University Bubble 101

Posted On: Wednesday - February 15th 2017 12:27PM MST
In Topics: 
  Student and other Snowflakes  University  Global Financial Stupidity  Inflation

On the topic of Global Financial Stupidity, with emphasis on the US, the University financial loan bubble is one that the writer is more familiar with than, say, the mortgage world, or treasury bonds. A glimpse into this problem came up during daily life just now.

We ate at a local restaurant for Valentines (beats buying into the jewelry racket - hey that's another one!). This particular restaurant has been at the same spot near the state university here for over 30 years. Firstly, just as gauge of inflation, the same exact menu item that I used to get every time I ate there in the early-oughts cost just about double what it did then. I can remember distinctly this London broil being $6.99 back in, I'll be generous, 2000. The same portion is $12.99 now, and they don't automatically give you tons of cornbread anymore either (this is cough, cough, Bullshit, cough, cough). Let's do the math, and I am going to account for compounding. It comes to 3.7% average price inflation over 17 years. Ah-hah, US Gov't! (Keep in mind, the calculator I found on moneychimp did not account for the lack of readily available cornbread!) Now this post is not specifically about inflation, so read on ....

A sign at the front where the hostess hung out said "We take University cash" or something like this. I though, hey, maybe I'll get some of this to make up some of my losses in Bitcoin. No, joking here, but I asked about it because I wondered what kind of currency they meant. It turns out, this means they take the student meal cards or chips or whatever it is today. I don't know what kind of odious deal they have with the school, but to me it's a very good window into the financial dealings and what this student loan bubble is about. Students can use the card that deducts money directly from some type of account.

OK, this deal has been around a long time, and back in the day, one could get in the neighborhood of 15-20% off meals in the long run by getting a card for the semester providing for X number of meals. The difference now is that students don't think about the few hundred dollars they had to shell out - probably near 1000 today - to get the card. All dealings are with student loan money for most of these students, and it's like a blank check. After all, it'll be what it's gonna be - a whole, almost mortgage-like, sum of money that will be due when I get that great job using my 5 1/2 year degree in what-have-you. No money will be due until then due to deferrals, extensions, grad school if I gotta, so just let it ride. The restaurant can make as much money off students that are on a "who-cares" budget than the regular customers. $12.99 for the London broil? Who cares! Don't be a cheap ass.

This is the way it's going until the lenders (US taxpayers) get wise, and what can't go on, won't go on, to paraphrase Instapundit's quote of somebody, somewhere on the internet.

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