There are 4,495 colleges and universities in the US. By our count, they reckoned there were at least 4,495 commencement speakers more suitable than your editor. Not one asked us to give the main graduation address.
That was probably a good decision on their part. Nevertheless, we prepared an address that we would have delivered had we been asked: To the Class of ’14: Congratulations chumps!
You and your families have paid tens of thousands or hundreds of thousands of dollars so that you can take your places in a modern economy. What were you thinking?
Have you ever heard of the ‘Cantillon effect’? I didn’t think so. You’ve been too busy trying to keep up with the expenses of a college education.
Have you bothered to think about what a government really is and what it really does? No? I guess I shouldn’t expect it. You’ve been too busy being indoctrinated in your politics and government classes.
How about ‘intertemporal discoordination?’ Well, I hadn’t heard about it either until yesterday. Now, I realise it’s an essential ingredient in today’s financial omelette, and it’s going to make you very sick.
Give me five minutes. I want to give you an education. Or at least begin the process of undoing the harm caused by four years in an institution of higher learning.
Many of you are already in debt. The banks lend you money so you can pass it along to the education industry. Where did the banks get the money to lend in the first place? And how come it’s so expensive to go to college that you have to borrow heavily to afford it?
Hey, didn’t they teach you anything in college? Allow me to enlighten you on how your economy works. You’ll see that you’re being taken for a patsy, a chump and a sucker.
First, why is it so expensive to go to college? Well, it’s a long story. But the short version is that the economy has been rigged up by collusion between industry and government. Everybody who isn’t a saint or a mental defective wants more status, more money and more power. The easiest way to get these things is to rig the economy in your favour.
Who can rig the economy and get away with it? The government, of course. Who can get the government to do what it wants? The oligarchs who control it, with their lobbyists, their campaign contributions and their voting blocks.
Just this week, there was an article in the Financial Times. It told us that the amount of ‘dark money’ going into election campaigns is soaring. ‘Dark money’ is what they call the cash that goes, not to the candidates directly, but to interest groups that do their own advertising and politicking.
A total of less than $100m in 2008, it rose over $300m in 2012 and seems to be headed to over $500m in this next election cycle. Donors all have an axe to grind. And almost everyone is aimed at your neck.
In the economy prior to the early ‘80s, Americans made things and sold them to the rest of the world. You didn’t need a college degree to make things. And you didn’t have to make campaign contributions. You just had to learn… and work hard… and sell things at a profit. Then, you could earn a decent living and live a decent life.
But then, the economy changed. The feds replaced money with credit. In ’68, they took gold out of the domestic monetary system. In ’71, they stopped honouring commitments to settle foreign accounts in gold.
Gold was limited. It limited the amount of money and credit in the economy. But this new money was almost unlimited. It made it easier and cheaper to buy things made by other people than it was to make them ourselves. Since 1980, the US spent nearly $10trn more overseas than it received from overseas sales.
Gradually, making things in the US became less and less profitable. So, if you wanted to earn a good salary you had to go somewhere else. Finance, administration, accounting, law, education, or health care. The good jobs in these industries required college. That’s why you’re here.
But wait, there’s more to the story. Unlimited credit also made it easier to support zombies and parasites. Government connived with industry to create quasi-monopolies, cartels, subsidies, guarantees and price supports. And the feds could add bureaucracy, controls, rules and regulations.
For example, the education industry added few teachers, but lots of ‘educators’ and policy coordinators. The health care industry added relatively few doctors – but a boatload of paper-pushing insurance workers and ambulance chasing tort lawyers.
Drive down any highway and you’ll see billboards for lawyers who offer to sue someone for you. They could also buy more votes from what I call the ‘poligarchs’, basically poor people who need to be bought off to maintain social peace and the illusion of fairness.
These zombies – I call them zombies because they don’t produce anything worthwhile, they just suck the blood out of the other parts of the economy – reduce output and add costs. But now, with their cheap credit, Americans – including the government itself – could borrow to support this overhead.
And have you heard of Baumol’s disease? Why do I bother to ask? Of course you haven’t. More on that when my speech continues, on Monday.