Best of the Week
Most Popular
1.UK General Election 2015 - Forecasting Seats for SNP, LIb-Dems, UKIP and Others - Nadeem_Walayat
2.UK General Election 2015 Seats Forecast - Who Will Win? - - Nadeem_Walayat
3.Gold Price Downtrend Looks Set to Continue - Clive_Maund
4.Commodity Prices Set To Plunge Below 2008 Lows - Austin_Galt
5.New Greece Drachma Revealed Amid Bank Runs - Greeks Buy Gold Sovereigns - GoldCore
6.Gold and Silver Stocks or General Stock Market Indices? - Rambus_Chartology
7.“Forgive Us Our Debts” – Only Way To Prevent Economic Meltdown - GoldCore
8.UK House Prices Trend 2015 and the May General Election - Nadeem_Walayat
9.12 Reasons Why Barry Ritholtz and Many UK Experts Are Mistaken On Gold - GoldCore
10.Recession is On The Way; Beat The Stock Market Crowd, Panic Now! - Mike_Shedlock
Last 5 days
Bondholders “Bailed In” In Austria – New Banking Crisis? - 3rd Mar 15
How to Profit from the Coming Oil Price Crunch - 3rd Mar 15
Is Japan Zimbabwe? Could Japan go Hyperinflation? - 3rd Mar 15
Bill Gross Says Fed May Raise Rates 25 Basis Points in June - 3rd Mar 15
The Secret Behind My Hedge Fund Trade on U.S. Housing Market - 3rd Mar 15
BLS CPI Lie - How's That Dsflation Working Out for You? - 3rd Mar 15
Tesla Bonfire of the Money Printers’ Vanities - 3rd Mar 15
Gold Demand in UK, Europe and U.S. – Reuters Interview GoldCore - 2nd Mar 15
Watch the Skies... for Investor Profits - 2nd Mar 15
How Investors Can Identify the Best Small-Cap Stocks - 2nd Mar 15
Gold and Silver - What If the Precious Metal Stocks Bulls are Back - 2nd Mar 15
Students Getting a PhD in Subprime Debt - U.S. Debt Breaking Bad Part 3 - 2nd Mar 15
The Stock Market is in The Process of Major Top! - 2nd Mar 15
Stock Market Weakening Trend - 2nd Mar 15
Gold Price Glimmer of Hope - 1st Mar 15
Stock Markets Are Riding High on Thin Air - 1st Mar 15
Varoufakis vs. the Troika - Showdown in Athens - 1st Mar 15
Subprime Rising - U.S. Debt Breaking Bad Part 2 - 1st Mar 15
Gold CoT Improving, But ... - 1st Mar 15
UK General Election 2015 Seats Forecast - Who Will Win? - 28th Feb 15
UK General Election 2015 - Forecasting Seats for SNP, LIb-Dems, UKIP and Others - 28th Feb 15
Stocks Bull Market Continues - 28th Feb 15
U.S. Debt Breaking Bad - 28th Feb 15
NATO Frankenstein - When Centralization Scales Beyond Our Control - 28th Feb 15
Gold And Silver Insanity Prevails; Precious Metals Without Direction - 28th Feb 15
Fed Raising U.S. Interest Rates - Shovelin’ Schmitt Against the Tide - 28th Feb 15
Don't Let This Stock Market Myth Cost You Your Gains - 28th Feb 15
Recession is On The Way; Beat The Stock Market Crowd, Panic Now! - 28th Feb 15
Stock Market Indexes Creeping Towards the Edge - 28th Feb 15
GGD Going for Mexican Gold - 27th Feb 15
Foreign Real Estate Is the New Swiss Bank Account - 27th Feb 15
10 Reasons Washington Has War Fever - 27th Feb 15
Gold and the Euro Tragedy, Iraq 3.0, Ukraine Conflict Three Ring Circus - 27th Feb 15
Deepak Chopra - New Age Genius or Bullshit Expert? - Video - 27th Feb 15 - Videos
New Greece Drachma Revealed Amid Bank Runs - Greeks Buy Gold Sovereigns - 27th Feb 15
Will Month Long Stocks Rally Continue? - 27th Feb 15
The Only Public Hedge Fund You Should Own - 27th Feb 15
UK House Prices Trend 2015 and the May General Election - 27th Feb 15
Why America is Ungovernable - The Republicans’ Civil War - 27th Feb 15
Gold vs Gold Stocks: Bullish Anomaly Developing? - 27th Feb 15
I Heart Capitalism, Nasdaq Stocks, Then And Now - 27th Feb 15
The Fed’s History of Assassination - 27th Feb 15 i
Gold Bull Market Forecast - Money Will Rotate Into These Dead Investments - 27th Feb 15
"Audit the Fed"? We've Already Done That (Well, Kind of) - 26th Feb 15
Forget Peak Oil; Worry About Peak Demand - 26th Feb 15
Currency Wars, Again - 26th Feb 15
The Fed Waited Too Long: Here Comes Inflation - 26th Feb 15
Investing Inertia Won’t Keep Your Cash Safe - 26th Feb 15
The Net Neutrality Scam - 26th Feb 15
Will Conservatives Out of Control Immigration Crisis Boost UKIP Election 2015 Prospects? - 26th Feb 15
EU Warns Ireland and Euro Zone of Debt Dangers - 26th Feb 15
Commodity Prices Set To Plunge Below 2008 Lows - 26th Feb 15
Ukraine Hyperinflation as Currency Plunges 44% in One Week! - 26th Feb 15
The State of the Global Markets 2015 - 53 Page Report - 26th Feb 15
NASDAQ New 15 Year High - Stock Market Death By Overdose - 25th Feb 15
12 Reasons Why Barry Ritholtz and Many UK Experts Are Mistaken On Gold - 25th Feb 15
Sugar Commodity Price To Sweeten Up - 25th Feb 15
Investor Profits from China 2,000-Year Unstoppable Trends - 25th Feb 15
How to Borrow Cheaply from a Government-Owned Bank - 25th Feb 15
Debt Be Not Proud - 25th Feb 15
Liberal Democrat Election Blood Bath - Could Nick Clegg Lose Sheffield Hallam? - 25th Feb 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

The State of the Global Markets 2015

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

Free Report - Financial Markets 2014