Best of the Week
Most Popular
1.The Trump Reset, US Empire's Coming Economic, Cyber and Military War With China (2/2) - Nadeem_Walayat
2.Now Is the Time to Buy Gold - 5th Jan 17 - John Grandits
3.CIA Planning Rogue President Donald Trump Assassination? Elites "Manchurian Candidate" Plan B - Nadeem_Walayat
4.The Trump Reset - Regime Change, Russia the Over Hyped Fake News SuperPower (Part1) - Nadeem_Walayat
5.Most Popular Financial Markets Analysis of 2016 - Stock Market Crash Postponed Again - Nadeem_Walayat
6.No UK House Prices Brexit Crash 2016 Despite London Weakness, Forecast 2017 - Nadeem_Walayat
7.President Trump Understands the NSA, CIA... LIE, America's Intelligence Agencies Crime Syndicate! -Nadeem_Walayat
8.President Donald Trump's 2017 New Year Message, BBC Fake News, Was 2016 a Dream? - Nadeem_Walayat
9.Major Stocks Bear Market Still Looms - Zeal_LLC
10.Biased 2017 Forecasts - Debt, Housing and Stock Market (1/2) - James_Quinn
Last 7 days
Will the CIA Assassinate Rogue President Donald Trump Like JFK? - 19th Jan 17
Bonds, Dollar, Stocks, Gold, Silver Major Markets at Turning Points - 19th Jan 17
Populism; the Danger? What About Debt? - 19th Jan 17
Gold Price 50-DMA Breakout - 19th Jan 17
Turkey, 'Axis of Gold' and End of US Dollar Hegemony - 19th Jan 17
The Most Important Market Chart on the Planet - 19th Jan 17
Trump Deficits Will Be Huge - 19th Jan 17
Stock Market Trading Patience Pays Off with CHK Using Momentum Reversals - 19th Jan 17
Gold - How to "Buy Low and Sell High" Like a Pro - 19th Jan 17
State of the Global Stock, Financial and Commodity Markets Report 2017 - 19th Jan 17
The Hunt for Russia's Next Enemy - 18th Jan 17
Returning Gold Bulls - 18th Jan 17
Biotech Breakthrough Could Create A $11.4 Trillion Opportunity - 18th Jan 17
Bitcoin and Gold - Outlook, Volatility and Safe Haven Diversification - 17th Jan 17
Stock Market Uptrend on Borrowed Time - 17th Jan 17
The One Stock to Retire On - 17th Jan 17
Trump anti-Communist Counter Revolution - 17th Jan 17
US Stock Market Update as the Trump Inauguration Approaches - 17th Jan 17
The American Crisis - Common Sense 2017 - 17th Jan 17
Obama Leaves, Hope Arrives, Will Stupid Stay? - 17th Jan 17
Damage Inflicted by Precious Metals Manipulation Is in the “Multi Billions” - Keith Neumeyer - 17th Jan 17
Gold Price Forecast 2017 Update - Video - 17th Jan 17
The Story of the U.S. Regime Change Plan in the Philippines - 16th Jan 17
Gold Price 2017 Trending Towards $1375 as Forecast - 16th Jan 17
'Deep State' CIA Director States We are Not NAZI's, Warns Trump Does Not Understand Russian Threat - 15th Jan 17
UK House Prices Forecast 2017 - Crash or Bull Market? - Video - 15th Jan 17
SPX Stocks Bull Market Update - 14th Jan 17
President Trump vs the Deep State that Hides in Plain Sight - 14th Jan 17
The Impact of Sir Alex Ferguson's Retirement on Man United's Share Price - 14th Jan 17
What Can Stock Market Tell You About Politics? - 13th Jan 17
Big Gold Buying Coming 2017 - 13th Jan 17
A Bullish Case for Gold 2017 - 13th Jan 17
Will Stocks Bull Market Continue to Charge or is it Time to Sell the News - 13th Jan 17
Gold and Silver Off To Shining Start to 2017 - 13th Jan 17
Gold’s Fundamental Outlook for 2017 - 13th Jan 17
Is trading stocks and shares just as luck-based as roulette? - 13th Jan 17
Trump CIA Like Nazi Germany - Fake MI6 Intelligence leaked to Fake News Mainstream Media - 13th Jan 17
USD in Decline. SPX and TNX May Follow - 12th Jan 17
CIA War On Trump - Leaks Fake MI6 Intelligence to Fake News Broadcast Media - 12th Jan 17

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

State of Global Markets 2017 - Report

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

© 2005-2016 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

Catching a Falling Financial Knife