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HIGHER EDUCATION BUBBLE UPDATE: Pity the poor avocado-eating graduates: University-educated millennials have absorbed elite values but will never enjoy the lifestyle.

Countless articles have rehearsed the class insecurities of the “left behind” Brexiters. Generally these unfortunates are depicted fulminating over pasties and ale in shabby market towns and grim post-industrial cities outside the London area. The object of their antipathy is the shiny “elite”, plugged into a promise-filled, multicultural urban life and the knowledge economy, seemingly buoyant in the new, frictionless modern world.

Leaving aside its substantive, real-world pros and cons, Europhilia has become a mark of devotion to the culture and worldview associated with this “elite” and the modern world it navigates. It is a value set strongly correlated with tertiary education and that has come to be called “openness”. . . .

Meanwhile, the boom in openness-promoting tertiary education produced not so much a boom in graduate jobs as inflation in the qualification levels required to do the jobs we already had. This has left many young people struggling to service a mountain of debt on salaries that are never likely to show much of the “graduate premium” they were promised.

Today, thanks in part to the “open” economy whose values form the foundation of the “cultural Remain” identity, the cost of living — and especially home ownership — has rocketed. Simple aspirations that were within the reach of the working class in the 20th century are an unattainable dream today for millions of young people far higher up the sociocultural pile. And yet those young graduates have all, in the course of moving away to get their degree, absorbed the “open” value set now explicitly taught in tertiary education.

The result is an Everywhere precariat, that has absorbed the values of a world that has little to offer it in terms of concrete benefits, and resolves this conflict by renting the heavily-subsidised and internet-enabled perks of a smarter lifestyle than it can afford to buy. Where once rentals might have just been housing and cars, today that can even include clothing.

Related: Kenneth Anderson: The Fragmenting of the New Class Elites, or, Downward Mobility.

n social theory, OWS is best understood not as a populist movement against the bankers, but instead as the breakdown of the New Class into its two increasingly disconnected parts. The upper tier, the bankers-government bankers-super credentialed elites. But also the lower tier, those who saw themselves entitled to a white collar job in the Virtue Industries of government and non-profits – the helping professions, the culture industry, the virtueocracies, the industries of therapeutic social control, as Christopher Lasch pointed out in his final book, The Revolt of the Elites.

The two tiers of the New Class have always had different sources of rents, however. For the upper tier, since 1990, it has come through its ability to take the benefits of generations of US social investment in education and sell that expertise across global markets – leveraging expertise and access to capital and technological markets in the 1990s to places in Asia and the former communist world in desperate need of it. As Lasch said, the revolt and flight of the elites, to marketize themselves globally as free agents – to take the social capital derived over many generations by American society, and to go live in the jet stream and extract returns on a global scale for that expertise. But that expertise is now largely commodified – to paraphrase David Swenson on financial engineering, that kind of universal expertise is commodified, cheaply available, and no longer commands much premium. As those returns have come under pressure, the Global New Class has come home, looking to command premiums through privileged access to the public-private divide – access most visible at the moment as virtuous new technology projects that turn out to be mere crony capitalism.

The lower tier is in a different situation and always has been. It is characterized by status-income disequilibrium, to borrow from David Brooks; it cultivates the sensibilities of the upper tier New Class, but does not have the ability to globalize its rent extraction. The helping professions, the professions of therapeutic authoritarianism (the social workers as well as the public safety workers), the virtuecrats, the regulatory class, etc., have a problem – they mostly service and manage individuals, the client-consumers of the welfare state. Their rents are not leveraged very much, certainly not globally, and are limited to what amounts to an hourly wage. The method of ramping up wages, however, is through public employee unions and their own special ability to access the public-private divide. But, as everyone understands, that model no longer works, because it has overreached and overleveraged, to the point that even the system’s most sympathetic politicians understand that it cannot pay up.

The upper tier is still doing pretty well. But the lower tier of the New Class – the machine by which universities trained young people to become minor regulators and then delivered them into white collar positions on the basis of credentials in history, political science, literature, ethnic and women’s studies – with or without the benefit of law school – has broken down. The supply is uninterrupted, but the demand has dried up. The agony of the students getting dumped at the far end of the supply chain is in large part the OWS. As Above the Law points out, here is “John,” who got out of undergrad, spent a year unemployed and living at home, and is now apparently at University of Vermont law school, with its top ranked environmental law program – John wants to work at a “nonprofit.”

Read the whole thing(s).

YEAH, I’VE HAD A FEELING THE BUBBLE WAS REINFLATING:  Where housing goes, so goes the economy?

MICHAEL WALSH: This is what a housing bubble looks like.

If you think things in San Francisco are ugly now, just wait until the bubble pops.

MEGAN MCARDLE: Toys R Us still sells lots of toys. Here’s why it’s going under.

But wait. If Toys R Us is going to have such a meaningful effect on overall toy sales, doesn’t that suggest that it’s still, you know, selling a lot of toys? Toys aren’t exactly buggy whips — there’s still a market for them (about $20.7 billion worth of sales in 2017). And Toys R Us seems to command a healthy slice of that market. So why can’t it be saved?

Good question. It turns out that, as with many failures, the answer is a combination of “bad planning” and “bad luck.”

Toys R Us has the problems you’d expect from a big-box retailer in the Age of Amazon. It also has some problems of its own making, notably the large amount of debt it took on during a 2005 leveraged buyout. When the company goes down, you can expect to hear a lot of accounts blaming bad management and greedy bankers. And sure, go ahead and blame them. But don’t be too hard on them. But for a little bad timing, they might well have gotten away with it.

We like to tell ourselves morality plays about failure. Someone is either a victim or a villain, and which is which varies by, among other things, ideology. During the financial crisis, for example, you got two starkly different accounts of the people who got caught short by the housing bubble; conservatives saw them as gamblers who deserved what they got, while liberals thought they must have been rooked by Wall Street.

In fact, if you interviewed those folks, you generally found that they were well aware that they couldn’t really afford their house if the payment reset. They just expected to be able to refinance it when prices climbed, or they got a raise, or at worst, to sell if they couldn’t afford the payments. Then prices collapsed, and they ended up in a whole world of trouble.

What they did was undoubtedly risky. But plenty of people took that exact same risk in 2001 — buying more house than they could afford. But those people had no trouble refinancing to more affordable mortgages, because the market was soaring and they had loads of equity. The same risk produced two very different outcomes depending on when people happened to take it.

You’ll see this pattern repeated over and over if you look at failures, from major disasters to corporate collapses: They start with people taking risks that others (or they themselves) had taken before. Only this time, something goes wrong, and that little risk turns into a big problem.

Yes, Nassim Taleb has some things to say about this.

POPPING THE HIGHER EDUCATION BUBBLE:

In the private sector, bubbles, like those in the housing or stock markets, usually lead to “crashes” and sharp falls in prices along with diminished volumes of activity. In higher education, massive government subsidies mute the decline in volume (enrollment) and prevent big price (tuition fee) crashes, but some sort of correction is nonetheless observable.

Lots of signs show the bursting of the bubble is underway. Enrollments are down, lower today than six years ago –a first decline of that duration in modern peacetime American history (including the Great Depression). Tuition increases are moderating and a few colleges are even starting to cut published tuition fees (sticker prices). Even some prestigious schools such as Oberlin College are having financial problems because their freshman class is smaller than anticipated. Student loan delinquency is high and rising, remarkable since the economy has been having the best performance in years, with real output growing at over a three percent annual rate and the unemployment rate at a very low 4.1 percent. . . .

Even more ominous is a clear decline in public support for colleges. This is critical because higher education depends on governments, directly through grants or indirectly through the student financial assistance programs, for a large portion of their financial support. If higher education loses political appeal, declining public financial subsidies will quickly follow. Three surveys in 2017 show many are skeptical of higher education’s contribution. For example, a Pew Research Center survey showed 36 percent of Americans believed higher education had a “negative effect on the way things are going in this country.” A strong majority (58 percent) of Republicans had that opinion, which is no doubt one reason why a number of provisions in the recent Republican-led tax reform bill adversely impact on universities.

There are even potentially some legal clouds on the horizon. Universities are populated by lots of attractive young persons, so the possibility of sexual harassment lawsuits is certainly high. To cite an example, at my own school, Ohio University, an English professor recently lost his job (after a good deal of legal maneuvering), and the university faces potential meaningful damages in civil proceedings brought by female graduate students who allege they were sexually harassed and that university officials did nothing to stop it. Prominent faculty at other schools (for example, Columbia) are facing accusations of misconduct. Also, as evidence mounts that football head injuries have significant long-run adverse effects on human cognitive function, the potential of expensive lawsuits against universities rises dramatically.

Enrollment demand is not likely to surge soon, in large part because of a demographic reality: a stagnant population in the 18 to 24 age group, along with a longer-term problem of general declining population growth.

Nope.

SUSTAINABILITY: Home Prices In 80% Of US Cities Grow Twice Faster Than Wages… And Then There’s Seattle.

A quick look at US housing shows that while wages may be growing at roughly 2.5%, according to the latest Case Shiller data, every single metro area in the US saw home prices grow at a higher rate, while 16 of 20 major U.S. cities experienced home price growth of 5% or higher: double the average wage growth, and something which even the NAR has been complaining about with its chief economist Larry Yun warning that as the disconnect between prices and wages become wider, homes become increasingly unaffordable.

And while this should not come as a surprise, one look at the chart below suggests that something strange is taking place in Seattle, which has either become “Vancouver South” when it comes to Chinese hot money laundering, or there is an unprecedented mini housing bubble in the hipster capital of the world.

The thing about bubbles is, they always pop — which is why many of us warned back in 2007-08 that it would be a mistake to pursue policies that would re-inflate housing prices.

POP: The debt-bubble landmine Obama left for Trump.

When this debt bubble bursts, just as the last one did, the manufacturing jobs Trump wants to save will be in even greater peril.

The country’s last bubble was in housing. Between 2000 and 2007, Americans nearly doubled their mortgage debt, from $5.9 trillion to $10.6 trillion.

This didn’t bother anyone in a position of power. The housing boom created millions of jobs, from construction to home-furnishing, and people felt rich.

What bothered the pols was when the illusion broke.

Since the 2008 crash, neither Democrats nor Republicans have been interested in creating a sturdier economy. Instead, they’ve built up another bubble, this time in the car and SUV industry.

How? The same way: cheap debt. In 2010, Americans owed $809 billion on their cars (after adjusting for inflation). Today, they owe nearly $1.2 trillion, according to the New York Fed.

That’s a 50% increase in an economy which has barely grown since 2009. And as Glenn likes to remind you, anything that can’t go on forever will stop.

CONRAD BLACK: Make-or-Break Moment At Hand for America Over Economic Growth.

GDP growth declined from 4.5% annually in the last six Reagan years, to 3.9% in the last six Clinton years (as the current-account deficit and the housing bubble ballooned), to 2% in the George W. Bush years, to 1% in the Obama years. If per capita GDP had increased in the first 15 years of this new century as it had in the years between 1945 and 2000, families and individuals in the United States would be 20 percent wealthier than they are. In the Reagan years, the federal debt increased to 50% of GDP from 40%. That debt declined a little in the Clinton years, but, in this century, even as a percentage of GDP, it has more than doubled.

These are extremely dangerous trends. The average American is aware of a 15-year flat-lined income in terms of buying power, and the absence of job security despite an official level of unemployment of a very acceptable 4.7%. Most would know, from their own experiences or acquaintances, that the labor force has shrunk, in fact by 15 million people.

There are now over 20 million Americans of prime employment age (25 to 54) who have dropped out and are sustained by the benefit system, especially Medicaid-supplied painkillers, food stamps, and activities that generally escape official compilation. Many of these are among the 750,000 people released each year by the bloated and corrupt prison system, which does all it can to demotivate, stigmatize, and render unemployable those released — and make more likely the return to its embrace. The system in any case always imprisons at least as many new convicts each year.

If the Trump administration does not get a tax bill through that rekindles economic expansion, the entire American project is going to face its greatest crisis since Roosevelt came in to grapple with the Great Depression.

Read the whole thing.

MY USA TODAY COLUMN: The Suicide of Expertise.

In the realm of foreign affairs, which should be of special interest to the people at Foreign Affairs, recent history has been particularly dreadful. Experts failed to foresee the fall of the Soviet Union, failed to deal especially well with that fall when it took place, and then failed to deal with the rise of Islamic terrorism that led to the 9/11 attacks. Post 9/11, experts botched the reconstruction of Iraq, then botched it again with a premature pullout.

On Syria, experts in Barack Obama’s administration produced a policy that led to countless deaths, millions of refugees flooding Europe, a new haven for Islamic terrorists, and the upending of established power relations in the mideast. In Libya, the experts urged a war, waged without the approval of Congress, to topple strongman Moammar Gadhafi, only to see — again — countless deaths, huge numbers of refugees and another haven for Islamist terror.

It was experts who brought us the housing bubble and the subprime crisis. It was experts who botched the Obamacare rollout. And, of course, the experts didn’t see Brexit coming, and seem to have responded mostly with injured pride and assaults on the intelligence of the electorate, rather than with constructive solutions.

By its fruit the tree is known, and the tree of expertise hasn’t been doing well lately.

Read the whole thing!

MY USA TODAY COLUMN: The Suicide of Expertise.

In the realm of foreign affairs, which should be of special interest to the people at Foreign Affairs, recent history has been particularly dreadful. Experts failed to foresee the fall of the Soviet Union, failed to deal especially well with that fall when it took place, and then failed to deal with the rise of Islamic terrorism that led to the 9/11 attacks. Post 9/11, experts botched the reconstruction of Iraq, then botched it again with a premature pullout.

On Syria, experts in Barack Obama’s administration produced a policy that led to countless deaths, millions of refugees flooding Europe, a new haven for Islamic terrorists, and the upending of established power relations in the mideast. In Libya, the experts urged a war, waged without the approval of Congress, to topple strongman Moammar Gadhafi, only to see — again — countless deaths, huge numbers of refugees and another haven for Islamist terror.

It was experts who brought us the housing bubble and the subprime crisis. It was experts who botched the Obamacare rollout. And, of course, the experts didn’t see Brexit coming, and seem to have responded mostly with injured pride and assaults on the intelligence of the electorate, rather than with constructive solutions.

By its fruit the tree is known, and the tree of expertise hasn’t been doing well lately.

Read the whole thing!

AND SO THE ERA OF HOPE AND CHANGE DRAWS TO A CLOSE: Percentage of Young Americans Living With Parents Rises to 75-Year High.

Despite a rebounding economy and recent job growth, the share of those between the ages of 18 and 34 doubling up with parents or other family members has been rising since 2005. Back then, before the start of the last recession, roughly one out of three were living with family.

The trend runs counter to that of previous economic cycles, when after a recession-related spike, the number of younger Americans living with relatives declined as the economy improved.

The result is that there is far less demand for housing than would be expected for the millennial generation, now the largest in U.S. history. The number of adults under age 30 has increased by 5 million over the last decade, but the number of households for that age group grew by just 200,000 over the same period, according to the Harvard Joint Center for Housing Studies.

Washington priced young people out of the housing market with the first bubble, and then priced them out again by re-inflating prices after the first bubble popped. If Millennials ever wake up to how badly Washington has screwed them, the political effects could be huge.

SUSTAINABILITY: Hikes In Cost of Housing Now 40% Higher Than Pay Increases.

Washington has been juicing the housing market ever since the last Washington-juiced housing bubble popped.

ROSS DOUTHAT: The Dangers Of Hillary Clinton:

The dangers of a Hillary Clinton presidency are more familiar than Trump’s authoritarian unknowns, because we live with them in our politics already. They’re the dangers of elite groupthink, of Beltway power worship, of a cult of presidential action in the service of dubious ideals. They’re the dangers of a recklessness and radicalism that doesn’t recognize itself as either, because it’s convinced that if an idea is mainstream and commonplace among the great and good then it cannot possibly be folly.

Almost every crisis that has come upon the West in the last 15 years has its roots in this establishmentarian type of folly. The Iraq War, which liberals prefer to remember as a conflict conjured by a neoconservative cabal, was actually the work of a bipartisan interventionist consensus, pushed hard by George W. Bush but embraced as well by a large slice of center-left opinion that included Tony Blair and more than half of Senate Democrats.

Likewise the financial crisis: Whether you blame financial-services deregulation or happy-go-lucky housing policy (or both), the policies that helped inflate and pop the bubble were embraced by both wings of the political establishment. Likewise with the euro, the European common currency, a terrible idea that only cranks and Little Englanders dared oppose until the Great Recession exposed it as a potentially economy-sinking folly. Likewise with Angela Merkel’s grand and reckless open-borders gesture just last year: She was the heroine of a thousand profiles even as she delivered her continent to polarization and violence.

This record of elite folly — which doesn’t even include lesser case studies like our splendid little war in Libya — is a big part of why the United States has a “let’s try crazy” candidate in this election, and why there are so many Trumpian parties thriving on European soil.

Also, the contempt for those she regards as non-elite. Economic problems, even sheer incompetence, are one thing. But people hate being regarded with contempt.

BUBBLES GOTTA POP: US Think Tank Warns That Australia Is About 6 Weeks Away From Housing Collapse.

Real estate prices in Australia’s largest housing markets have soared over the past couple of years fueled, in no small part, by demand from Chinese buyers looking for offshore locations to park cash. The Sydney and Melbourne markets have been the largest beneficiaries of foreign capital with real estate prices up 53% and 51%, respectively, since 2012. That said, based on data from the Australian Bureau of Statistics it looks like home prices in Australia have already started their descent.

Looks like China may have found yet another way to export its economic mismanagement.

HIGHER EDUCATION BUBBLE UPDATE: A Leak In The College Bubble?

When the housing bubble burst and sent the economy into a tailspin, the college bubble started to inflate even more rapidly. Desperate to compete in a brutal labor market, workers faced intensifying pressures to rack up degrees. Colleges (even marginal institutions) found a pool of captive consumers willing to pay high prices for their dubious credentials. And businesses, which had a dominant edge in the slack labor market, had the luxury of tossing out applicants without impressive educational histories.

But now that the labor market is tightening, each of these dynamics is changing, and the artificially inflated value of a college degree may be starting to come back down to earth. . . .

This trend couldn’t be more welcome. As we’ve noted before, college—at least for many students, and in many areas of study—”functions more and more as a signaling device for employers and a networking tool for the middle and upper classes rather than as a rigorous educational program.” There are a number of interests that would like to see this system sustained—academic bureaucracies, downwardly mobile children of the rich, and investors in student debt chief among them. But employers, students, and the public at large are all better served by a job market that allocates opportunities based on actual skills and knowledge, rather than empty letters on a resume.

All is proceeding as I have foretold.

HIGHER EDUCATION BUBBLE UPDATE: How Campuses Encourage Racial Balkanization.

Normally, “deans of diversity affairs” are not in the position of fending off accusations of racial insensitivity. It’s their job to make sure that trigger warnings and speech codes expunge every last drop of bigotry from campus life. But Concordia’s mandatory minority orientation session struck many students as discriminatory in and of itself. And understandably so.
As the article notes, Concordia has hosted a similar minority orientation session every year. The practice is widespread throughout the American higher education, and it is representative of the way that academic-left ideology believes in fighting bias: Through ethnic studies programs, racially exclusive housing, and safe spaces—that is, cordoning women and minority students off from the sea of bigotry that allegedly surrounds them.

We’ve previously highlighted the evidence that this approach is woefully ineffective. Social science research suggests that self-segregation efforts often exaggerate racial tensions. Instead of creating a sense of solidarity and common identity among students, campus bureaucracies often encourage division and mistrust.

Concordia’s diversity bureaucracy is convinced that the outrage from students of color of the racially segregated orientation event is a misunderstanding, because the aim is merely to welcome minority students and make them feel at home. How could anyone possibly object to that? Well, this seems like an instance where a 2007 quote from Chief Justice John Roberts seems particularly apt: “The way to stop discrimination on the basis of race is to stop discriminating on the basis of race.”

Insufficient opportunities for graft.

BROKEN PROMISES: THE HOUSING MARKET IN SAN FRANCISCO (AND TEN IDEAS TO FIX IT):

San Francisco is moving toward a dystopian future

If we do not change our current housing strategy, the natural result will be a type of cultural destruction. It’s easy to point to individual cases of displacement that pull on the heart-strings — a tech family is throwing out grandma to convert a duplex into a mansion (which is genuinely sad and should be prevented!) — but the real displacement is happening at a macro level. We are on a self-imposed path leading to only one place: a city that is entirely rich and, more or less, entirely white. That isn’t the fault of any one person on either side, but it is the fault of those that refuse to allow any rational policy response to people’s desire to live here.

In time, housing and everything else will become so expensive that we will price every working- and middle-class person out of the city. The gentrification wave will keep rolling. A bubble might burst here or there, but ultimately San Francisco is so self-destructively finite that all the regular people will be pushed to the East Bay, to Pacifica, to Daly City, etc.

No matter how expensive the left makes it to live amidst the squalor of 21st century San Francisco, they can’t drive out the Gods of the Copybook Headings.

HIGHER EDUCATION BUBBLE UPDATE: Luxurious College Apartments, Built on Debt.

The lazy rivers. The dining-hall steakhouse. The hot tubs. The dazzling fitness centers. Journalists who cover higher education love these lists of amenities in student housing, and readers love to hate them.

Take the latest trend in college housing: luxury off-campus apartment buildings that rent only to students. This is, on the face of it, somewhat mysterious. Students are not known for their fantastic credit. Nor for taking excellent care of their surroundings. I myself recall moving into a rather standard off-campus rental that first had to be cleared of the 57 bags of garbage that the previous occupants left behind. Everything you would infer from that fact about the condition of the house is correct.

Yet apparently today’s students have a rather more inviting option: student-only apartment buildings considerably nicer than those occupied by, say, many successful journalists of my acquaintance. This naturally raises the question: Where are the students getting the money for this?

In some cases, from their parents. I cannot explain why those parents should want to spend sizable sums procuring top-flight housing for their progeny, and why they differ in this so much from the parents of my generation, who were generally willing to approve off-campus living only on the condition that it cost less than a year in the dormitories.

But in other cases, the students choosing these luxury options are almost certainly financing that lifestyle with money lent, at below-market rates, by you the taxpayer.


Do tell.

HERE WE GO AGAIN: House ‘Flipping’ Skyrockets, Sparks Concern Over a Housing Bubble.

THIS HOUSING BUBBLE WILL END BADLY, TOO, Kevin D. Williamson warns at NRO:

[H]ousing prices are going up for the same reason that college tuitions are: because the government facilitates lending people money at concessionary rates to purchase them. The Fed has, despite the occasional sobering gander in the direction of reality, been keeping the cheap-money sluices pretty much wide open. The federal regulators have loosened their grip over Fannie Mae and Freddie Mac’s lending activities, and, according to a Fed report released Monday, banks are once again loosening up their lending standards.

This ended badly the last time. It’ll end badly this time, too.

Read the whole thing.

WHEN HILLARY TALKS ABOUT THE MIDDLE CLASS TOMORROW, I’LL BET SHE WON’T MENTION THIS: California’s war against the middle class: Massive income inequality pushes a growth in crowded rental households and lack of income growth.

But you know who did talk about it today? Carly Fiorina:

I think income inequality is a huge problem. And let’s look to the state of California where I lived for 12 years, liberal policies have been in place for decades, and yet 111 billionaires, good for them, the highest poverty rates in the nation, the exodus of the middle class, the destruction of industry after industry. Now they’re destroying agriculture in California.

The truth is, Hillary Clinton’s ideas create more income inequality. Why? Because bigger government creates crony capitalism. When you have a 70,000 page tax code, you’ve got to be very wealthy, very powerful, very well connected to dig your way through that tax code. So, she made to cry income inequality, what I will continue to point out is the fact that every policy she is pursuing will make income inequality worse, not better, crony capitalism even worse, not better. And meanwhile, we will continue to crush the businesses that create jobs and middle class families.

Indeed. Because economic freedom offers insufficient opportunities for graft.

HIGHER EDUCATION BUBBLE UPDATE: Millennials Weighed Down By Student Loan Debt.

U.S. Census Bureau data shows that the number of 25- to 34-year-olds living in their parents’ homes jumped 17.5% from 2007-2010. This is similar to Pew Research, which found that 57% of 18- to 24-year-olds lived with their parents in 2012. By way of comparison, in 1960, three out of four women and two out of three men had finished school, left home, were financially independent, had married and had children by age 30.

Meanwhile, the number of 30-year-olds who own their own homes is now roughly equal to those who live with their parents–a sharp contrast to 2003, when a 30-year-old American was twice as likely to own a home as he or she was to live with parents, according to the New York Federal Reserve (24). There’s also a clear correlation between growth in student debt and the rate at which adult offspring live with their parents. For every $10,000 increase in a state’s student debt per graduate, there’s a corresponding 2.9 percentage-point rise in 25-year-olds living with parents (25).

All of this comes as the dollar amount of student loans outstanding in the U.S. has tripled in the past decade, reaching a record $1.2 trillion last year. (See “Growing U.S. Student Debt Could Have Long-Term Credit Implications,” published Aug. 26, 2014.) In fact, student debt was the only type of household borrowing that continued to grow during the recent recession and recovery.

Ouch.

HOUSING BUBBLE STILL BROKEN: Stuck With a House That Can’t Be Sold: Even though the housing market is improving, some owners with troubled properties won’t see relief anytime soon.

When you ask 29-year-old Anthony Walker about the home he owns, his response is a chorus of resigned sighs. It’s not quite the reaction you’d expect from one of the few in his generation who has managed to achieve homeowner status. But the property that Walker co-owns with a good friend and former roommate is deeply underwater. That means that since he purchased the property, the value has slipped so much that the house is worth less than total mortgage debt taken out to buy it. As time passes, he’s growing increasingly doubtful that he’ll ever see the property’s value back in the black.

It’s a predicament that more and more owners of less expensive starter properties are facing. Homes that were bought for a “reasonable” price at the top of the market are now floundering in negative equity, and according to Svenja Gudell, the director of economic research at the real-estate data firm Zillow, there’s a good chance that such properties will never be worth the mortgage debt owed on them. “In the lowest third of the housing market, not only are you more likely to be underwater, but homeowners tend to be very deeply underwater,” says Gudell. “It will take a really long time to lift some of those homeowners out of negative equity. And some of them will never reach positive equity.”

The Insta-Wife and I are big real-estate window-shoppers, and we’ve noticed that you get a lot more for the same money in a lot of places that we look at than you got a few years ago, despite claims of a recovery.

BUBBLE, BUBBLE TOIL AND TROUBLE: The Federal Housing Administration, the next housing crisis?

When queried by members of the committee about the January 2015 premium reduction as well as the FHA’s precarious financial status, Castro was at pains to provide even basic information about the current value of the FHA portfolio. He also refused to admit that the FHA was operating outside of the law, could not say when it would achieve the 2 percent capital reserve benchmark and repeatedly delivered a series of meaningless platitudes about the benefits of homeownership. Rep. Scott Garrett (R-N.J.) pointed out that the FHA has offered “pricing gimmicks” while lowering its credit standards, down payment requirements and premiums, which are tactics that have been criticized elsewhere as “predatory lending.”

Ironically, on the same day that Castro testified, the FHA was once again included on the Government Accountability Office’s High Risk List due to the agency’s “substantial growth in its insurance portfolio and significant financial difficulties.” The FHA has been on the list since 2009.

On the other hand, there have been excellent opportunities for graft.

POLITICO: Where Was Obama When The Middle Class Needed Him?

The past six years have seen a series of hits to middle-class economic security in the form of radical changes in healthcare; decreased pension guarantees from companies; less job security; and volatility in financial markets that has made retirement planning challenging. Cap that off with the massive hit to financial net worth because of the bursting of the housing bubble and you have a recipe for roiling discontent. Washington, meanwhile, anchored by the Obama administration, is widely seen as having done precious little other than shore up the financial system and the banks in 2009.

When it comes to the economy, in fact, Obama arguably has spent most of his presidency focused either on the needs of the very poor (the uninsured) or the very rich (Wall Street’s banks, which were nursed back to health).

Hey, they don’t call him President Goldman Sachs for nothing.

HIGHER EDUCATION BUBBLE UPDATE: Introducing The College-Cost Denial Industry. “There’s an agenda here, it’s well funded and knows just how to attract the right kind of attention. Brookings, New America and other think tanks provide perfect fodder for explainer sites such as The Upshot and Vox, where single-source reporting seems to be in vogue. Still, these reports are right about one thing: The student debt bubble isn’t going to explode like the housing bubble. Instead, it’s going to fill slowly as it grows over decades, burdening borrowers further and further into the future. As Roosevelt Institute fellow Mike Konczal points out, though the Brookings paper celebrates stability in the size of month-to-month payments over time, the average repayment period has nearly doubled. A recent analysis by Leonhardt’s colleague Anna Bahr shows how a new Obama administration repayment plan costs the average debtor more in the long run than the standard models. Instead of buying homes and cars, borrowers are paying down debt so colleges can buy more dorms and student centers. Though they only get to enjoy them for only a handful of years as students, they pay on a long installment plan.”

Couldn’t have said it better myself.

HIGHER EDUCATION BUBBLE UPDATE: Student Loan Debt Is Dampening The Housing Market.

Wow, who could have seen this coming?

NOT TOO BIG TO FAIL: In Great Britain Bank must burst housing bubble. Here the bubble was never even fully corrected but it hasn’t fully re-inflated either.

HIGHER EDUCATION BUBBLE UPDATE: Welcome to the Well-Educated-Barista Economy: A new study offers an unsettling explanation of why young adults have been hit so hard.

So why aren’t there more housing starts? Answer: Because new households are forming at less than 40% of the normal rate. Young adults are living with their parents at much higher rates than before the Great Recession. Many cannot afford monthly rental costs, let alone come up with the down payments they need to qualify for mortgages.

This reflects the continuing travails of young adults in a slack labor market. Among recent college graduates ages 20 to 29, the Bureau of Labor Statistics reports, unemployment stands at 10.9%, more than three points higher than in 2007. A study from the Federal Reserve Bank of New York finds that of the recent college graduates who have managed to find work, more than 40% are in jobs that do not require a college degree; more than 20% are working only part-time; and more than 20% are in low-wage jobs. . . .

These developments are jarring. For the past generation we’ve been telling ourselves and our children that demand for higher-order skills is surging and that a college education is the key to the future. But recent research by three Canadian economists calls this proposition into question. Paul Beaudry and David Green of the University of British Columbia and Benjamin Sand of York University document a declining demand for high-skilled workers since 2000. In response, they say, “high-skilled workers have moved down the occupational ladder and have begun to perform jobs traditionally performed by lower-skilled workers, . . . pushing low-skilled workers even further down the occupational ladder and, to some degree, out of the labor force altogether.” Well-educated baristas and unemployed high-school graduates are flip-sides of the same phenomenon. . . .

To explain this, Messrs. Beaudry, Green and Sand argue that as the IT revolution matures, the demand for advanced cognitive skill cools relative to the preceding investment stage, as it has with the maturing of every preceding general-purpose technology. That’s plausible, but so is the even more troubling hypothesis that IT can replace an ever-widening range of higher-skilled workers with less-educated individuals using systems whose inner workings they cannot begin to fathom.

If correct, these economists’ work turns conventional wisdom on its head. It would imply that our wage and employment woes are structural as well as cyclical—that in tandem with the global market for labor, the IT revolution has permanently transformed the U.S. labor market by suppressing the growth of purchasing power on which the economy depends. Responding to this new reality would challenge the innovative capacity of a political system that is hard-pressed to discharge even its most routine obligations.

To be young and underemployed is bad. To be young, underemployed, and $100,000 in student-loan debt is worse.

PEOPLE AREN’T ACTUALLY ABANDONING MICROWAVES.

But when you read a little deeper, it turns out that people aren’t actually abandoning microwaves; they’re just not replacing them as frequently. . . .

Microwaves are also, in some ways, moving upscale. Sales of microwaves that are built into the kitchen, rather than sitting alone on a counter — which are much closer cousins to the commercial oven — have grown by more than 100 percent since 2000.

Hmm. So people are shifting toward built-in microwaves — and sales of microwaves peaked in 2006. This doesn’t suggest a trend toward fresher food to me; it suggests that the housing bubble produced a surge in demand for microwaves, as contractors and homebuilders installed them above half the ovens in the U.S. When the housing bubble popped, demand sank precipitously. Because people replace built-in appliances much less often than they do the ones on their countertop, it’s taking a long time to recover.

Also, they’re more reliable now, so they need replacing less often. And the new ones no longer offer fancy features that the old ones lack, so there’s no reason to replace them unless they break.

INSTAVISION, NOW ON YOUTUBE: Recovery? What Recovery? Is The Next Housing Bubble Getting Ready To Pop? With Andrew Malcolm and Terry Jones of Investor’s Business Daily.

INSTAVISION: Recovery? What Recovery?!? Hear Why the Next Housing Bubble Could Be Ready to Burst. With Andrew Malcolm and Terry Jones of Investor’s Business Daily.

economic

HIGHER EDUCATION BUBBLE UPDATE: Student debt may hurt housing recovery by hampering first-time buyers.

The growing student loan burden carried by millions of Americans threatens to undermine the housing recovery’s momentum by discouraging, or even blocking, a generation of potential buyers from purchasing their first homes.

Recent improvements in the housing market have been fueled largely by investors who snapped up homes in the past few years. But that demand is waning as prices climb and mortgage rates rise. An analysis by the Mortgage Bankers Association found that loan applications for home purchases have slipped nearly 20 percent in the past four months compared with the same period a year earlier.

First-time buyers, the bedrock of the housing market, are not stepping up to fill the void. They have accounted for nearly a third of home purchases over the past year, well below the historical norm, industry figures show. The trend has alarmed some housing experts, who suspect that student loan debt is partly to blame. That debt has tripled from a decade earlier, to more than $1 trillion, while wages for young college graduates have dropped.

The fear is that many young adults can no longer save for a down payment or qualify for a mortgage, impeding the housing market and the overall economy, which relies heavily on the housing sector for growth, regulators and mortgage industry experts said.

Do tell. Someone should write a book on this phenomenon.

I WISH IT WOULD GET TO MY NEIGHBORHOOD: Yep, It’s Another Housing Bubble.

WHEN THE HIGHER EDUCATION BUBBLE AND THE HOUSING BUBBLE MERGE.

BARNEY FRANK THINKS HOUSE OF CARDS IS UNREALISTIC. A reader emails: “Hey, how about a plot line where an obese, snarky congressman who always has to be the smartest guy in the room gets in trouble because his hustler boyfriend is running a gay brothel out of his apartment? Added twist, he convinces the nation that his housing bubble pop was the other party’s fault. Then there’s the time another boyfriend is busted for pot cultivation, and the world’s smartest congressman/pot legalization advocate, present when the cops show up, claims he doesn’t even know what pot looks like … Nah, no one would believe it. Memo to HOC, write in Barney, please.” Heh.

ROLLING STONE: The federal government has made it easier than ever to borrow money for higher education – saddling a generation with crushing debts and inflating a bubble that could bring down the economy.

Really? Do tell.

Oh, wait, there’s more:

The thing is, none of it – not last month’s deal, not Obama’s 2010 reforms – mattered that much. No doubt, seeing rates double permanently would genuinely have sucked for many students, so it was nice to avoid that. And yes, it was theoretically beneficial when Obama took banks and middlemen out of the federal student-loan game. But the dirty secret of American higher education is that student-loan interest rates are almost irrelevant. It’s not the cost of the loan that’s the problem, it’s the principal – the appallingly high tuition costs that have been soaring at two to three times the rate of inflation, an irrational upward trajectory eerily reminiscent of skyrocketing housing prices in the years before 2008.

This is sounding kinda familiar. But it’s nice to see Rolling Stone take notice. From there, perhaps the message will filter out into publications read by young people thinking of college.

DEMOCRATS DIVIDED OVER STUDENT LOANS: The Hill: Warren Rips Manchin On Student Loan Proposal. “Liberal firebrand Sen. Elizabeth Warren (Mass.) blasted a fellow Democratic senator Tuesday as a dispute over student loan rates escalated divisions within the party. The clash, which is highly unusual among party colleagues in the upper chamber, came at a private caucus meeting about a subject that is helping Republicans land blows against their Democratic opponents. . . . The bipartisan plan endorsed by Manchin and the others would set interest rates for undergraduate Stafford loans at the 10-year Treasury rate plus 1.85 percent. It would set the rates for unsubsidized graduate Stafford loans at the 10-year Treasury rate plus 3.4 percent.”

Here’s some recommended reading on the problem, which transcends Warren’s rather simplistic take.

UPDATE: Related: Student Loan Pretenders: New evidence that subsidized debt is harming borrowers.

Government researchers continue to show that federal student loans are hazardous to both students and taxpayers. But Senate liberals don’t seem to care, as long as the money keeps flowing to their constituents in the nonprofit academic world. . . .

The Congressional Budget Office recently estimated taxpayer losses on student loans at $95 billion over the next decade. Meanwhile, researchers at the Federal Reserve Bank of New York have been tracking the harm to young borrowers. Student-loan debt used to be a rough indicator of economic progress, because it meant that the borrower was attaining higher levels of education, long associated with higher incomes and lower unemployment.

But in recent years an historic surge in student-loan debt is changing education for many borrowers from a winning investment into a staggering burden. Such debt has nearly tripled since 2004 and now hovers around $1 trillion, with defaults rising on student loans and other types of debt held by these young borrowers.

Whereas credit scores used to be similar for young people with or without student-loan debt, New York Fed economists find a divergence after 2008. “By 2012, the average score for twenty-five-year-old nonborrowers is 15 points above that for student borrowers, and the average score for thirty-year-old nonborrowers is 24 points above that for student borrowers,” they note in a recent report.

Fed researchers are now struggling to understand the impact on markets such as housing and autos given the “lowered expectations of future earnings and more limited access to credit” for those who made large leveraged bets on education. Many of them must now delay starting families and buying their first homes.

The problem here isn’t an insufficiency of credit. It’s that prices are too high.

ANOTHER UPDATE: Student Loan Compromise Pits Dem Against Dem.

MORE: Reader Nathan Brindle writes:

I had student loans in school that totaled about $20,000 by the time I left grad school (in 1993). (Obviously I didn’t attend an Ivy!) The only reason they didn’t total $30,000 was because I had a fellowship for one year of grad. And I paid the $20K off in 10 years – no consolidations, although I did take three years of deferral while I got settled into my new job (which had nothing to do with my degree tracks, FWIW).

What I can’t understand about student loans is this: The government thinks it’s OK to loan tens of thousands of dollars to 18-22 year old kids with no jobs and only imagined prospects on no more than a handshake and a signature. And it guarantees those loans, too, even it if will pursue you to the grave to pay them back. Some kids end up with enough in student loans that they could have bought a house, instead.

And there’s the rub. No bank would give a mortgage loan to a 18-22 year old with no job and no prospects on no more than a handshake and a signature. Not only would it be a dangerous risk, but it would be bloody immoral on its face to do such a thing to a young person just starting out in life. Why then is it considered appropriate and moral to load up the same cohort of kids with mortgage-sized student loan debt?

What exactly is so valuable about a college education that warrants mortgage-sized costs to get one, when so many students fail to complete their courses of study (and probably shouldn’t have been in college anyway)? I worked for the university when I was in grad school, and let me tell you, I met a LOT of students who were only there because some high school guidance counselor or their misguided parents had pushed them to attend.

Higher education bubble, indeed. Let that sucker pop, let the bad and mediocre colleges and universities wither, and let a million MOOCs bloom in its place. Let professors compete for students. Because competition is good!

I think we’ll see that.

HIGHER EDUCATION BUBBLE UPDATE: Mammoth 2-Year College to Lose Accreditation. “City College of San Francisco will lose its accreditation in one year and be shut down, its regional accreditor announced on Wednesday, unless the college can prevail in a review or appeal process with the Accrediting Commission for Community and Junior Colleges. The two-year college, which enrolls 85,000 students, would be the largest institution ever to lose its accreditation. Without regional accreditation it would no longer receive state funding and would certainly close its doors. One year ago the commission, part of the Western Association of Schools and Colleges, slapped a ‘show cause’ sanction on City College for a wide range of identified problems, including dangerous budget deficits, a balky governance system and a failure to track student outcomes. A subsequent report from a state agency reinforced concerns about the two-year college’s fiscal health, including that it only had enough cash reserves on hand to cover three days of operation.”

UPDATE: Interim Chancellor Gets Big Bucks: ” Scott-Skillman will earn the same annual salary as Fisher, $276,000. Her annual pension from four decades of jobs in public colleges is $95,041 from the Public Employees Retirement System and $74,076 from the California State Teachers’ Retirement System, for a total annual compensation of $445,117. As it did for Fisher, City College will give Scott-Skillman housing and car allowances.”

ANOTHER UPDATE: A reader who requests anonymity emails: “My grandson just finished high school and lives within walking distance of City College of San Francisco. He intends to do his first two years at a community college but refuses to attend City College, preferring a school in the next county. His reasons? Excessive political correctness, idiotic curriculum, and, frankly, anti-white animus. Why does the do those characteristics seem to be regularly associated with corruption and incompetency?” Racists are usually not very bright.

HIGHER EDUCATION BUBBLE UPDATE: A Dangerous ‘New Normal’ in College Debt.

As college tuitions rise and state and local funding for higher education falls — along with median household incomes — students are taking on staggering levels of debt. And many can’t find jobs that pay well enough to quickly pay off the debt. This has long-term implications for our society and our economy, as that debt begins to affect when and if young people start families or enter the housing market.

The student debt crisis may become a dangerous “new normal,” according to a report this week by the nonprofit State Higher Education Executive Officers Association. . . .

An analysis last month by Donghoon Lee, an economist at the Federal Reserve Bank of New York, found that “student debt is the only kind of household debt that continued to rise through the Great Recession” and is now the “second largest balance after mortgage debt.”

According to Mr. Lee, student loan debt is fast approaching a trillion dollars, up from less than $400 billion in 2004, and both the number of borrowers and the average balance per borrower have “increased by 70 percent between 2004 and 2012 (7 percent per year).”A September Pew Research Center report found that “a record one-in-five households now owe student loan debt.”

That report also found that student loan debt as a share of household income was 24 percent for families in the lowest income quintile. That was at least twice the share of any other quintile.

As the report put it, “The relative burden of student loan debt is greatest for households in the bottom fifth of the income spectrum, even though members of such households are less likely than those in other groups to attend college in the first place.”

And many of those graduates can’t find work or are underemployed, and they struggle to pay back their own personal mountain of debt.

Yes, the higher education bubble has increased income inequality, burdened lower- and middle-class families with excessive debt, and made social mobility harder by requiring a college degree even for entry-level jobs that don’t really require it. This isn’t news if you’ve been reading my stuff, but it’s nice to see other people noticing.

SENIOR SELL-OFF: Aging Baby Boomers And The Next Housing Crisis.

This problem will be made worse by the financial and demographic consequences of the higher education bubble, as the post-college people who should be buying houses can’t afford them, or don’t need them because they can’t afford to have kids.

DANIEL LUZER SAYS THAT HIGHER EDUCATION IS NOT A BUBBLE. But what he really seems to be saying is that it’s not as bad as the housing bubble.

That may be true, but that doesn’t mean that it isn’t bad. Note this from the Financial Times:

In basic economics, a bubble occurs when the value of an asset exceeds the level determined by economic fundamentals. The fundamental value is typically measured by the discounted stream of expected future cash flows. For equities, this is a function of the fundamental value of the stock market, which analysts use different measures to gauge. And for housing, the fundamental value is a function of the potential return of renting the property. We therefore look at the ratio of home prices to rent as a gauge of fair valuation. In the case of tuition, fundamental value can be defined by future earnings, and hence income. . . .

A basic rule of thumb, as advised by FinAid, is that total education debt should be less than half of expected starting salary upon graduation. The median salary for 25-34 year olds with a bachelor’s degree is $45,000, and $54,700 for a master’s degree and the average debt upon graduation upon is about $25,000 for undergraduate and $35,000 for a Master’s degree (the latter is based on estimates from FinAid). This suggests the debt burden is too high – in both cases, it is more than half of the starting salary.

And for many, it’s much, much worse than that. Also, focusing on the amount of student loan debt being traded, which is what Luzer does in concluding that it’s not a big problem misses the point. As the Financial Times piece notes:

It’s unlikely that, say, German Landesbanks or Norwegian pension funds will surface as major holders of student loans — we don’t expect flashbacks to funky structure subprime revelations. And why is that? Because the US government is holding a hell of a lot of it — something in the region of 85 per cent of student loans outstanding were either issued by the government or have a government guarantee.

That’s not to say that the potential for inaccurate pricing of the risk, especially given the cultural aspects of education, isn’t there. It very much is.

Who’s making simplistic comparisons to the housing bubble, again? Also, the consequences of higher education debt being too high play out in a lot of different, but destructive, ways. First, they make the housing bubble worse, as people leave college or graduate school with the kind of debt they used to not take on until they bought their first (or second) home. The student loan debt makes it harder for them to buy a house at all, thus limiting a major source of new demand.

Another impact is that student loan debt causes people to delay marriage and have fewer children, which not only (again) reduces housing demand, but has a long-term negative effect on economic growth. Not only does it exacerbate the “baby bust” in general, but it makes the baby bust worse among the most educated, which can’t be good for society, unless your goal is something like Idiocracy. This seems like a bad idea.

Meanwhile, if you’re thinking about borrowing money to attend college, check out these charts.

UPDATE: Reader Aaron Chmielewski writes: “Looking at gross income isn’t quite good enough either, what we should be looking at is also cost of living. Many of those jobs are in expensive areas. What really matters is the person’s ability to save. What is their debt relative to discretionary, disposable income (income after taxes and basic living expenses and financial obligations)? What is their financing expense relative to discretionary, disposable income?” Good point.

HIGHER EDUCATION BUBBLE UPDATE: Big Bloat On Campus: An F For Effort on Holding Down Tuition.

At the University of Minnesota, the number of employees with “human resources” or “personnel” in their job titles has grown from 180 to 272 since the 2004-05 academic year. Since 2006, the university has spent $10 million on consultants for a vast new housing development that is decades from completion. It employs 139 people for marketing, promotions and communications. Some 81 administrators make $200,000 per year or more.

In the past decade, Minnesota’s administrative payroll has gone up three times as fast as the teaching payroll, and twice as fast as student enrollment. Oh, and tuition more than doubled in that same period, to more than $13,000 per year.

These facts and figures, gleaned from a fascinating article in last weekend’s Wall Street Journal, are depressingly typical of American higher education, where administrative payrolls and other non-teaching costs have been growing rapidly — without any obvious commensurate benefit for students.

To the contrary, the bloat on many U.S. campuses is now a significant cause, along with cutbacks in state spending, of the surge in tuition, which, in turn, is an obstacle to upward mobility for an entire generation of young Americans.

Do tell.

ACROSS THE UNITED STATES: “Echo Housing Bubbles.”

WALTER RUSSELL MEAD: Yes, there really is a Higher Education Bubble.

The big difference between the bubble metaphor as classically used and the bubble metaphor as applied to higher ed is simple: higher ed is a (mostly) non-profit industry. While colleges and universities issue debt (and with ratings agencies downgrading some higher ed institutions there is a small financial bubble in these securities that appears to be losing air), the higher ed bubble is less about profits and stocks than it is about capacity. We have built too much inefficient capacity in higher ed, and the bursting of the bubble won’t be manifested in a falling value of Yale stocks and bonds or of diplomas, but in a constricted hiring market, the closure of some institutions and painful contractions at others. It is also manifested in an excessive growth of student debt, much of which will not be repaid.

Just as some cities were more vulnerable in the housing bubble, so some departments and some programs are more vulnerable in higher ed. Just as some of the consequences of the housing bubble were felt quickly while others will work themselves out over an extended period of time, so some consequences of the higher ed bubble are already being felt while others will be with us into the future. Just as well managed, efficient construction companies were able to ride out the bust while highly leveraged and inefficient companies went under, so some higher ed institutions will manage the transition reasonably well while others will undergo great stress and even collapse. And just as people continue to need houses no matter what is happening in the housing market, so the business of earning and awarding diplomas will go on — even if methods change.

Look away from the difference between non-profit and for-profit industries, and higher ed looks to be in something very much like the early corrective phase of a classic boom and bust cycle. Overcapacity and over investment in some branches of higher ed is already leading to pressure to shift students out of the humanities and liberal arts and is likely to spread to law programs, where costs continue rising despite signs that enrollment may have already peaked. . . . Unrealistic prices and unrealistic expectations about how those prices will hold up; unrealistic investments predicated on unrealistic growth and revenue expectations; expensive structural inefficiencies developing over a long period of favorable market conditions exposing many firms to devastating losses if conditions change: these classic indicators of bubble dynamics all characterize American higher ed today.

Read the whole thing, which is in response to this post by Daniel Drezner that I had missed because it’s behind a paywall. But hey, Mead has responded, probably better than I would have, so I’m calling it a win!

CALL IT THE “HUNGER GAMES” BUBBLE: What The Hell Is Happening In The DC Housing Market? “People seem to be buying $650,000 houses on the assumption that they will someday turn into $1,000,000 houses—that central Washington will turn into Manhattan.”

It’s all explained here.

DR. HOUSING BUBBLE: Is the middle class dream an illusion for Californians? What we can learn from domestic and foreign migration patterns. “Nationwide the typical family makes around $50,000 and in California it is roughly $54,000. Yet home prices are much more expensive in the state. I think what you are seeing is really the bifurcation of the state. That is, you have a high income subsection fighting for certain cities (with no new housing development) and a growing number of lower income Californians in areas that are seeing very challenging economic times.”

Funny how you often see this sort of bifurcation in areas run by liberal Democrats who spend a lot of time talking about equality.

DR. HOUSING BUBBLE: Modified mortgages re-enter shadow inventory – By next month the housing crisis will have cost 5,000,000 Americans their homes via foreclosures. Distressed inventory still above 5,000,000. Funny, everything was sounding all hopey-changey just a few weeks ago.

FLIGHT CAPITAL: “Foreign money is flowing heavily into US real estate markets. Now some think that foreign money is going to prop up the entire market but this is simply not the case. The money flowing in from abroad is going specifically into targeted markets. This isn’t necessarily a US trend only. Canada is experiencing a massive housing bubble from money flowing in from China in particular. Here in Southern California many cities are seeing solid money flowing in from Asian countries. You have this occurring while big fund domestic investors are buying up low priced real estate cross the country as investments. What occurs then is the crowding out of your typical home buyer. . . . I’m always wary about home prices rising so fast while incomes remain stagnant. This is a hot money scenario.”

WALTER RUSSELL MEAD: Black Depression.

The October employment numbers deepened the gloom among African Americans and those (including the Via Meadia team) who believe that the United States as a whole cannot progress as it should unless African Americans are getting ahead too. As a report from Think Progress reminds us, in October, African American unemployment rose almost a full percentage point to 14.3 percent.

As we’ve noted in earlier posts, unemployment is only part of the story. America’s Black middle class is facing a crisis of historic proportions. African Americans were among the biggest losers in the housing bubble; well intentioned but ill advised policy changes intended to get more low income families and marginal households into home ownership kicked in just in time to lure African American families into the housing market at the peak of the bubble. The loss of wealth and savings has been nothing short of catastrophic; decades of progress in building net worth for middle class and lower middle class minority families have been wiped out since 2007.

So. How’s that hopey-changey stuff workin’ out for ya?

IS D.C. FACING A HOUSING BUBBLE, OR A LOBBYING BUBBLE? “DC’s housing market is very strange. While the rest of the country falls, we’re in a veritable boom. Where others zig, we zag. What the heck is going on?”

I favor the Hunger Games explanation.

HEATHER MCDONALD: Diversity Now, Diversity Tomorrow, Diversity Forever!

The University of California, San Diego has done it again. Last year, it announced the creation of a new diversity sinecure: a vice chancellor for equity, diversity, and inclusion. Campus leaders established this post even as state budget cuts resulted in the loss of star scientists to competing universities, as humanities classes and degree programs were eliminated to save money, and as tuition continued its nearly 75 percent, five-year rise. The new vice chancellorship was wildly redundant with UCSD’s already-existing diversity infrastructure. As the campus itself acknowledges: “UC San Diego currently has many active diversity programs and initiatives.” No kidding. A partial list of those “active diversity programs and initiatives” may be accessed here.

Now UCSD has filled the position and announced the new vice chancellor’s salary. Linda Greene, a diversity bureaucrat and law professor from the University of Wisconsin-Madison, will pull in $250,000 a year in regular salary, but that’s just the beginning: she’ll receive both a relocation allowance of $60,000 and 100 percent reimbursement of all moving expenses, a temporary housing allowance of $13,500, two fully paid house-hunting trips for two to the San Diego area, and reimbursement for all business visits to the campus before her start date in January 2013. (By comparison, an internationally known expert in opto-electronics in UCSD’s engineering school, whose recent work has focused on cancer nanotechnology, received a little over $150,000 in salary from UCSD in 2011, according to state databases.) The UCSD press office did not respond to a request for the amount the university paid the “women-owned executive search firm with a diverse consulting team” it used to find Greene.

Read the whole thing, to understand something about what’s inflating costs in the higher education bubble.

THE HOUSING BUBBLE? Clinton Built That.

CULTURE OF CORRUPTION: CBS, AP: Dem chair of House Oversight covered up ties to Countrywide for himself, colleagues, and staff. “How did Countrywide end up as one of the worst villains in the housing-bubble collapse, which cost taxpayers hundreds of billions of dollars and nearly crushed the financial sector? Simple: they bought political connections by offering sweetheart deals to people like Chris Dodd, who headed the Senate Banking Committee, and Towns, whose committee was supposed to keep corruption out of federal regulation of the market. When the entire mess collapsed, people like Dodd and Towns were in position to manipulate the investigations in order to avoid detection. Dodd was less successful at that effort than Towns, who got away with it as long as Democrats remained in charge of Congress — and the White House, which has been mighty incurious on the whole issue since running on populist outrage over the housing-bubble collapse.”

Plus: “Towns announced his retirement in April. He should be expelled, and his pension benefits stripped for this coverup.”

OVER A YEAR AGO, I TALKED ABOUT A “LOWER EDUCATION BUBBLE” IN PUBLIC SCHOOLS. Now we hear this: Enrollment Off in Big Districts, Forcing Layoffs.

Enrollment in nearly half of the nation’s largest school districts has dropped steadily over the last five years, triggering school closings that have destabilized neighborhoods, caused layoffs of essential staff and concerns in many cities that the students who remain are some of the neediest and most difficult to educate. . . .

In some cases, the collapse of housing prices has led homeowners to stay put, making it difficult for new families — and new prospective students — to move in and take their place.

But some say the schools are partly to blame. “We have record-low confidence in our public schools,” said Kevin Johnson, the mayor of Sacramento and head of education policy for the United States Conference of Mayors. (He is married to Michelle Rhee, the lightning rod former chancellor of the Washington public schools and now an advocate for data-driven reform). “If we have high-quality choices in all neighborhoods, you don’t have that exodus taking place,” he said.

The rise of charter schools has accelerated some enrollment declines. The number of students fell about 5 percent in traditional public school districts between 2005 and 2010; by comparison, the number of students in all-charter districts soared by close to 60 percent, according to the Department of Education data. Thousands of students have moved into charter schools in districts with both traditional public and charter schools.

Public schools have lost the public’s confidence, and with reason.

HIGHER EDUCATION BUBBLE UPDATE: Mortgaging your way to a college education – the burden of student debt and the impact on the starter home market. “Over two-thirds of past due debt is hitting with those 39 and younger. A good amount is hitting the under 30 crowd. Remember those co-signed loans? There is little doubt why the housing recovery has been so tepid nationwide. In California, home prices are still out of sync in many locations but just think about a more realistic nationwide scenario. A young graduate comes out with $50,000 in student debt and the starter homes they are looking at cost $150,000. This is very typical. How easily can they shoulder that new debt amount? Are they even willing to take this new loan on? Virtually every other debt segment has pulled back since the recession hit outside of student debt. Home ownership rates for younger Americans have fallen dramatically in the last decade and this burden of ‘other’ debt is becoming a big issue. It is also impacting baby boomers as kids boomerang back home. Another trillion dollar debt market with major issues. You don’t need a Ph.D. to know this is a big problem.”

HOW’S THAT HOPEY-CHANGEY STUFF WORKIN’ OUT FOR YA? (CONT’D): The twin lost decades in housing and stocks – baby boomers selling homes to a less affluent young American population. The impact of baby boomers on the housing market. “You have a wealthier generation that has seen their wealth decline trying to sell to a less affluent and smaller generation. Instead of household formation or even renting, over 2 million young Americans moved back home. Is it any wonder why we have now faced a lost decade in housing?”

And, of course, recent (and even not-so-recent) grads with heavy student loan debt can’t afford to pay top dollar for a house, if they can afford a house at all. Thanks, Higher Education Bubble!

WALTER RUSSELL MEAD: Student Loan Program Pumps Legal Ed Bubble: For Now.

From the admirably thorough if sometimes forbidding info that Hastings provides, a few facts jump out. The first is the staggering rise in the cost of law school tuition over the last decade, even as total applications to the school fell by nearly a third, and as employment opportunities for newly-minted JDs collapsed during the same period. As the report highlights, Hastings’ tuition revenue nearly doubled from 2003 to 2011, while in-state tuition at the institution more than doubled, from $21,000 to $47,000 from 2004 to 2012.

But the story gets bleaker. For those readers just starting college this fall but considering law school (i.e. starting in the 2016-2017) academic year or who have kids in this position, total non-resident tuition and fees at Hastings by then is projected to rise to nearly $59,000 per year. Taking into account living expenses, that means that the average graduate of Hastings – who, the school’s administration freely admits, face difficulty getting jobs in a Bay Area market where Stanford and Berkeley graduates dominate – will face nearly $200,000 in non-dischargeable student loan debt. That’s the kind of number that we at Via Meadia are referring to when we talk about a War on the Young.

It would be one thing if all of these naïve liberal arts graduates were paying for the privilege of a Hastings education with money from the family vaults. But they’re not. Close to 100 percent of the tuition that students paid was financed by federal loans, like the Stafford, Perkins, and GRADPLUS programs. The student loan system is effectively allowing Hastings to raise its tuition beyond any reasonable or sustainable point and it is encouraging students to make bad investments — in much the same way federal debt programs encouraged the housing bubble of the last decade.

Indeed.

And this is key: “Most student loans do not get discharged if you go bankrupt. They are a ball and chain that will drag you down for decades. Please, look very carefully before you leap.”

I’m not saying don’t go to law school. I’m saying don’t borrow money to go to law school. At the very least, read Brian Tamanaha’s book before you do.

HIGHER EDUCATION BUBBLE UPDATE: Grants, Loans Fuel Higher Education Bubble. “Students are paying less and less of direct college costs, relying more on government grants and loans. That has encouraged universities to jack up tuition expenses, fueling a vicious circle reminiscent of the housing bubble. U.S. universities charged students $190 billion in 2001-02 for tuition, fees, room and board and more, according to data from Sallie Mae. By 2010-11 that had more than doubled to $410 billion. Even after adjusting for inflation, student charges shot up 72%.”

Say, did I mention I’ve got a book out on this subject?

HIGHER EDUCATION BUBBLE UPDATE: State Loan Agencies May Be Subject to Whistle-Blower Claims, Federal Appeals Court Rules.

In 2009, a former researcher with the U.S. Department of Education filed a lawsuit, charging that several student-loan agencies and companies had defrauded the federal government. But a judge dismissed the charges against four entities, all state-created student-loan authorities which had argued that they were not subject to suit under the federal False Claims Act.

Now, a three-judge panel of the U.S. Court of Appeals for the Fourth Circuit has ruled that the lower court did not properly determine if the state loan authorities were subject to the federal law. . . .

In the suit, Mr. Oberg contended that many of the nation’s largest student lenders, both for-profit companies and nonprofit corporations, had improperly received $1-billion dollars in excess federal subsidies. The lawsuit has resulted in several settlements with lenders, including one in which the company Nelnet agreed to pay $55-million.

Things are looking more like the housing bubble all the time. Who knew? The full opinion is here.

U.S. NEWS: Why The Higher Education Bubble Will Be Worse Than the Housing Bubble. “Even when homeowners got hopelessly behind on their mortgages, two options helped. First, they could declare bankruptcy and free themselves of their crippling debt; second, they could sell their houses to pay down most of their loans. Students don’t have either of these options. It’s illegal to absolve student loan debt through bankruptcy, and you can’t sell back an education.”

I WAS EXPECTING AN EARTH-SHATTERING KABOOM: The Green Energy Bubble Is Bursting Fast Everywhere.

So the tech bubble burst a decade ago, and the housing bubble five years ago. The higher education bubble is swelling to the bursting point, but it is the green energy bubble that is bursting loudest at the moment, and as usual environmentalists are slow to see that they’re about to get run over by a revival of the hydrocarbon economy. Those old dinosaurs may have been big lumbering animals, but the nimble fossil fuels they threw off are crushing the so-called green “fuels of the future” beloved of fruit-juice drinkers and vegans everywhere.

I’d prefer a space-solar/nuclear/hydrogen economy myself, but the greens don’t seem to favor that and I’m not sure the tech is ready yet anyway.

HOW’S THAT HOPEY-CHANGEY STUFF WORKIN’ OUT FOR YA? (CONT’D): Jobs? What Jobs? Note this chart in particular:

Why have jobs recovered so slowly, and so little, compared to past recessions?

UPDATE: Reader John Hawkins — no, not that one, another John Hawkins — writes: “You keep saying that Jimmy Carter is a best-case scenario for Broke Obama, and looking at that jobs chart confirms it, at least when it comes to employment. Carter’s recession is the yellow line up in the corner. The current red line is four times deeper and five times longer.”

And reader Brock Cusick emails:

Glenn, this chart is more important than just Obama’s awful stewardship of the economy. Look closer. Look at how each recovery takes longer than the previous one. The longest recovery prior to this one was 2001, and the longest recovery before that was 1991. This is a chart of demosclerosis. We don’t just need to get rid of Obama. We need a hard reset of the entire Federal apparatus. A do-over, if you will. Or the next recession will be even worse – no matter who’s in office.

Here’s a simple solution: Any Federal agency which isn’t delivering real value, is shut down. Give the employees a generous exit package to lessen the human cost, but get the regulators to stop interfering with the economy. And any Federal agency that’s kept, gets six months to re-write the regulations so that they’re clear, transparent, market friendly, and less than 100 pages in length.

And, of course, pass a major tax reform. Make the tax code 10 pages in length. Make that a hard cap.

Works for me.

ANOTHER UPDATE: Economic historian Eric Schubert writes:

There are two basic reasons why the job situation remains so tough:

First, the current recession is a classic balance sheet recession that was 30 years in the making. The housing bubble of the last decade was the culmination of our increasing love of debt and our failure to save. Nouriel Roubini called it four years ago. His analysis – along with Gary Schilling’s – still holds. The large run-up of government debt under the Obama Administration has allowed private balance sheets to heal. – a process very similar to what Nordic countries faced in the 1990s. The process would have happened if John McCain had won in 2008. An inevitability, unless you want 25-30 percent unemployment over a very short period of time. Low job growth is a function of the laws of economics, not politics.

The problem we now face is that next year the government balance sheet will need to be addressed, which will prolong the hiring slump over the next five years. No sign President Present is up to that job.

Second, there is a structural mismatch on skills and education young men and women are getting and what is needed in the economy. Walter Russell Mead has been writing on the subject extensively for the past year. Too many folks leaning on the Blue Social Model for their future; education needs serious reform. Arnold Kling wrote a convincing column months that there is some strong evidence that a comparable mismatch also prolonged the Great Depression.

http://www.american.com/archive/2011/november/what-if-middle-class-jobs-disappear

While I agree with some of Mr. Cusik’s ideas, Obama has done little either way to impact employment. What he did with the stimulus package, however, was one of the most egregious forms of crony capitalism in the history of this country. And as Michael Barone has repeatedly commented, the President still pushes the outdated Blue Social Model from the 1950s, which makes him more of a square than Governor Romney! In that respect, a second term would slow the healing and transformation our economy needs, and which I believe Governor Romney understands or will soon grasp.

Let’s hope.

INVESTOR’S BUSINESS DAILY: Congress Is Making The Higher Education Bubble Worse.

By keeping the price of loans artificially low, Congress will make the value of getting a college degree appear to be worth more than it really is, thereby encouraging more students and their families to take out more loans. That means more demand for college, resulting in higher tuition. So Congress is putting more air into the higher-ed bubble.

So why are lawmakers doing it? The simple answer is the election is six months away, college loans are, in effect, a middle-class subsidy, and neither political party wants to upset loads of middle-class voters. And with all the emphasis both sides are putting on attracting young voters, they especially don’t want to anger them by increasing the price of college.

The somewhat more complicated answer is that politicians know that they are not likely to be blamed if the bubble does eventually burst. The economist Thomas Sowell once told me, “People ask me, after something like the housing bubble, don’t members of Congress ever learn? And I reply, ‘Of course they learn. They learn they can get away with it!’”

Indeed.

HOUSING: The Monster Lurking In The Shadow Inventory.

HOW’S THAT HOPEY-CHANGEY STUFF WORKIN’ OUT FOR YA? (CONT’D): $270 Billion In Student Loans Are At Least 30 Days Delinquent.

UPDATE: Reader Jim Mullis writes:

The parallels between this and the housing crisis 4 years ago are too significant to ignore. Consider this thought experiment. The Student Loan Bubble comes to a crisis point, with or without a Black Swan Event. This happens just before the November election, making it a really big October Surprise. Which political party is better positioned to capitalize on this crisis? Which political Party can count on the narrative being shaped to its liking by major media? If promises of major government “help” or loan forgiveness are made by this political party, how do you suppose those several million student borrowers and their families are likely to vote?

And to take this a bit further, how likely is there to be a groundswell of support for “free” higher education as a result of all this? Any politician who opposes the above does so at his own risk.

Hmm.

WALTER RUSSELL MEAD: Higher Education Bubble Hits Housing Market:

Don’t think you’re off the hook if you aren’t one of these students who owes money. Many economists now believe that we may be approaching a crisis point at which the crushing debt burden faced by twenty and thirty somethings will forestall important life steps like buying a car, getting married, or owning a home. This last item in particular could be a serious blow for the still-shaky housing market. For Boomers looking to retire and supplement their savings with house equity, this is going to hurt: if the rising generation is too burdened by debt to pay top dollar for housing, retiring Boomers are going to get less of a windfall than they were hoping.

Yep. As I’ve said before, it’s hard to buy a house when you’ve basically already got a mortgage.

HOW’S THAT HOPEY-CHANGEY STUFF WORKIN’ OUT FOR YA? (CONT’D): Short sales and foreclosures made up 52 percent of all recent Southern California home sales.

DO LIBERALS OPPOSE AFFORDABLE HOUSING? “So it appears that while liberals push for more federal housing subsidies, they fight against more housing, and hence less affordable housing, at the local level. Now you might suspect that the hope is that one off-sets the other. I wouldn’t be surprised to believe the citizens of, say, San Francisco want the rest of us to subsidize their lifestyle and also believe more federal subsidies can take care of affordable housing needs. But the unfortunate truth is that the two, increased federal subsidies and local supply restrictions, end up driving up housing prices, contributing to housing bubbles and ultimately do little to provide affordable housing. The reason is that increased demand, which is what most federal housing subsidies do, simply drives up price in the presence of inelastic supply. If liberals truly cared about the poor and needy, they’d deregulate their local housing market and actually allow for the provision of affordable housing.”

Yeah, but who wants poor people in Marin?

HOUSING: The true picture of the California housing market – 114,000 foreclosures listed on the MLS but 257,000 foreclosures are active. “Over 622,000 homes are in foreclosure or have missed at least one mortgage payment. 30 percent of California homeowners in negative equity.”

HIGHER EDUCATION BUBBLE UPDATE: Student Debt Hinders Housing. “As outstanding student debt approaches $1 trillion, it’s one more reason record-low interest rates aren’t doing more to boost housing. The tighter lending standards that have emerged in the wake of the recession weigh particularly on younger, first-time home buyers, according to a Federal Reserve study sent to Congress on Jan. 4. These households tend to be younger and often have relatively new credit profiles, lower-than-average credit scores and fewer economic resources to make a large down payment, the report said.”

Yep. It’s harder to qualify for a mortgage when you basically already have one.

HOW’S THAT HOPEY-CHANGEY STUFF WORKIN’ OUT FOR YA? (CONT’D): House Prices Hit Post-Bubble Low. “The housing bust, in other words, appears to be even worse than it was at the nadir of the recession. For millions of homeowners, that’s an unsettling reality, and potentially an issue in the presidential campaign. But the damage may be far more widespread.”

MEGAN MCARDLE: Don’t be too impressed with Krugman’s predictive powers:

What is so strange about this belief–aside from the collective hyperlocal amnesia that prevents them from remembering that yes, even the great Paul Krugman has made some bloomers in his time–is that the examples of his Nostradamus-like powers are not, in fact, at all special. Chief among them–the sort of Ur prediction upon which he has apparently made his reputation–is “calling” the housing bubble in 2003.

Contra the fuzzy recollections of his readers, this is not an example of unusual foresight unparalleled in the world of journalism. I called the housing bubble a full year earlier than he did, in 2002. The Economist was writing about the global housing bubble even earlier than that, thanks to Pam Woodall’s fearsome analytic talents.

This is obviously not a sign that I am possessed of near-superhuman foresight, because while I foresaw the collapse, I did not foresee it leading to a run on the money markets, or any of the other specific events of 2008. Neither, as far as I am aware, did Paul Krugman. Nor, for that matter, Nouriel Roubini, who was predicting a crisis, to be sure, but a completely different crisis from the one we actually got, one that would be triggered by America’s persistent current account deficits and dollar devaluation.

So far, none of the people who have urged me to recognize Krugman’s superior analytic abilities on the grounds that he called the housing bubble, have changed their minds and agreed with me when I informed them that I “called” it even earlier than their sage. Nor have they switched their allegiance to The Economist, which has been quite sharp about Krugman in its time.

I get the feeling that Krugman himself rather encourages this touching faith in his unusual forecasting abilities.

I once had a lot of respect for Krugman as an economist.

HOUSING BUBBLE UPDATE: Real distressed properties of Corona del Mar – Most expensive zip code in Orange County lists 2 foreclosures on MLS but has 28 properties in the shadow inventory. “According to LPS Applied Analytics nearly 40% of homeowners in default have not made a payment in at least two years. The typical foreclosure now takes 674 days. It is one thing to talk about some middle class family in a $150,000 home struggling to get by because of a job loss or illness. But what about squatters sitting in million dollar homes in prime locations?”

JOEL KOTKIN: The Sun Belt’s Migration Comeback.

Along with the oft-pronounced, desperately wished for death of the suburbs, no demographic narrative thrills the mainstream news media more than the decline of the Sun Belt, the country’s southern rim extending from the Carolinas to California. Since the housing bubble collapse in 2007, commentators have heralded “the end of the Sun Belt boom.”

Yet this assertion is largely exaggerated, particularly since the big brass buckle in the middle of the Sun Belt, Texas, has thrived throughout the recession. California, of course, has done far worse, but its slow population growth and harsh regulatory environment align it more with the Northeast than with its sunny neighbors.

Moreover, the Sun Belt is poised for a recovery, according to the most recent economic and demographic data.

Read the whole thing.

A BUBBLE OF LIES: US Housing Market Was Artificially Inflated By 14% In 2007-2010 NAR Reports.

HIGHER EDUCATION BUBBLE UPDATE: A Mortgage With Every College Graduation. “In order to have a healthy housing market you need to have a steady employment base and also a low level of distressed properties. Both of these prerequisites unfortunately are not applicable to the current economy. One albatross of future buyers is the now increasing burden of student loan debt. While virtually every other debt sector has contracted since the recession hit student loan debt is the only segment that has increased dramatically. . . . Just look at the data; in 2000 student loan debt was roughly 2 percent of all household debt. Today student loan debt makes up over 7 percent of total household debt. Many future buyers are going to have their purchasing power curtailed by the amount of debt they are carrying with student loans.”

Yeah, as I’ve been saying for a while, if you graduate college with the equivalent of a mortgage already, you’re not going to be so quick to take on another one.

And check out this graphic:

Others, equally disturbing, at the link. Moral: Something that can’t go on forever, won’t. This can’t go on forever.

HIGHER EDUCATION BUBBLE UPDATE: Virginia Postrel: Universities Feast on Federal Student Aid: Virginia Postrel.

Any serious policy reform has to start by considering a heretical idea: Federal subsidies intended to make college more affordable may have encouraged rapidly rising tuitions.

It’s not as crazy as it might sound.

As veteran education-policy consultant Arthur M. Hauptman notes in a recent essay: “There is a strong correlation over time between student and parent loan availability and rapidly rising tuitions. Common sense suggests that growing availability of student loans at reasonable rates has made it easier for many institutions to raise their prices, just as the mortgage interest deduction contributes to higher housing prices.”

It’s a phenomenon familiar to economists. If you offer people a subsidy to pursue some activity requiring an input that’s in more-or-less fixed supply, the price of that input goes up. Much of the value of the subsidy will go not to the intended recipients but to whoever owns the input. The classic example is farm subsidies, which increase the price of farmland.

Read the whole thing. Including this:

A good chunk of the educated public has decided that college educators are decadent and lazy. Many are positively lusting to see higher education get its Detroit-style comeuppance.

This attitude is unfortunate and often unfair, but it’s the direct result of decades of federal policies. Any strategy to reduce college costs needs to look beyond traditional subsidies to remove some of the insulation that stifles innovation and feeds public resentment.

Indeed.

WITH BARNEY FRANK’S DEPARTURE, FANNIE & FREDDIE LOSE A FRIEND:

Rep. Barney Frank’s Monday decision to retire will remove one of the staunchest defenders of Fannie Mae and Freddie Mac — and may replace the Massachusetts Democrat with an even stauncher defender, California Rep. Maxine Waters. . . . Waters, who has represented South Los Angeles since 1990, has viewed Freddie and Fannie as key to serving low-income housing needs. In a 2003 hearing, she denied that anything at all was amiss with the mortgage giants.

“We do not have a crisis at Freddie Mac, and in particular at Fannie Mae, under the outstanding leadership of Mr. Frank Raines,” she said. She applauded the expansion of its activities too.

In fact, the highly leveraged giants were swollen with subprime loans, which began defaulting when the housing bubble burst in 2007. By 2008, the federal government had to step in.

Technically private, the companies had long benefited from an implicit government guarantee. The housing crisis made that explicit. So far, taxpayers have had to bail out Freddie and Fannie to the tune of about $154 billion.

Waters has been the subject of an ethics probe relating to a meeting she set up with top Treasury officials to help save a minority-owned bank. Her husband was a bank director and shareholder. She has denied any wrongdoing.

I remember when “Insane Clown Posse” was just the name of a band, and not a description of our political class.

HIGHER EDUCATION BUBBLE UPDATE: UNC-Wilmington Professor Tells It Like It Is.

The genesis of the problem in our universities is the “democratization” of education and the easy availability of student loans, “Affordable education,” November 7. The nation is thus saddled with a trillion dollars in student loan debt ready to follow the housing bubble.

The floodgates have been opened wide to campus admission with faculty responding by adding courses and programs that do not prepare students in the important basic areas, especially, in the hard sciences and mathematics. Accordingly, students do not seek truly academic knowledge and skills but are just satisfied with a diploma, which is used by potential employees as a selection tool.

Administrators cater to such business model irrespective of how soft academic programs expand exponentially with the more solid academic curricula not being supported and even eliminated. Students are thus shackled with bogus degrees that lead nowhere. The state subsidizes students and so the increase in the number of students results in higher tuition costs for all. . . . The failure of K-12 education is finally creeping and crippling our entire university system. Too bad.

Indeed.

SO I’M NOT SURE WHETHER TO FILE THIS UNDER “HIGHER EDUCATION BUBBLE UPDATE” OR “HOUSING BUBBLE UPDATE.” Animal McMansion: Students Trade Dorm for Suburban Luxury.

While students at other colleges cram into shoebox-size dorm rooms, Ms. Alarab, a management major, and Ms. Foster, who is studying applied math, come home from midterms to chill out under the stars in a curvaceous swimming pool and an adjoining Jacuzzi behind the rapidly depreciating McMansion that they have rented for a song.

Here in Merced, a city in the heart of the San Joaquin Valley and one of the country’s hardest hit by home foreclosures, the downturn in the real estate market has presented an unusual housing opportunity for thousands of college students. Facing a shortage of dorm space, they are moving into hundreds of luxurious homes in overbuilt planned communities. . . .

The finances of subdivision life are compelling: the university estimates yearly on-campus room and board at $13,720 a year, compared with roughly $7,000 off-campus. Sprawl rats sharing a McMansion — with each getting a bedroom and often a private bath — pay $200 to $350 a month each, depending on the amenities.

Gurbir Dhillon, a senior majoring in molecular cell biology, pays $70 more than his four housemates each month for the privilege of having what they enviously call “the penthouse suite” — a princely boudoir with a whirlpool tub worthy of Caesars Palace and a huge walk-in closet, which Mr. Dhillon has filled with baseball caps and T-shirts.

Or maybe it’s just a sign that today’s students know a good opportunity when they see one.

HIGHER EDUCATION BUBBLE UPDATE: Fearing Massive Debt, More Students Are Choosing to Enroll at Public Colleges Over Elite Universities. “As student-loan default rates climb and college graduates fail to land jobs, an increasing number of students are betting they can get just as far with a degree from a less-expensive school as they can with a diploma from an elite school—without having to take on debt. More students are choosing lower-cost public colleges or commuting to schools from home to save on housing expenses. Twenty-two percent of students from families with annual household incomes above $100,000 attended public, two-year schools in the 2010-2011 academic year, up from 12% the previous year, according to a report from student-loan company Sallie Mae. “

MATT WELCH: The Only Thing Missing From “The New Declaration of Independence”: Any Sense That Adults Are Responsible for Their Choices.

Cradle-to-grave employment (at least outside the public sector) has been dead since at least the end of the Cold War. Undergraduate degrees in English and Film and Sociology and Philosophy (and a thousand other subjects) have had debatable workplace utility for as long as I’ve been alive. There have even been previous housing bubbles and busts in Alex Pareene’s lifetime.

I don’t recall anything like the promises so cruelly unkept in Salon’s list. I do remember my father warning me that an engineering degree would be much more useful in the workplace than English, to which I uttered a phrase available to 18-year-olds everywhere: Thanks, Dad; not your call. Ditto for the legions of well-meaning adults urging me to finish my undergraduate degree, to sign up for the Selective Service, and even (when I finally attained a decent living in the second half of my 30s) to pay a mortgage instead of paying rent. One of the best perks about being a grown-up is that you get to make your own choices, and to own the results, good and ill.

Which is why phrases like “wage slaves,” “inescapable debt,” and “force” “force” “force” leave me feeling like a brother from another planet. Adult human beings have agency, the ability (even responsibility!) to run their own cost/benefit analyses and choose accordingly.

Well, some people are doing their best to stamp that out.

Plus this: “And since when have right-thinking liberals from the creative class bragged about ‘playing by the rules’ anyway? Is it really my imagination that the point used to be something closer to the opposite?” That was then, when the pie of Other People’s Money seemed endlessly expanding. Now that it’s contracting, things are different.

ANNE APPLEBAUM: It’s not the rich who are destroying middle America, it’s the upper-middle-class.

Related: Stuck At the Bottom: Culture And The American Dream.

UPDATE: Maybe it’s more a New Class problem. Here’s something I wrote a while back:

Rand Simberg blames BBC snobbery on upper-middle-class sensibilities, and I think he’s almost right. It’s really a case of New Class sensibilities.

I can’t help but notice that anti-Americanism, and the various manifestations of what some have called Transnational Progressivism, are most common among people who, well, have state-supported managerial or intellectual jobs, the people who made up what Milovan Djilas and others called the “New Class” of bureaucrats and managers in the old Communist world. Not surprisingly, the New Class was deeply concerned with matters of status and position, and deeply opposed to things that might have led to competition on merit. There’s nothing new about such a view, which predated communism: As David Levy and Sandra Peart note, it’s an attitude that even in the nineteenth century was characteristic of anti-capitalists and anti-semites – and, nowadays, there’s a lot of overlap between anti-capitalists, anti-semites, and anti-Americans.

A common thread among anti-semitism, anti-capitalism, and anti-Americanism is the fear of being outdone by people willing to work harder. It’s not surprising that such a fear exists among a disproportionate number of those who take state-supported jobs. It’s thus not surprising, then, that New Class sensibilities are so often anti-American and anti-capitalist, and increasingly (or perhaps I should say, once again) anti-Semitic, too. The New Class, in this regard, as in many others, is like the old haut-bourgeoisie.

The New Class is characterized as much by self-importance as by higher income, and is far more eager to keep the proles in their place than, say, Applebaum’s small-town dentist. It’s thus not surprising that as its influence has grown, economic opportunity has increasingly been closed down by government barriers.

MORE: Further thoughts from Ross Douthat:

The public-sector workplace has become a kind of artificial Eden, whose fortunate inhabitants enjoy solid pay and 1950s-style job security and retirement benefits, all of it paid for by their less-fortunate private-sector peers. Some on the left have convinced themselves that this “success” can lay the foundation for a broader middle-class revival. But if a bloated public sector were the blueprint for a thriving middle-class society, then the whole world would be beating a path to Greece’s door.

Our entitlement system, meanwhile, is designed to redistribute wealth. But this redistribution doesn’t go from the idle rich to the working poor; it goes from young to old, working-age savings to retiree consumption, middle-class parents to empty-nest seniors. . . . Then there’s the public education system, theoretically the nation’s most important socioeconomic equalizer. Yet even though government spending on K-to-12 education has more than doubled since the 1970s, test scores have flatlined and the United States has fallen behind its developed-world rivals. Meanwhile, federal spending on higher education has been undercut by steadily inflating tuitions, in what increasingly looks like an academic answer to the housing bubble. (If the Occupy Wall Street dream of student loan forgiveness were fulfilled, this cycle would probably just continue.)

The story of the last three decades, in other words, is not the story of a benevolent government starved of funds by selfish rich people and fanatical Republicans. It’s a story of a public sector that has consistently done less with more, and a liberalism that has often defended the interests of narrow constituencies — public-employee unions, affluent seniors, the education bureaucracy — rather than the broader middle class.

Do tell.

HIGHER EDUCATION BUBBLE UPDATE: The Global Overselling Of Higher Education. “Central planning — of the whole economy, or of the housing market, or of education — always wreaks a great deal of damage.”

SPENGLER: Wall Street Protestors Have Met the Enemy and It Is They.

That is why the Wall Street protesters are foolish and petulant. American households levered a $6 trillion net inflow of foreign savings during the decade 1998 through 2007 into a bubble that benefited them far more than it did Wall Street. The impact of the bubble on the household balance sheet exceeds the growth in real-estate assets, moreover, because most small business expansion followed the housing bubble.

For fifteen years we rode a tsunami of foreign capital pouring into American markets. We didn’t save a penny. Why should we? Our home equity was our retirement account. Our smartest kids got MBAs and went to Wall Street derivatives desks. Engineering was for dummies. Home prices rose so fast that local governments swam with tax revenues and hired with abandon. Everybody went to the party. Now everybody has a hangover, especially the bankers. We thought we were geniuses because we won the lottery. Now we actually have to produce and export things, and we have to play catch-up. Our kids are competing with Asian kids who go to cram school and practice the violin in the afternoon. This isn’t going to be easy, and the sooner we decide to roll up our sleeves and get back to work instead of looking for bankers to blame, the better our chances of coming back.

Read the whole thing.

DR. HOUSING BUBBLE: The reluctant California home seller – 35 percent of homes bought pre-2000 in California yet sellers still expect unrealistic prices. Market dominated by distressed properties of foreclosures and short sales. I still see a lot of unrealistic sellers around here, too. Plus this: “Ultimately the market can only support what local household incomes can adequately carry and if you haven’t been paying attention, the California economy isn’t exactly booming.”

A LOOK AT the housing bubble in Bel Air. It’s worse than you think. “Here is someone that waited one year too long to exit the market. If this home was put on the market in early 2007 it would have fetched $1 million and more easily. Yet listing it in September of 2008 when the markets were imploding in historical fashion was not exactly good timing. The chase to the bottom is rather clear. It went from a listing price of $1,495,000 to the current list price of $870,000. Will this home sell at that level? . . . Of the 23 homes listed on the MLS for Bel-Air 3 are short sales and one home is listed as a foreclosure. Yet this does not tell us the entire story and this is the continuing saga of problems that we will be facing for years to come.” Chasing the market down is the worst mistake you can make but I keep seeing people do it. (Via NewsAlert).

HIGHER EDUCATION BUBBLE UPDATE: Be Realistic About Planning For College Costs.

After many families carefully mapped out a plan to pay for college costs, the economy’s downward spiral forced them to rip it up.

State-budget cuts forced many colleges and universities to make huge tuition hikes. Job losses siphoned money for college savings accounts.

When home values nose-dived during the housing bust, students and parents lost the ability to tap home-equity lines for extra cash. The Dow’s wild swings have chewed up balances in 529 college-saving accounts, which often include stocks.

“Parents are desperate,” said April Osborn, executive director of the Arizona Commission for Postsecondary Education, which administers several federal and state grants that go to Arizona college students.

Don’t be desperate. Look for cheaper alternatives, which abound. If they miss out on the “college experience” because they start out at a community college and then finish as commuter students at a public university, well, that’s too bad but it’s not tragic, and it’s certainly not worth bankrupting yourself to avoid.

KENNETH ANDERSON ON regulatory scrutiny of the ratings agencies. My prediction is that not much will come of this, because when they investigate they’ll find that many politicians — including some major Democratic operatives with connections to the Administration — were encouraging the ratings agencies to turn a blind eye to the problems during the housing bubble. Then the story will fade away.

A HOUSING BUBBLE, A HIGHER EDUCATION BUBBLE, AND NOW . . . A BURGER BUBBLE? “Michelle Obama invested heavily in burgers. I’m thinking it’s time to short them.”

MICHAEL BARONE: Government looks to past, free enterprise to future.

Decision makers have responded as if they were facing liquidity crises (we don’t have enough cash to pay off debts immediately) instead of solvency crises (we will never be able to pay off these debts). Too often pain has not been prevented, but just postponed — and prolonged.

In retrospect much of the pain could not be avoided. As economist Tyler Cowen has put it, we were not as rich as we thought we were. Housing bubble prices did not turn out to be real wealth, unless you sold out at the peak and moved to a cave.

Trying to put everyone back in the position they once thought they were in simply won’t work. But it does sound attractive politically. People can remember what life was like in the past.

We don’t, however, know what it will be like in the future. Republicans want less government spending and more leeway for entrepreneurs to create new businesses and jobs. No one knows what innovative products and services will emerge.

That’s the beauty of free enterprise, but it also makes it a hard sell politically. Unless voters have figured out no amount of government spending is going to restore the old status quo.

Well, if they haven’t figured it out, they will. But the longer it takes them, the more damage will be done.

A REPORT FROM inside the Higher Education Bubble. “Perhaps most troubling to me, as an adjunct history instructor at a community college, is the situation faced by college students who are like the housing speculators of 2005 and 2006.”

UPDATE: A reader emails:

I’ve been following your Higher Education Bubble posts with some interest. I happen to work for a Midwest based company that specializes in outsourcing plant maintenance. It’s a growth industry because so many of current manufacturing maintenance employees are in the late 50’s, and there is a great dearth of qualified folks to replace them. We recruit heavily from the military because it’s one of the last best places that produce motivated, experienced, and qualified technicians. That kid with a French Lit. degree flipping burgers would have done better to have gone to tech school, community college or the Big Green Machine and learned how to maintain electrical or hydraulic equipment. They’d be earning 40-50K within a year or two and they most certainly wouldn’t have a problem finding a job.

I’m not overly worried… the Market will provide. I just know that when my son comes of age, unless he’s going into IT or engineering, it’s the local community college or the military for his education.

Not a bad idea.

MORE HIGHER EDUCATION BUBBLE THOUGHTS.