Thursday, August 7, 2014
Subprime Mortgages, as American as Apple Pie?
Marc Faber : I ask you all to ponder this because recently student loan debt has become the new subprime mortgage, and has become part of the American national agenda. Student debt has crossed the $1.2 trillion marker, becoming the second highest form of consumer debt after housing mortgages, with 2/3rd of students with an average of USD $26,000 debt after graduation.
Until 2008 people were acquiring mortgages that they couldn’t pay, and in 2014 we move to the same beat but to a different drummer. Nowadays, students are getting loans to pay for college but there’s a degree of uncertainty as to whether they can afford that debt or not and also how much debt can they take on.
So far there are many who graduate staring down a tough job market, with a large debt to service. As such, policies to fix this issues has been taken into debate, and many ideas have surfaced due to this. Ideas run the gamut, from slashing students' interest rates by half, fixing the interest rate at a 10% cap of a student's income for the next 20 years in the U.S., to forgiveness/bankruptcy innovations and even house arrest in Mexico. Progress as it may appear, the problem yet remains without a feasible solution- students can’t find decent paying, full time jobs, and interest rates are increasing, and the economy remains on a downturn.
Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.Dr. Doom also trades currencies and commodity futures like Gold and Oil.
Posted by Nicole Bourbaki