America and the Subprime Student Years

An evil chance seldom comes alone. No, it’s not about patterns. It’s about the laws governing the real economy. Many times it becomes convenient for some to trade illusions for the price of authentic truths. The problem is that the implicit subsidy created from the so-called buyer’s inability to distinguish between the two sides (reality and illusion) may be more than an interpersonal, expropriation transfer, but rather a sort of refundable credit from whose term the beneficiary, knowingly or not, cannot escape — even more so when the subsidy is explicitly a bank credit, by all dictionary definitions. In the area of bank credits, approved at a rate at that modern life found fit, there is a theory saying that “the most expensive loans are cheap loans.” The whole world struggled to prove the fact that this theory does not apply to it, or at least not on the exact day when the mortgage credit is incurred (with no durable income), consumer credit (sometimes, just with your ID) or student loans (with no productive results). Among those struggling: the Subprime Americans.

We define the adult Subprime American as “the person who wants to live in a house he cannot afford without a cheap loan.” We define the young Subprime American as “the person who wants to study, with no significant control over the productive or refundable characteristics of the acquired and credit-financed training.” He is able to live in the same family environment. It is undoubtedly the most dramatic case. But let us see how it came to this, let us contemplate the big picture.

Intentionally exaggerating, let’s take an example to help us understand what happened even in the most moderate situations. Let’s say that John Subprime Smith, unemployed worker living in Zzyzx, California (yes, it’s an actual place!) makes some calculations and sees that he meets all the exclusive requirements for mortgage credit set by his local bank. This was taking place sometime in 2002. Five years later, John realizes that he is unable to pay his mortgage, the bank realizes it ran out of liquidity and the Fed sees that it has a moral duty to provide it. The trouble started about 10 years ago, when Smith’s neighbor, John Overoptimistic Doe, got a frugal loan from the same bank and put it in the stock for Mirage.com Inc. Overbid by the fever of the “new economy” and lured by the money of the “old printing press,” this course of action ends in kaboom! The bank is shaken to the core and the Fed brings generous liquidity. And so, the bank is saved and openheartedly waits for … Smith, who has a son, Johnny the Smart One, who had been at the same bank, getting a “student loan.”

Just like his father, Johnny falls into the trap of easy credit. He bets that the dynamics of the economy are a one way up roller coaster and that he will have more luck in the job market than his old man because he will have a diploma in his hand. These hypotheses combined lead him to think he is going to have no problem paying back the loan, that he is able to take another one — a mortgage loan and even more — and that he can use this mortgage as his very own cash machine for a chain of consumer credits, to help him buy many things in his house.

Johnny is one the youngsters who, put together, owe the American bank system over a trillion dollars in student loans. The “too big to fail” excuse is the one that allowed such dead-hand credits, in a shuffle of appropriated spot profits, with forward tax losses for contributors (by means of inflation and taxes). The expansion of loans gave birth to mortgaged destinies and self-labeled intellectuals.

This didn’t only happen in the U.S. Education, science, technology and the consequent influx are claimed to be America’s contributions to evolution, but also a slap to the face for the rest of the world. Today, it’s not the world’s curses that got to America, but its recklessness toward the laws of economy that clearly state that exclusive policies lead to unintended consequences elsewhere or come back to the exclusivists, and that these consequences cause a self-sustaining chain reaction. An evil chance comes after a fake happiness; most times, it doesn’t come alone. These students came to represent the society’s “ballast,” from “the bubble” of progress. Naïve, they “Occupy Wall Street,” asking for a big government to control High Finance. Naïve, they celebrate “Thanksgiving Day of Ignorance” (of the law of cause and effect … ).