re: The importance of student debt to the consumerist economy

Chomsky entertains me. He's a smart guy, smarter than me, but he's never really clear about where he's going with it. His work points to communism, in its purest form.

Essentially, less than 1% of the world's population hold more than 99% of the wealth, and the human condition is a result of this lopsided distribution. This snip about student loans is just one pixel of any Chomsky-esque 70" LCD TV.

I interpret political philosophy the same way I listen to music; to what end? Where is this going? Am I going to get verse chorus verse chorus bridge verse chorus? Or is this going somewhere?

The problem with Chomsky's end game is that a theoretical redistribution of wealth would end up back in the hands of the top 1% within a few decades, if not sooner. Unless you put severe restrictions on how wealth can be transferred. And then you are a real slave to the system, much more of a system slave than we are now under capitalism, at least in the free and developed world.


More to be said, but life calls.

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That school also has over a billion dollar endowement. Do you know what an endowement is?

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Yes, I am very aware. Didi you not read my earlier post? The point is many feast on new dollars at the pig trough of modern college money while getting farther and farther from actually educating the students.

Look, I have never been, nor will I be, massively rich. I have however worked for them and the money wasted is pretty insightful. All this pales compared to the financial waste in modern "public" institutions of higher education.

While a billion dollar endowment at a tiny school in KY who grew it over the past 50 years or so is something to learn from. If say Auburn had followed a similar path they may be sitting on a 20 billion dollar endowment instead of a measly 600 million. The bigger the institution the greater economies of scale. Imagine if a portion of the Auburn undergrads were growing the food to feed the school? Think of how the savings would add up. No middlemen, greatly reduced transportation costs, and healthier diets lower in fats and preservatives.

It is indeed a model but it need not be unique in how other schools can educate their students in both academics and life experiences while controlling spending and actually lowering the cost of higher education. Again, growing the cost of education at 6% to 12% a year is not sustainable over the long term if you have any appreciation of the Laws of 72.

If I win 500 million in the lottery, and get diagnosed with 6 months to live on the same day, and decide I am going to put that money to good use by creating Deeprig9 University with 10 million and putting the 490m in an account to acrue interest to pay for ongoing expenses long after my death, then Deeprig9 University would have a 490m endowment. If the interest acrued on that money exceeds the annual expenses in a year, then the overage gets added back to the endowement, thus increasing the endowement. If future grads donate money later on, that would also grow the endowement.

Do you now understand what an endowement is?


And now that you do, can you see my point?

Where are all of the other colleges and universities in America going to get their endowements? And what if 99% of their students don't qualify for Pell grants? What if only 60% qualify?

Start up furniture manufacturing plants?

You go to a guy who made big money and put the touch on them for some real cash. Invest that cash. Use that income to fund educational expenses like chairs, scholarships, and things that make your school better.

Some may be blank checks but many are restricted like donor drops 1 million to endow a chair in chemistry at good old state U because they went there and majored in chemistry. Do I have the picture down pretty well?

Endowments do not generally go to athletics but do go to buildings and equipment in the education side along with funding for teaches and students on the soft side.

Lets say I worked for Richie Rich and he inherited 2,000,000 shares of Coca Cola stock and his basis for taxes was 1 dollar a share but Coke is trading at 40 dollars a share and throwing off 1.20 a share in annual dividends. Ritchie Rich is a UGA alumni and drops 1,000,000 shares to endow future scholarships for future UGA scholars who drink Coke.

In theory UGA now has about 40,0000,000 in endowment money throwing off 1.2 Million in annual scholarship money. It was free money to them and the KO divided has been historically stout so it is free money spitting out more free money as long as it remains untouched. Instead of being happy they sell it and invest in some private equity deals sold by some Wall Street guys with no skin in the game. In addition they drop some in hedge funds and commodity trading and leverage up the risk while providing no income to feed the scholarship needs on a yearly basis.

2008 - or similar event - rolls around and that 40 million turns to 20 million overnight and all the while not throwing out real dollars to fund the needs. Folks at UGA do not care, they just roll the money train up to the next Ritchie Rich they can land and the cycle repeats. Now do you think I understand how it works?

Look I know lots of folks my age who built up positions in stable - but not sexy - investment vehicles who are living on retirement funded by the rents and dividends they provide. Safe, slow, but steady on the income while allowing the principle to remain untouched.

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You go to a guy who made big money and put the touch on them for some real cash. Invest that cash. Use that income to fund educational expenses like chairs, scholarships, and things that make your school better.

Some may be blank checks but many are restricted like donor drops 1 million to endow a chair in chemistry at good old state U because they went there and majored in chemistry. Do I have the picture down pretty well?

Endowments do not generally go to athletics but do go to buildings and equipment in the education side along with funding for teaches and students on the soft side.

Lets say I worked for Richie Rich and he inherited 2,000,000 shares of Coca Cola stock and his basis for taxes was 1 dollar a share but Coke is trading at 40 dollars a share and throwing off 1.20 a share in annual dividends. Ritchie Rich is a UGA alumni and drops 1,000,000 shares to endow future scholarships for future UGA scholars who drink Coke.

In theory UGA now has about 40,0000,000 in endowment money throwing off 1.2 Million in annual scholarship money. It was free money to them and the KO divided has been historically stout so it is free money spitting out more free money as long as it remains untouched. Instead of being happy they sell it and invest in some private equity deals sold by some Wall Street guys with no skin in the game. In addition they drop some in hedge funds and commodity trading and leverage up the risk while providing no income to feed the scholarship needs on a yearly basis.

2008 - or similar event - rolls around and that 40 million turns to 20 million overnight and all the while not throwing out real dollars to fund the needs. Folks at UGA do not care, they just roll the money train up to the next Ritchie Rich they can land and the cycle repeats. Now do you think I understand how it works?

Look I know lots of folks my age who built up positions in stable - but not sexy - investment vehicles who are living on retirement funded by the rents and dividends they provide. Safe, slow, but steady on the income while allowing the principle to remain untouched.

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But every major university already does this....

You have a baby...I have a couple of young ones. If you run projections based on the "average" tuition increase over the last 10 yrs you'll see pretty quickly that it isn't sustainable. It's ridiculous how the availability of credit has blown huge bubble in the areas that loans can finance.

It's no secret that the Internet for profit "colleges" have been scamming the govt for years. Signing up kids and taking their $$$, and leaving the them with worthless degrees and tons of debt - they're the junk bonds of the college set. The big University's are bloated too...raking in tons from lotto money, govt grants and loans....they just need to make room and the cash flows in. I don't see how any 19 yr old could earn enough to attend college without help if you factor in room, board, etc.

The crunch won't hit until the govt printing presses dry up...which may be soon but will definitely be within 15 yrs because that'll be when the Medicare wave crests.

I'm trying to convince my boys to be painters or boat mechanics....it's hard as hell to find one of those worth a shite and the ones that are good can make a mint.

Agreed...but the same govt backstop that bailed out the banks in 2008 is supporting the student loan industry....which creates the same ridiculous moral hazard as the people making the loans have no interest in whether they can be paid or not.

This has to stop in order for the system to correct. And this won't stop until the Fed and treasury cannot jump in with unlimited debt to fund the defaults.

Or least that's how I see it breaking down...

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Chomsky entertains me. He's a smart guy, smarter than me, but he's never really clear about where he's going with it.

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Chomsky is at the head of a class of people that has slowly been taken out of society. The real intellectual class, from all sides, gets totally ignored by media.

I rip into Chomsky. He's a bad communicator, especially for being the father of linguistics. There is no climax. No high or low. I have to remember that nowadays this has a lot to do with his age, but still, his young stuff is still poorly delivered.

But I still go back to him time n again and absorb his knowledge as much as I can.

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His work points to communism, in its purest form.

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He's an anarchist/libertarian socialist.

This is a mysterious and seemingly contradicting label to most Americans.

That alone should tell you that there's something more to the story than the big government vs small government duality of conservatives and liberals.

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The problem with Chomsky's end game is that a theoretical redistribution of wealth would end up back in the hands of the top 1% within a few decades, if not sooner. Unless you put severe restrictions on how wealth can be transferred. And then you are a real slave to the system, much more of a system slave than we are now under capitalism, at least in the free and developed world.

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Let's not pretend like you know his prescription for how society should be run.

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Let's not pretend like you know his prescription for how society should be run.

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What you are saying here is that I'm right about Chomsky but for the wrong reasons?