[Feisbook Control]

(10-24-2014 05:50 PM)DjembaDjemba Wrote:  

The student debt bubble is more of an American problem, the other Anglo states (UK, Canada, not sure about OZ and NZ) subsidize higher education. Instead of students being on the hook down the line, the money is fronted outright by the government. It's a better system than what the US has.

We still pay for higher-ed here, but it's something to the tune of $2000 per semester.

Djemba: That's just rearranging the deck chairs on the Titanic though. If the degree is not worth anything, then it's not worth anything. The cost is still there and someone still pays for it. In some ways, it's even worse in the system you're talking about because at least in the U.S. system, there's some form of moral hazard that might eventually put people off saddling themselves with so much debt. In the system you're talking about, there is a drain on society. Either the students eventually end up paying for those degrees through their own taxes, or more likely, some other poor schmuck has to carry them through his. In the meantime, younger people who might have seen older people saddled with debt and reassess if such a thing is good or not continue to think that there is actually such a thing as a free lunch.

Troll: It may well come, but if it does, it will be an unmitigated disaster. It is a fundamental biological drive to want to provide resources to one's offspring to help them get ahead of the competition.

In the short term, some people would migrate or send their money offshore. This has been played out time and time again the world over where people in unstable countries in the developing world have sought refuge for themselves, or at least their money, in places perceived to be stable and governed by sensible laws. Usually, this has been places such as the US, UK, Switzerland, but there have been regional players also, such as Hong Kong or Singapore. I believe Dubai/UAE is trying to position itself in a similar way. Another option is for people to hoard precious metals.

Most people wouldn't be that smart in the short term in the West simply because they have no real direct experience with such circumstances, and because they still labour under the illusion that their countries are somehow different to what they perceive as third world governments. There are the first inklings of real paranoia, distrust and disillusionment, but most people still believe things are pretty good.

However, they would respond to the perverse incentives created by inheritance laws in another way. Obviously, there'd be no reason at all to try to store wealth. People would not defer consumption in order to build businesses or invest in those of others. In the (very) short term, it would be great. The government would point to all of the consumption occurring in the economy as wonderful news, evidence of the brilliance of its plans, and might even expand its reach. In the medium to long term, however, all of the momentum in the economy would change into stagnation, and then decline. The economy would become sclerotic, captured either by the government or its cronies. There would not be innovation, and the country, its institutions and its companies would become increasingly unable to compete economically on the world stage. Life would get harder. As this happened, all the usual effects would happen: growth in the black market, capital flight (despite attempts at capital controls), under the table use of other nations' currencies or smuggling of precious metals, and eventually emigration to greener pastures. At the same time, the government would double down on its programmes, and would become increasingly draconian in order to try to get people to comply. That would be a feedback loop that would eventually spiral out of control to who knows what: sabre rattling at neighbours, revolution, opportunistic invasion by another nation?

Every dog has its day, and every empire declines. As it turns its back on what led to its rise, America will decline like any other nation in history.