US student loans grotesquely high

[Jarhyn]

I can't help but recognize that the issue here is that Swammerdami is pointing out that not only the government can shit out money from an unbounded pool.

So can banks.

The only difference is that banks have an ostensible responsibility to "eventually" return the money they shit into the universe, though functionally they don't because their loans-to-deposits ratio is allowed to be skewed.

In fact the majority of the money supply comes from banks doing this rather than governments.

I am not sure that I think this is an acceptable position insofar as I think that the only entity that ought be allowed to do this is the government, because this otherwise deprives SOME private citizens of the power to create money, while giving it to others.

This means that those who have this get their leverage multiplied and then increased with interest where those who don't have this power have their leverage reduced to a mere fraction and then are parasitized for interest.

the correct location for money to enter the economy would be as an individual stipend as UBI, and the a secondary flow on the basis of government contract, while pushing all lending and debt to nontransferable postal banking, allowing the government to replace the private interest in the fractional reserve system.

 

[Swammerdami]

I am certain that the mechanics of money creation in the USA are immensely convoluted, like pretty much everything the US government does.

None of those details change the fact the the US government cannot run out of US dollars. They can always spend more. Whether they should is a different matter.

Perhaps I misunderstood what is you're sneering at, exactly, but if you disagree with the statement then you better explain why I'm wrong.

The mechanics of money creation in the USA are TRIVIAL — That's why I encouraged Infidels to think of how banking worked a century ago when the mechanics were slightly easier to understand.
Private banks create money through the mechanism called fractional-reserve banking.

I'm sure you're familiar with the "debt-ceiling crises" occasionally imposed by Republicans. We don't need to discuss them except that they demonstrate that your "cannot run out of US dollars. They can always spend more" is at best an over-simplification.

The U.S. government borrows dollars. (It sells Treasury bills, notes and bonds.) If its credit is in doubt (if there is risk that the dollar will fall in value), bond-buyers will insist on higher interest rates for those bonds. This is just what happens when a private household needs to borrow!

PLEASE: Read those words. Think about the words. Don't just chime in with the Pavlovian-reflex "Ha ha chortle! Comparing government debt with household debt! Idiot! Chortle chortle ha ha."

 

[Loren Pechtel]

Some degrees are harder for some people than others. I know some very, very bright people who are excellent at their jobs but are terrible at writing, even when it is writing a simple training document. Showing? Yes! Explaining what can or has gone wrong? Yes! Solving problems? Writing down the steps to perform a task or to trouble shoot when something goes wrong? Not so much. Which is one reason I did a lot of technical writing at my last job.

I definitely agree. Intelligence isn't one-size-fits-all by any means. You can be good at some things and not good at others.

Similarly, I know some very, very bright people who are terrible at mathematics. Or physics. I am musically illiterate!

Illiterate is an understatement when it comes to me and music. I think it's a perception flaw of some kind--in most cases I simply can't hear the beat of music. Genetic--my father had exactly the same problem.

 

[Loren Pechtel]

I do have very mixed feelings about loan forgiveness for students who chose well endowed Ivy League schools. For the most part, I think that such schools should spend some of their enormous endowments to provide scholarships for students who do not come from wealthy families. Economic diversity is something that the Ivies and their brethren could really benefit from. Or: simply lower tuition across the board, and more heavily subsidize students from families with modest incomes.

But I really do NOT believe that such highly esteemed institutions of higher education should be only for the wealthy. Talent and intellect and personal drive and ambition are distributed across the socioeconomic groups. Rich kids can learn a great deal from kids who come from much more modest means.

I doubt that many Ivy leaguers qualify based on the income threshold. This is a case where I think the sorting out would cost more than it would save.

 

[Loren Pechtel]

I used to think the same thing. The truth is that one can be a brilliant...physicist or chemist or engineer but totally suck at teaching. Teaching effectively is built upon not just knowledge of the subject but also knowledge of how to teach, how to reach students, help them learn independently (much learning is outside of class, particularly in upper grade levels), in addition to knowledge of group dynamics, developmental psychology, psychology, sociology, classroom management and a high degree of tolerance for paperwork and administrators and parents (well meaning and not so well meaning). How did I figure this out? Well, I spent a bunch of years volunteering in elementary

This. I know I'm not a good teacher. One of the prime requisites for being a good teacher is being good at finding other ways of explaining something when the student doesn't understand--and I suck at that. I never had any class where the teacher was both good with computers and good at explaining them. The only computer teacher I learned much of anything from was the very first class--and that guy didn't know much about computers. Rather, he taught me how to dig the answers out. Since then virtually 100% of my computer learning has been digging out answers. Classes at most pointed me in the right direction to dig.

 

[Loren Pechtel]

It's OK-ish for medieval and pre-industrial economies that don't exhibit much growth, but even in their case it suffers from the complete decoupling between money supply and economic activity. If a new, large, and cheap supply of the commodity is found, whether that be untouched reserves in California or Australia; Refined gold stolen during the genocide of South and Central American peoples; Or Spanish galleons being plundered for their stolen American gold, the economy goes to shit.

Fiat money can be created and destroyed as required to match the demand for money in the economy. Of course, that's not always done very sensibly or effectively, but it has the advantage of being under the control of sovereign currency issuing states, rather than being arbitrarily imposed by the global availability of some shiny metal.

This. Resource-based money basically gives control of your economy to dice. It only makes sense if you can't trust the hand controlling the fiat money.

In one sense the kWh would make a good resource for money, but the lack of ability to store it defeats this. Other than that resource money is deflationary and vulnerable to major discoveries. You might say that major discoveries of gold aren't going to happen--but there's the Caloris basin. While it certainly hasn't been proven it's likely natural zone refining on an epic scale--there's probably a layer of solid gold buried deep beneath it. Humanity isn't up to mining it yet, but what happens when we are?

 

[Loren Pechtel]

• Money is created by private banks, in a process called "fractional-reserve banking."

This depends on how you define "money".

Fractional reserve banking certainly increases the movement of money, but that doesn't mean the total amount of money has actually increased even though for economic purposes it has.

I like to compare it to a wheel. Stick a dollar on it and turn the wheel. From the standpoint of the economy you count that dollar every time it comes around and you see it again--but it's really still just a dollar. Fractional reserve banking is spinning the wheel, not printing dollars.

 

[Toni]

Some degrees are harder for some people than others. I know some very, very bright people who are excellent at their jobs but are terrible at writing, even when it is writing a simple training document. Showing? Yes! Explaining what can or has gone wrong? Yes! Solving problems? Writing down the steps to perform a task or to trouble shoot when something goes wrong? Not so much. Which is one reason I did a lot of technical writing at my last job.

I definitely agree. Intelligence isn't one-size-fits-all by any means. You can be good at some things and not good at others.

Similarly, I know some very, very bright people who are terrible at mathematics. Or physics. I am musically illiterate!

Illiterate is an understatement when it comes to me and music. I think it's a perception flaw of some kind--in most cases I simply can't hear the beat of music. Genetic--my father had exactly the same problem.

My hearing is not great, for one thing. I’m tone deaf, fir another and my sense of beat or rhythm is…minimal. But I was taught to read sheet music at a very basic level. Hearing the different parts? No effort at all was devoted to that part of my ‘music education.’ My husband and kids are much better because they’ve had much more music education than I have and do not have the poor hearing I’m saddled with. I DO hear more abd understand more because watching them listen to music, I figured out that I was missing things and how to hear parts that I had missed. I am still very very bad but I know a lot more than I used to know.

 

[Swammerdami]

• Money is created by private banks, in a process called "fractional-reserve banking."

This depends on how you define "money".

Fractional reserve banking certainly increases the movement of money, but that doesn't mean the total amount of money has actually increased even though for economic purposes it has.

I like to compare it to a wheel. Stick a dollar on it and turn the wheel. From the standpoint of the economy you count that dollar every time it comes around and you see it again--but it's really still just a dollar. Fractional reserve banking is spinning the wheel, not printing dollars.

Sigh. We've been around and around on this. (You may be thinking about "velocity of money" but that measures rapidity of buy/sell transactions. Fractional reserve banking involves deposits and loans.)

To avoid any ambiguity or lack of definiteness, let's discuss specifically the USA.

If a bank lends George Roe $1000, then M1, M2 and M3 each increase by $1000. M1, M2 and/or M3 are what economists mean when they speak of "money." This increase to the money supply occurs regardless of whether George takes his money in the form of a check-book or smart-phone App or asks for physical "Benjamins."

Is the preceding statement True or False? I'm not asking this because I don't know the answer! I'm trying to define a base-line for the discussion. If you believe that the loan to George Roe did NOT increase the money supply by $1000, then explain what your definition of "money" is, and why you think your definition is preferable to the definition that economists use.

 

[Ford]

Some degrees are harder for some people than others. I know some very, very bright people who are excellent at their jobs but are terrible at writing, even when it is writing a simple training document. Showing? Yes! Explaining what can or has gone wrong? Yes! Solving problems? Writing down the steps to perform a task or to trouble shoot when something goes wrong? Not so much. Which is one reason I did a lot of technical writing at my last job.

I definitely agree. Intelligence isn't one-size-fits-all by any means. You can be good at some things and not good at others.

Similarly, I know some very, very bright people who are terrible at mathematics. Or physics. I am musically illiterate!

Illiterate is an understatement when it comes to me and music. I think it's a perception flaw of some kind--in most cases I simply can't hear the beat of music. Genetic--my father had exactly the same problem.

My father was the same way. He liked to listen to music (though he didn't care for "that damned rock and roll!") but only heard the entire song. Fortunately, I got that gene from my mom, who loves jazz, classical, and musical theater. I can hear specific tracks and "isolate" them in my head when listening to most music. There's also a learning component to it as well. Over my career I learned multi-track recording fairly well, and can look at a session on a computer screen and tell you what's going on without listening to it. Kinda like that scene in "The Matrix" where Tank can "see" the world just by looking at the code on the screen.

The musical ear? That's inherited. The other stuff? That's experience.

Now show me a math problem or an equation? I'm lost.

 

[bilby]

It is your (and bilby's) insistence that government spending is fundamentally different from private spending that shows ignorance, and leads to confusion.

The difference is in the sequencing; If I want an automobile, then before I can buy one, I must obtain the money from someone else. I can earn it, borrow it, or even steal it; But I cannot buy anything until I obtain it.

Currency issuing governments do things the exact opposite way. First they buy stuff; Then, if they want to reduce the inflationary effect of their purchasing, they might decide to get money from someone else to offset that.

If you don't think that this is a fundamental difference, then you don't think.

 

[Swammerdami]

It is your (and bilby's) insistence that government spending is fundamentally different from private spending that shows ignorance, and leads to confusion.

The difference is in the sequencing; If I want an automobile, then before I can buy one, I must obtain the money from someone else. I can earn it, borrow it, or even steal it; But I cannot buy anything until I obtain it.

Currency issuing governments do things the exact opposite way. First they buy stuff; Then, if they want to reduce the inflationary effect of their purchasing, they might decide to get money from someone else to offset that.

If you don't think that this is a fundamental difference, then you don't think.

Your claim that the U.S. government creates money by spending is confused. You are ignoring two facts: (1) government spending is essentially the same as private spending; (2) there are at least two DIFFERENT types of fiat money.

(1) Government spending and private spending.
. (A) Cash
. . (i) Government taxes George Roe $1000 and buys a statue of a frog with the proceeds, decorating some bureaucrat's office.
. . (ii) Government does NOT tax George Roe. With the extra $1000, George buys the same statue himself and decorates his living room.
Same-same.

. (B) Borrowing
. . (i) Government sells a bond (goes into debt) to raise $1000; then buys the statue.
. . (ii) George Roe buys the statue putting it on his credit card.
Same-same. Some borrowers have better credit ratings than others. So what?

(2) Fiat Money
The United States has issued various sorts of paper money over the years: United States Notes, Silver Certificates, etc. Lincoln's "greenbacks" were promises to pay gold at some undisclosed future date. This paper traded at a very big discount to its putative value in gold. Bank of America issues traveler's checks: promises to redeem in legal tender. These trade at 100 cents on the dollar. (At banks in foreign countries, you get a slightly better rate on a traveler's check than actual Benjamins!) WHICH is the "fiat money"? A distrusted promise to pay in gold, or a trusted promise to redeem in sound central-bank currency?

But never mind. For over 50 years, the United States has NOT issued United States Notes, NOR Silver certificates, etc. All paper currency issued in the United States for fifty years has been "Federal Reserve Notes." (We will ignore coins and postage stamps. OK?)

Obviously most money these days is electronic; there's no need for paper Benjamins. This electronic money is created by banks, both private banks and the FRB (but NOT the U.S. Treasury). The electronic money created by the FRB has essentially the exact same status as the physical Benjamins it issues.

Federal Reserve Notes are issued BY the individual Federal Reserve Banks, and are backed 100% by assets of the Federal Reserve Banks. Government agencies pay for their purchases using checking accounts. These accounts do NOT have overdraft protection.. If the agency needs physical Benjamins, it does what any bank customer would do: It cashes a check at a bank branch. Clear?

The relationship between the US Government and the FR Banks may be confusing. The FR Banks are nominally owned by its Member (private) banks; the 12 Bank Governors are elected by private banks. But the U.S. President appoints a majority of the two governing committees; and Congress imposes rules. After paying members their statutory dividends, any excess profit made by FRB is paid into the U.S. Treasury. Despite these facts, the FRB's mechanisms are those of a private bank operating independent of government. This may change at some FUTURE date due to politics, crime or corruption, but for over a hundred years this is how FRB has operated.

Some countries' governments have a form of Fiat Money where they just print whatever they need. That is NOT how Federal Reserve Notes work. Clear?

Thanks for your kind attention. I hope you learned something.

 

[laughing dog]

It is well established that banks create money. It is also well established that in countries with fiat money, governments also create money. In modern economies with fractional reserve banking systems, governments and the banking system create money. And, they both can destroy money as well.

 

[Derec]

But you don't need to be an English major to be able to write decently. That's why you take English classes, not why you become an English major.

English Comp I and II is just the beginning. Writing assignments are part of many classes in science and engineering curricula all the way to graduation.

 

[Derec]

Not everything is about you.

Clearly. But you posted that right under my post and it lacked a quite of any other post.

If I was replying to you I would quote the post to which my reply was directed.

And yet you did not quote any post. So I thought you were replying to the post above it, which just happened to be one of mine.

There's no non sequitur in my post; If you genuinely don't understand why it's of vital importance to the thread topic, you should probably read it again. Slowly. Several times, if necessary.

No need to read it again. I do not think anybody in this thread made an argument that somebody's worth is determined by how much they make or by their "net worth".
At most what we are arguing is that students should tailor their educational path to the expected profession. If your plan is to become a high school teacher or a social worker or some other middle income profession, then taking out six figure loans for a private school is not a smart idea. That has nothing to do with saying that school teachers' metaphysical "worth" is less than that of a vapid heiress like Paris Hilton.

 

[Derec]

Now that most assuredly wasn't a reply to you, so unless you're a mind reader, or Oleg is your sock puppet, you can't have any possible justification for making that claim.

You were talking about things like creating money ex-nihilo which is a MMT trope.

 

[Derec]

I don't remember you complaining about Trump's two trillion dollar give-away to the rich and major corporations.

I do not remember supporting it either.
Not much use in posting on things >95% of posters agree with anyway.

 

[Derec]

I've read in a couple of news sources, that over 90% of those who will receive help from the Biden order, make less than 75K.

Probably so, because a) there are far more of them and b) those making say $100k but who have taken out a reasonable amount of loans have paid them off already in all likelihood.

like middle aged and older adults who were taken in by scam schools or those who due to circumstances, often beyond their control, never finished obtaining their degree and are struggling with dept.

Scam school loans have been forgiven earlier. People who fail to graduate have access to income based repayment. If dropping out prevents them from finding a well-paying job they have been paying little to nothing anyway.

I would have liked to see the interest rate on these loans lowered to less than 1%, but something is better than nothing.

The interest rate on these loans are pretty good actually. Currently undergrad loans are at 5% fixed, which is lower than even mortgage rates right now. And that for a loan without collateral.

I don't understand getting upset over this bailout, as it's obviously going to help those who need help the most.

To be honest I am more upset about those who think this is not enough and demand all student loans forgiven.
As you say, this plan is not perfect, but it is far better than what the Democratic Left is demanding.

The real problem is the insane rise in tuition. Tuition in both public and private schools have risen far more than inflation. What's up with that? Georgia, has a huge surplus right now. Why isn't our stupid governor using some of that money to lower tuition at state schools and make 2 year schools either free or very affordable without the need for loans. We need the technical skills of mechanics, plumbers, electricians, as well as all kinds of medical workers, who can be educated in a two year program, or even a one year certificate.

Georgia still has HOPE that can be used for technical schools I believe. But I agree with you that states should fund a greater share of costs. However, it should also be on college admins to keep costs in check. Less administrative bloat. The facilities at public universities have become nicer over the last 20 years too, which costs a lot of money obviously.

I'm not knocking the English majors although as one who pursued that degree prior to becoming an RN, I know that it's hard to find a decent job with an English degree. We don't need people with liberal arts or business degrees nearly as much as we need plumbers.

That's what I am saying. Pure humanities are mostly for teaching it, especially advanced degrees, which is obviously limited in employment.

etc Now that I think of it, a former neighbor of mine who had a four year degree in business, gave up his job, studied to become a plumber and then started his own business. I assume that his business degree helped him have a better understanding of business compared to most people.

I suspect that too.

 

[Derec]

You missed the point I was trying to make. That 18 year olds are NOT competent to make decisions regarding financial instruments that negatively affect a significant portion of their lives. And that a slumlord can recognize that.

A slumlord (or even a reputable landlord) wants to get paid on the first of the month. Not in four years when you get your degree.
Rent and student loans are very different and can't be compared like that.
And you have to apply for student loans every year. Do you deem a 21 year old starting his or her senior year still incompetent to enter contracts? A 22 year old contemplating getting more loans for that PhD in Medieval Literature? Where do you draw the line?

Higher education should be free, or close to free.

Public universities are still heavily subsidized. I looked up my alma mater. The difference between in-state and out-of-state tuition is >$20k/a. That's the amount the state provides to educate their own citizens.

Now there are countries where university is tuition free. Example Germany. But I am not sure Americans would like that system too much.
For one, if it is fully paid by the government it is more restricted. How do you decide who goes to university? Merit? Affirmative action? It is bad enough now, but imagine if race determined not only which university you could attend, but whether you could attend university at all.
In Germany there is a lot of early tracking of students. In Bavaria, university track schools (Gymnasium) start in 5th grade for example.
Tracking is a bad word among many education policy makers in the US.

Student facilities - libraries, student centers, student athletic centers - also tend not to be as nice as those in American universities because those things cost a lot of money to build and keep up.

It is ridiculous to force people to pay $160K or more just to get an undergraduate education which not only benefits the person receiving the education, but also the community in which they live. Having an educated population is good for the nation.

It would be ridiculous if it were true. Tuition at public universities is nowhere that high for an undergrad degree. At my alma mater, a flagship public university ranked in the top 50 national universities, has tuition and mandatory fees at <$50k for all four years. And of course, loans are not the only way to pay for that as there are also scholarships (Georgia has lottery-funded HOPE which pays for most of the tuition as long as you maintain a 3.0 GPA), Pell Grants etc. And if you want to save money further, you can always take your core classes at a community college and transfer after a year or two.

Nobody needs to go to a fancy private college. And we the taxpayers sure as hell do not need to pay them. They can always go to State U instead.

 

[Derec]

It is difficult to secure a credit card under age 21 since the Credit Card Accountability Responsibility and Disclosure Act of 2009 and you still have to demonstrate that you have a steady source of income. Which is difficult to do at age 18, while going to university.

That's different than in my day. That said, a college student can still have a part time job.

The entire point of attending a university is to get an education that will hopefully allow you to lead a better life.

But that education does not need to be at an expensive private university.
And going to an affordable public one will not leave you with "mountain of debt you cannot hope to pay off" just for an undergrad. Especially since there are things like Pell Grants and scholarships.