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Editor’s Note: It’s graduation time in America again. So in today’s Daily, we feature a commencement address every student deserves to hear. It’s by Mark’s friend and business partner (and founder of Agora Inc.), Bill Bonner. Be sure to pass it on to every graduate you know… |
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By Bill Bonner, editor, The Bill Bonner Letter: Last year at about this time, we waited for the phone to ring.
Not calling were thousands of universities in need of someone to give the annual commencement speech.
Every year, we prepare an appropriate graduation speech. And every year, with the unanimous accord of America’s institutions of higher learning, we do not
give it.
With six children who have gone to college, we have heard more than our share of these speeches. They are almost always dull, embarrassing, earnest, and
trivial.
The University of Virginia had a TV newscaster. St. John’s College had socialist philosopher Cornel West.
We can’t remember the others—most likely because they had nothing memorable to say.
Class of 2015: The Most Indebted in History
It is unlikely that we would ever be called upon to give a speech to graduating students. But if we were, we would say the following: Congratulations,
class of 2015—you chumps!
The Wall Street Journal reports that you are the most indebted generation in history.
The average graduate with student debt has a little more than $35,000 of it. The whole bill for student debt this year is expected to reach $68 billion—a
tenfold increase over the last 20 years.
That may seem like a lot of money. And big numbers get reported in the headlines along with the celebrity news.
But student debt is like the foul smell of gangrene: It testifies to a deeper, inner corruption.
We are now 25 centuries after Pericles and Socrates. But today, the typical university has no more interest in learning than a rat terrier or a
congressman.
Our government is a disgrace to honest democracy, if there were such a thing; it is a scam and a deceit.
Rich, powerful special interests wager billions of dollars on hollow puppet candidates, knowing their investment will pay off hugely if they are
successful.
Our money system is an elaborate fraud, too. It steals from laborers, merchants, and artisans and rewards speculators, insiders, and layabouts. The entire
system is sick and dysfunctional.
But you probably have no idea what we’re talking about, because you’ve just spent the last four years of your life—and paid a fortune—so you could avoid
learning about it.
Victims of the System
If you’ve studied the sciences or engineering (especially petroleum engineering, according to a study done by Georgetown University), maybe you’ll be able
to earn enough to pay back your student debt.
But most of you have wasted your money with degrees in subjects that won’t help you understand the real world we live in or earn an extra dime in it.
Many of you have spent the best years of your lives… and borrowed a fortune… to learn things that aren’t true.
History, economics, government, politics—for every useful and truthful insight you may have learned, there are probably 100 more that were buried under
claptrap.
There’s a big difference between the real world and the world of a college student. The real world is grittier, harder to understand, more cynical than you
can imagine.
And it’s big.
The world of academia is much smaller. There are the well-defined limits of the school… the limits of the work… limits on student conduct.
There are also tests—and they are limited, too. Generally, you know when the tests are coming… what they will cover… and what you have to do to succeed
at them.
In real life, if there are any limits, you don’t know where they are. You never know when you’ll be tested. Often, you can be in the middle of a major test
and not know it. You don’t know what you need to do to pass, either.
And you surely don’t know this: You are being tested right now. You are now confronted with a problem you probably have never thought about. But it’s one
that could ruin… or at least greatly impair… your entire lives.
You are victims of a system set up before you were born. The benefits of that system, such as they are, go to your parents and grandparents.
But you have to pay for it.
You’ll find it hard to keep up with the payments. As a result, it is unlikely you will be able to enjoy the material wealth and freedom of action that we,
your parents, took for granted.
A Lifetime of Debts
You may know this already… but as economist Laurence Kotlikoff told the Senate Budget Committee in February, when properly accounted for, Washington has
racked up more than $210 trillion of debt that you will have to pay… and pay… and pay for all your lives.
That is the money that will go to fund programs that were voted on before you were born.
It will also pay for retirees and sick people… people who your government sent to Vietnam, Iraq, and Afghanistan to get their legs blown off… people
who got sweet union contracts from their city and state governments… and people who have learned to game the system.
None of these bills are for things that you had any say in. Many of them were a waste of money from the get-go. Some were a curse. But—good or bad—you’re
supposed to pay for them.
And that’s just the first toke…
Now, at least you are getting free of the education industry. Now, you can go out beyond the campus and take a deep breath in the real world.
But watch out, you may choke on the foul air…
Heirs to Claptrap
You are heirs to claptrap, nonsense, bogus theories, and trillions of dollars in debt.
The systems, programs, and institutions your parents set up are mostly worthless scams. Worse, they produce outcomes contrary to their stated goals.
Health care programs do not make them healthy; they make them dependent on the drug industry.
Defense-industry spending doesn’t make us safer; it funds drones, bumbling interventions, and assassinations… and it creates more foreign enemies.
We end up not only poorer, but also less secure.
All of those assertions take more time to explain and prove than we have time for now. But here’s a little example that you will appreciate…
25 Years of Poverty
Under President Lyndon Johnson, the government set up the Federal Direct Student Loan Program to provide “low-interest loans” (back then, “low” meant 8%)
to students.
Private lenders made the loans, but they received the full backing of the feds.
The idea was to help you afford higher education… and earn larger salaries as a result. And with your increased earnings, you were supposed to be able to
pay off the loan.
But at more than 11% of outstanding debt, the Student Loan Program now has the highest delinquency rate of all forms of household debt (mortgage loans,
auto loans, credit cards).
And it will probably go much higher… as students take on more debt. Total outstanding student debt is expected to bubble up to $3.3 trillion by 2025.
What do you do if you can’t pay?
Well, the feds have a solution for you. The trouble is, it turns you into the very thing the program was meant to avoid.
Here’s how it works…
As long as your income is low, you are allowed to make small, token payments every month. Keep this up for 300 payments, and your debt is considered
satisfied, no matter how little you paid.
In other words, the Student Loan Program encourages you to live in poverty for a quarter of a century to get rid of your student debt.
Most likely, this will be easy for you to do anyway.
First, because most college degrees do little to make you more valuable to employers.
Second, because your parents’ rigging of the economy will make it difficult to make any financial progress anyway.
The median household income—after you account for inflation—has been falling since the late 1990s. And good jobs are hard to get. There are fewer
“breadwinner” jobs today in America than there were in 1999.
And you can forget about starting your own business. The rate of new startups is collapsing. (The U.S. ranks 46th on the World Bank’s list of the easiest
countries in which to start a business.)
You can thank your parents for that, too. The system is designed to protect them, their Social Security benefits, their health care, their stock market
portfolios, and their businesses.
Protect them against what?
Against you!
You are the future. You are the competition. You are the ones who should want to shake things up and tear down the walls of bureaucracy, taxes, paperwork,
and regulation that make it so difficult for you to start new businesses, get good jobs, and build real wealth.
You should be talking revolution—overthrowing your parents’ multitrillion-dollar debts and pulling out of their wars on poverty, illiteracy, Iraqis,
Afghans… you name it.
You need to stop these silly, pointless, and expensive programs so you can have the resources to pay for your own programs and launch your own stupid wars.
You need to get rid of your parents’ zombies—the millions of unproductive people who get money from the government—so you can afford your own families…
your own pet projects… and zombies of your own.
A Suicidal System of Credit
You need to stop your parents’ suicidal credit-based money system, too.
You don’t know about this, do you?
Your professors of government, politics, economics, and finance didn’t mention it, did they?
Well, the system is corrupt and self-destructive. It works only by increasing the amount of debt in the society—including student debt.
And it works only until the debt bubble gets so big it blows up.
But there’s a logic to it… a sinister logic that turns you into chumps for older generations.
Spending on credit favors the existing owners of capital… and people who have existing claims on the government money.
Let me explain…
When the government borrows money, it gives the money to a zombie to spend or it spends it directly.
Usually, the money goes to an older person—your parents or grandparents—in some form of social welfare subsidy, pension, job, contract, or support program.
When they spend the money, it goes into the coffers of corporations. This increases profits… and share prices.
Who owns those corporations?
Do you?
You don’t?
Then who does?
Your parents and grandparents benefit again. They are the owners of the nation’s financial assets. By increasing credit, they shift real wealth from the
future to the present… and from you to them.
This is the money you haven’t earned yet.
I’ll spell it out for you: The government borrows a dollar. It gives the dollar to one of its pet zombies. (It could be a health researcher, a drug addict,
or somebody who makes bombs.)
The money goes—one way or another—to a corporation, which registers it as a sale.
If it has a 10% profit margin, $0.10 is recorded as a profit. If it sells at a price-to-earnings ratio of 20 times, its stock price goes up $2. This makes
the owner of the stock—it could be one of your parents—$2 richer. (I’m oversimplifying… but you get the point.)
But the government now owes $1 more. And who’s going to pay it?
You are!
Your parents and grandparents are retiring… and collecting their Social Security and health care benefits. They think they will be able to sell their
stocks, too… and their houses… and have even more money to spend.
Time to Wipe the Slate Clean
Now, it’s up to you…
You need to get a job so you can pay for their health care benefits. You need to pay your taxes so they can keep their wars going. You need to buy a house,
too, so they can move to Florida and retire.
You need to vote for their candidates… work for their companies… and pay their bills.
This is the test you face. You are arriving in the economy at the tail end of a 60-year credit expansion.
Debt has boomed. The economy has boomed. We, your parents, enjoyed an economic expansion that began when we were born and continued, with only short
interruptions, until we retired.
We got out of school with little or no student loans. We could start businesses with fewer impediments. We could borrow money to fund our businesses and our
lives. We could hire, fire, switch jobs… buy and sell houses… move from place to place.
We were freer—and richer—than you will be… unless you can wipe the slate clean of our debts… our foolish wars and dumbbell programs… and our attempts
to hold back the future and prevent you from living rich, full, free lives of your own.
If you don’t rise to this challenge, you will inherit our bills, our regulations, our restrictions, our obligations, our delusions, our prejudices, and our
vanities.
You will also inherit a financial crisis—worse than the crisis of 2008—and a long and grinding economic slump.
The debt expansion of the last 60 years will turn into a dreary debt contraction, possibly dragging the economy into another Great Depression.
Either you find a way to shuck off, default on, or inflate away your parents’ debts… or you’ll stagger under the weight of them for the rest of your
lives.
Either you break free from the jackass things your parents have done to you… or you deserve what you get.
Congratulations, chumps.
Regards,
Bill
Reeves’ Note: Bill just did something he has never done before… He released shocking research detailing how the debtor America will come to an end. He says the future of the credit system will come down to one sudden, disturbing event. Be sure to read Bill’s presentation right here.