The Higher Education Bubble

With almost a trillion dollars in loans outstanding and an estimated 27% of those loans more than 30 days in arrears, it's getting easier every day to predict the next segment of the economy to collapse.

Those who understand how the bubble-blowing combination of the Federal Reserve and government policy destroyed the housing market, fueled the dot-com bubble of the early 2000s, and shares some level of responsibility for every nationwide recession since 1913 watched in trepidation when "college for all" replaced "home ownership for all" as the entitlement mantra. It's starting to look suspiciously like they were right once again.

Fitch Ratings notes that the "The Federal Reserve Bank of New York recently reported that as many as 27% of all student loan borrowers are more than 30 days past due. Recent estimates mark outstanding student loans at $900 billion- $1 trillion."

Homebrew Production is Coming

Author's Note: The Homebrew Industrial Revolution, by Kevin Carson, goes into great detail about many of the concepts underlying this series of posts. A number of columns will focus on information gleaned from there. Well worth the time to read. Highly recommended.

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In the first column in this series, The Apolitical Economic Superpower, we discussed the rapid growth of the untaxed, unregulated economy that currently provides 50% of the world's jobs, and is expected to provide two-thirds of the world's jobs by 2020, according to the Organisation for Economic Co-operation and Development (OECD).

In The Rising Phoenix Society, we learned of David Obi, who brought electricity to the masses in Nigeria by working an underground distribution deal with a Chinese manufacturer. We looked at local and urban farming as an example of the growth of apolitical employment in the US, and touched on regulation and infrastructure costs as two reasons that smaller-scale production may prove increasingly more competitive with factory farming in the future.

We also noted the great changes in the creation and marketing of literature, music, photography and other arts over the last few years, thanks to the largely unregulated and tax-free internet. We mentioned the grassroots effort that arose in opposition to the corporate-driven attempt by government to squash that great blossoming of creativity. We also observed that education (as opposed to government managed and financed "schooling") is on the cusp of a similar great transformation.

However, there's one major element of society that has and always probably will remain within the Domain of the Dinosaurs; the holy trinity of mass production, mass marketing, and mass distribution. Like it or not, that model is a keystone of the modern economy. The current assumption is that centralized mass production, with its requirements for massive capital investments, high energy and transportation costs, reliance on nation-wide infrastructure, considerable administrative overhead, and reliance on a production-driven throwaway consumption model is the only viable model for production.

Can that model be challenged by one without all those drawbacks? By the process of negation, that model would include low capital requirements, low overhead, local distribution, and build-to-demand production of durable, repairable goods. Unless goods can be economically produced in much smaller batches on much less expensive equipment, that model is a non-starter. But innovations on the horizon suggest a strong possibility that those conditions will be met in the not-too-distant future.

Greece Surrenders to the Underground Economy

The Guardian recently published Greece on the breadline: cashless society takes off, an all-too-brief look at what's happening in the streets of Greece in response to their government's international monetary woes. This paragraph is what triggered my reaction and the title of this post.

The Greek parliament recently passed a law encouraging "alternative forms of entrepreneurship and local development", including exchange networks such as Volos's, giving them official non-profit status for tax purposes.

As I read it, Greece has surrendered to the underground economy by writing off a significant chunk of future tax revenue, and it has to do primarily with "exchange networks such as Volo's." To understand, we have to go back to the top of the Guardian's story.

Around the Web 3/23/12

Here are few interesting articles that I've noticed in the last week or so that I thought might be of interest to those who enjoy The Tireless Agorist.

Pizza Federalism, Kickstarter and the Arts

Discussion of federalism is all the rage these days among conservatives. Such conversations are generally framed by the Tenth Amendment, interpreted as an issue of "States Rights," and then dismissed by the left as a throwback to the days of the Civil War.

The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

I believe a more honest appraisal of the concept requires consideration of the Ninth Amendment as well, and others are becoming at least tangentially aware of that idea.

The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people.

When both the Ninth and Tenth Amendments are included in the discussion, federalism expands to encompass "pushing government decisions down to the lowest democratic level possible," as Jonah Goldberg notes.

Government Integrity Analyzed

A consortium led by the Center for Public Integrity, a "nonpartisan" watchdog group, released a report on the integrity of state-level governments on Monday.

Not one state got an "A," the breakdown was 5 "B"s, 19 "C"s, 18 "D"s, and 8 "F"s.

I found it particularly telling that this "nonpartisan" watchgroup did not issue grades for either the District of Columbia or the federal government.

Here's how they begin their lament.

The Booze Cause of the Economic Crisis

Everybody should believe in something; I believe I'll have another drink.
Author unknown
Appearing at Real Clear Politics today, Causes of the Crisis, wherein Robert Samuelson proclaims "Four years after the onset of the financial crisis -- in March 2008 Bear Stearns was rescued from failure -- we still lack a clear understanding of the underlying causes."

He makes note of the two competing theories; that Wall Street, unregulated, took too many risks, and that mortgage-lending standards created the housing bubble. He then examines the case for a root cause of both.

Actually, both theories are correct -- and neither is... But the fact that these theories are not mutually exclusive suggests that both were consequences of some larger cause. Just so. What ultimately explains the financial crisis and Great Recession is an old-fashioned boom and bust, of which the housing collapse was merely a part.

In this, Samuelson is correct. He then proceeds to give a history lesson, pointing out that the boom began with the decisive defeat of double-digit inflation in the early 1980s, (while failing to address the cause of, or cure for, that inflation, however). He points to two mild recessions in the ensuing years, and gives credit to the Federal Reserve for "defusing" those two threats. He then states "booms become busts because justifiable confidence becomes foolish optimism," and continues his history lesson by spreading the blame everywhere; on investment banks, households, lending standards, regulators, ethical standards, even criminals. But not one word of explanation as to how "justifiable confidence becomes foolish optimism."

Exploitation: A Matter of Perspective

Matt Yglesias asked what was perhaps a rhetorical question at Slate on Friday, in his column The Real Story Is Everywhere In China Where They're Not Making Apple Stuff.

He first notes that "Public radio's popular This American Life episode about abuses in the Foxconn factories that make Apple products has been retracted on the grounds of the "significant fabrications" it apparently contained."

Matt then suggests that perhaps Apple's real sin was in "exposing our delicate western sensibilities to the misery [of Chinese workers]."

As he points out, "You don't read articles about working conditions in factories making socks destined for export to Kazakhstan, and you don't read articles about working conditions on the rice farms that people eagerly leave to go toil in the sock factory."

And then it's time for the rhetorical sucker punch. I use that term as a compliment, not a pejorative; it's an important question to ask.

When you read something bad about a Foxconn factory and then see that thousands of people line up for the chance of a job at one of them, that really ought to make you wonder. What were those guys doing the day before they decided to stand in line? How did that look?

Well, Matt, thanks to the New York Times, this Tireless Agorist can answer that question for you, through the eyes of a young man born in China and now attending an American university. He sent the following note to David Pogue, who included it in his column What Cameras Inside Foxconn Found.

30 Seconds to Destroy Democracy

All tyranny needs to gain a foothold
is for people of good conscience to remain silent.
Thomas Jefferson
Author's Note: Regardless of your position on the Presidential candidacy of Dr. Ron Paul, I believe you will find this attack on the democratic process profoundly disturbing. If the rule of law means nothing at the lowest levels of the political process in America, how can we expect it to have meaning at the highest? Please share this column with everyone you know. Our silence grants a foothold to tyranny.

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If you believe that democracy is still alive and well in the United States, I invite you to watch the video below. In less than 30 seconds, from the call for the vote to the closing of the convention, you'll see an attack on democracy intended to destroy the will of the people, bringing to mind Jimmy Doolittle's 30 seconds over Tokyo, intended to destroy the will of a different people. This Tireless Agorist is sure that just as the raid on Tokyo provided a morale boost for the American people, the Athens-Clarke County Republican Party establishment got a boost in their morale from believing they had successfully completed their raid on democracy.

But just as Doolittle's raid strengthened the resolve of the Japanese people, so too has this action strengthened the resolve of those who expect their voices to be heard through peaceful, democratic means and the rule of law.

Shocker: Hybrid Cars Stalled

First Shocker: General Motors has announced it will idle production of its Chevrolet Volt plug-in hybrid for five weeks because of slow sales, in spite of efforts to boost the vehicle's consumer appeal. The shutdown begins March 19th and ends April 23. Approximately 1,300 workers at the Hamtramck, Michigan factory will be out of work for that period.

The Volt was launched with great fanfare last year, but has suffered a rocky start with sales far below projections. Its primary purpose has been to serve as a lightning rod for critics of the Obama administration's auto-industry bailout and concurrent emphasis on alternative energy. It's also a fine example of crony capitalism at its best.

The company currently has an inventory of more than 6,000 Volts on hand. At current sales volumes, that represents almost a six month's supply.

The world's No. 1 automaker sold just 7,671 Volts last year. Some 1,203 Volts were sold last month, about double the number for January, but well below December's total of 1,529.