Hang Tuff, Kids: Negative Household Worth Can Be a Sign of a Great Future

Mike Riggs flags below a new report from Pew showing that a massive gap has opened up between the net value of households headed by old people (65 years and older) and those run by young people (defined as people 34 years old and younger). Here's Pew's writeup and chart:

In 2009, households headed by adults ages 65 and older possessed 42% more median net worth than their counterparts had in 1984. By contrast, households headed by adults younger than 35 in 2009 had 68% less median net worth than their counterparts had in 1984. The typical oldest household had 47 times as much median net worth in 2009 as the typical youngest household, by far the highest gap in the 25 years that the government has been collecting such data.

Well, it just looks terrible for the kids these days, doesn't it?

Let's break it down in two ways.

First, about the old people: What the growth in net worth suggests (to me anyway) is that old people are doing pretty swell. That's a good thing, right? You work hard your whole life and you have money and time left over at the end. Hurray. Yet what this also shows is that redistribution programs that take money from the non-old and give to the old (e.g., Social Security, Medicare, various tax credits) are clearly not necessary in the ways they once might have been. When Medicare was passed, old people were more likely to be poor than the national average. That's not the case any more and it strongly argues for means-testing and limiting access to programs designed to alleviate penury among old people. And programs that never had any justification in need - I'm looking at you, Medicare Part D, the Prescription Drug Plan - should be scotched altogether.

What about the young folk these days? Things look bad for them but I'm skeptical that things are so rotten. Younger people have far more access to credit than ever before - in the form of student loans (the typical grad who takes out student loans has somewhere in the $25,000 range in student loans upon graduation), credit cards (still easier to get than they were in the '70s and '80s), and mortgages. Pew says the biggest asset younger households have is a house. If you're a married couple a decade out of college and you've got a mortgage, you're doing pretty well.

But you're going to look pretty bad on paper. You could be pulling down $100,000 as a unit, but you'll likely have $40,000 in student loans. And you have next to no retirement savings. If you've got a car loan, that's another liability that reduces your net worth even as it means you've got a new ride.

Then there's the house. You probably bought it with 5 percent or 10 percent down, meaning you owe a ton on it; that's not a bad thing, it's just a fact. If you bought sometime in the 2000s, your house has likely dropped in value from the purchase price while your mortgage hasn't, which again reduces your net worth. Yet the fact of being able to own a house (well, pay a mortgage on one), is surely a sign of a pretty good standard of living. And that hasn't budged in 20 years. In 1990, about 35 percent of 24-29 year olds owned their house; in 2010, the percentage was...37 percent (the peak of 42 percent in 2006). For 30-34 year olds, the relevant percentages were 52 percent in 1990 and...52 percent in 2010. I'm betting that most, if not all, of the big net worth decline is tied to home values, which are in a historic slide still. When you factor that in, along with the fact that young people enter the full-time, career work force later than they used to, well, increases in student loan debt isn't all what it's cracked up to be. 

Bonus question: Are there other people out there who, like me, are fans of widely available credit? If there's one thing worse than debt, I'd say it's being denied the chance to borrow against your future. For god's sake, credit cards and car and home and student loans allowed me access to the very things that allowed me to get and keep jobs and build whatever passes for my life. I've yet to stiff anybody and wouldn't dream of doing so. I have plenty of friends who got in over their heads and went bankrupt (either literally or figuratively). But why should the rest of us who use credit judiciously and pay back our borrowed money suffer because other people can't handle the responsibility? When I hear folks on the right and the left talking about reducing available credit as a way of helping those of us too stupid and reckless and poor, I just don't know what to say. I'm slow to suggest my personal experience is any sort of typical route (much less a model worth emulating) but I do know I had negative net worth at least until I was in my late 30s (I may still be close to that). But that figure would have told you very little about my standard of living.

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  • Rich||

    Serious question: Why is using means testing considered more equitable than not using it, particularly when it comes to a mandated pay-in? Perhaps adding "ways testing" (e.g., looking at life choices) to the mix would be better in the large.

  • Apatheist||

    The reason they can't pass means testing it it will expose SS as the welfare it is (rather than some investment). If it really is THEIR money they are getting back then you can't means test it. Nevertheless as the whole thing goes bankrupt they probably will means test it and I hope at that point my generation wakes up and says "We Won't Pay."

  • AlmightyJB||

    Isn't it supposed to be retirement "insurance". If so, that would seem to indicate that you only would only get money if you were in financial need.

  • Apatheist||

    Different people have called it all sorts of things but in practice it works no different than any other tax and redistribution scheme. The payroll tax is paid, the money goes into the general budget, it gets spent on whatever they feel like including cutting checks to current recipients. Any extra money when there was a "surplus" was spent and now that it is in a "deficit" they have to supplement it with money from elsewhere.

  • Matt C||

    isn't it supposed to be retirement "insurance"

    No, it is a really screwed up social pension.

  • cynical||

    Given people's attitudes about health coverage, expecting them to understand the concept of social "insurance" as "many pay a little, few receive a lot" is a little optimistic.

  • ||

    Why is using means testing considered more equitable than not using it, particularly when it comes to a mandated pay-in? Perhaps adding "ways testing" (e.g., looking at life choices) to the mix would be better in the large.

    Social Security has access to lifetime earnings. I would much prefer "means testing" based on lifetime earnings (which really means just tweaking the formula) to penalizing people who chose to save rather than spend.

  • Matt C||

    penalizing people who chose to save rather than spend

    this is the central goal of our Federal Government

  • adam||

    Definitely a good point. Any means testing would have to be combined with a penalty during your working years for not saving x% of your income equal to the amount not saved. Otherwise it creates some very bad incentives.

  • Zeb||

    I don't think fairness has much to do with it. The fact is that SS is welfare for old people, whether they need it or not. It is stupid to pretend that it is anything else other than a wealth transfer from young to old. In my view, if we are going to have it, it should be a safety net, i.e. something you can fall back on in your old age if you are about to starve to death.

  • ||

    A big thing is that more people go to college and graduate and professional school.

    If you become a lawyer, doctor, MBA, or even a PhD, you'll likely have less wealth at age 30, and even probably at age 35. You're not likely to catch up to the person who worked straight out of college until later.

  • ||

    When "widely available credit" is issued without any moral hazard or state-sponsored market distortions, its a good thing.

    When it is paired with moral hazard (that is, bailing out the lenders who portfolios go splat) and market distortions (nationalized student loan programs, nationalized secondary mortgage market) its a fucking disaster.

    Get rid of the moral hazard and market distortions, and I suspect you will find that credit is still widely available to the credit-worthy. To others, not so much.

  • ||

    Get rid of the moral hazard and market distortions, and I suspect you will find that credit is still widely available to the credit-worthy. To others, not so much.

    Actually, so long as you make it legal to price the credit appropriately, it will be available to others, just expensive.

    True, a common government response is to make it illegal to price risk, which results in either moral hazard or in shutting off access to the less creditworthy. (Or making them use the shadow credit market of layaway and the like.)

  • ||

    Exactly. Make loans available to everyone; don't price according to risk. Pure government logic.

  • ||

    What, are you saying payday institutions aren't just raping the underprivilegded? HERESY!!

  • ||

    You see this in the crusade against payday lending. Yes, the interest rates are sky-high, but they reflect the risk to the lender of making the loans. But the SWPL crowd insists that they're "predatory", and wants to artificially cap the rates. The result, naturally, will be less lending.

  • robc||

    This.

    Also, while I think widely available credit is a good thing in the libertarian sense, I thinking using it to a large extent is foolishness.

    There is very little need to ever have a negative net worth. There are alternatives to college loans. Cheap junkers get you around until you can afford a real car. Rent until you have a decent down payment on a house so you are unlikely to go underwater (Note: 20% wasnt enough for some parts of the country for some parts of the last decade).

    This isnt a NEVER BORROW MONEY EVER screed, but pretty close. Judicious borrowing can be properly used, but going negative net worth is rarely a good idea.

  • ||

    If people become less risky and investment in them more assured, credit costs will go down all around. If there are real risks to lending to certain people, credit will stay high. Low cost, widely available credit is a laudable goal, but can't be achieved just by declaring it so. It has to be earned by a trustworthy society.

  • T||

    Not everybody is so lucky as to become one with The Jacket, Nick. You have to think of the little people.

  • adam||

    Maybe everyone should be required to sign a document at age 18, and periodically thereafter, electing to 1) be treated as an adult, or 2) be treated as a child. If you elect 2, you will be 'protected' by a slew of consumer regulations, etc. Your only responsibility is to tell any company you deal with that you're a number 2.

  • Apatheist||

    If we choose 1) do we get to stop paying into the ponzi scheme?

  • adam||

    yes, and you get no pay-out, even if you are starving in the street. pay-outs for number 2's cannot be debt financed.

  • ||

    I had a negative net-worth for while after business school also. Technically, if I had created a personal Balance-Sheet it would have included the value of my education under "Goodwill" and would have put me in the positive.

    The question was never "should unqualified people be allowed to borrow?" The important questions are:

    1. Should the federal government encourage risky lending through Freddie & Fannie?

    2. Should we continue to bail out Freddie, Fannie, and the banks when those loans fail?

  • robc||

    Worlds easiest qustions.

    No and No.

    if I had created a personal Balance-Sheet it would have included the value of my education under "Goodwill" and would have put me in the positive.

    I loled.

    Interesting question though, when does the goodwill accrue? Does it build up or does it all show up on graduation day?

    I would guess the latter, as if you drop out early you have the debt but no (or very little) goodwill from it.

  • AlmightyJB||

    You also have to consider the degree. For a typical OWS'er with some shit liberal arts degree it's zero (they freely admit it).

  • Mo||

    A growing company with no debt or that isn't selling off equity to invest in future growth is a company that's going to get killed by the competition.

  • ||

    Any company with no debt is going to get killed. Why would pay for an asset that will produce revenue for years up front?

  • Mo||

    Apple has no debt. They're obviously doing it wrong. Maybe you could be their CFO.

    Loads of big successful companies have no debt. But the thing is, they have sufficient cash flow to throw into growing business, so they don't need to make secondary offerings or issue debt. A big established company with significant cash flows can get away with it, a small company that is trying to grow at a significant clip can't.

  • robc||

    Dang it, Mo beat me.

    Here are the 10 largest publicly traded companies with zero debt:

    1. Apple
    2. Amazon
    3. Visa
    4. Mastercard
    5. Chunghwa Telecom
    6. Intuitive Surgical
    7. Activision Blizzard
    8. Bed Bath and Beyond
    9. ARM Holdings
    10. T Rowe Price

  • yonemoto||

    How are Google and Ron Paul not on this list?

  • yonemoto||

    Oh, NM, google has short-term debt.

  • ||

    "Has" no debt. They had plenty of debt in the past. That's how they grew.

  • ||

    In 1995 Apple had $461 million in short-term and $303 million in long-term debt.

  • Mo||

    Gee, it's almost like you didn't read my second paragraph.

    A big established company with significant cash flows can get away with [having no debt], a small company that is trying to grow at a significant clip can't.
  • yonemoto||

    why do companies have to grow that fast? It's simply not necessary. In N Out, for example, builds each new restaurant on the profits of the last (something about adhering to biblical prohibitions on usury). They're fabulously successful - they make good hamburgers, too, and are doing a good job of not getting reamed by Five Guys.

  • Mo||

    If you're in an old style, low tech industry, where growth and innovation are relatively small, you can afford to grow slowly. If you're in an industry that is changing rapidly and profitable, if you don't grow fast, someone else will take out the necessary debt to capture the market before you even have a chance to grab it. In N Out may find that their expansion will be slowed down because Five Guys and their ilk are grabbing the market slice and establishing loyalty before they can establish a beachhead.

  • ||

    So what? Perhaps they have no need for big assets. All that means is they contract out their manufacturing and really just make designs and ideas. I gaurentee you the companies that actually make their products have a lot of debt, even mature ones.

  • Mo||

    Apple made $7.5 billion in capital expenditures in 2010. They also make over $2 billion in prepayments to parts supplier so that they have capital to build components.

  • robc||

    Apple says "Hi!"

  • ||

    My company has no debt.

    Oddly, we regard having cash flow free of exaction by banks as a positive, not a negative.

  • ||

    IF your company doesn't posses a lot of capital assets or leases assets rather than buying them, it doesn't have debt. My guess is they have things like long term leases that function just like debt.

  • ||

    We're a hospital system. We have shitloads of capital assets. We don't lease anything, not even equipment.

    Its cash on the barrelhead, right down the line.

    Probably has something to do with our Board being olde-schoole ranchers and oilmen, who don't owe nuthin' to nobody.

  • yonemoto||

    Don't tell them the dollar is an instrument of monetized debt, so if they have cash reserves, they owe money to that friendly uncle who runs the printing presses.

  • ||

    Sorry I missed this RC. But you clearly know nothing about ranching or farming if you don't think it involves debt. Every rancher has to borrow money. What do you think you save up to buy the 150K tractor? Do you think you buy a two hundred yearlings on cash? That is just not how the business works. And if those guys are telling you that, they are having some fun lying to their Harvard lawyer.

    And if they don't go into debt with a company that has multi millions worth of medical equipment, they are fools. There is no reason not to lease or borrow for that equipment. Paying up front makes no sense. Say I have a 100K and want to buy a 100K piece of equipment. If I am a good credit risk, I can borrow that money at a lower interest rate than I can earn investing my 100K elsewhere.

  • Maxxx||

    LOL

    Now that's funny John.

  • ||

    Yes - Debt, correctly invested, expands your capital base. These people squandered their borrowed money on worthless (at least financially worthless) degrees.

    They would have been better off enrolling at ITT to learn a trade and reading Aristotle in their spare time.

  • ||

    I like the education as "goodwill".

    Goodwill shows up on balance sheets only after an acquisition, as a place to park the amount paid that exceeds the value of other balance sheet assets.

    Nobody, but nobody, just creates a "goodwill" line item out of thin air.

    So, no, you personal balance sheet would not, and could not, have a "goodwill" line item.

  • ||

    It is a producing asset though. Your law degree enables you to have your job. I think the value of your law degree can be roughly calculated. How much money giving an average rate of return would it take to produce yearly the difference in your salary with and without your law degree. That figure minus the money you paid for it is its value.

  • ||

    It is a producing asset though.

    Doesn't mean its a balance sheet asset.

    Having a loyal, motivated worksheet is a hell of a "producing asset", but you can't list it on a balance sheet. Balance sheet assets are assets that can be sold. You can't sell a degree.

  • ||

    Oh, there's a market, but you just have to find someone with the same name.

  • ||

    Goodwill can't be sold and it is a balance sheet asset. Just because it can't be sold doesn't mean it isn't a balance sheet asset.

  • ||

    Just because it can't be sold doesn't mean it isn't a balance sheet asset.

    Isn't that by definition the reason it can't be a balance sheet asset?

    Accounting can't take into account intangibles like that, so its up to the individual to translate that into something tangible.

  • ||

    Then how is good will a balance sheet asset?

  • ||

    Then how is good will a balance sheet asset?

    It isn't.

  • robc||

    It is. Was just looking at AAPL ones, re: the debt discussion and Goodwill was on there.

  • ||

    link? I've never seen goodwill in a company statement.

  • robc||

  • ||

    here

    http://caps.fool.com/blogs/goo.....gic/238037

    Judging from this explanation, goodwill is something other than what we're arguing about, though I'll admit this is the first time I'd seen goodwill on a balance sheet. Maybe I've just been ignoring it and forgot it existed.

  • Maxxx||

    "Goodwill" on corporate balance sheets is the kind of fantasy bullshit accounting that helped get the economy to it's current state.

  • ||

    It has been a while since I took acounting but I distinctly remember it on there. What RobC said.

  • ||

    like I've said. I've never seen "goodwill" on a company proft/loss statement.

  • robc||

    proft/loss

    Is this a funny way of admitting you were wrong?

  • ||

    Is this a funny way of admitting you were wrong?

    No, but I do admit that what I thought we were talking about and what goodwill actually is are two different things. I got caught up in thinking goodwill was a term for assets not classified under the tangible or non-tangible, when its an accounting statement showing premium paid for tangible assets.

  • Mo||

    "like I've said. I've never seen 'goodwill' on a company proft/loss statement"

    The amortization of goodwill appears on the income statement.

  • adam||

    have ever seen any asset on a profit/loss statement? assets and liabilities are listed on balance sheets. income and expenses are listed on profit/loss statements.

  • ||

    Goodwill might be the exception that proves the rule on balance sheet assets being marketable.

    IANAA, but I have seen it used solely as a parking place for purchase moneys that exceed "hard" assets.

  • robc||

    I have seen it used solely as a parking place for purchase moneys that exceed "hard" assets.

    Ditto. When you spend $2B on a company with $500M in assets, that extra $1.5B has to go somewhere. Seems to me it should depreciate like other long term assets, but I am also NAA.

  • ||

    so basically its never been used in your memory to account for "mental" assets and accountants would probably flip if you started putting prices to people's degrees.

  • Mo||

    In IFRS there is the concept of internally generated intangible assets. The qualifications are actually somewhat similar to a degree. To qualify it must satisfy:

    • The asset is identifiable (check)
    • Future economic benefits are probable (check)
    • The company has the intent and ability to complete the asset (check)

    Re: the second item, note that the unemployment rate for college grads (5%) is half that of high school grads, even in this economy. More than 5% of college grads have worthless degrees.

  • Mo||

    Yeah, if you're going to go with the balance sheet analogy, you're better off with the intangible asset. It's in progress while you're building it up and then amortizes over time. As you get older and older, the value of your education goes down and your experience matters more.

  • robc||

    I am not an accountant (obviously): Does Goodwill depreciate over time?

  • Mo||

    No. But you periodically reexamine it for impairment. If it becomes apparent that the goodwill is worth less than the original price, you are supposed to reduce it accordingly.

  • ||

    Goodwill Accounting

  • Michael||

    I do recall that a certain Mr. William Ayers once prescribed a solution for this dilemma, and I hope somebody alerts OWS of it soon.

  • romulus augustus||

    Those over 65 today vs. in 1984 have been relentlessly preached to to save for their retirement. Folks in 1984 were far more likely to have defined benefit pensions. I wonder if the pv of those in 1984 was counted as wealth?
    I image 401k and IRA value today is counted. I agree that means testing is no Fayer - if anything, test lifetime income. I don't think savers want to be penalized to pay benefits to the guy or gal who lived it up and now has very little saved.

  • Joe M||

    Wow, that includes the value of their houses? I feel pretty okay about my financial situation now.

  • Mo||

    Value of their homes net of the loan.

  • ||

    Me too. $170k not even remotely enough to retire on. If that were my net worth and I was 65+, I'd be shitting my pants. And, I guess, still working.

  • ||

    If that were my net worth and I was 65+, I'd be shitting my pants. And, I guess, still working.

    Or just vote for democrats who define you as a "victim" for having made bad decisions.

  • Destrudo||

    11 comments and this thread has been overrun by trolls yet? Amazing.

  • Destrudo||

    *hasn't*

  • ||

    Overrun by trolling Accountants and Financial Analysts.

  • ||

    If there's one thing worse than debt, I'd say it's being denied the chance to borrow against your future. For god's sake, credit cards and car and home and student loans allowed me access to the very things that allowed me to get and keep jobs and build whatever passes for my life.

    Kevin Smith made Clerks by maxing out his credit cards. It was a gamble but he would've had to pay for it one way or another, and more power to him. Of course, he's a TEAM BLUE diehard, and getting rather pathetic in his old age but it does show the power of free market credit--with free market consequences.

  • Apatheist||

    The youtube guys as well. If I remember correctly they funded almost everything with credit card debt. Of course, just like Smith it was huge risk and there are far more people out there in debt for attempting the same thing (which is why it is called risk). Somebody who uses a credit card to buy a car or a new phone isn't risking anything, they are just going into debt. Credit cards should never be used for consumer purchases unless you intend to pay them off immediately.

  • Matt C||

    Or if you are buying an appreciating assest with a ROI greater than the interest rate of your credit card "loan." For example, if the the Fed and ECB decide to unload all the sovereign debt by printing paper, I would heavily endorse buying gold with credit cards.

  • ||

    Hang Tuff, Kids: Negative Household Worth Can Be a Sign of a Great Future

    This is clearly The Jacket's attempt for NKOTB to reform and go on a reunion tour.

    It's a very free market approach.

  • ||

    Whose poster did you have in your locker, Groovster? I'm thinking you'd be the Joey McIntyre type.

  • ||

    Sorry for the thread jack but this is very interesting. It appears everything we heard about the Bin Ladin raid was a lie. They killed him 90 seconds into the raid not 15 minutes. But more importantly, Obama screwed the pooch by announcing it immediately so he could get credit politically.

    President Obama stepped up to a podium in the East Room of the White House that night to announce bin Laden’s death. That rapid announcement, explained Pfarrer, posed a major threat to U.S. national security.

    “There was a choice that night,” Pfarrer told TheDC. “There was a choice to keep the mission secret.” America, Pfarrer explained, could have left things alone for “weeks or months … even though there was evidence left on the ground there … and use the intelligence and finish off al-Qaida.”

    But Obama’s announcement, he said, “rendered moot all of the intelligence that was gathered from the nexus of al-Qaida. The computer drives, the hard drives, the videocasettes, the CDs, the thumb drives, everything. Before that could even be looked through, the political decision was made to take credit for the operation.”

    http://news.yahoo.com/correcti.....33289.html

    What a pathetic amateur.

  • Apatheist||

    He could have at least not announced all of the intelligence they gathered but there was no way that raid was staying a secret, what with the crashed helicopter and the fact it was in the middle of a suburb. Could you imagine the conspiracy theories that would of pooped up if they had tried to keep the whole thing secret?

  • Supreme Generalissimo Fluffy||

    That's really a little silly.

    Pfarrer is assuming it would be possible to attack and destroy the bin Laden hideout and have Al-Qaeda not know just because we didn't announce the outcome ourselves.

    Like they wouldn't notice or something.

    Like the Pakistanis wouldn't have noticed.

    I think it's also silly to give Obama a lot of personal credit here, but I have to say that I also would have made the announcement. "But if we maintain perfect operational security and our opponents just happen to be morons, along with their allies in Pakistani intelligence, we can finally conquer Eurasia!" Doubtful.

  • ||

    They would have noticed eventually but not immediately. It is not like they had him on spead dial. The "weeks or months" is silly. They would have noticed that. But Obama could have waited a few days or at least until we knew they knew. And who knows if they would have known. why not wait and find out? The only reason to rush to the camera is to strut around over the body for political purposes. And you can do that any time.

  • Joe M||

    You're just looking for an excuse to talk shit about Obama. It's okay to admit it.

  • Mo||

    You don't think the ISI would have noticed the crashed super high tech American chopper in the posh suburb that OBL happens to live in?

  • BigT||

    We could have installed some bugs and listened closely for a few days monitoring chatter to see the flow of info. Opportunity wasted.

  • romulus augustus||

    Or claim OBL was taken alive and was ratting and then watch when the cockroaches started scurrying from their hiding places.

  • ||

    what this also shows is that redistribution programs that take money from the non-old and give to the old (e.g., Social Security, Medicare, various tax credits) are clearly not necessary in the ways they once might have been.

    I don't know about that. I think it shows money is fungible. Instead of cashing out of the big house and moving into a smaller, more manageable one, oldsters are staying put (and looking upon this as a right rather than an option), because those transfer payments allow them to do so, at least for a while longer.

  • Matt C||

    And cashing out of an expensive house decreases your net worth HOW?

  • Apatheist||

    Without the monthly payments they would have to move to a smaller house (or renting) and use the difference to pay for their monthly expenses. P Brooks is pointing out that having that bigger house is a privilege not a right that is subsidized at the taxpayer's expense.

  • GILMORE||

    For god's sake, credit cards and car and home and student loans allowed me access to the very things that allowed me to get and keep jobs and build whatever passes for my life

    Ahh, but loans, interest, movement of capital etc. are all things enabled by people who work in finance, which as we all know, isn't "making anything", and according to the wise-minds of OWS, is just "moving money around", and, while lucrative, is a 'socially destructive field'*

    Also, while we're imitating the idiotic economic delusionism of the progressive left, we should add that all those things like cars, homes, leather jackets that you bought on credit? You didn't really *need* them. They were all needs created by our capitalist consumer culture, not real, socially valuable goods. We don't need all that stuff man. If you hadn't been sucked into the false consciousness of capitalist consumerism, your life would be far richer because you'd be like, more *connected* with other people and shit... community.... shared resources...yoga.... hemp .... wheat germ... naomi klein....

  • ||

    You just use that stuff to go out and bowl alone.

  • BigT||

    More time spent usefully gamboling.

  • Heroic Mulatto||

    THREADJACK: MSNBC reports on North Carolina's eugenics program (1929-1974); manages to insinuate that American eugenics was promoted by corporations (i.e. rich White men ='right-wing'), as opposed to being a founding cause of the Progressive movement.

  • ||

    manages to insinuate that American eugenics was promoted by corporations (i.e. rich White men ='right-wing'), as opposed to being a founding cause of the Progressive movement.

    Margaret Sanger and W.E.B. Dubois were rich White guys? That actually might explain a few things.

  • Zeb||

    Well, there were plenty of rich white guys who supported it too (you might say that there was some sort of a scientific consensus. Hmm...). But is wasn't the president of Haines who passed the laws allowing the state to forceably sterilize people.

  • ||

    Whose poster did you have in your locker, Groovster? I'm thinking you'd be the Joey McIntyre type.

    The tough and brooding Donnie Wahlberg, Dagster!

    "All that I needed was youuuuuuuuu..."

  • CE||

    ...what this also shows is that redistribution programs that take money from the non-old and give to the old (e.g., Social Security, Medicare, various tax credits) are clearly working as expected not necessary in the ways they once might have been.

    Fixed.

  • ||

    why should the rest of us who use credit judiciously and pay back our borrowed money suffer because other people can't handle the responsibility?

    This is a rhetorical question, right?

    Anybody knows you cannot have discrimination based on risk. That's mean.

  • ||

    It is a producing asset though.

    The loan itself is a wasting asset, John.

    To quote sevo and myself from the 2K Monster Thread of Dread:

    (trying to bypass the over-post/vermin)
    Waddaya mean "assets"!?

    Well, not hard or tangible assets, in that sense. I guess you could say "Junk Bonds." Since a debt note is a holding, and keep in mind I'm not a Wall-Street-Wizard-of-Smart, it's still "occupying" ledgers on the government's books. So it's not a tangible asset in that sense, like a car or house, but can still be collected upon default, and, like any other asset, can cause an implosion if the debt is not repaid.

    The asset, in this case, is the sheepskin following a successful graduation.

    I'm also curious if any of these little geniuses have investigated hardship deferment.

    sevo|11.5.11 @ 10:12PM|#

    You're right that it's a financial asset; I was posting in more realistic terms.
    But like the subprime mortgages, the value of that sheepskin is questionable.
    I think the term we need is 'wasting assets'.

    The other tangible asset is professional licensing for occupations on which employment is contingent upon for entry.

  • ||

    The loan is the cost of the degree. Suppose I have a 50K loan and a degree in X to show for it. Assuming that degree gets me a job, the 50K is no different than the loan on any other asset.

  • ||

    Assuming that degree gets me a job

    but if you don't have a job, the might as well be for blowjobs rendered.

  • Matt C||

    +1

  • ||

    Yes and no. If I never get a job, it might as well have been spent on blowjobs. But if it eventually gets me a job, it is a producing asset.

    Beyond that, if I buy a widget machine and for whatever reason never sell a damn widget, the widget machine is still an asset.

  • ||

    A widget machine is only an asset for its worth to someone else, which can be easily calculated. At worst, if it function is so specialized that it can't be used for anything else, it has immediate scrap value. If, however, there is some demand for components, it gets valuation for that.

    A degree has the same worth as a score on a cosumer reports report. Companies don't value those, but they do crave them.

  • Apatheist||

    Sheepskin diplomas have scrap value as fancy condoms.

  • ||

    Technically, wasting assets are assets that consume, rather than produce, income.

  • ||

    Assuming that degree gets me a job, the 50K is no different than the loan on any other asset.

    Maybe we are looking at this all wrong. Instead of making student loans nondischargeable, they can just repo them.

  • ||

    Well, repo the degrees I mean.

  • ||

    Oooh, I like this idea. The best part is that you could hire some of these graduates without jobs to repossess the diplomas.

    "A repo man spends his life getting into tense situations."

  • ||

    They kind of do. IF you go into default you can't get your transcripts from the school.

  • ||

    huh? who is withholding your transript? The banks who own your note?

  • Gimlet||

    "We all have a set of mutual obligations towards each other — we are our brother’s keeper, we are our sister’s keeper — and that those mutual obligations have to express themselves through government policies."

    - Barack Obama, 2004

    Wasn't it the slavemasters that used to "keep" people?

  • ||

    defined as people 34 years old and younger

    Is 34 the cut off age between gen x and the pokemon generation?

  • Lord Humungus||

    so in order to reach distribution Nirvana, we have to literally eat the rich, stealing everything they own?

  • Lord Humungus||

    and old

  • ||

    Technically, wasting assets are assets that consume, rather than produce, income.

    Hence, RC, why I referred these student loans as "toxic assets" on the aforementioned thread, and sparked the exchange with sevo.

    I see no difference b'twixt Fannie Mae and Freddie Mac and this Student Loan debacle. The only thing missing is a wholesale bailout. Otherwise, consuming income of the taxpayers to subsidize this stuff does fit the technical definition: it's just cost shifted the risk from the individual.

  • Supreme Generalissimo Fluffy||

    Speaking of the value of education and student loans, here is a fun test I found online called

    Prof, or Hobo?

    Enjoy.

    http://individual.utoronto.ca/somody/quiz.html

  • ||

    5/10.

  • tarran||

    7/10: I misidentified 2 profs as hobos and 1 hobo as a prof.

  • tarran||

    7/10: I misidentified 2 profs as hobos and 1 hobo as a prof.

  • For Warty||

  • tarran||

    7/10: I misidentified 2 profs as hobos and 1 hobo as a prof.

  • robc||

    7/10.

  • ||

    I must be unusually weak at distinguishing hobos from professors. Probably too much time in academia.

  • Brett L||

    Without smell, it's harder.

  • Joe M||

    6/10, although I was going against my gut reaction because I thought they were trying to trick me. They succeeded anyway.

  • PermaLurker||

    9/10 It's in the eyes. Last guy fooled me apparently he LIKES being a hobo.

  • ||

    10/10 I almost missed one, #5 the B&W one in (I assume) the Metro. I figure that one is the most often missed.

    ER experience teaches a lot.

  • BigT||

    There's a difference?

    All hobos in my book.

  • ||

    They kind of do. IF you go into default you can't get your transcripts from the school.

    Have you been taking swigs of Tulpy's Dimetapp? I have never in my life heard of this happening. The debt is either bank or government owned. The only time this could happen is if for some reason you owe money directly to the school.

  • Jersey Patriot||

    But why should the rest of us who use credit judiciously and pay back our borrowed money suffer because other people can't handle the responsibility?

    Why aren't you asking the same thing of the student loan companies? Your auto finance company made a good decision loaning you the money to purchase your car. If they hadn't, they would have ended up in bankruptcy court trying to get what they could of your assets, which would essentially be nothing.

    OTOH, when a student loan company loans $36,000 to a guy to get an MFA in Puppetry, we can all agree that it was dumb. But it was just as dumb for the student loan agency as it was for the student. But only the student suffers, and only the student takes the blame.

    Why should student loan companies get a free pass for their subprime loans?

  • ||

    The government wanted it that way. Not enough loans were being made to hit the promotion of higher education goals, so they started the guarantee program.

    Everyone is at fault here. You think we are defending the banks, but there really is enough stupid to go around.

  • Jersey Patriot||

    If Reason isn't defending the banks, then why are all the articles about those lazy, irresponsible humanities majors, and almost none of them about foolish student loan companies propped up by the government? Where are the articles about the fake requirements for a college education to do anything but flip burgers? Why are all the articles full of pious testimony from Reason staffers about how smart they were? (Nick, Matt, Tim...)

    You can't tell me that Reason is as upset about the foolish student loan companies as it is about the foolish (or just plain unlucky) students. I won't buy that for a second.

  • ||

    I suppose one could blame the banks on some moral level, but the government guaranteed the loans. The government made them non-dischargeable.

    It's quite similar to what was done with housing finance, where the government similarly had the notion that everyone should have a house and not have to pay market rates on the money they borrow.

  • Mo||

    And who do you think lobbied the government for that, the bank or the guys getting MFAs in puppetry?

    Look at the shit fit Republicans and bank lobbyists threw when Dems proposed getting rid of the middle man. The banks highlighted the value of the marketing they did to get as many people loans as possible. The lenders are hardly innocent bystanders in this. The lender and the borrower both have an obligation in making sure that the borrower has the ability to pay. If he doesn't, both sides fucked up.

  • ||

    That's not what I said. I'm just saying that without the government's involvement, none of this happens. Naturally the usual suspects go along with the scam.

  • romulus augustus||

    "Look at the shit fit Republicans and bank lobbyists threw when Dems proposed getting rid of the middle man"

    What kind of shit fit do you think the Democrats would throw if the GOP said henceforth student loans would be restricted to only those who chose majors where significant job shortages will appear in the next decade?

  • Old Farts||

    Enjoy your future, suckers!!!

  • jtuf||

    We should phase out social security over the next 20 years. The baby boomers did not pay into the system. They payed a tax, that along with their other taxes, did not generate any surplus for drawing on in the future. After decades of them putting the government into debt to pay for the War on Drugs and sundry other disastrous programs, I don't owe them a dime.

  • ||

    I can't help but think that saying there's a massive gap between the third rung of the ladder and the sixth only works when you've pulled the fourth and fifth rungs out.

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