Dave Gonigam – November 3, 2011
- The hijacking of the American Dream, Part III: The perpetual payment machine. Average student loan debt tops $25k
- Traders giddy as G-20 leaders gather, Greece backs down from referendum, and European central bankers cut rates
- “Give him the tools”… Reader gets very close to the essence of Project X: Your last chance to sign up before we go silent
Think back to what the term “American Dream” meant when you were growing up. Somewhere along the line, something went haywire.
Public intellectuals hijacking the “American Dream” and defining it for you in comforting shibboleths…
“Stocks for the long run.”
“Housing always goes up.”
“A college education is your only ticket to the good life.”
The first two have long since been shattered. The hammer of reality is about to make impact on the third.
The typical 2010 college graduate is larded down with $25,250 of student loans, according to research out this morning from the Project on Student Debt.
Among this group, the unemployment rate is identical to the national average — 9.1%. And when you consider how the unemployment numbers are fudged, the true rate is likely double that.
$25,250 may not sound like much… until you realize that it’s more than half the per capita national debt. As of this morning, the national debt is on the verge of $15 trillion… $47,902 for every American.
The 2010 student debt burden is 5% higher than that of the class of 2009. That tracks the typical tuition increase, according to figures out last week from the College Board.
Of course, that average $25,250 is just that — an average. In some places, it’s lower. In Utah and Hawaii, it’s under $16,000. But elsewhere, the Project on Student Debt finds staggering numbers…
Total student loan debt is on a pace to top $1 trillion this year. Last year, the total exceeded the amount of credit card debt outstanding for the first time.
“I’ve paid on my student loans, but I owe just as much as when I started,” Laura Pounders told the New York Post last month. She went back to college at age 40, hoping to secure a higher-paying job than the two she had.
That was 16 years ago.
“It makes me cringe when I hear politicians say we need people to go to college. Why? So you can accrue $50,000 in debt and get a job that pays $8 an hour? I’m going to die with this debt.”
Indeed, she might. You can get out from an underwater mortgage via foreclosure and/or bankruptcy. Your credit rating is destroyed, and you can borrow in the future only at usurious rates. The lender takes a big write-down and tries to be more careful about whom to lend to in the future. Both get a fresh start.
There is no fresh start with student loans. Under a law passed in 2005, student loan debt cannot be discharged in bankruptcy.
For lenders, this was just like subprime… only better. Not only could they lend to anyone capable of fogging a mirror, they were guaranteed that if the borrower got into trouble, they had a legal backstop to jack up borrowers’ balances via penalties and higher interest… which they could collect by garnishing wages and even Social Security checks.
In other words, the student loan industry invented a perpetual-payment machine with the connivance of Washington.
Note when the red line on this chart starts to grow like Topsy.
If none of this makes sense to you, it’s not supposed to…
We identified a “higher education bubble” last May and again last month, when Patrick Cox and Byron King were both asked to name “the next bubble” during our Safety & Survival Summit.
But there’s an even bigger bubble on the horizon that still hasn’t burst… and that’s the bubble of confidence in the proclamations of the elites. Like “stocks for the long run”… and “housing always goes up.” And the idea that college is the only ticket to the American Dream.
Maybe you bought into these proclamations at one time or another. You cottoned onto the scam earlier than most. Good for you. But that still leaves you in a fix.
Like this fellow who signed up yesterday for Project X: “Addison,” he writes, “at this point, my wife and I have worked as hard as we know how to; we’re both 52 years old… We were reared on the idea that working hard, working honestly and treating people as they should be treated would allow for a retirement if not wealthy, at least dignified.
“That dignity is now on a fading horizon, and as far as I can tell, we’ll both work until we are unable to go any further. In the meantime, folks who don’t really know what ‘work’ is have made off with my life’s savings.”
This concern gets to the heart of what Project X is all about. A newsletter or trading service alone can’t address this. Addison has spent six long years since writing Empire of Debt thinking about how to deliver a comprehensive solution set for people whose illusions are shattered… but who then need to set to work building wealth.
In a few hours, the sign-up for Project X will close. We’re eager to continue bringing you updates about it. But the only way to make sure you’ll receive them is by signing up. After tonight, further updates will go only to those people who’ve taken that step. Here’s where you can do so.
How time flies. Today and tomorrow are the G-20 meetings in Cannes, France — where we’ve been promised a final settlement to the eurozone mess.
Of course, we know it won’t happen… but just the promise that it might has sent the Dow up again today. As of this writing, it’s within 20 points of 12,000 again.
Helping things along: Greece’s prime minister appears to be backing down from his plans to hold the bailout referendum he announced less than 72 hours ago. We can only guess at the sort of discussions that heated up the trans-European telephone lines during that span.
Also goosing markets: The European Central Bank lowered its benchmark interest rate by a quarter percentage point, to 1.25%.
For months, conventional wisdom had it this couldn’t happen: The new ECB chief Mario Draghi, hailing from debt-addled Italy, couldn’t afford to be seen as opening the easy-money spigot after being on the job only two days.
So much for that. The euro is back below $1.37 now.
[Ed. Note: The ECB’s move put a spring in the step of Germany’s DAX index… delivering a 118% gain in only three days to readers of Strategic Currency Trader.
Editor Abe Cofnas has played the DAX like a well-tuned Stradivarius in the last eight weeks… and with more euro-volatility on the way, there’s more where that came from. You can be on board for his next trades Monday morning right here.
The ECB rate cut propelled gold to his highest level since late September. At last check, the spot price was $1,762. Silver is steady as she goes… $34.48
“With a name like ‘Project X,’” a reader writes, “I surmise that it, in some ways, focuses on the challenges that the heirs of the boomers face. To put it concisely, this would be the erosion of the middle class.”
“The generational blame game we’re seeing in The 5 is exemplary of what’s become a society that embraces a victimization complex. It’s never our fault. Let us find the culprit and bleed them dry. And this, of course, is a natural bedfellow to the entitlement mentality that regularly pops up in such diatribes.”
“And these lies have been central in the undoing of our society in general. The whole fiscal/employment/social/fascist machine runs on these destructive mechanisms.”
“For most of us, we just want to figure out how to keep what we have and build upon it. With the middle class slipping into poverty, it’s increasingly difficult to gain access to affordable and truly helpful financial advice. How can a guy who makes $500 a week really build a nest egg? Obviously, he can’t start with a $1,500 newsletter.”
“But if someone would educate him, give him the tools to be able to see things as they are and recognize opportunity, perhaps he could begin to build up his holdings. If someone pointed him to a means of turning his tiny $1,000 savings into $1,100, $1,200, $2,000, etc., over a period of time, then such a person would be providing an invaluable service to men who are willing to work, but struggling to make ends meet while doing so.”
“And obviously, such a plan would need to recognize that debt is killing them just as assuredly as their presumptions at living beyond their means. Balancing all of the above would certainly lead to greater prosperity for our middle class.”
“Maybe I missed my guess. If so, perhaps your next project could focus on some of these challenges. And while you’re at it, I could really use a job.”
The 5: Project X is not a reference to one generation or another… but on nearly everything else, you’ve nailed it. As has this reader…
“The generation behind the boomers? Granted the hole is getting pretty deep for them, but frankly, I can’t advise how to stop the digging. But what I can do (as a parent) is try to teach and prepare them and open their eyes to the problem they will face. They will pay, we know that.”
“If you’re reading The 5, it is about individuals. It discusses the political and the macro economic picture, but it is about protecting and building individual wealth.”
“So get off the bandwagon of the Social Security Ponzi scheme. If you can cure it, please do it. Otherwise, start trying to teach your young ones what is going on and let them prepare for their future despite the government.”
“Project X sounds like it addresses this issue, from the individual’s standpoint, and yes, I am a greedy bastard, as I would like to maintain my standard of living and my children’s standards of living in the future. And regardless of all the gloom and doom, I plan to enjoy the late years of my life preparing and teaching my children to prepare.”
“And that is why I subscribe and will continue to subscribe, and not let stupid individual opinions of selected issues interfere with what is being presented in these pages.
“Of course, it is always fun to see the outrageous opinions that spur such discussions. Keeps things lively.”
The 5: It’s a tall order, but that’s very much what Project X sets out to do. Addison alluded to it in his “breathless rant” email you received yesterday: “What we’re building promises to revolutionize the way you see the world… and help you build lasting wealth for you and your family.”
Granted, it’s still a work in progress: “Some of its components,” Addison went on, “haven’t even been designed because the vision we’ve set out for the team of editors, producers, photographers, programmers and designers has yet to prove possible. If you’re an engineer… you know how this works.”
We’re eager to bring you additional updates about Project X. But that won’t be possible after midnight tonight… unless you sign up now to continue to receive them.
You see, an integral part of Project X is to bring together like-minded individuals who express the very concerns you’ve read about today… and the commitment to take matters into their own hands.
So after tonight, we’re limiting Project X only to those people who’ve taken the step to sign up. It’s a small step. It takes less than 30 seconds. There’s no obligation that comes with doing so. But if you want the chance to be a part of something extraordinary, it’s a step you need to take. Here’s where to go.
“I have lost control of my future,” writes one of the 7,147 people who’ve submitted Project X survey responses in the last 10 days. “I am trapped in a decaying economy and controlled by a government that has betrayed her citizens. All because of greed and illiteracy.”
The 5: We understand the sentiment. But if you think you’ve lost control, then you’ve lost the battle. Project X is about taking control, Washington and Wall Street be damned. If that sounds overwhelming, that’s OK… but Project X might not be for you.
If you are ready to take control, we urge you to take the next step… and sign up here. Unless you do so, you may never find out what Project X is all about.
Regards,
Dave Gonigam
The 5 Min. Forecast
P.S. “I fear inevitable inflation as a result of printing money,” reader M.R. writes, “will erode the value of my retirement plans.”
He’s another of the 7,147 people who’ve submitted Project X survey responses in the last 10 days. Others are more concerned about a less-stealthy form of confiscation.
“I don’t believe in America anymore,” reader C.G. says bluntly. “They will come for what I have worked for and saved and they will call me rich.”
We haven’t heard from only retirees, either. “The massive debt and lack of action by our federal government,” reader B.S. writes, “is leading us into decades of declining employment and depression. I honestly don’t know if I will ever be able to retire.”
Feel a little less lonely now? You’re definitely part of a substantial crowd whose voice isn’t heard in ordinary media channels. The response prompted Addison to record this short message…
The clock runs out at midnight tonight. If you want to sign up for Project X, please do so now. This will be the final communication about Project X that you’ll see in The 5.