Mish's Global Economic Trend Analysis |
- Student Debt "Lotto" Reality
- Republican Infighting Over Fiscal Cliff; Senator DeMint Says House Speaker Boehner's Proposal Will "Destroy American Jobs"; Reflections on "Hard Choices"; Game Theory
- Aging Population: Old Problem, New Reality; Reflections on Difficult Trade-Offs
| Posted: 04 Dec 2012 08:29 PM PST In response to Trends in College Tuition vs. Bachelor's Degree Wages; Interesting Demographics of Student Loan Debt History I received an interesting email from "JMM" who writes ... I realize you are projecting what you believe will happen in the future, and that geometric growth in student debt is unsustainable, but your argument on student debt should be tempered by the current economic reality. Those who finish a degree are better off not only in income, but in reduced unemployment. Employers making hiring decisions place an emphasis on college. That is the bottom line. That trend is not going to change for a long, long time. I have known some very intelligent people that never went to school. They were disadvantaged because of it. Yes, some geniuses and talents make it without education (Steve Jobs and NBA players for example), and some people win the lottery. That doesn't make the lottery an investment strategy. Thanks for your time, JMMThank JMM I happen to like your analogy to the lottery, except in reverse. Take for example the last mega-lottery with a payout to a single winner of nearly a half-billion dollars. I bought lottery tickets because for the first time in a long time. The odds favored entry, (assuming a single winner although a bad assumption), yet nearly everyone was a loser. I did not win either. The school "lotto" is not as bad, but it is very bad. Some do very well, many break even, and a large percentage lose. Earnings of those who do very well, may (on average) exceed those who don't, yet the net percentage of people benefiting may very well be negative. Regardless, the sheer number of students getting totally wiped out by going into debt to attend college is staggering, and unsustainable. Here is the simple math: What's unsustainable by definition cannot last. Trends in college costs are unsustainable. Reader Emails By the way, I received many interesting emails regarding student loans and will publish some shortly. Thanks to all who responded. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.  |
| Posted: 04 Dec 2012 11:55 AM PST Republican House Speaker John Boehner's has offered president Obama a proposal to generate $800 billion in new revenue. Obama rejected Boehner's proposal in one hour flat because it does not go far enough in raising taxes on the wealthy. Indeed, all Boehner proposed was closing loopholes. Yet, closing loopholes to raise $800 billion over ten years is too much for Tea-Party activists such as Senator Jim DeMint, co-founder of the Senate Tea Party caucus. Bloomberg reports Republican DeMint Criticizes Boehner's Deficit Plan. House Speaker John Boehner's proposal to generate $800 billion in new revenue "will destroy American jobs" and Republicans should oppose it, Senator Jim DeMint of South Carolina said today.Boehner's Plan Dead-on-Arrival Boehner's plan is dead-on-arrival regardless of how many Republicans are in favor of it. The president will not accept any plan that does not hike taxes on the wealthy, and unlike a few months ago, Obama is prepared to offer little or nothing to get his way. Reflections on "Hard Choices" Last summer, Obama said he was prepared to make "hard choices". In return for higher taxes, I had this three-point proposal
Negotiation tactics would have been easy. Start by offering higher taxes on those making over $1 million, then work down to $250,000, putting pressure on the Democrats every step of the way. If Obama rejected the offer, the Republicans would have had the upper hand in who was to blame. If Obama accepted, we would have negotiated real reforms. But No! Republicans flushed a golden opportunity for "hard choices" right down the toilet. Why? Republicans were foolishly cocky as to their odds of winning the election. As a result, we now witness massive infighting of Republicans, instead of massive Democrat infighting over "hard choices" a few short months ago. The bottom line is we are going to suffer from higher taxes and get little in return for it, "not reducing our $16 trillion debt by a single penny" as Senator DeMint says. Game Theory At this point, game theory suggests both sides may have more to gain by doing nothing than compromising. If so, welcome to the fiscal cliff. I am actually OK with that vs. the alternative of unwinding everything. We do need to address the deficit. Unfortunately, game theory also suggest a deal in 2013, undoing the fiscal cliff, further kicking the deficit-can down the road. Bright Opportunity Ahead Looking ahead, I do see a shining light. Rand Paul 2016! Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.  |
| Aging Population: Old Problem, New Reality; Reflections on Difficult Trade-Offs Posted: 04 Dec 2012 09:29 AM PST Here is an interesting video in which Bloomberg's Mia Saini looks at the effect of an aging population on a country's economy. Link if video does not play: Old Problem, New Reality As a consequence of the youth gap and a record low birthrate in the US, "the alternative would be to keep on increasing taxes or reduce benefits for the elderly". The US birthrate per thousand was 122.7 in 1957, it was 63.2 in 2011. Difficult Trade-Offs In regards to the problem facing aging countries, Singapore prime minister stated "None of them have come to any very satisfactory solution because the trade-offs are difficult ones." US demographics are better than Europe and Asia, but with US Medicare and Social Security promises related to costs far greater than elsewhere, the US is in no better shape. There is no alternative to massively increasing taxes unless Congress comes up with genuine health care reform to rein in cost of medicine. Even then, age limits will need to rise and some rationing of services near the end of people's lives will be necessary. Demographics are such that few politicians are willing to tell US citizens we cannot afford the promises we have made, so the pretending continues. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com "Wine Country" Economic Conference Hosted By Mish Click on Image to Learn More  Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.  |
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