Mind Blown

Wow! Is it ever! 

Who are these people who borrow money for toys and vacations? Do they not pay attention to a little thing called interest? 

Interest on a loan is a great thing - when you're the one collecting it.

Until Debt Do Us Part

Our immediate gratification, consumption-driven culture never ceases to amaze me.

Apparently, somebody has statistics to show that a good marriage is built on a solid foundation of debt. Oh, and they are in the loan business.

"Big hat, no cattle" is a scenario for a doomed marriage.

Indentured Servants

Student loans have become a hot political issue. That is too bad because the true solution to the issue will be delayed. There are a few simple principles in play here.

• First Issue: Supply and Demand. With the massive government subsidization of higher education, it is no wonder that college tuition is out of control. This subsidy has created an increasing demand curve against a relatively fixed supply so of course the cost of tuition has outstripped inflation for many years.

• Second Issue: Return on Investment. The conventional “wisdom” that “everyone should be able to get a college degree” has left us with millions of new graduates with thousands in debt because their schools misled them into thinking that getting a job with a unique degree would be an easy path to success.

• Third Issue: Caveat Emptor. Parents are not teaching their children fiscal responsibility! Their children are targeted by predatory financial institutions for credit cards and assume debts for material things before starting a career. Without a strong sense of reality and good math skills, these children become indentured servants to these institutions for their entire life. Sadly, most parents are incapable of teaching their children about fiscal responsibility as too many families are living paycheck to paycheck and have little or no net worth.

I believe a classic market correction is in the works. Increasing competition from on-line learning venues will lower the cost of getting a higher education soon (over the next ten years). Costs will plummet as the “bricks and mortar” college experience is replaced by a predominately on-line experience. Think of it as disintermediation of the “bricks and mortar” experience. Then the predatory financial institutions (and the alcohol cartel) will need to find new ways to exploit our children.

Here is a great “rant’ by Dave Ramsey the creator of Financial Peace University on this issue. He nails it. http://www.daveramsey.com/radio/home/loadclip/studentloans-20120426?ictid=text