The Next Credit Bubble

March/08/2012 16:42PM
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A friend sent me a new site that all the financial community has begun reading every day. It’s  I have borrowed the following quotes from this entry.


“The outstanding student loan balance now stands at about $870 billion,1 surpassing the total credit card balance ($693 billion) and the total auto loan balance ($730 billion). With college enrollments increasing and the costs of attendance rising, this balance is expected to continue its upward trend. Further, unlike other types of household debt such as credit cards and auto loans, the student loan market is incredibly complex. Numerous players and institutions hold stakes at each level of the market, including federal and state governments, colleges and universities, financial institutions, students and their families, and numerous servicers and guarantee facilitators.

Student loans have received considerable media attention in recent months as researchers and policymakers voice growing concern about the heavy debt loads assumed by students and their parents. In addition to worries about the volume of outstanding student debt, there is concern about having enough federal aid to support the large number of students taking up postsecondary education. Federal and state governments are deeply involved in the student loan market, either directly originating student loans or indirectly guaranteeing them. The Health Care and Education Reconciliation Act, signed into law last year, ended private lending of federally subsidized loans, approved expansion of Pell Grants, and appropriated funds to invest in institutions that serve minority and low-income populations. Still, advocates for students clamor for more to be done to increase the availability of student loans. Further, state budget cutbacks to higher education amid tight fiscal circumstances may result in higher tuition.

In October 2011, President Obama announced executive actions to cap monthly federal student loan repayment at 10 percent of discretionary income for college graduates, eased from the previous 15 percent. This cap comes as some relief to those who worry about how they will pay back their debt. Moreover, student loan debts are typically shouldered by recent college graduates and other young workers, who tend to face lower incomes and higher rates of unemployment than older cohorts.

From the second to the third quarter of 2011, the total outstanding student loan balance grew 2.1 percent, from $852 billion to $870 billion. Over the same time period, other types of consumer debt declined or remained flat. Of the 241 million people in the United States who have a credit report with Equifax, our data provider, about 15.4 percent—or 37 million—hold outstanding student loan debt. The student loan debt, however, is not evenly distributed across the general population. Among people under thirty years old, 40.1 percent have outstanding student loan debt. Among people between the ages of thirty and thirty-nine, 25.1 percent have outstanding student loan debt. In contrast, only 7.4 percent of people who are at least forty years old have outstanding student loan debt. As a result, $580 billion of the total $870 billion in student loan debt is owed by people younger than forty.”

Think about this. How many sub prime loans are in this $870 billion bundle. Sub prime because the person receiving the loan did not finish the college degree.  Sub prime because the person just used the loan to live on away from home because it beat working. Sub prime because even the well-intentioned borrower who did finish college can’t get a job in the Obamaland.

Who’s holding this paper? Who is the equivalent of Freddie and Fannie in this little fiasco?

Which of the Central Planners running our country are watching this unfold? Obama, forget it. The congress, forget it. Geithner, forget it?  The Fed, forget it.

See, this is what Central Planning gets you. It’s like erosion. Drop by drop until you become Greece. Giving more than you can ever get. Even if you tax every dime from every unfortunate rich soul in America, you still remain over extended and go broke.

Another drop of erosion.  Dental visits to hospital emergency rooms are up. Nationwide they are up 16%. What does that mean. In Florida, in 2010, 115,000 ER dental visits resulting in more than $88 million in charges. That included 40,000 Medicaid patients. So you neglect our teeth for years, spending that money on a new flat screen. When you get a tooth ache, you don’t go to a dentist , you go to the ER. You don’t pay, your neighbor who has insurance through his company pays with higher premiums.

And, so it goes in the land of “we will help everyone who needs anything” Central Planning.

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