Since 1913, we have had a debt-based monetary system. Since debt requires additional money to continually be added to the system (so that debt can be serviced with interest payments), our country has a simple mandate: Grow. Everything has to grow – GDP, debt, money supply (loosely defined) – or we fall. It’s like a shark having to swim forward or die from a lack of oxygen.
As a result, we are some of the most heavily indebted people in the world. We have record levels of government and corporate debt, and our household debt levels are back near record levels after a temporary falter in 2008/09. Millennials are carrying quite a bit of debt due to their student loans: According to Inc., almost two-thirds of millennials have more than $10,000 in student loan debt, and that’s on top of other forms of debt like credit cards and car loans.
Significant numbers of Millennials are planning to put off life-establishing moves that people have traditionally made in their 20s and 30s. Forty-one percent say they’ll put off buying a house and 31 percent say they’ll delay buying a car. More disturbingly, 17 percent say they won’t get married yet because of the burden of their student debt, and 31 percent are putting off having children because of it.
So what do we do when the economy needs to grow (read: add more debt) and a large group of citizens is refusing to take on more debt due to their already heavy burden? We pretend their current debt doesn’t exist so we can lend them more!
As ZeroHedge notes, “Fannie Mae is right on top of the issue and has just released new rules allowing millennial borrowers to, among other things, simply exclude student loans, credit cards and auto loans that are “paid by someone else”…wink wink…when applying for a new mortgage. As an added benefit, taxpayer subsidized mortgage loans can also now be used to repay student debt.”
This is clearly one of the last gasps of a desperate system, a system that cares everything about increasing debt and nothing about credit quality or the ability of borrowers to repay what they owe.