Economic bubbles are a logical by-product of an epoch in which capitalists are always right. In conventional, supply-side economics, the one and only possible explanation for any problem with the operation of the overall economy is the claim that the rich still don’t have enough money to unleash the economic boom they and their lackeys are always promising.
As they get even more money, the fact remains that, despite the constant claims to the contrary, a shortage of capital has never been the source of any economic crisis within corporate capitalism, a system that generates chronic problems of effective demand, not of too little money at the top.
As the supply of buyers for potential new products remains stagnant or shrinks, the growing over-supply of investment-seeking wealth at the top of the economic pyramid has no productive place to go. Hence, it flows into one or another scheme for making money with little or no investment in hiring new workers. Money chases money, and bubbles, our age’s cutesy term for ultimately baseless financial rackets, inflate and eventually pop.
The latest bubble? Student loans.
Yesterday’s New York Times reported:
Student loan debt outpaced credit card debt for the first time last year and is likely to top a trillion dollars this year as more students go to college and a growing share borrow money to do so.
Two-thirds of bachelor’s degree recipients graduated with debt in 2008, compared with less than half in 1993. Last year, graduates who took out loans left college with an average of $24,000 in debt. Default rates are rising, especially among those who attended for-profit colleges.
Like all other bubbles, the whole thing is being pushed as a magical answer to “our” economy’s worsening failure to come anywhere close to decently employing everybody who wants a job, as if getting a college degree (or being trained to fix windmills or empty bedpans) in itself creates a new job. Now, that’s bubblicious.
It will be interesting to see if the next decade’s unemployed college grads pick up enough knowledge and courage along with their debt burdens to actually step up and challenge the decrepit overclass still running this stumbling, crumbling society.