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Wednesday, November 11, 2015

The U.S. education bubble is now upon us

SAN FRANCISCO (Project Syndicate) — One of the fundamental purposes of government is to advance important public goods. But, if not handled carefully, the pursuit of significant social goals can have unfortunate economic and financial consequences, sometimes even leading to systemic disruptions that undermine more than just the goals themselves.

This happened a decade ago in the United States, with the effort to expand home ownership. It has been playing out more recently in China, following an initiative to broaden stock-market participation. And it could happen again in the U.S., this time as the result of an attempt to improve access to funding for higher education.

In the first case, the U.S. government eagerly supported efforts to make mortgages more affordable and accessible, including the creation of all sorts of “exotic” lending vehicles. The approach worked, but a little too well. The surge in debt-enabled demand drove up real-estate prices, while banks’ greater willingness to lend led many people to purchase homes they couldn’t afford. The collapse of the subsequent bubble — a major contributor to the 2008 global financial crisis — nearly tipped the world economy into a multi-year depression.

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1 comment:

Anonymous said...

Fort Detrick right here in Maryland conducted tests too but I do not know any details.

We must also remember the atomic bombs that our government was testing in the NV desert. The government encouraged nearby residents to relax, open their windows and enjoy the show. Afterward, men would should up at the grade schools with Geiger counters and scan the children for radioactivity.