US CAPITALIST MODEL - Middle-class the Indebted Working Class

Working-class, Middle-class, Debtor-class, Financial-class, Socialising Capitalist Risk (Privatising Profits), Columbia University, New York University, FIRE Economy, Housing Economy, Rentier Class, IN SUMMARY http://www.counterpunch.org/2017/06/02/are-students-a-class/ June 2, 2017 Are Students a Class? by Michael Hudson Students usually don’t think of themselves as a class. They seem “pre-class,” because they have not yet entered the labor force. They can only hope to become part of the middle class after they graduate. And that means becoming a wage earner – what impolitely is called the working class. But as soon as they take out a student debt, they become part of the economy. They are in this sense a debtor class. But to be a debtor, one needs a means to pay – and the student’s means to pay is out of the wages and salaries they may earn after they graduate. And after all, the reason most students get an education is so that they can qualify for a middle-class job. The middle class in America consists of the widening sector of the working class that qualifies for bank loans – not merely usurious short-term payday loans, but a lifetime of debt. So the middle class today is a debtor class. slow growth of U.S. employment in the post-2008 doldrums (the “permanent Obama economy” in which only the banks were bailed out, not the economy) the financial class views the role industry and the economy at large / as being to pay its employees enough / so that they can take on an exponentially rising volume of debt interest and fees (late fees and penalties now yield credit card companies more than they receive in interest charges) = soaring, leaving the economy of goods and services languishing money and banking textbooks say that all interest (and fees) are a compensation for risk / any banker who actually takes a risk is quickly fired / banks don’t take risks / that’s what the governments are for / ie socializing the risk, privatizing the profits banks anticipating: U.S. economy may be unable to recover under the weight of the junk mortgages and other bad debts / that the Obama admin left on the books in 2008 banks therefore insisted: > that the government guarantee all student debt also insisted that govt. guarantees the financial gold-mine buried in such indebtedness ie. late fees that accumulate FICTITIOUS 'AS IF' ECONOMY - FINANCIAL ECONOMY whether students actually succeed in becoming wage-earners or not > the banks will receive payments in today’s emerging fictitious “as if” economy > govt. will pay the banks “as if” there is actually a recovery if there were to be a recovery, then it would mean that the banks were taking a risk – a big enough risk to justify the high interest rates charge on student loans = simply a replay of what banks have negotiated for real estate mortgage lending students who do succeed in getting a job hope to start a family, or at least joining the middle class most typical criterion of middle-class life in today’s world (apart from having a college education) is to own a home / but almost nobody can buy a home without getting a mortgage / price of such a mortgage is to pay up to 43 percent of one’s income for 30 years / ie. one’s prospective working life in today’s as-if world that assumes full employment, not just a gig economy banks know how unlikely it is that workers actually will be able to 1. earn enough to carry the costs of their education 2. along with cost of real estate debt - costs of housing are so high - price of education is so high - amount of debt workers must pay off top of every paycheck is so high *US labour is priced out of world markets (except for military hardware sold to Saudis & other US protectorates) So the banks insist that the government pretends that housing as well as education loans not involve any risk for bankers banks insist that govt protects housing as well as education loans from any risk for bankers Federal Housing Authority / guarantees mortgages that absorb up to 43% of the applicant's home income is not growing / job loss is formerly middle-class labor is being downsized to minimum-wage labor (MacDonald’s and other fast foods) or “gig” labor (Uber) the fees mount up rapidly when there are defaults – all covered by the govt AS IF it is this compensates the banks for risks that the govt. itself bears From debt peons (footsoldiers / menials) to wage slaves peon fm. Spanish peón, fm. Medieval L. pedōn-, foot-soldier college education is a precondition for joining the working class (except for billionaire dropouts) / the middle class is a debtor class / so deep in debt that once they manage to get a job / have no leeway to go on strike / protest against bad working conditions = what Alan Greenspan described as the “traumatized worker effect” of debt Students = the new NINJAs: No Income, No Jobs, No Assets / parents have assets, and these are now being grabbed, even from retirees govt. has 1. assets – the power to tax (mainly labor these days) 2. even better – the power to simply print money (mainly Quantitative Easing to try and re-inflate housing, stock and bond prices these days) students hope to become independent of their parents > burdened by debt + facing a tough job market > left even more dependent > why so many have to keep living at home > as students do get a job and become independent > they remain dependent on the banks > to pay the banks, they must be even more abjectly dependent on their employers view matters from the vantage point of bankers bankers have $1.3 trillion in student loan claims - college tuitions are soaring USA - even more than health care (financialised health care, not socialised health care) - banks often end up with more education expense than the colleges - b/c any interest rate is a doubling time at student loan rates of, say, 7 percent > interest payments double the original loan value in just 10 years Rule of 72 provides an easy way to calculate doubling times of interest-bearing debt / divide 72 by the interest rate, and you get the doubling time fatal symbiosis has emerged between banking and higher education in USA / bankers sit on the boards of the leading universities / not simply by buying their way in as donors / b/c banks finance the TRANSFORMATION of universities into real estate companies universities major real estate holders in New York City: - Columbia University - New York University - like the churches, they pay no property or income tax - as considered to play a vital social role - from the bankers’ vantage point, their role is to provide a market for debt - student debt magnitude now outstrips even that of credit card debt - sweetheart deal with New York University - made by Citibank - New York University, steers incoming students to it to finance their studies with loans - school can charge as much for an education as banks are willing to lend students - banks are willing to lend as much as govts will guarantee - bankers on the school boards endorse bloated costs of education - knowing: however much more universities make, the bankers will receive just as much in interest and penalties FIRE ECONOMY Finance, Insurance, and Real Estate sectors criticism exists on the shifting of the U.S. economy to a FIRE economy at the expense of a manufacturing and export-based economy United States has eschewed productive elements of its economy in favor of consumption to its long term detriment Particularly after 1973 … pundits of the status quo hailed the proliferation of the "FIRE" (finance, insurance, real estate) economy as the coming of a new "service" "post-industrial" economy that would replace the old "smokestack" economy and the jobs lost through plant closings, restructuring, and down-sizing https://en.wikipedia.org/wiki/FIRE_economy FIRE SECTOR OWNED MAINLY BY ONE PERCENT same thing with housing - whatever owner of a home receives when he sells it - bank will make an even larger sum of money on the INTEREST charges on the mortgage = why all the growth in the U.S. economy is going to the FIRE sector, owned mainly by the One Percent UNDER these terms / a “more educated society” does not mean a more employable labor force / it means a less employable society b/e - more and more wage and consumer income is used not to buy goods and services, not to eat out in restaurants or buy the products of labor / but to pay the financial sector and its allied rentier class rentier - person who lives on income from property or securities Rentier capitalism economic practices of monopolization of access to any kind of property (physical, financial, intellectual, etc.) / and gaining significant amounts of profit without contribution to society more educated society under these rules = simply ... - a more indebted society - an economy succumbing to debt deflation, austerity and unemployment (except at minimum-wage levels) for half a century Americans imagined themselves getting richer and richer / by going into debt to buy their own homes and educate their children riches have turned out to be riches for the banks, bondholders and other creditors / not for the debtors What used to be applauded as “the middle class” turns out to be simply an indebted working class. http://www.counterpunch.org/2017/06/02/are-students-a-class/ This was a great article. It's shocking what the banks are permitted to get away with under a system of private capitalism (versus state capitalism / socialism) - ripping off the taxpayer in every way possible, to enrich the few at the top.