The Top Half

Here’s a sobering statistic:  according to the latest Credit Suisse report on global wealth, if you have net assets of $3,650, you are in the top half of the world’s wealthiest people.

Sad, isn’t it?  Even though the amount of global wealth grew by more than $20 trillion in the past year, you can qualify for the top half of the world’s wealthiest people if you have simply accumulated what many Americans earned at a summer job as a lifeguard or a waitress during one of their high school years.  And that $3,650 figure includes the value of your home and all of your other assets.  To get into the elite Top Ten Percent of the World’s Wealthiest People category, you need only have collected $77,000 in net assets — and the people in that category, together, hold 87 percent of the world’s wealth.

Although the Credit Suisse report talks about the world’s wealth, the message it conveys is really about the world’s poverty.

Another Reason Not To Celebrate Columbus Day

Columbus Day is one of those “holidays” that really isn’t a holiday in any meaningful sense of the word.  Sure, federal workers and state workers get the day off — they get every holiday off, without fail — and so do bank employees.  For the rest of us working stiffs, however, Columbus Day is just another day to slog into the office and briefly wonder why that the flow of rush hour traffic is lighter than on the average work day.

And these days many people don’t care much for Christopher Columbus, either.  Admiral of the Ocean Sea, persuader of Ferdinand and Isabella, intrepid explorer — forget all that stuff we learned in grade school!  Now we hear that Columbus brought disease and slavery to the New World and is viewed as standing for colonialism, cultural insensitivity, and a Eurocentric vision of the world.  That’s why some people insist, instead, on celebrating Indigenous People’s Day.

Poor old Chris and his lame holiday are taking a beating from every quarter — which is why I got a chuckle out of the story sent along by the Friendly Doc Next Door, about an Ann Arbor, Michigan bank that announced that it wasn’t celebrating Columbus Day because Columbus, after all, is a city in Ohio.  Why not?  College football’s greatest rivalry is as good a reason as any to not recognize a federal holiday that is a “holiday” in name only.  When Arbor Day rolls around, we here in Ohio will retaliate by not celebrating it, either.

Student Loans And Shrinking Choices

We’ve all heard a lot lately about college students graduating with crushing amounts of student loan debt.  A recent Washington Post article brought home the grim and spiraling reality of student loan debt — and made me wonder what its long-term ramifications are for the families of those students and the economy as a whole.

The Post article compares consumer debt loads in 2005 to those in 2014.  Nine years is not a long time — less than a decade and only one presidential administration ago — but the changes are dramatic.  The percentage of 20-somethings with mortgage debt has fallen from 63.2 percent to 42.9 percent, and the percentage with student loan debt has almost tripled, from 12.9 percent to 36.8 percent.  In short, fewer are borrowing to buy a tangible asset and more are borrowing to acquire an intangible asset with uncertain value.

We don’t know how far up the age scale this exchange of mortgage debt for student loan debt extends, but the homeowners among us should consider what a shrinking pool of potential buyers means for the value of our property and our chances of selling it.  Banks won’t view young people who owe tens of thousands of dollars in student loans as good candidates for hefty mortgage loans, and young people who can’t find the high-paying job they need to make debt payments won’t want to be saddled with a house that might interfere with their freedom to move to where jobs are more plentiful.  The upshot is shrinking choices for debt-addled 20-somethings and shrinking options for the rest of us.

But the impact goes even farther.  The Post article shows that people in their 60s also have increased their student loan debt, and that more families in every income bracket are borrowing to pay for college.  The cost of a college education thus affects entire families, with credit-worthy senior citizens taking out loans to help their children and grandchildren pay for that diploma.  The acquisition of new debt by 60-somethings runs counter to the most fundamental rule of retirement financial planning, which is that people nearing retirement should pay off debt rather than taking on more.  How many older people are deferring retirement to pay off student loans — and in the process hanging on to jobs that might otherwise be available to those recent college graduates?

For too long we have viewed a college degree as a kind of holy grail that will inevitably produce a successful career and have geared national policy to make college more “affordable” by increasing the availability of student loans.  That approach has removed any incentive for colleges to hold down costs, and the result is sharply increased tuition costs funded by long-term consumer borrowing that affects entire families.  I’m as much of a fan of a college education as anyone, but isn’t it time to challenge our colleges and universities to figure out a way to provide that education at lower cost?