Tag: student loan bubble

Bill Introduced Allowing Cancellation Of Over $1 Trillion In Student Debt Through Bankruptcy

Tyler Durden's picture
by Tyler Durden
May 22, 2017 5:32 AM

Courtesy of Sov Man’s Simon Black, here are several of the most bizarre legal anecdotes to take place in the US and around the globe over the past week, staring with a bill currently making its way through Congress, which is seeking to wipe out over $1 trillion in student loans.

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A Convenient Way to Cancel a Trillion Dollars of Debt

What happened:

Bankruptcy is like the ultimate get out of jail free card. You just get to wipe the slate clean, and even though your credit score and ability to borrow might suffer, you are free from all your previous obligations. But student loans have long been exempted from being erased by bankruptcy.

If this bill passes Congress however, hundreds of billions of currently delinquent student loans, potentially as much as $1.4 trillion worth of student loan debt…

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SOMETHING WICKED THIS WAY COMES

I stopped trying to predict markets back in 2008 when the Federal Reserve, Treasury Department, Wall Street bankers, and their propaganda peddling media mouthpieces colluded to rig the markets to benefit the elite establishment players while screwing average Americans. I haven’t owned any stocks to speak of since 2006. I missed the the final blow-off, the 50% crash, and the subsequent engineered new bubble. But that doesn’t stop me from assessing our true economic situation, market valuations, and historical comparisons in order to prove the irrationality and idiocy of the current narrative.

The proof of this market being rigged and not based upon valuations, corporate earnings, discounted cash flows, or anything related to free market capitalism, was the reaction to Trump’s upset victory. The narrative was status quo Hillary was good for markets and Trump’s anti-establishment rhetoric would unnerve the markets. When the Dow futures plummeted by 800 points on election night, left wingers like Krugman cackled and predicted imminent collapse. The collapse lasted about 30 minutes, as the Dow recovered all 800 points and has subsequently advanced another 1,500 points since election day. Krugman’s predictive abilities proven stellar once again.

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GO TO SCHOOL & BUY A CAR

Great news. Consumer credit SURGED in January. We blasted through the $2.5 trillion level. Car loans and student loan skyrocketed by almost $21 billion in just one month. Remember how I was wondering about all the new cars in West Philly? Here’s the answer. Ally Bank (GMAC in disguise) is making car loans of $35,000 to people in West Philly that have an average annual income of $16,000 and live in low income housing so they can buy Ford Expeditions. Imagine how smart all those people studying in their underwear at the University of Phoenix will be in two years when they graduate. Every dime of these $1 trillion in student loans are being covered by you. Obama is handing it out from your stash.  Sounds like a sustainable economic model.

Consumer Credit Outstanding 1

Seasonally adjusted
  Year Quarter Month
  2010 2011 2012
  2007 2008 2009 2010 2011 r Q4 Q1 Q2 r Q3 r Q4 r Nov r Dec r Jan p
Total percent change (annual rate)2 5.8 1.6 -4.4 -1.7 3.6 2.5 2.2 3.6 1.4 6.9 9.8 7.9 8.6
Revolving 8.1 1.7 -9.6 -7.5 0.4 -2.6 -3.7 1.5 -2.0 6.0 9.9 5.5 -4.4
Nonrevolving 3 4.4 1.5 -1.2 1.5 5.1 5.0 5.1 4.6 3.0 7.4 9.7 9.0 14.7
Total amount (billions of dollars) 2522.5 2561.8 2450.1 2408.3 2494.5 2408.3 2421.5 2443.3 2451.9 2494.5 2478.2 2494.5 2512.3
Revolving 941.9 957.5 865.5 800.2 803.8 800.2 792.8 795.9 792.0 803.8 800.1 803.8 800.9
Nonrevolving 3 1580.7 1604.3 1584.6 1608.1 1690.7 1608.1 1628.6 1647.4 1659.9 1690.7 1678.1 1690.7 1711.4
 
Terms of Credit 4

Not seasonally adjusted. Percent except as noted.
Commercial banks
Interest rates
48-mo. new car 7.77 7.02 6.72 6.21 5.75 5.87 5.86 5.79 5.90 5.45 5.45 n.a. n.a.
24-mo. personal 12.38 11.37 11.10 10.87 10.92 10.94 11.01 11.36 10.80 10.52 10.52 n.a. n.a.
Credit card plans
All accounts 13.30 12.08 13.40 13.78 12.74 13.44 13.43 12.89 12.28 12.36 12.36 n.a. n.a.
Accounts assessed interest 14.68 13.57 14.31 14.26 13.09 13.67 13.44 13.06 13.08 12.78 12.78 n.a. n.a.
 
Finance companies 5
Interest rates 4.87 5.52 3.82 4.26 4.73 4.57 4.73 n.a. n.a. n.a. n.a. n.a. n.a.
Maturity (months) 62.0 63.4 62.0 63.0 62.3 62.5 62.3 n.a. n.a. n.a. n.a. n.a. n.a.
Loan-to-value ratio 95 91 90 86 80 82 80 n.a. n.a. n.a. n.a. n.a. n.a.
Amount financed (dollars) 28,287 26,178 28,272 27,959 26,673 27,423 26,673 n.a. n.a. n.a. n.a. n.a. n.a.

Consumer credit surges again in January

By Greg Robb

WASHINGTON (MarketWatch) – U.S. consumers increased their debt in January by a seasonally adjusted $17.8 billion for a third month of sharp gains, the Federal Reserve reported Wednesday. Over the three most recently reported months, consumer debt has gained an average of $18.0 billion, compared with an average monthly gain of $5.3 billion from October 2010 until October 2011. The increase in January was larger than the roughly $10 billion gain expected by Wall Street economists. The increase was powered by non-revolving debt such as auto loans, personal loans and student loans-these three categories combined for a $20.7 billion jump in January, the biggest gain since November 2001. Credit card debt fell by $2.9 billion in the month, the first decline since August.

The credit card was essentially invented at the same time we went off the gold standard in the early 1970s. And look what has happened since. This will surely end well.