Authored by James Altucher via Laissez Faire blog,
I’m often accused of being too much of an optimist.
When someone tells me, “Global warming will destroy the Earth,” I think, Good thing people are working on alt-energy solutions.
When someone tells me, “Automation will crush jobs,” I think, Well, look at what happened when ATMs supposedly were going to replace bank tellers. Nothing. The cost savings created a bank on every corner.
If someone says, “What about American debt rising so much?” I go through the basic math:
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The U.S. is $21 trillion in debt
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But the U.S. just has to pay $300 billion a year to service that debt. That’s only 7% of GDP, down from 17% in the mid-’90s. So we’re actually financially healthier than we were 20 years ago
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If you subtract out what the U.S. owes the U.S. (yes, we owe money to ourselves), then the national debt is just $13 trillion and our debt obligations go down to about 3% or 4%.
If your salary was $100,000 and you had to pay just $4,000 a year to service all of your debt, you would say, “No problem.”
Let’s take on more debt.
And yet… I think America is DOOMED. And I think there’s no solution for the country.
There are only so many flowers you can plant over s**t. Eventually the whole thing smells like s**t.
If you’re going to survive with your finances intact, you need to know just how doomed we are.
The Disastrous Government Backing of Student Loans
Trouble started with the Higher Education Act of 1965.
It has a seemingly fine and generous idea: Let’s help the less fortunate get a higher education so they can be more competitive.
I love this idea. The intention is sound.
But unfortunately it failed due to corruption, lousy economics and lack of understanding of basic finance.
Price of Tuition
Since 1965, the price of tuition has gone up HIGHER THAN INFLATION every single year (EVERY. SINGLE. YEAR.) by an average of 9%.
By comparison, medical care costs have gone up faster than inflation by an average of 5% every year.
Since the government is backing the loans, college presidents are simply charging more without thinking about the future consequences of the country OR OF THE STUDENTS who take on these loans.
Student Loan Debt Is Now $1.5 Trillion
In 2003, student loan debt was $250 billion. But that debt has grown and compounded every year and now sits at $1.5 trillion.
Here’s the problem: Everyone is brainwashed into thinking they need college 1) to have a satisfying social experience from the ages of 18–22 and 2) because they won’t get jobs if they don’t go to college.
If an 18-year-old, whose brain is more inclined toward taking risks, is being offered $250,000 in loans, of course they’re going to accept.
Meanwhile, they are not even allowed to drink a glass of beer.
The Middle Class Is the Victim
The rich can afford to send their kids to college.
The lower class gets financial aid and has to take on less debt.
The middle class can only afford higher education by taking out hundreds of thousands of dollars in student loans. Average student loan debt is about $50,000, but my guess is the middle class — which doesn’t benefit from financial aid — has a debt figure much higher.
Anecdotally, when I survey my younger friends, debt ranged from $100,000 to half a million dollars. The latter was with a doctor, but sadly, he hates being a doctor and is now trapped.
If the middle class is the victim, that means eventually the middle class dies out.
Student Loan Debt Is Debt You Can’t Get Rid of in Bankruptcy
Why did the government do this? Because 18-year-olds are not qualified to make financial decisions about their lives.
You can get rid of mortgage debt, credit card debt or almost any other debt with bankruptcy. But not the student loan debt you owe the government.
The government will follow you forever, garnishing your wages, until you pay them back when you are 90 years old, keeping you in near-poverty your entire life.
So much for the government trying to help kids get a higher education.
Income Inequality Will Be Greater Than Ever
The upper classes will continue to pay for their kids to go to Harvard. Where they will marry other Harvard grads and go on to have Harvard kids.
The middle class, which is moving toward the lower class, will be forced to send their kids to lower-ranked and cheaper schools (while they continue to pay down their own debt), increasing the disparity between the classes as the middle class quietly shuts their doors.
The Bottom Line
The corruption of the college tuition system has ruined the country.
This generation of kids will not be able to be entrepreneurs or innovators, which has been the driving force of U.S. growth throughout its history.
This will lead to the death of the middle class, further income inequality and eventual recession, depression and violence.
So… the best way is for people to find opportunities right now before the s**t hits the fan (even though it’s already starting to hit the fan).
There are still opportunities. And yeah, I’m still an optimist.
I want to be in love, have more kids, take care of myself and die a peaceful death with high quality of life until old age.
I want to choose my future.
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