Danielle DiMartino Booth, INEFFICIENT FRONTIER4

The Inefficient Frontier — The Buck Stops Nowhere

Spice was once the very spice of life. To bring this precious commodity to the table, on March 20, 1602, the Vereenigde Oost-Indische Compagnie (VOC), or Dutch East India Company, was chartered with its government’s blessing. To this pioneer conglomerate of commercial entities from Holland and Zeeland, the Dutch government gifted the VOC a first-mover advantage — a 21-year monopoly to trade spices between Asia and Europe. Before too long, spices were but a line item on the balance sheet for stakeholders to consider (the VOC also carries the minor distinction of being the first company to issue bonds and stocks to the general public). By way of its maritime prowess, the VOC expanded into a vast array of industrial and trade-related industries, including shipbuilding and wine to complement those spicy dishes its origins facilitated. As such, the Dutch guilder was the world’s first true anchor currency.

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Danielle DiMartino Booth is CEO and Director of Intelligence at Quill Intelligence LLC.

Visit QuillIntelligence.com to find out more. Click HERE to SUBSCRIBE.

For a full archive of my writing, please visit my website Money Strong LLC at www.DiMartinoBooth.com

Click Here to buy Fed Up:  An Insider’s Take on Why the Federal Reserve is Bad for America.

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Fed’s Inflation Focus Needs a Tuneup

Past errors by the central bank compel it to put less emphasis on consumer prices and more on financial stability.

What now? Continued Federal Reserve interest-rate increases for as far as the eye can see? Those are the primary questions with the last inflation target standing essentially hitting the central bank’s 2 percent bullseye.

The core personal-consumption-expenditures price index (PCE), a broad measure of inflation that excludes food and energy, rose 1.98 percent in July from a year earlier. The core PCE has long been the gentlest measure of inflation, so for many economists the evidence that it’s catching up to every other similar metric, such as the widely recognized consumer price index, that have long since pierced 2 percent is akin to the end of a vigil. (The government is expected to say Thursday that the consumer price index rose 2.4 percent in August from a year earlier when excluding food and energy.)

So, let’s get on with more rate hikes already — right? Perhaps, but such rigidity in the approach to monetary policy is a vestige of the past. Federal Reserve Bank of St. Louis President James Bullard has risen to the forefront of questioning the sanctity of relying solely on inflation in guiding policy. But it’s not because he feels inflation is too hot or too cold, but rather it is inappropriate.

Bullard can always be relied upon to strike a dovish tone — so much so that many consider him dovish for the sake of being dovish. He warned in a speech last week that Fed policy was already “neutral or somewhat restrictive” as reflected in a very flat yield curve, which is one of Wall Street’s most reliable indicators for forecasting recessions. He downplays inflation as a reliable metric given how the economy has evolved, with financial assets becoming a bigger part of the economy. “Neither low unemployment nor faster real GDP growth gives a reliable signal of inflationary pressure because those empirical relationships have broken down,” Bullard said.

9.5.18-us-private-sector-fin-assets

There’s some irony in markets branding Bullard as the most dovish member of the Federal Open Market Committee while placing Chairman Jerome Powell at the opposite end of the spectrum in the hawkish camp. The two are literally echoing one another’s views. Consider this from Powell’s Jackson Hole speech last month:

“Inflation may no longer be the first or best indicator of a tight labor market and rising pressures on resource utilization. Part of the reason inflation sends a weaker signal is undoubtedly the achievement of anchored inflation expectations and the related flattening of the Phillips curve. Whatever the cause, in the run-up to the past two recessions, destabilizing excesses appeared mainly in financial markets rather than in inflation. Thus, risk management suggests looking beyond inflation for signs of excesses.”

In an Aug. 15th interview with Central Banking, Bullard also said financial excesses should be monitored closely given the growth of the shadow banking system since the crisis a decade ago. Here, the Fed has always been handcuffed, limited to regulating bank holding companies and financial institutions with a bank charter. It has no jurisdiction over private equity or technology firms that have crept into the world of finance, entities Bullard said are in the business of avoiding regulatory overview:

“The whole game in Silicon Valley is to do regulatory arbitrage: ‘Let’s provide financial services in ways that are not covered by ordinary laws, and let’s build up a business, like Uber. Let’s build up a business and a constituency for that business outside of the normal legal framework, and then we will wait for the legal system to catch up, and then we’ll litigate at that point.’”

The geographic parallels with pre-2008 are striking. As the subprime mortgage lending apparatus was being built out in the housing boom years, then Fed Chairman Greenspan was repeatedly warned that the central bank would have to catch the falling knife when housing turned. To this, Greenspan’s stock reply was that the Fed only regulated a quarter of mortgage lending and therefore was not exposed to the mania building in Janet Yellen’s San Francisco Fed District, with Countrywide Financial at its epicenter. “It’s that shadow world where the next crisis will be brewing,” Bullard said, “and how is the regulatory apparatus going to handle that going forward?”

Bullard and Powell are both clearly looking back to the Fed’s past errors in judgment and questioning the efficacy of core PCE dictating monetary policy. They know that what started in the shadows of subprime lending ended with the fall of Lehman Brothers Holdings Inc. and the unleashing of systemic risk, the dangers of which were absent in a broken inflation metric. The question for the here and now is whether their shared perspective proves to be prescient, but at the same time, too late.


This article originally appeared in Bloomberg Opinions — 9.12.18

Danielle DiMartino Booth, a former adviser to the president of the Dallas Fed, is the author of “Fed Up: An Insider’s Take on Why the Federal Reserve Is Bad for America,” and founder of Quill Intelligence.

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Danielle DiMartino Booth is CEO and Director of Intelligence at Quill Intelligence LLC.

Visit QuillIntelligence.com to find out more. Click HERE to SUBSCRIBE.

For a full archive of my writing, please visit my website Money Strong LLC at www.DiMartinoBooth.com

Click Here to buy Fed Up:  An Insider’s Take on Why the Federal Reserve is Bad for America.

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Of False Prophets and Promises, DiMartino Booth

Of False Prophets and Promises — From Subprime to “Investment Grade”

From Subprime to “Investment Grade” – Lehman’s Lessons Learned & Squandered

Does the wolf in sheep’s clothing always walk away fat and happy? Not according to 12-century Greek rhetorician Nikephoros Basilakis. In Progymnasmata, the traditional Biblical parable is prefaced with, “You can get into trouble wearing a disguise.” The shepherd in the Greek version did indeed admit the wolf into his sheep’s fold freely and even closed the wily, evil-doer in securely within the vulnerable flock’s shelter. But, alas, to the wolf’s comeuppance, the less-than-astute shepherd also had a craving for mutton for dinner. And so, ravenous, he unsheathed his knife and killed…the wolf. In Nick’s estimation, whether by design or chance, penalties will be meted out.

 


Danielle DiMartino Booth is CEO and Director of Intelligence at Quill Intelligence LLC.

Visit QuillIntelligence.com to find out more. Click HERE to SUBSCRIBE.

For a full archive of my writing, please visit my website Money Strong LLC at www.DiMartinoBooth.com

Click Here to buy Fed Up:  An Insider’s Take on Why the Federal Reserve is Bad for America.

Amazon.com | Barnes & Noble.com | Indie Bound.com  |  Books•A•Million

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9.11.01, Danielle DiMartino Booth, Quill Intelligence, Angels Manning Heaven's Doors

Angels Manning Heaven’s Trading Floors

The time is 8:46 am EST. The date is September the 11th.

It is a fact of life that time marches on. Memories fade. Still, it’s difficult to believe it has been 17 years since our nation’s innocence was robbed. Every anniversary brings less media coverage, which renders memories of past milestones that much more important.

If you can bear it, look back at September 2002, the one-year anniversary of 9/11. The wounds in our hearts were still open, the emotions raw. The stock market mourned alongside all of those who couldn’t fathom 365 days having passed. Between the NYSE and the Nasdaq, nearly $10 trillion had been lost. Routines ground to a halt. Our full attention was given to the families of those who had lost loved ones as 2,801 of their names were read out loud at Ground Zero, the gaping 16-acre concrete pit where the Twin Towers once stood. Candlelight vigils took place in every one of New York’s boroughs.

Today, it is with the deepest of respect that I humbly ask that you stop what you’re doing for a moment to look back and reflect on September 11, 2001. Your and my world changed that day, one on which so many heroes were made against their will. If you have more than a moment, please read Angels Manning Heaven’s Trading Floors. I have but words with which to honor the fallen. So that is what I give every year knowing with full confidence that it is yet another perfect trading day in heaven. And rightly so.

Never Forget.

Danielle

 

 

9.11.01, Danielle DiMartino Booth, Quill Intelligence, Angels Manning Heaven's Doors

Angels Manning Heaven’s Trading Floors

 

He could have passed for Yul Brynner’s twin if it wasn’t for those eyes. He was 57 years old, 6’2” tall, tan and handsome with a shining bald head. But his eyes, those elfish eyes dared those around him to partake of anything but his infectious happiness. It was those eyes I will never forget.

It was Labor Day weekend, 2001. One of my best friend’s college buddies from UCLA was in town and his uncle had a boat. So we had the good fortune to be invited to take a cruise around Shelter Island on that long holiday weekend 17 years ago. I was 30 years old at the time and I can tell you there was no “boat” about this Yul Brynner look-a-like’s 130-foot yacht. The crystal champagne flutes, the hot tub on the deck, the full crew – none of these accoutrements faintly resembled the boats I’d been on as a middle class girl spending summers off Connecticut’s stretch of Long Island Sound. The thing is, our friend’s uncle was none other than Herman Sandler, the renowned investment banker and co-founder of Sandler O’Neill.

I wasn’t sure what to expect of Sandler and I had no idea that this chance meeting would make a soon to happen unspeakable act that much more real. Would Sandler exude that same pomposity so common among the Ivy League investment bankers who had underwritten the Internet Revolution? In a word, hardly. Sandler personified self-made man. After introducing me to his family, of whom he was immensely proud, he graciously offered me something to eat or drink. And then, he told me a story about a man who knew the value of never straying the course. It haunts me to this day.

It was a good old-fashioned American Dream story about a man and some friends who started an investment bank to banks and built their firm to the top of the world. Literally. The secret to his success, which he enjoyed from his place in the clouds, on the 104th floor of the south tower of the World Trade Center was simply hard work, he said. He prided himself, relaying to me in what I could tell was a tale he’d repeated time and again, not only on making it to the top of the tallest building in the city, but on beating the youngest and hungriest to the office in the mornings and turning off the lights at night. Never forget where you come from. Never take for granted what you have.

In 2001, I had been on Wall Street for five years and was enjoying my own success and experiencing firsthand what money could buy. Given the choices my world offered, most would not have chosen night school. But I was determined to fulfill a lifelong dream and attend Columbia where I was to earn my master’s in journalism to complement my MBA in finance from the University of Texas. I guess I was not like most others. I wanted something tangible to open the next door in my career, which I knew would involve both the markets and writing. I called it my retirement plan.

Throughout this Wall Street by day, student by night chapter of my life, the minute the stock market closed at 3 pm, I would rush to the west side subway lines to trek north to Columbia’s campus. Just before Labor Day that year, I had turned in a class project, exploring the world of the famous Cornell Burn Center at New York-Presbyterian Hospital. During my time on the project, the unit was quiet save a few occupants, which apparently was not the norm. So those brave nurses had to paint a picture for me of what it was like when the floor was bustling with victims of fire-related disasters. Many of the stories of pain and suffering were so horrific I remember being grateful for the relative calm and saying a little prayer the unit would stay that way.

I returned to work on Tuesday, September 4, after that long weekend that proved to be fateful, with a new perspective on life and work, inspired by Sandler’s humility. Little did I know we were all living on precious borrowed time. It was impossible to conceive that one short week later, Sandler’s inspirational tale and those nurses’ surreal stories would collide in a very real nightmare.

It’s the Pearl Harbor of my generation. Most Americans can tell you where they were on the morning of September 11, 2001. I had walked part of the way to work that day, so picture perfect was the blue of the blue sky. I was in my office at 277 Park Avenue in midtown watching CNBC’s Mark Haines on my left screen and pre-market activity on my right screen. As was most often the case, it was muted as live calls on economic data and company news came over the real life squawk box on my desk. My two assistants were seated outside my office going through their pre-market routine, fortified as was usually the case with oatmeal, yogurt and coffee. In retrospect, the mundaneness of the morning’s details are bittersweet.

It was almost 9 am and out of the corner of my eye, I noticed that a live picture of the World Trade Center had popped up on CNBC. Haines reported, as did many initially, that a small commuter plane had hit the north tower of the World Trade Center. As distracting as the image was, I tried to go back to my own morning routine, preparing for the stock market open in what had ceased to be one-way (up) trading after the Nasdaq peaked in March 2000.

And then, at 9:02 am, time stood still. A scream pierced the floor as one of my assistants watched a second plane, a second enormous plane, fly straight into what appeared to be Morgan Stanley’s office floors in the south tower, where her father was at work. As things turned out, it didn’t matter where the plane had hit for the employees of Morgan Stanley that morning. They had Rick Rescorla, the firm’s Cornish-born director of security and a Vietnam veteran who had been preparing for this day for years. He knew the Twin Towers were an ideal target for terrorists. Thanks to his efforts and years of constant drilling – every three months, which some thought overzealous — all but 13 of Morgan Stanley’s 2,687 employees and 215 office visitors survived that day. With the evacuation complete, Rescorla heroically reentered the buildings to continue his rescue efforts and in doing so, paid the ultimate price.

Ironically, as was the case with Morgan Stanley’s Rescorla, some at Sandler O’Neill had lived through the first attack on the World Trade Center. When the young firm had outgrown its previous office space, it chose the south tower as its new home, moving in the same week it was bombed on Friday, Feb. 26, 1993. Many who struggled their way down over 100 flights in crowded stairwells, through seas of discarded women’s shoes, learned the lesson that they would have been just as well staying put. It was that very hesitation, borne of that lesson, that cost many of the firm’s employees their lives.

In the 16 minutes between the time the first and second planes struck the towers, the Port Authority had announced over the south tower’s intercom system that the issues were isolated to the north tower and to stay put. That didn’t mean the scenes across the way at the north tower were any less horrifying as rather than suffocate or burn to death, some leapt to their deaths before the very eyes of those across the way in the south tower. Amid this mayhem, Jennifer Gorsuch, a Sandler employee, emerged from the ladies room just in time to hear Sandler shout, “Holy shit!” Gorsach rushed to find a friend and fellow Sandler employee who had survived the 1993 ordeal and knew of an escape route. Together, the two set off down an open stairwell.

Sandler, though, going off his 1993 experience, told one investment banker who did survive 9/11 that the safest place to be was in the office. He added, though, that anyone who wanted to leave was welcome to do so. Of the 83 employees in the office that morning, 17 chose to leave right away. The bond traders and most of those on the equity desk chose to remain. Only three other Sandler employees would make it out alive. The rest, including Sandler himself, were never aware that one, and only one, open staircase offered them safe passage; the building’s intercom system had been knocked out at the time of the second plane’s impact.

From the little we know, many that day above the crash site tried to get to the roof. Though it would not have made a difference in the end, it is nevertheless deeply disturbing that the door to the roof was found to have been locked. The towers were exempt from a city code that required roof access to remain unlocked. The Port Authority and Fire Department had agreed that the safest evacuation route was down, not up. Plus, enforcing the exemption delivered a loud and clear message to vandals, media-mongering pranksters and those contemplating suicide.

For me, the sweetest sorrow came down to the nobility of those brash, boisterous traders. Many that day, at Sandler O’Neill and Keefe, Bruyette & Woods and Cantor Fitzgerald, among others, were among the 1,500 who could have possibly escaped but chose to do right by their firms’ clients. You see, once it was understood that the attacks were an act of terror, the markets began to flash angry red, promising to crash at the open, handing certain victory to the evil, soulless weaklings who took aim at the economic heart of this great country. It is the traders who chose to man their stations I mourn to this day, those I have always called, with utter reverence, the real Masters of the Universe

The helplessness I felt when the buildings fell was matched only by my horror at the silence that followed. At some point between 9 am and 10 am that morning, I found myself praying the deafening fire engine and ambulance sirens tearing down Park Avenue would just stop blaring. The cacophony had filled the 102 minutes that followed the initial plane striking the north tower at 8:46 am. But then the buildings did fall. Although the second to be struck by a plane, the south tower was the first to fall at 9:59 am. In the 29 minutes that followed, we all prayed the north tower would escape the fate of its sister to the south. But it was not to be. The unthinkable, the impossible happened, not once, but twice. And then it was quiet, quiet for days and months and now, 17 years.

Of course, there were miraculously 12,000 who walked away, mainly those who had evacuated the floors beneath the impact zones in both buildings. No doubt, the survivors paved a pathway of hope to help the country heal. But the dearth of rescues was nevertheless heartbreaking as we collectively sat vigil praying man and dog would pull a survivor from the pile. Hence the devastation wrought by the silence. It was unfathomable to contrast those who had braved the fires and lost, and the mere 22 survivors admitted to the no longer nearly vacant Cornell Burn Center of my Columbia class project experience. As if to punctuate the pain, four hospital EMS employees had been lost along with 408 other rescue workers that dark day.

Normalcy was suspended in the days and hellish nights that followed. We financial markets survivors, weighed down by guilt as we were, were told to do what those in those towers had done so bravely. We stayed on call in the event Dick Grasso and the other powers that be were able to open the markets for trading. We were prepared to be the calm in the stormy market seas that were sure to follow the initial open.

Unlike the markets, Columbia resumed classes on Wednesday, September 12th. The moment I stepped out of my cab on 125th Street that evening, the memories of the sounds of 9/11 were lost in the overwhelmingly toxic smells of its aftermath. Buffered as I was, at home in the middle of the island on Fifth Avenue, I had only experienced the tragedy’s aftermath from the nonstop playback news images of the towers that were, and then ceased to be. But Columbia, with its proximity to the Hudson, is an inescapable spot to take in what the winds carry. That evening it was the sad novelty of the smell of burning computers, steel and God knows what else, something I hope to never know again.

On Friday, September 14th, I was set free to travel north to Connecticut to the loving arms of my family who were worried so. They tried to bolster my spirits, what with my 31st birthday set to arrive on Monday. But I was in no place to find the will to celebrate. I was short the markets, poised to profit the minute trading opened on Monday morning and beating myself up as a traitor to my country for being so. The moment I was able to do so on the morning of September 17th, I closed out my position. And I manned my station.

That night, most of my friends dragged me out to my favorite Italian restaurant. But one of us was absent from the table. My dear friend, whose UCLA friend had introduced us to Herman Sandler, found herself in the right place at the right time to begin to help the healing process. At the time, she was working at Bank of America in midtown. The very day the towers fell, the bank had offered Sandler O’Neill survivors temporary office space in the same midtown office at which my friend worked. Jimmy Dunne, who found himself running Sandler O’Neill in the flash of an eye, gratefully accepted. Dunne had been out of the office on 9/11 trying to qualify for the U.S. Mid-Amateur Classic; he survived by chance and chance alone. So devastated was my friend that she chose to stay late every night, on her own time, to help Dunne write condolence letters to the families of the 66 Sandler employees who had lost their lives. She would eventually end up working at Sandler.

On my birthday, six days after 9/11, my friends insisted that robbing us all of joy, the very ability to celebrate life’s little occasions, would represent yet another feather in the caps of the cowards who attacked our fearless traders, our Masters of the Universe who were now all, and would be forever, on heavens’ trading floors. We raised our glasses to them that September evening and I remember thinking I hope Smith & Wollensky delivers in the celestial realm.

But I don’t digress. I never do on 9/11. I never shy away from remembering the worst day of my life. To do so would be an unforgivable dishonor to the 2,759 victims who gave their lives on that painfully beautifully September morning. And so, I never will.

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THE LIQUIDITY PARADOX

The Liquidity Paradox — Markets at Risk of Spontaneous Combustion

Members of the subtribe Hominina struggle mightily with spontaneity. Routine ensures order and the innate succor of predictability. Regrettably, life often diverges from script, jarring us from our safety zones. Perhaps we could learn a thing or two from fire, which has been known to self-ignite under the right conditions. Curiously, moisture is often the combustible catalyst. All that’s needed is a base of materials that have low ignition temperatures and protracted heat and humidity. Combine anything you’d find in a barn – hay, straw, or peat – and an endless stretch of sweltering, soupy summer days, which isn’t hard to imagine these days. A requisite amount of oxidation with a dash of bacterial fermentation later and you’ve laid the groundwork for heat that has no way to escape.

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Danielle DiMartino Booth is CEO and Director of Intelligence at Quill Intelligence LLC.

Visit QuillIntelligence.com to find out more. Click HERE to SUBSCRIBE.

For a full archive of my writing, please visit my website Money Strong LLC at www.DiMartinoBooth.com

Click Here to buy Fed Up:  An Insider’s Take on Why the Federal Reserve is Bad for America.

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THE CUBICLE CULT, Danielle DiMartino Booth, , Federal Reserve, Office, Quill Intelligence

The Cubicle Cult and Other “Endangered” Office Species

* Read Danielle DiMartino Booth Daily via The Daily Feather — Click to Subscribe

Poor Jack. He just thought he was getting a free pass when he first heard that 1659 proverb promising that, “All work and no play makes Jack a dull boy.” It would seem the ‘Jack’ of the 17th century was an English Channel off course, and 30 years too early to frolic in Louis XIV’s Versailles playground. At least that’s how Scottish government reformist Samuel (no) Smiles saw it when he warned that, “All play and no work makes (Jack) something worse.” Cue the dark refrain. But why not let Jack wallow in frivolity if he’s idly inclined? Leave it to the Irish to prescribe penance, or as Irish novelist Maria Edgeworth penned in 1825, “All work and no work makes Jack a mere toy.” Poor Jack?

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Danielle DiMartino Booth is CEO and Director of Intelligence at Quill Intelligence LLC.

Visit QuillIntelligence.com to find out more. Click HERE to SUBSCRIBE.

For a full archive of my writing, please visit my website Money Strong LLC at www.DiMartinoBooth.com

Click Here to buy Fed Up:  An Insider’s Take on Why the Federal Reserve is Bad for America.
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DiMartinoBooth, Money Strong, Quill Intelligence, Central Bankers

Do Central Bankers Have the Capacity to Apologize?

* Read Danielle DiMartino Booth Daily via The Daily Feather — Click to Subscribe

It would seem that Sorry is the hardest word to say and hear. It was rare that Sir Elton John took the lead on writing his lyrics. “Sorry Seems to be the Hardest Word” was an exception. Long-time collaborator and co-writer Bernie Taupin reminisced that the lyrics captured, “That whole idealistic feeling people get when they want to save something from dying, when they basically know deep down inside that it’s already dead. It’s that heartbreaking, sickening part of love that you wouldn’t wish on anyone if you didn’t know that it’s inevitable, that they’re going to experience it one day.” The 1976 blockbuster hit was certified gold on January 25, 1977.

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Danielle DiMartino Booth is CEO and Director of Intelligence at Quill Intelligence LLC.

Visit QuillIntelligence.com to find out more. Click HERE to SUBSCRIBE.

For a full archive of my writing, please visit my website Money Strong LLC at www.DiMartinoBooth.com

Click Here to buy Fed Up:  An Insider’s Take on Why the Federal Reserve is Bad for America. Amazon.com | Barnes & Noble.com | Indie Bound.com  |  Books•A•Million

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Danielle DiMartino Booth, Bloomberg, studentloanseconomy

Student Loans Are Starting to Bite the Economy

Potential homeowners are being thwarted by the costs of paying off bills for higher education

 

It’s that time of year, when students prepare to head back to the classroom. For many taking the next step in higher education, the question is increasingly, “Is it worth it?” Millions of millennials have already put off settling downbecause of the rising costs of servicing college debts to the detriment of economic growth.

Student loans are now the second-largest category of household debt in America, topping $1.4 trillion and trailing only mortgages at $9 trillion. And while Korn Ferry puts the average starting salary for a 2018 college graduate at $50,390, up 2.8 percent from 2017, the just-released July Consumer Price Index report shows the inflation rate rose 2.9 percent over the last 12 months. Does the phrase “treading water” come to mind?

A recent report by Bloom Economic Research breaks out the demographic challenges that have resulted from the 176 percent increase in student loan debt in the decade through 2017. In the years leading up to the housing crisis and the dramatic loosening of mortgage credit standards, many families tapped readily available home equity to finance pricier higher educations for their children than they would have otherwise been able to afford. After the bust, this avenue was blocked, leaving only the higher education inflation it had fueled.

From 2007 through 2017, the CPI rose by 21 percent. Over that same period, college tuition costs jumped 63 percent, school housing surged 51 percent and the price of textbooks by 88 percent. These troubling growth rates wipe away any mystery behind today’s staggering levels of student loan debt, which have almost tripled from the 2007 starting point of $545 billion. As of the fourth quarter, student loans represented 10.5 percent of a record $13.1 trillion in U.S. household debt, up from 3.3 percent at the start of 2003.

Regardless of income bracket, housing is the biggest line item in family budgets. On that count, the best news for fresh grads is that rent growth appears to be slowing as a flood of apartment supply hits the market. According to RentCafe, the average rent in the U.S. was a record $1,409 in July, a 2.8 percent from a year earlier. While rent growth has stopped outpacing gains in salaries, the level is nevertheless prohibitively high for many, especially those weighed down by student loans the minute they cross the stage. The average student loan payment is $351. Tack that on to average rents and you’re pushing $1,800 before you hit the online grocery app icon on your smart phone, the bill for which runs at least $100 a month for most of us. Using college grad starting salaries, that takes up a large chunk of monthly take-home pay of about $3,400 if you live in Texas or $3,100 if you’re in New York.

8.8.18-CPI-collegedebtwithtitletojj

The latest demographic breakdown available has an end point of 2016. What we know through that period is that 22.4 percent of all U.S. households carried student debt, with the percentage rising to 44.8 percent for those aged 18-34, or $33,000 on average, up from 18.6 percent in 2001. The average household has to save for almost six and a half years to cover a 20 percent down payment on a home at current prices, according to a recent study by Zillow’s HotPads. That’s based on the steep assumption that workers can sock away 20 percent of their monthly take-home pay.

The outer birth-year band for millennials is 1981, making 2018 the year millennials are closer to 40 than they are to 30. While homeownership has picked up, it’s been held back for a decade due to the stagnant wage growth coupled with onerous debt burdens. The macroeconomic ramifications are well-documented. Baby boomers house a record level of their millennial offspring who can’t afford to leave home. Birth rates have fallen to a 30-year low as marriage is put off. Emanating from this trend is the money not plunked into nesting as families grow, a consequence not lost on Federal Reserve Chairman Jerome Powell.

“You do stand to see longer-term negative effects on people who can’t pay off their student loans. It hurts their credit rating, it impacts the entire half of their economic life,” Powell said in March. “As this goes on and as student loans continue to grow and become larger and larger, then it absolutely could hold back growth.”

Clearly, reform of some kind must address the issue of student debt, which is not to say debt relief or outright forgiveness. Institutions of higher learning in this country must take some of the responsibility for the current state of affairs in the nation’s most populous demographic group. And while the misguided cultural stigmatization of vocational education appears to finally be abating, further inroads to reintroduce balance to the workforce must be made.

The return on investment in a four-year degree isn’t as straightforward as it was for high school grads circa 1988. The reality of cost burdens must be weighed against the quality of life millions have forsaken thanks to the ease with which they’ve been able to finance the higher educations that have rendered their lives to lower rungs.

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Embracing the Unexpected — The Ancient Art of Conceiving Systemic Risk

Woe was Heraclitus. Such was the weight of the world on the pre-Socratic Greek philosopher’s shoulders that he left this world known simply as the “weeping philosopher.” In his mind, life was not for those with the capacity to contemplate its meaning. Rather, life was lived fully by the innocent alone. In his words, no doubt misconstrued since he took his last breath in 475 BC, “Lifetime is a child at play, moving pieces in a game. Kingship belongs to the child.” As for those with designs on defying the odds, Heraclitus counseled that, “Everything flows, and nothing abides.” The beauty of paradox is that investigation lays bare the naivete of staunch doubters.

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Danielle DiMartino Booth is CEO and Director of Intelligence at Quill Intelligence LLC

For a full archive of my writing, please visit my website Money Strong LLC at www.DiMartinoBooth.com

Click Below to buy Fed Up:  An Insider’s Take on Why the Federal Reserve is Bad for America

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Qi, Quill Intelligence, Danielle DiMartino Booth, Chinese Yuan

The QI of FX — China Holds the ‘7’ Line on its Currency

Overachieving Western parents have no idea how indebted they should be to Zhou Youguang, the linguist who spearheaded the development of the Hanyu Pinyin Romanization in the 1950s. Shortened to ‘pinyin,’ the Chinese government published the system which converts characters to Roman script in 1958. Other international organizations followed suit including the United Nations in 1986. The formalization complete, helicopter parents who’d heard the buzz — that Mandarin was the next hot thing to get into Ivy League colleges — were capable of following along with their children’s homework progress without having to learn the Chinese characters themselves.

To Continue Reading Click Here — QuillIntelligence.com

 

Danielle DiMartino Booth is CEO and Director of Intelligence at Quill Intelligence LLC

For a full archive of my writing, please visit my website Money Strong LLC at www.DiMartinoBooth.com

Click Below to buy Fed Up:  An Insider’s Take on Why the Federal Reserve is Bad for America

Amazon.com | Barnes & Noble.com | Indie Bound.com  |  Books•A•Million

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