My wife just read me a story about how many of our callowed youth are borrowing against their student loans to buy Bitcoins. Now, it alarms me that the administration of this program is so loosey goosey that such irresponsible behavior can occur. (Loans under this program now total $1.3 trillion and growing rapidly.)
This student loan program, unless it is quickly reined in, is an ideal candidate to cause our next financial crisis ... and our Federal Reserve System will not have the same latitude to deal with it now as it had in 2008.
["Captain of the Titanic, there is a very big iceberg ahead ..."]
Why is buying Bitcoins more irresponsible than investing in oil futures? Clearly these youth have watched Texas Hold 'Em on TV. Gpoing all-in, some of them will sell so profitably that they pay back their loans, plus buy a nice house and car. Some will get hosed.
ReplyDeleteAs to being a bubble, this is different from assets and commodities. There is no 'there' there. What does 'underwater' mean in the context of Bitcoin?
Most will be hosed. Borrowing money to buy any risky asset is insane ... particularly by tyros. Even the pros (Bear Sterns, Lehman Bros.) screw up. Those who are loaning money for school should insure that it is being used for that.
DeleteThe students should invest in coal, oil, gas, and REITs.
DeleteBTW, the student loan program is already a financial crisis. Why are tuitions so high, so unsubsidized, and loaned against at 5-7% while the fed funds rate less than 2% ? Nice vig...
ReplyDeleteI suspect rates are so high because of elevated default rates. Guess what default and vig rates are going to be when the fed funds rate is 6%?
DeleteIf the loans are fixed rate, they are a good hedge against inflation. If they invested in gold, would they be smarter? Or are you saying that they should just suck it up and pay down debt on an unmarketable, non- depreciable asset like education? Or maybe if they cannot fund their education out of pocket, that they should look at trade school to do food services, welding, automotive
ReplyDeletemaintenance. Or just wait tables, drive trucks, do construction tasks.... just accept their station in life. Or wish they were in a country that helps intelligent, ambitious citizens have a path to contributing all they can to the common wealth.
The only investment that educational loans should be made in ... Is education. Anything else, including Spring break trips, is fraudulent.
DeleteSounds like you are ready to take on home equity loans 'specifically for home improvements' like a dirt bike, a Hawaiian vacation, a set of mag wheels that are so effin cool, and liposuction.
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