America's economic growth has come from subprime borrowing by the poorest 60%

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Originally published at: https://boingboing.net/2018/07/24/subprime-2-point-0.html

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#2

Ah, the classic 15 to 27% graph.

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#3

Normally, economic expansion is driven by more spending by the wealthy

Citation please? :wink:

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#4

That’s the scale I use to rate movies!

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#5

I can see why! I’ve always used a 13 star scale (but with just odd numbered stars), but I will have to give the 15 to 27% scale a try!

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#6

This is from 2006’s “Maxed Out” documentary:

Which is excellent, and you should watch.

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#7

Good call. Most of the data I know of shows exactly the opposite. If you want to boost the economy, get money into the hands of the lower 60%. If you want to exploit and remove money from the economy, get money into the hands of the wealthy.

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#8

Good god. Don’t go to college, and don’t start businesses. That definitely sounds like the way to keep an economy moving.

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#9

Yeah this definitely sounds like the next big crash waiting to happen. I’m going to assume it’ll occur either between the Trump presidency or during his successor’s presidency. Either way, it’s going to probably crater the world economy for good this time unless someone radically reworks the economy away from capitalism.

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#10

since 90% of new businesses fail in three years, pray tell why is borrowing to start one a sound idea?

That’s always been a sticking point in my mind. Do people really believe in their ideas for a new restaurant/service/app/startup that they would max out credit cards or hock their home? Seems that trading a bit of ephemeral equity in an idea would be the way to go, rather than taking out a loan. More and more these days, it’s all about equity. Own it, baby!

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#11

If TPTB in American society really want to maintain a sham consumer economy then crushing and unsustainable subprime debt will only get them so far. There are fewer and fewer jobs and the precariat and unnecessariat keep growing, so eventually they’ll have to switch to a (likely rigged and highly restricted) UBI to keep up appearances.

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#12

It depends by what you mean by “an economy.”

Back in the day when the cost of higher education was reasonable, it was a great idea to go for that education. As long as you didn’t graduate at the wrong time (as pointed out in the post), and find yourself with student loan debt and no job offers.

Now that the cost of a four year degree is the highest it’s ever been, you are really taking a chance…

As for opening a business, if you can do it without borrowing money, lucky you! If you can’t… you better really hope you can go the distance, or at least pay back what you borrow before you go under.

If an “economy” depends on people going into debt to succeed, then these are the salad days.

If you would like to be grist for the mill, by all means, go into deep debt with things the way they are now. The rich will get richer, and you’ll be ground to dust.

If they want to keep the economy moving, they should stop pouring sugar in the gas tank.

We aren’t making these rules; they are. We are just trying to survive in a collapsing system.

Money is imaginary anyway.

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#13

It’s very well established that lifetime earnings increase with education level. You can be taken advantage of by for-profit schools, you can get a degree that doesn’t pay off, you can overpay for a “name brand” diploma. None of that means you shouldn’t go to college, it just means that you need to be smart about how you do it.

https://trends.collegeboard.org/education-pays/figures-tables/lifetime-earnings-education-level

Regarding business debt, the issue isn’t whether you have to go into debt to start a business, it’s whether you have to go into personal debt. Depending on the state where you incorporate, an LLC can shield you from any personal liability. Again, it’s about being smart at the outset.

https://www.nolo.com/legal-encyclopedia/personally-liable-business-bebts-business-bankruptcy.html

In addition, the US provides bankruptcy protection for those who start businesses, which is a huge boost to small business entrepreneurship.

Don’t get me wrong; inequality is bad, the 1% are bad, all of that is true. But we can’t cut off our nose to spite our faces. Go to college, FFS! The blanket advice from this post that, “the merits [of higher education] are at best debatable,” borders on irresponsible.

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#14

People who can afford a top tier college education already have the connections they need to succeed. Poor people don’t have that. What we have here is a case of mistaking correlation for causation.

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#15

Agreed. BUT…

The cost of PUBLIC HIGHER ED has risen across the board. The number of scholarships and grants available has shrunk considerable since prior to 2008.

For many people loans, some grants/scholarships, and working a full time job is the only way that’s going to happen. And then what happens when you graduate, and there are few jobs to be had. This has happened twice within my life time - in the late 90s/early 2000s and after the 2008 crash. And this is the new norm.

It’s increasingly an unavailable option for many. Or they end up deeper in debt and unable to ever get out of that hole.

If it means being indebt at the level of a mortage and being unable to get a job…

11th-doc-this

All going to a top tier school does is increase your networking opportunities. And top tier schools spend a good deal of time opening up those opportunities and having their faculty ensure those opportunities.

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#16

And I would contend that the smart thing to do is to avoid student debt; stop giving these businesses money you haven’t earned yet, and may never earn. The interest on those loans is like a death of a thousand cuts.

Not that people shouldn’t continue to learn; there are a lot of options for learning that are either free or considerably less expensive online (maybe not for long; we have yet to feel the crunch of the collapse of net neutrality) even though it won’t lead to a degree.

“A degree” =/= “your worth.”

Has that been adjusted to account for the current economic environment in our country and the escalating cost of a higher education, or is it based on past data, before things took a decided turn for the bleak?

I would be shocked – SHOCKED – if an article presented by a business with the name of The College Board concluded that going to college wasn’t worth it in the long run.

I have absolutely no doubt there are people right now with college degrees flipping burgers for less than $10hr. My sister just completed her MFA, and she’s having an extremely hard time finding work. Before long the grace period on her loans will be up, and the interest rates are going to kick in. She’s being crushed by the stress.

It’s a goddamn mess, and the whole thing seems to be designed around squeezing every last dime out of a person. Which is why the powers that be have made student loan debt almost inescapable outside of dying.

It’s how a goddamned game show pitched around eliminating a person’s student loan debt even got off the ground. I haven’t seen any “Pay My Mortgage” game shows yet.

Right. Being smart helps with everything, really. Being lucky is even better. Because lucky idiots will succeed in spite of themselves.

Sometimes, even if you’ve set up your business in a smart way, you may find yourself in a position where, if you don’t sink your personal money into it, your business will fail. And if you do try to keep it afloat with your own money, the odds are good it will fail anyway. We try to keep what we have for as long as we can, no matter what it costs.

When the end comes, it helps to be very well connected or part of an industry that is too big to fail. Or heck, why not both?

For the average person looking to get out from under the thumb of a boss, starting a business isn’t the way out that it used to be.

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#17

Seriously. As a percentage of income, the wealthy sequester income into stagnant or completely still pools of investment, savings, and depreciating holdings. Everybody else spends almost everything they earn, keeping it flowing in the economy. Maximum economic growth is achieved with a large middle class.

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#18

But again, that’s not a choice for many, because getting a BA is the new high school degree for many professions, if you don’t want to work retail/service work, which tends to be low paid.

This is hardly about education, but is also about how people pull themselves out of poverty. A college education used to be an effective way to do so, but not always now.

That’s it exactly, extracting worth and sending up to those already living in comfort.

maybe there should be, but most of the people who have mortgages probably can afford to do so, where more people who can’t afford it have student debt.

I’m not sure it ever really was. And only a small percentage of (native born) Americans start businesses… it’s more common in immigrant communities.

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#19

It’s the Roaring 20s all over again where instead of increased wages, people are getting “cheap” debt.

One only needs to look at how the 1930s went to see how that turned out.

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#20

Haha! Unpossible!

The invisible hand of the marketplace drove all the people responsible for making bad decisions in 2008 into the poorhouse, so obviously the new generation that has replaced them would never make the same mistakes.

I mean, come on, this is basic Austrian economics! In 2008 we had a government that was vociferously in favor of unrestrained market forces, so it let the subprime lenders and their parent banks collapse, which in turn allowed lenders who had been more responsible to buy up the bad loans at pennies on the dollar, which in turn allowed debtors to renegotiate on terms they could pay, which has resulted in the unprecedented booms in home ownership, social mobility, and economic growth that we’ve experienced ever since. We’ve never had such a national economic expansion!

Wait, what? You say in 2008 a bipartisan bankster bailout ignored the moral hazard, subverted the market and sacrificed Main Street on the altar of Wall Street so there’s been historically unparalleled wealth consolidation and there’s literally no incentive for businesses to behave in the best interests of society? Bah! Fake News, I say, Fake News! BAH!

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