Archive for June 9th, 2011

About colleges’ value-to-cost ratio …

June 9, 2011

Everybody knows that college tuition is going thru the roof … pushing college out of reach for many and burdening most of the rest with near-lifelong debt.

USA Today reported recent studies by Rutgers University, Northeastern University professor Andrew Sum and Pew Research found that:

  • The median student loan for graduates from 2006 through 2010 is $20,000
  • Only about three-quarters of college grads younger than 25 were employed …
  • … with over a quarter of those employed working jobs that didn’t require a college degree.
  • 57% of Americans have decided that the value-to-cost ratio for college is lousy.

Ken’s Take: Anybody see a parallel between the Fed gov’t and higher education?  High prices, high debt, low value-to-cost.

Just like peas in a pod …

Posted in Education - Academics | 1 Comment »

So much for consumer deleveraging …

June 9, 2011

In the 1960s and 1970s, consumer debt as a percentage of after-tax income averaged a bit over 60%.

Starting in the Clinton years – and gaining steam through the Bush years – the ratio doubled – as consumers took out easy money mortgages and credit cards.

The 2009 financial scare prompted a wave of debt-reduction, but it looks like the austerity wave is becoming passé.

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According to the WSJ:

The economy is likely to be stuck with at best subpar growth until the private sector’s deleveraging, or debt-shedding, process is complete.

Households have made some progress lately, but this still looks to be in its early stages.

While debt as a percentage of after-tax income has fallen from its peak, it remains about 120% — well above the 89% it averaged in the 1990s.

And, there are signs that consumers are even starting to borrow again:

  • Consumer credit outstanding rose by $5.5 billion in April after a $6 billion increase in March.
  • Student-loan debt is at record-high levels
  • There has been an uptick in credit-card borrowing by cash-strapped consumers.

P.S. In Japan, deleveraging took the better part of 15 years.

[AOT]

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Posted in Credit Cards, Debt - Deficit, Financial Services & Crises | Leave a Comment »

Has anybody bothered to study the cumulative effect of these things?

June 9, 2011

That’s the question that JP Morgan CEO posed – in public – to Fed chair Bernanke.

Bernanke’s answer: “No”.

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It’s widely reported that:

Dimon rattled off a couple of the more than 300 new regs that Dodd-Frank will impose on banks.

Then, he popped the question, adding

“I have a great fear that somebody will write a book that the things we did in the crisis will slow down the recovery”.

Bernanke quipped that he thought the Fed and Administration were doing pretty good, then bluntly answered the question: “No”.

Posted in Financial Crisis | Leave a Comment »