Wolf Richter at Wolf Street.
Consumer credit – auto loans, student loans, and revolving credit such as credit card balances and personal loans, but not housing-related debt such as mortgages and HELOCs – grew 5.4%, or by $208 billion, in the second quarter compared to a year ago, to a new record of $4.06 trillion.
The student loan ponzi scheme.
But that surge in student loan balances is not because there are more students enrolled. On the contrary: According to the latest data available from the National Center for Education Statistics, enrollment fell by 7% between 2010 and 2017, from 18.1 million students to 16.8 million students.
So who got this $1.6 trillion that students now owe and that the taxpayer guarantees? Students are just the conduit for this money. Who ends up with it? Universities; Apple and other companies, such as textbook publishers, that focus on selling their goods and services to students; other participants in the economy such as grocery stores and concert venues; and importantly, investors in a booming asset class called “student housing.” They are the recipients of these taxpayer guaranteed funds. And every dime of this debt contributes to the economy as measured by GDP – on the time-honored principle of Apocalypse not now.
This is also how the Military Industrial Complex operates. Tax dollars are funneled to other countries via aid then the money is used by that country to purchase military hardware. This also adds to GDP.