From Debt Peons To Wage Slaves - Are Students A 'Class'?
by Tyler Durden
Jun 2, 2017 9:25 PM
Authored by Michael Hudson, via NakedCapitalism.com,
Students usually don’t think of themselves as a class. They seem “pre-class,” because they have not yet entered the labor force. They can only hope to become part of the middle class after they graduate. And that means becoming a wage earner – what impolitely is called the working class.
But as soon as they take out a student debt, they become part of the economy. They are in this sense a debtor class. But to be a debtor, one needs a means to pay – and the student’s means to pay is out of the wages and salaries they may earn after they graduate. And after all, the reason most students get an education is so that they can qualify for a middle-class job.
The middle class in America consists of the widening sector of the working class that qualifies for bank loans – not merely usurious short-term payday loans, but a lifetime of debt. So the middle class today is a debtor class.
Shedding crocodile tears for the slow growth of U.S. employment in the post-2008 doldrums (the “permanent Obama economy” in which only the banks were bailed out, not the economy), the financial class views the role industry and the economy at large as being to pay its employees enough so that they can take on an exponentially rising volume of debt. Interest and fees (late fees and penalties now yield credit card companies more than they receive in interest charges) are soaring, leaving the economy of goods and services languishing.
Although money and banking textbooks say that all interest (and fees) are a compensation for risk, any banker who actually takes a risk is quickly fired. Banks don’t take risks. That’s what the governments are for. (Socializing the risk, privatizing the profits.) Anticipating that the U.S. economy may be unable to recover under the weight of the junk mortgages and other bad debts that the Obama administration left on the books in 2008, banks insisted that the government guarantee all student debt. They also insisted that the government guarantees the financial gold-mine buried in such indebtedness: the late fees that accumulate. So whether students actually succeed in becoming wage-earners or not, the banks will receive payments in today’s emerging fictitious “as if” economy. The government will pay the banks “as if” there is actually a recovery.
And if there were to be a recovery, then it would mean that the banks were taking a risk – a big enough risk to justify the high interest rates charge on student loans.
This is simply a replay of what banks have negotiated for
real estate mortgage lending. Students who do succeed in getting a job
hope to start a family, or at least joining the middle class. The most
typical criterion of middle-class life in today’s world (apart from
having a college education) is to own a home. But almost nobody can buy a
home without getting a mortgage. And the price of such a mortgage is to
pay up to 43 percent of one’s income for thirty years, that is, one’s
prospective working life (in today’s as-if world that assumes full
employment, not just a gig economy).
Banks know how unlikely it is that workers actually will be able to earn enough to carry the costs of their education and real estate debt. The costs of housing are so high, the price of education is so high, the amount of debt that workers must pay off the top of every paycheck is so high that American labor is priced out of world markets (except for military hardware sold to the Saudis and other U.S. protectorates). So the banks insist that the government pretends that housing as well as education loans not involve any risk for bankers.
Do students think about their future in these terms? How do they think of their place in the world?
Students are the new NINJAs: No Income, No Jobs, No Assets.
But their parents have assets, and these are now being grabbed, even from retirees. Most of all, the government has assets – the power to tax (mainly labor these days), and something even better: the power to simply print money (mainly Quantitative Easing to try and re-inflate housing, stock and bond prices these days). Most students hope to become independent of their parents. But burdened by debt and facing a tough job market, they are left even more dependent. That’s why so many have to keep living at home.
The problem is that as they do get a job and become independent, they remain dependent on the banks. And to pay the banks, they must be even more abjectly dependent on their employers.
It may be enlightening to view matters from the vantage point of bankers. After all, they have $1.3 trillion in student loan claims. In fact, despite the fact that college tuitions are soaring throughout the United States even more than health care (financialized health care, not socialized health care), the banks often end up with more education expense than the colleges. That is because any interest rate is a doubling time, and student loan rates of, say, 7 percent mean that the interest payments double the original loan value in just 10 years. (The Rule of 72 provides an easy way to calculate doubling times of interest-bearing debt. Just divide 72 by the interest rate, and you get the doubling time.)
A fatal symbiosis has emerged between banking and higher education in America. Bankers sit on the boards of the leading universities – not simply by buying their way in as donors, but because they finance the transformation of universities into real estate companies. Columbia and New York University are major real estate holders in New York City. Like the churches, they pay no property or income tax, being considered to play a vital social role. But from the bankers’ vantage point, their role is to provide a market for debt whose magnitude now outstrips even that of credit card debt!
Citibank in New York City made what has been accused of being a sweetheart deal with New York University, which steers incoming students to it to finance their studies with loans. In today’s world a school can charge as much for an education as banks are willing to lend students – and banks are willing to lend as much as governments will guarantee to cover, no questions asked. So the bankers on the school boards endorse bloated costs of education, knowing that however much more universities make, the bankers will receive just as much in interest and penalties.
It is the same thing with housing, of course. However much the owner of a home receives when he sells it, the bank will make an even larger sum of money on the interest charges on the mortgage. That is why all the growth in the U.S. economy is going to the FIRE sector, owned mainly by the One Percent.
Under these terms, a “more educated society” does not mean a more employable labor force. It means a less employable society, because more and more wage and consumer income is used not to buy goods and services, not to eat out in restaurants or buy the products of labor, but to pay the financial sector and its allied rentier class. A more educated society under these rules is simply a more indebted society, an economy succumbing to debt deflation, austerity and unemployment except at minimum-wage levels.
For half a century Americans imagined themselves getting richer and richer by going into debt to buy their own homes and educate their children. Their riches have turned out to be riches for the banks, bondholders and other creditors, not for the debtors. What used to be applauded as “the middle class” turns out to be simply an indebted working class.
Students usually don’t think of themselves as a class. They seem “pre-class,” because they have not yet entered the labor force. They can only hope to become part of the middle class after they graduate. And that means becoming a wage earner – what impolitely is called the working class.
But as soon as they take out a student debt, they become part of the economy. They are in this sense a debtor class. But to be a debtor, one needs a means to pay – and the student’s means to pay is out of the wages and salaries they may earn after they graduate. And after all, the reason most students get an education is so that they can qualify for a middle-class job.
The middle class in America consists of the widening sector of the working class that qualifies for bank loans – not merely usurious short-term payday loans, but a lifetime of debt. So the middle class today is a debtor class.
Shedding crocodile tears for the slow growth of U.S. employment in the post-2008 doldrums (the “permanent Obama economy” in which only the banks were bailed out, not the economy), the financial class views the role industry and the economy at large as being to pay its employees enough so that they can take on an exponentially rising volume of debt. Interest and fees (late fees and penalties now yield credit card companies more than they receive in interest charges) are soaring, leaving the economy of goods and services languishing.
Although money and banking textbooks say that all interest (and fees) are a compensation for risk, any banker who actually takes a risk is quickly fired. Banks don’t take risks. That’s what the governments are for. (Socializing the risk, privatizing the profits.) Anticipating that the U.S. economy may be unable to recover under the weight of the junk mortgages and other bad debts that the Obama administration left on the books in 2008, banks insisted that the government guarantee all student debt. They also insisted that the government guarantees the financial gold-mine buried in such indebtedness: the late fees that accumulate. So whether students actually succeed in becoming wage-earners or not, the banks will receive payments in today’s emerging fictitious “as if” economy. The government will pay the banks “as if” there is actually a recovery.
And if there were to be a recovery, then it would mean that the banks were taking a risk – a big enough risk to justify the high interest rates charge on student loans.
Banks know how unlikely it is that workers actually will be able to earn enough to carry the costs of their education and real estate debt. The costs of housing are so high, the price of education is so high, the amount of debt that workers must pay off the top of every paycheck is so high that American labor is priced out of world markets (except for military hardware sold to the Saudis and other U.S. protectorates). So the banks insist that the government pretends that housing as well as education loans not involve any risk for bankers.
The Federal Housing Authority guarantees mortgages
that absorb up to the afore-mentioned 43 percent of the applicant’s
income. Income is not growing these days, but job-loss is. Formerly
middle-class labor is being downsized to minimum-wage labor (MacDonald’s
and other fast foods) or “gig” labor (Uber). Here too, the
fees mount up rapidly when there are defaults – all covered by the
government, as if it is this compensates the banks for risks that the
government itself bears.
From Debt Peons to Wage Slaves
In view of the fact that a college education is a precondition for joining the working class (except for billionaire dropouts), the middle class is a debtor class – so deep in debt that once they manage to get a job, they have no leeway to go on strike, much less to protest against bad working conditions. This is what Alan Greenspan described as the “traumatized worker effect” of debt.Do students think about their future in these terms? How do they think of their place in the world?
Students are the new NINJAs: No Income, No Jobs, No Assets.
But their parents have assets, and these are now being grabbed, even from retirees. Most of all, the government has assets – the power to tax (mainly labor these days), and something even better: the power to simply print money (mainly Quantitative Easing to try and re-inflate housing, stock and bond prices these days). Most students hope to become independent of their parents. But burdened by debt and facing a tough job market, they are left even more dependent. That’s why so many have to keep living at home.
The problem is that as they do get a job and become independent, they remain dependent on the banks. And to pay the banks, they must be even more abjectly dependent on their employers.
It may be enlightening to view matters from the vantage point of bankers. After all, they have $1.3 trillion in student loan claims. In fact, despite the fact that college tuitions are soaring throughout the United States even more than health care (financialized health care, not socialized health care), the banks often end up with more education expense than the colleges. That is because any interest rate is a doubling time, and student loan rates of, say, 7 percent mean that the interest payments double the original loan value in just 10 years. (The Rule of 72 provides an easy way to calculate doubling times of interest-bearing debt. Just divide 72 by the interest rate, and you get the doubling time.)
A fatal symbiosis has emerged between banking and higher education in America. Bankers sit on the boards of the leading universities – not simply by buying their way in as donors, but because they finance the transformation of universities into real estate companies. Columbia and New York University are major real estate holders in New York City. Like the churches, they pay no property or income tax, being considered to play a vital social role. But from the bankers’ vantage point, their role is to provide a market for debt whose magnitude now outstrips even that of credit card debt!
Citibank in New York City made what has been accused of being a sweetheart deal with New York University, which steers incoming students to it to finance their studies with loans. In today’s world a school can charge as much for an education as banks are willing to lend students – and banks are willing to lend as much as governments will guarantee to cover, no questions asked. So the bankers on the school boards endorse bloated costs of education, knowing that however much more universities make, the bankers will receive just as much in interest and penalties.
It is the same thing with housing, of course. However much the owner of a home receives when he sells it, the bank will make an even larger sum of money on the interest charges on the mortgage. That is why all the growth in the U.S. economy is going to the FIRE sector, owned mainly by the One Percent.
Under these terms, a “more educated society” does not mean a more employable labor force. It means a less employable society, because more and more wage and consumer income is used not to buy goods and services, not to eat out in restaurants or buy the products of labor, but to pay the financial sector and its allied rentier class. A more educated society under these rules is simply a more indebted society, an economy succumbing to debt deflation, austerity and unemployment except at minimum-wage levels.
For half a century Americans imagined themselves getting richer and richer by going into debt to buy their own homes and educate their children. Their riches have turned out to be riches for the banks, bondholders and other creditors, not for the debtors. What used to be applauded as “the middle class” turns out to be simply an indebted working class.
Watch the video George wouldn't lie about this stuff.
ReplyDeleteI like the part around the 4:50 minute mark.
Feels like it. Would the JEFFY and Bob M. be on board with that?
They don't give an F about you!!!
Hey Davey,
ReplyDeleteDid you vote for the school. So you're just starting the indebtedness earlier. Kids who attend this overpriced megamess will still be paying for it when they are having kids. They will also be paying to repair it..........lol.
They will probably be supporting their parents to, especially if they were government employees whose pensions have collapsed due to over-promised, underfunded pensions. It's estimated the US has 100 trillion in unfunded government pensions. Thats on top of the 300 trillion worldwide in private unfunded pensions.
So we are not funding the promised pensions now and haven't and somehow we are going to do this when? Government debt is only increasing in %. It's not getting better, lessening, so how is this all going to magically happen unless we start to get realistic.
In the past city, town, state workers made a little less pay, but benfits were above average and stability was high. Now government employees make more on average then private sector workers when benefits are included. Federal employees made 72% more on average than private sector in 2014 when benefits were included. That was a $52,000 difference in costs per employee.
In 2012 the average fed,state, local employee to private sector comparison was private sector average $44,600 per year. During the same period, government workers reported an average annual salary of $51,840 -- $7,240 per year more than private-sector employees.
So, rather than say I dont give an F about people, how about we get closer to the truth and say I give a F about the majority of the people overpaying for services.
You Dave dont appear to give an F about the taxpayer as long as "you get yours"!
Feel a little different when it pointed at you Bob?
ReplyDeleteFederal employees made. Apples to Apples please Bobby.
Bobby the fact is the taxes we pay when the value of a dollar earned is still low.
Look around we are one of the lowest/were and now we will be more where it should have been.
Like the town workers hear it from you and Jeffy,don't like it sell and move. No one has to stay it's your option. Why should any town workers go without due to lack of taxpayers being under effort! They pull their weight and then are asked to get put on hold for lack of funds.
Bobby can give all the f he wants for the people who have had it great tax wise,while whining the Jeff stories.
School,the first round i voted yes. I could see the need like any person with sight could. After the lie about TC only being a place holder i changed my vote.
I hope you don't think the 47-50 million will cover it.
I would think there is room to inflate that price as time has delayed the start it was sure to increase the price. You know with the code changes for electrical and heating systems now need to be more efficient.
So when they open the new school and figure out the budget to run and staff it how much of a over ride will the AC recommend the BOS ask for.
School,Police station, over rides, highway equipment,road repairs, we should just use the salt only and see how that goes too. $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ BOOM!
So you see if you think the taxes are high and bad now. You should prepay for a funeral it's now around 9,000.00 and lock in your price as it will go up too.
I pay my 8270.00 in real estate taxes and have paid taxes since 1978.
I don't expect them to go down and wages shouldn't either.
Pony up like the rest of us who "choose" to stay in beautiful Templeton Mass.
Those who get what they want go to town meetings and vote.
We all get the same chance,don't we Bobby?
Davey,
ReplyDeleteDid you read..............Or did you pick and choose like usual. Federal, State and LOCAL employee to private sector comparison was private sector average $44,600 per year. During the same period, government workers reported an average annual salary of $51,840 -- $7,240 per year more than private-sector employees.
The above numbers do not even begin to account for benefit packages!!!!!
Apples to Apples..............then compare you compensation package to the comparable private sector compensation package and stop only mentioning "wages".
I'll use comparableness when you do. You keep comparing town workers salaries with private sector wages. It's not apples to apples, so why do it?
The school is going to kill this towns finances, period.
This towns taxes were not cheap. They were appropriately based on services. Look at how much the government has grown over the past few decades. Much faster than the population grew. How about Police 30 yrs ago till now as just one example.......maybe a 1000% increase in staff. This while the Towns population increased 50%??
You pay $8270 in taxes because you own property valued at $514,000 in Templeton. You pay the same $16.12 per $1000 as everyone else.
No we dont all get the same chance David, not at all. The Town meeting issue a joke. Its a yea or nah about a pre determined issue like the school override votes. When 200 people show up to a town meeting, most due to rescind issue, voters dont feel represented.
The overrides either go the planned way or we re-vote until they do.
Hey Dave, Does posting a meeting agenda at 4:14PM on Thursday, when Town offices are closed Friday constitute a 48 hour notice to a Monday 6:30PM meeting? I ask this because they exclude Saturday, Sunday, legal Holidays from the 48 hrs. Does a Town Hall being closed count as time???
Anyone?
So the school employees are part of your lob-sided stat. Great news we get to tow the line for them on the wage farce too.
ReplyDeleteIt's posted 24 hours a day on both the town web site/official way and also the lighted meeting booth behind the town hall.
When i add the hrs for this posting i get the required minimum amount needed.
If you voted to change the rules for Friday's it would not count?
At 4:14 pm on Monday you get the required posting time.
Pay for any job is often miscalculated unless you have done the job in question.
Risk factor,we get nothing for! I could go on and on about what we get for what we do.
Thing is for years we have been under effort on the tax income side in this town and before it levels off there will be pain enough to go around.
I was once told by a intelligent former boss if you can't afford to own a home in Templeton you won't find it any cheaper in other towns.
I pass that advise and add move there if you can't afford it here.
It's not so much about affording as it is about spending foolishly.
ReplyDeleteDavid, On the hours till meeting point. My point was this. The 48 hrs is for a reason. They dont count Saturdays, Sundays and legal Holidays because on those days access to Town records is not available. In Templeton they are not available Friday-Sunday and legal Holidays.
Anyways, thanks for the attempt.
David.......risk factor, on and on..........what do you think your pay is for???? Do we have to break out every nickel and what it pays for?
That intelligent boss, did he tell you the same things about your job?????
We are all entitled to our opinions and like the sun rise every day we get it.
ReplyDeleteJust because we see things differently makes no difference to me.
I look for the facts and draw a conclusion from them.
Some think they know the facts and like last night are stuck with just an opinion that was wrong.
So have Bev call some more names and not know what the facts are.
If you vote to change the required 48 hrs and drop the friday you will get the facts needed to fulfill your opinion, It's that simple Bobby!
So we need road money and it's cheaper in Templeton so pony up and stop the whiners so they will have other things to label people for.