The President is a smart man. Why does he embarrass himself this way?

Colleges and universities raise their tuition much faster than the rate of inflation for two reasons. First, too many of their customers (students) don’t care enough about what it costs to go to college.  These students are receiving  gobs of loan money to pay those costs. The government makes students even less sensitive to college costs by guaranteeing the loans, thereby artificially maintaining low interest rates.

When buyers don’t much care about the cost of what they are purchasing, why should the sellers keep costs low? This econ 101 stuff.

The second reason that tuition increases are out of control is that universities continue to expand their bureaucracies. They seem more interested in cultural education than practical education. For example,  the  ”diversity and inclusion”  apparatus at many colleges is sucking huge amounts of money from the primary educational mission.

Here is one article that discusses this second point and yet a third reason why the President gets an F in tuition economics.  At the same time that the government is pushing too many students into college with cheap loans, it is requiring colleges to make sure that the costs of attending exceed the amount of money that can be borrowed.

What?

Read it for yourself:  Obama Fosters the Skyrocketing Tuition He Criticized.

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1. Obama Buying Votes instead of Prosecuting Fraud

The federal government has never accepted that all of its attempts to “rescue” the housing market are fruitless. Bad loans and unqualified homeowners are a sad fact of the real estate bubble. Nothing that Congress or the White House says or does can change that.

Actually, the White House probably does understand that. However, Obama and his team have been accurately labeled by most voters as economically incompetent. This is bad for them because election season is now upon us. It is time to buy some more votes, this time from “underwater” homeowners. According to the White House, these poor souls must be allowed to refinance their mortgages. The banks won’t do it and Congress won’t do it. So out come the “executive orders.”  Source: President Obama To Announce Major Revamp Of Home Lending Program, HARP.

This is so transparent. Don’t you agree?

Being underwater on your mortgage does not mean that you can’t afford your mortgage payments. It just means you aren’t highly motivated to make those payments. So this is really an effort by the Obama team to make the underwater homeowners feel less buyer’s remorse. They bought the wrong property at the wrong time and in the wrong place. It happens.

The Obama team should instead spend its time and resources prosecuting all of the bank fraud associated with stated income loans a/k/a “liars” loans that played a major role in the real estate bubble. Not even one lender or investment banker has been charged for their participation in this. To this extent, I agree with the Occupy Wall Street protesters.

After the much smaller savings and loan failures and scandals of the ’80′s, numerous criminal charges were brought, with great success. Why not now?

If you want a very clear explanation of how our government has failed to bring the Wall Street criminals to justice, listen to this report from NPR.  You will become angry. I did.

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1. Obama Gets an “F” in Tuition Economics

Bob Lutz, former vice-chair at GM, thinks the engineers need to be put back in charge of the automobile companies.  I like this quote from a recent article on this subject:

The auto industry is actually a terrific proxy for a trend toward short-term, myopically balance-sheet-driven management that has infected American business.

One of the outcomes of balance-sheet focused management is that the engineers with the most experience are shown the door in favor of new grads who can be paid less. This gives us products designed by MBA’s who don’t know anything about product design and by baby engineers who are just learning what’s up. That’s a recipe for a crappy product and a poorly run business.

Think of the benefits to all of us if we shut down 75% of the law schools and business schools:  Better products, better companies, fewer wasted hours in class, fewer student loans, fewer bankers trying to screw us with goofy financial products, and fewer ridiculous lawsuits filed by starving attorneys. What’s not to like?

Have you ever heard anyone say this:  What we need are more MBA graduates.

You can read more here.

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Perhaps the most striking of the objective indicators in Ferguson’s presentation is this:  In 1968, the per capita GDP in the U.S. was 33 times that of China. By 2008, that ratio had declined to 5:1.  Think about that, particularly considering how many Chinese there are.

Ferguson examines the effects on these trends caused by recent stimulus and quantitative easing actions taken by western governments. It has made things worse. Much worse. The collective debt problems of western governments have put is in critical care.

Take a look at slide 29 in Ferguson’s presentation, where he cites the Congressional Budget Office. The CBO has stated that to merely stabilize our debt to GDP problem, the government must either decrease “all adult benefits” by 12.5% by 2015 or increase “all taxes” by 11%.  If we wait until 2025, those percentages increase to 26%! This is from the CBO, the in-house experts that Congress pays to tell them the truth.

Ferguson also notes that China is extremely wary of inflation imported from the west, caused by our quantitative easy (flooding the economy with new money). As a result, China is slowly but steadily decreasing the amount of U.S. treasury securities that it owns.

The “sovereign debt crisis” is real. I encourage everyone to review Ferguson’s slide show (linked below) and then share it with your Congressperson. They will likely ignore it unless you make it clear that your vote is at stake.

Niall Ferguson: The West And The Rest.

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Tomorrow the Fed Open Market Committee meetings end. Some announcement is expected about new strategies for stimulating the economy, likely through a plan of “quantitative easing.”  This is the politically correct phrase now being used to describe what the Fed may do to apply inflationary pressure by increasing the money supply.  I prefer the term “monetizing the debt”  which I have written about earlier.

I think the Fed will make this happen because that’s what Bernanke has suggested. But there will be dissent among the committee members. The only real question is whether the Fed will announce how much money it plans to inject into the system tomorrow, or whether it will do it piecemeal.

This is why I bought more TIPs last week, even with a negative yield.

What are your plans for responding to what could be two days of financial uncertainty?

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Let’s get one thing out of the way first. There will not be a balanced budget by 2015, no matter what plan the fiscal commission suggests. Congress – Republicans and Democrats alike – does not seem capable of doing that.  (OK maybe it could happen if the Tea Party takes over the House, Senate and the White House.)

But there will be an attempt to do something – and that brings us to some of the strategies being discussed by the commission which are more about increasing revenue and less about decreasing spending.

Near the top of the list is the mortgage interest deduction, which costs the government a lot of tax dollars and is something unique to our tax system. Eliminating this deduction has been discussed before but quickly and firmly squashed by the real estate and banking lobbies. Thus, if anything comes of this agenda item, it will not be a complete elimination of the deduction. Instead, I predict that the proposal will be to phase the deduction out for the higher income taxpayers.

Social Security and Medicare are being also discussed but there will be no proposals for immediate reform. That’s too complicated and politically risky for this panel.

Keep your eyes and ears alert for the commission  report. Your economic future may depend on it.

You can read more about it here:   Deficit Panel Targets Areas to Cut and here:  FiscalCommission.gov

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This attorney’s business is in Florida which ranks #3 on the foreclosure avalanche scale. His firm charges customers a $1400 flat fee per foreclosure. His customers are banks. That is not a high fee which is why his firm has so much business. He is earning extraordinary profits because of high volume and efficient operations.

No doubt his firm pushed the envelope on being diligent with paperwork.  On the other hand, there are no particular allegations that I could find that his business wrongfully foreclosed on innocent homeowners.

Although being a foreclosure machine would not appeal to me, you have to admire someone who builds a successful business on doing one thing and doing it well. But that doesn’t matter to a lot of people. The business owner is a lawyer, he is rich, and his business is legally forcing homeowners in default out of their homes. That makes him a villain.

Heck, to a lot of people, just being a lawyer makes you a villain.

What is your take? (Link below)

Foreclosure Fortune Buys Bugatti, Yacht, Mansions for Attorney

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