While the stock market is doing well since the financial crisis, the U.S. economy is having a tough time. According to Bloomberg, the U.S. economy is on track to miss the 3% GDP growth mark for an entire decade since 2005.
The economy would have to grow at a 4.75-percent rate during the final two quarters of 2015 to reach 3 percent for the year. A recent Bloomberg survey of 70 economists found that the median forecast for the remainder of the year was for GDP of 3 percent.
The new figures all but assure GDP for the year yet again will fail to reach the 3-percent mark, the pace economists generally say is needed in order for the average American to really feel it.
The article pointed out three reasons why GDP growth has been stagnant: 1/The recession was really bad; 2/The economy is less efficient and 3/The nation is losing its entrepreneurial drive. However, these reasons seem unpersuasive because we are leading the globe in innovation with Silicon Valley attracting the best talents. I think the main reasons for low growth are 1/Slowdown and recession in major markets like Japan, China and Europe and 2/The growing national debt and student loan that need to be rebalanced.
Thoughts?
There are a ton of reasons. Here are a few I think are hurting us. I have them numbered, but I am not ranking them. Number one people are too entitled, and they expect to be handed awesome jobs immediately. They choose to stay with mom and dad over taking a shitty starter job. The participation trophy argument basically. Number two relates to 1, wages are low because companies are trying to increase shareholder value. Starting wages are barely enough to cover cost of living for jobs for normal people. This doesn't allow for a ton of excess spending especially when combined with student loans. Number 3, it costs a lot of money to improve yourself even if you want to. You want to learn coding? Pay 12 grand to do the iron yard. Want to take the CFA? that'll be about 600-700 for the prep plus another grand or so to take the test. Number 4, we allow people to take debt for worthless majors such as criminal justice and art. Not to mention that you might literally take 100s of thousands for that art degree depending on where you go. Number 5, we aren't honest about our system and pushing people in to majors they need to go in to make money. For example, if you go to a state school that isn't highly ranked, you probably need to be in a STEM major to make a return on your investment. If you're at Harvard then you can major in whatever the fuck you want. Number 6, I would agree with the slow down of entrepreneurial drive. Sure, we have a ton of innovation in the tech field. But what is it really getting us? I talked to an FA at my last internship, and she had a really unique perspective. She said that the invention of cell-phones and computer changed the way everyone did business. This amounted to a tangible reason as to why the stock market would increase in value. Without another shift like that, then any increase in stock market value is basically just an adjustment for inflation. It's been 3 or 4 years since we discussed that, so I am not positive I captured everything.
Why take 2005-2015 period and compare the boom part of the cycle against recovery? Then I don't see how GROWING national and student debt are detrimental to economic growth. If anything, extra borrowing & spending should boost the numbers now (but possibly at the expense of growth in the future?).
Or maybe the demographics trend is putting pressure on growth.
sry for large pix
We are at 1trillion or so in student debt. That debt comes payable 6 months after graduation for every college student. That means most of that is payable by students right now because the people in college currently aren't all that likely to hold a majority of that debt because college is limited to freshman through seniors so a crop of a span of about 4 years. That means all of the rest of those students have their economic decisions affected by their debt to the tune of the (vast) majority of 1 trillion dollars. That's 1 trillion that won't be spent into our economy. As someone with student debt, I'm a bit biased as to its affects, but I think it is a crushing force.
Disagree. A $30k loan at the highest student loan rate in IBR has the same outlay as a $10k car financed at 48 months and 3% APR. IBR brings payments to the min of 10% of disposable income or amortizing payment over 10 years. This isn't crushing. In fact, the cost of fully amortize a Stafford Loan over the IBR period is $6.94/month per every $1k in debt.
Averages for the latest cohort are around $28k in debt with 70% of graduates borrowing. Most of the hyperbole around SL debt is Acela corridor nonsense based on personal or F&F anecdotes, not data.
Realistically, the weight of the debt on a person depends on their salary. One million dollars in debt won't hurt someone who makes one million a year. But 10000 in debt can crush someone who makes 16000 a year. Also, I don't think the averages debt levels hAve caught up to the increase of college recently.
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