Best of the Week
Most Popular
1.Gold Price Target of USD 2,300 - GoldCore
2.Greece Banking System Collapse Monday as ECB Pulls the Plug, Capital Controls Ahead of GrExit - Nadeem_Walayat
3.Why British Muslims Are Leaving Elysium Paradise for Syrian Hell - Nadeem_Walayat
4.Greece BANKRUPT! Financial and Economic Collapse to Follow IMF Debt Default - Nadeem_Walayat
5.Extreme Gold/Silver Shorting - Zeal_LLC
6.European Empire Strikes Back Against Greek Debt Fantasy, Counting Down to GREXIT - Nadeem_Walayat
7.Gold And Silver – Three Choices: Sell, Hold, Hold and Add. A Trading Treatise - Michael_Noonan
8.Gold and Silver Price Headed for Breakdown - Jordan_Roy_Byrne
9.Greece Crisis OXI - Raul_I_Meijer
10.Flatline Investing and Dead End Debt Schemes - Doug_Wakefield
Last 5 days
Financial and Commodity Markets Become Scary: Crash Point Or Turning Point - 5th July 15
A Revolutionary Pope Calls for Rethinking the Outdated Criteria That Rule the World - 5th July 15
Forget 'Haircut', Instead Syriza Plans Beheading of Greek Bank Depositors, Theft of Deposits - 5th July 15
The Pentagon’s 2015 Strategy For Ruling the World Through Endless War - 5th July 15
United States Celebrates the Disastrous Secession From Great Britain - 5th July 15
Greece Referendum Vote Result Forecast Yes Win, But Depression Will Continue - 5th July 15
The Great Greek Economic Depression - 4th July 15
Happy 4th of July Stock Market Analysis - 4th July 15
The Most Pressing Reason Yet You Want to Avoid Investing in Retail Stocks - 4th July 15
Fed’s Full Normalization and the Stock Market - 3rd July 15
The U.S. Dollar's 2014-2015 Rally: Wave 3 in Action - 3rd July 15
Stock Market Where are we? And where are we Going? - 3rd July 15
Xi’s Anti-Corruption Campaign Is Key to China’s Prospects - 3rd July 15
How the New Iranian Nuclear Deal Will Impact Crude Oil - 3rd July 15
China's Stock Market Rollercoaster Ride Continues - 3rd July 15
Gold Stocks Cheap to Buy but Not for Long - 3rd July 15
Capital Controls and a Bank Holiday in Greece… Here’s How You Can Profit - 3rd July 15
Greece's Varoufakis: I will Resign if there's a 'Yes' Vote - 2nd July 15
The Student Loan Bubble: Gambling with America’s Future - 2nd July 15
Inflation Is Lurking, but This Asset Can Protect You - 2nd July 15
Three Total Wealth Stock Investor Tactics You’ll Need Because Greece Isn’t Over - 2nd July 15
Why This $5.6 Trillion Investor Profit Boom Is Set To Take Off - 2nd July 15
Greek Debt Crisis: "Too late to prepare now" - Video - 2nd July 15
Guaranteed US Dollar Death Dynamics - 2nd July 15
The Greek Stress Test & The Reality Of Incremental Changes - 2nd July 15
Forget Drachmas Greece Syriza Government Could Instruct Central Bank to Print Euros! - 2nd July 15
Greece Debt Crisis Trigger for Stock Market Crash or Bull Rally? Video - 1st July 15
Gold Stocks Break Below 2008 Low - 1st July 15
SPX Stock Market Retracement May be Over - 1st July 15
Silver Tunnel Vision 'Experts' - 1st July 15
Gold And Silver - Monthly, Quarterly Ending Analysis - 1st July 15
Europe’s Controlled Demolition - 1st July 15
The End of Dow 18,000; Bailouts No Longer Extended  - 1st July 15
Athens Mayor: Greek Government Should Resign - 1st July 15
China Stocks - This Is What a Bubble Looks Like - 30th June 15
Stocks Plunge on Greece Euro-Zone Financial Armageddon Blackmail - 30th June 15
Greece Crisis Shows Importance of Gold as Europeans Buy Coins and Bars - 30th June 15
Stock Investors Express Route to Profits in the Healthcare Sector - 30th June 15
Beyond the Greek Impasse - 30th June 15
Gold GDXJ : Impulse Move Pending - 30th June 15
Fed Interest Rate Increase Could Be Best Thing to Happen to Gold - 30th June 15
Marc Faber - Greece is Basically Bankrupt - 30th June 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

China Stocks - Where are they going?

New American Socialism, One of the Most Obvious Frauds Ever Foisted on the American People

Politics / US Politics Jul 05, 2011 - 07:50 AM GMT

By: DailyWealth

Politics

Best Financial Markets Analysis ArticlePorter Stansberry writes: Yesterday, I left you with a question...

Over the past few days, I've described what I call New American Socialism. As I've shown you, it's a kind of legal corruption whereby the risks of doing business are assumed by the taxpayers... but the profits still accrue to private enterprise.

The corruption has infected one industry after another. And it's weighing down our economy... But I've actually preferred having it in many of the stocks I've recommended over the years. It tends to be good for investors.
 
So the question now is, am I still interested in buying into New American Socialism? It's a difficult question... and the answer is complicated. So bear with me...
 
In yesterday's essay, I described a tragedy unfolding in the education sector. If you missed the essay, I suggest you go back and give it a read. You'll find the numbers disturbing.
 
Essentially, the for-profit education industry is selling a product its customers cannot afford.
 
This industry games the rules of the government and spends a fortune on lobbying – more than $12 million in the last year. This industry would literally not exist without government-guarantees standing behind 90% of its revenues.
 
And Wall Street experts estimate this industry will rack up around $250 billion in credit losses over the next decade – an amount of money that exceeds the losses from Fannie Mae and Freddie Mac so far.
 
All these risks will eventually cost the U.S. Treasury billions of dollars. You see, this industry overwhelmingly targets women and minorities – people who are often up against a wall financially. These students will never be able to repay these debts.
 
While these students have no financial skin in the game (many borrow 100% of their tuition), they face enormous consequences down the road from this scheme... Student loans are notoriously difficult to discharge, and many borrowers will be crippled financially by the obligations they cannot afford.
 
The facts of this situation are incontrovertible and well known – even inside the current president's administration. And yet... even when all of these facts were studied and reviewed... what did the president do?
 
Critics had demanded so-called "gainful employment" regulations that would limit how much a student could borrow to an amount of money he would likely be able to repay based on the current employment and income track record of other alumni. Obviously, such sensible regulation was never likely to be implemented by Washington... especially not by a minority president when the funding in question goes overwhelmingly to poor, minority students.
 
Instead, in early June, Obama's administration promulgated a new set of rules that were supposed to address the abuses and the risks of the government's generous funding rules for for-profit education.
 
The new rules actually loosen the funding requirements – substantially.
 
Colleges will be eligible for federal support as long as at least 35% of their students are repaying their loans over the first three years. Now, up to 65% of the students can default. And what about limiting loan amounts to ability to repay? Loan amounts may not exceed 30% of anticipated discretionary income.
 
How will students pay for food, housing, transportation, insurance, etc. if they're spending 30% of their incomes on student loans?
 
Rather than tightening the standards, the new rules actually loosen the standards. They also go further in guaranteeing continued federal support. Under the new rules, no schools will lose funding until 2015 at the soonest, to give them time to adapt to the new "standards," which were trumpeted as a major reform.
 
Only in Washington D.C.
 
The for-profit education "business" is one of the most obvious frauds ever foisted on the American people. The industry has been structured to take advantage of the least sophisticated members of society. It promises benefits the average student is unlikely to achieve: a better job and a better life. Instead, these students are saddled with unpayable debts and enjoy no corresponding increase in wages.
 
Assuming the government should not do anything to protect the students from this fraud, shouldn't the risks of perpetrating this fraud be left with the companies themselves? Let for-profit education companies guarantee these loans. Let them take the risk that these debts will never be repaid.
 
But that's not how New American Socialism works. What happens is, all the profits of this scam go to the executives and the shareholders. The risk goes to the government.
 
Our leaders are now so corrupted by New American Socialism they can't even stop the for-profit education scheme I describe above.
 
The facts, by the way, aren't even in dispute. This is the obvious stuff – the stuff no one can really dispute. If our leaders let this industry rack up $250 billion in bad debts over the next decade, how can we expect them to do anything to stop our massive annual deficits and our runaway federal debt?
 
If the administration can't stop the for-profit education industry from getting its hands into the U.S. Treasury, whom will it stop? Nobody.
 
So the only real question is: Do I want to be buying stocks – any stocks – right now?
 
When I consider the unsustainable debts and unfunded liabilities the government has taken on... and the upcoming credit crisis New American Socialism has created... I arrive at the answer: "No."
 
Regards,
 
Porter Stansberry
P.S. Our best hope for more stability and a return to prosperity is for people to realize that what we've been doing so far isn't solving our problems. It only makes them worse. But... I'm not optimistic.
 
In the latest issue of my newsletter, Stansberry's Investment Advisory, I detail my best two new ideas to profit from the next stage of this crisis. To learn more about my advisory and access the issue, click here.

http://www.dailywealth.com

The DailyWealth Investment Philosophy: In a nutshell, my investment philosophy is this: Buy things of extraordinary value at a time when nobody else wants them. Then sell when people are willing to pay any price. You see, at DailyWealth, we believe most investors take way too much risk. Our mission is to show you how to avoid risky investments, and how to avoid what the average investor is doing. I believe that you can make a lot of money – and do it safely – by simply doing the opposite of what is most popular.

Customer Service: 1-888-261-2693 – Copyright 2011 Stansberry & Associates Investment Research. All Rights Reserved. Protected by copyright laws of the United States and international treaties. This e-letter may only be used pursuant to the subscription agreement and any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), in whole or in part, is strictly prohibited without the express written permission of Stansberry & Associates Investment Research, LLC. 1217 Saint Paul Street, Baltimore MD 21202

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Daily Wealth Archive

© 2005-2015 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Biggest Debt Bomb in History