch is gone.

Between the out of control FIRE [finance, insurance, and real estate], medical industrial complex, and student loans debts have skyrocketed thus starving the general economy of much needed capital.  

Our citizens are so strapped with debts America has now moved into the European disease of austerity where the majority of income going to debt repayment.

Exponential growth of debt is not sustainable and if governmental policies are not reversed that encourages debt expansion our standard living will continue to drop.

DYI