An entire generation is saddled with unsustainable debt
President Joe Biden
No, it is not an entire generation. The debt excludes those who paid their loans or chose not to attend college adding more debt. But the solution of simply writing off $300- $570 Billion is worse. He did this by Executive Order, without any Congressional Vote. No doubt it would have been a party line deal and he has the votes, but that does not make it a good idea or legal.
Universities have added some 9,000 masters degree programs over the last decade. Many are of questionable value. Studies show that perhaps half are not worth their purchase price.
Biden’s Chief of Staff Ron Klain suggests this will be popular with younger voters, yeah, no kidding. It will also be popular with other Democrat voters. Polls show Trump to be unpopular with college educated (make that degreed) women. And University Administrations are heavily Democrat. So here are the problems.
- This procedure does not begin until after the mid-term election so chalk this up to a finger in the wind experiment.
- If perceived to bring in more votes, bet on Democrats trying to outbid one another with giveaways in future elections.
- This adds to not reduces future deficits.
- This is a tax on those who did not attend college or paid off their loans.
But the worst feature, is the University Tuition/Fee Expansion Order. Universities have no liability for the indebted students unable to find jobs. Sensing the start of a forgiveness program, administrators will have no compunction about raising fees, adding staff, and creating even more marginal programs. And with a wink and nod, Financial Assistance Centers will suggest that the loans will be forgiven anyway, so just sign on the dotted line.
Meanwhile energy prices have firmed. Crude oil is back above $90. And crude looks to be putting in a low. Natural gas prices have soared above $9. Energy shares rallied boosting the indexes on Wednesday. Expect more energy price rally into the fall. But Mr. Putin has a problem with his threats to decrease or cut off the EU from natural gas.
The gas wells need to stay active. He has no alternate market, and shutting supply also shuts down his income. Putting the gas wells on hold may well cause liquid accumulation making a re-start difficult. And after years of convincing customers Russia is a reliable supplier, well the EU is already scrambling to obtain LNG elsewhere. Even Germany is looking to coal and not shutting its remaining nuclear plant.
Stocks in general should advance in weak rebound. The real test will begin when that rally ends, if it has not already.
