The papers tell that money is rushing into stocks. And yet, the Dow barely budged yesterday.
Japanese stocks, on the other hand, are moving up. Apparently, other investors are coming to think that our ‘Trade of the Decade’ was not such a bad idea after all.
On the one hand, Bernanke, Abe, Draghi… and all the others… are pumping as much money into the system as they can. They say they need more money to keep the system from falling back into recession. They don’t mention it, but without their EZ money, zombie industries – including health, education, Wall Street, defence – would be in big trouble.
While the feds pump, the private sector is trying to wring the debt out as fast as possible. And Gary Shilling says there will be “another five years of painful deleveraging.”
In our opinion, they’re both right. But we’ll come back to that tomorrow.
Today, let’s look again at the sad plight of the young in America. They get whacked coming and going. No jobs and no money, thanks largely to deleveraging. But plenty of debt and very high expenses, thanks largely to the feds’ vigorous pumping.
It’s no accident, we’ve been saying. They’re victims of dirty dealing by their parents and grandparents.
Here’s Bryan Goldberg:
… young people need to understand how much their grandparents’ generation has ruined things for them. The average American retires with less than $70,000 in savings, but an elderly man and woman receive about $275,000 in medical care during that time — and you kids are paying for it by inheriting trillions upon trillions in Medicare bills that granny and grandpa never intended to pay and will be too dead to worry about soon.
You kids are beyond screwed.
It’s not hard to see how it works. Healthcare has become very, very expensive with spending reaching over $7,000 for every single American. Who spends the money? Overwhelmingly, it is done by or for old people. Who foots the bill? Mostly younger people.
Why are the costs so high? Because healthcare costs have been collectivised. Through insurance and government, old people found they could get health care benefits and someone else would pay for them. Only one out of ten dollars of health care spending is paid by the person who gets the service. The rest is paid by someone else, usually someone younger.
And it gets worse and worse. The baby boomer generation is big. And it expects extravagant healthcare services. But it won’t pay the costs. Someone else will have to pick up the tab. Who? Younger people.
Of course, the story is deeper, more nuanced, which is to say there’s a lot of rotten wood in this pile. Costs went up because the feds created an almost unlimited demand for healthcare, financed by an almost unlimited line of credit. For the old person, it’s ‘use it or lose it’. If he doesn’t get the pills and the tests, it’s like a free vacation he didn’t take – lost forever.
And now, for every person who is actually giving something that might be described as useful healthcare, there are three others who are creating expensive new drugs, filing insurance claims, shuffling papers, defrauding the system, giving tests and threatening a lawsuit. The zombies have taken over.
The zombies have taken over the education system too.
Here’s Bryan Goldberg again, with some advice:
If you can get into an ultra-top-tier college, then go ahead and do it. An Ivy League degree is worth getting, at least for undergrad. The value of a law or business degree is becoming more and more questionable each year.
But for the rest of you, it may be worth skipping college altogether.
The world doesn’t need any more girls with Spanish degrees from California State, Long Beach. Sorry, but it just doesn’t. We need you gals to learn how to build software in equal number with your male peers. They are no smarter than you, and they are definitely way less organised and far less attentive to detail. So go show them what you are made of.
But won’t a college degree pay for itself? It probably won’t. According to UC Berkeley’s website, a four year education will cost you $210,000 in tuition and living expenses, and a private education could run you way more. A part-time job at Starbucks will eat into very little of that sum, and you will be forgoing a real job during that same time. And — if I can convey just one point in this whole article, let it be this… saving money takes forever. Even if you do get that coveted six-figure job, you will find that it takes forever to save $210,000. Decades even.
Yes, dear reader, education has become another scammy rip-off. Kids are enticed to spend money, in the hope that credentials will help them get work. They are loaded up with debt. And then, they discover that the promised jobs don’t exist.
You might also wonder why it costs so much to go to college? The estimate above comes to $52,000 per year, which is $8,000 more than the average household income, at $46,000.
Let’s say it costs about $1,000 a month to house a student in a dorm and give him regular cafeteria meals. That leaves $40,000 for ‘tuition’. Maybe something big has happened since we were in college in the late ‘60s. Maybe not. But from what we recall, college wasn’t worth $40,000. Not even close.
Look, let’s say you take five classes. Each class gives you two lectures per week. This is a total of 5 x 2 = 10. (We’re keeping the maths simple in case you weren’t a maths major.) There are about 15 weeks per semester, and two semesters. So, we’ll say 30 weeks x 10 lectures = 300 hours of lectures per year. At $40,000, that prices each lecture at $133.
Who would pay $133 for a college lecture by a drowsy, second rate professor of economics? Or a seminar with a teaching assistant? Hey, go to the Teaching Company. You can get 30 lectures from the best professors in the country for just $10 each… or less. And you don’t have to park.
Or, go to the Khan Academy, or to one of the many places where you can get all the lectures you want for free.
From our own limited experience, we wouldn’t pay $133 for any of the many lectures we attended in college. None were worth it. We had one professor who taught a course in ‘political science’. Apparently, he couldn’t spot the fraud in his own subject. Politics has nothing to do with science. They’re not even on speaking terms. But the professor insisted that he was a scientist, so we stopped attending class.
Another professor led us on a deep exploration of philosophy. But he had been so moved by Wittgenstein that he didn’t feel you could say anything meaningful about it.
“Am I here? Are you here? What does being here mean? Who the hell knows?”
We were invited to sit around and meditate for much of the lecture period. We kept going to class to see what he would do next. Worth attending? Maybe. Worth paying for? Nah…
Looking back on it, we see that he was right. But it was an insight that takes years of reading, thinking and reflection to understand. Like the gallows and the grave, you have to be ready to appreciate it.
You get much more information, more ideas, better reasoning, more history and better organisation in a $29 book.
Don’t like the idea of learning on your own? Try this: get a collection of ten people together who all want to study philosophy. Hire an out-of-work PhD philosopher for $50,000 a year. That’s eight hours per day in a small class for just $5,000 each. The following year, hire an unemployed lawyer. Then, an unemployed economist, etc. Then, after four years you will have spent only $20,000 and you will be unemployed too.
What happened to the education industry? Was it spoiled by too much easy money? Students learned that they could avoid the rigours of the real world by staying in school, at someone else’s expense. First, at the expense of parents. Later, at the expense of taxpayers. And finally, when the debt bubble blows up, at the expense of almost everyone.
But the students are the biggest victims. They waste their most glorious years – the years when Alexander conquered the world and Chopin composed a nocturne and three polonaises – sitting in stifling classes with boring professors. After years of beer parties and trivial pursuits they come out with such great debts they can scarcely be paid and such dull brains they can scarcely think.
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