(Condensed from New Jersey Banker, Summer 2008)
As our nation and our economy struggle through the fallout from the subprime mortgage crisis, it's apparent that the need for widespread financial education has never been greater. How many foreclosures might have been averted if homeowners had been better educated on mortgage products?
The same holds true for teaching young children to save, training young adults on budgeting and the proper handling of their deposit accounts, credit cards, and protecting senior citizens from financial predators. The American Bankers Association says that at present, as many as 86% of students in the U.S. have never taken a course in personal financial education. The need is magnified by the exploding population of new immigrants who don't speak English and who have not entered our banking system .
The challenge is great and developing a solution will require a collaborative effort on the part of both the public and private sectors. The good news is that the banking industry is putting forth positive and lasting efforts to promote financial literacy.
An example of a local New Jersey Bank who has found success with their teaching program is illustrated below:
First Hope Bank
Introduced in 2004, the bank has worked in conjunction with Great Meadows School Librarian Helene Palestri and her Young Savers Program, made up of first - through fifth- graders, who make deposits weekly into First Hope KIDS (Kids Investing Dollars Sensibly) acounts by visiting the school library, which is transformed into a bank, where fifth grade "tellers" collect, tally and credit the money. There's even a "branch manager" to welcome young bankers and direct them to an available teller.
Palestri says, that "the fifth grade teller jobs are very much coveted." The children must complete an application before being offered the position and that each teller has a name plate and a "work basket" containing a calcualtor, and stamp date and deposit slips. The Manager, Dawn Barbera, of First Hope's Great Meadows Office says the children "get a kick out of watching their money grow through interest." The program is a huge hit with parents and children alike.
Thursday, August 14, 2008
Wednesday, August 13, 2008
Financial Illiteracy Hits "Home" Revisited- by Patrick L. Ryan
(Condensed from New Jersey Banker, Summer 2008)
In order for our young adults to meet the needs of their future and and that of their future families, there must be an educational foundation put in place to help off-set our current trends in financial illiteracy, namely our current mortgage crisis. Those who succumbed to great salesmanship of low teaser rates and minimal monthly payments, and who are now discovering how risky those loans really were and the unbearable financial burdens they must bear after those low introductory rates conclude. Hence, our on-going crisis of home foreclosures and bankruptcies.
Slick sales presentations, easy credit and lax regulation are a significant part of the problem, but our first line of defense is ourselves and our financial literacy. Understanding compound interest, the mechanics of a loan agreement and the applicable mortgage tables are vital skills which all of us need to survive the financial realities of the 21st century.
Slick sales presentations, easy credit and lax regulation are a significant part of the problem, but our first line of defense is ourselves and our financial literacy. Understanding compound interest, the mechanics of a loan agreement and the applicable mortgage tables are vital skills which all of us need to survive the financial realities of the 21st century.
All the writing and mathematical skills carefully taught and absorbed over an educational career will not allow today's young adult to recognize the importance of early retirement planning, personal finance, credit card management and the elements of the myriad mortgage contracts available today without specific financial training.
The lack of financial literacy training in the prevailing educational systems is as serious a deficiency as can be imaginable. False financial moves early in life involving student loans, credit cards or other instruments can haunt young people for the rest of their lives through large debt loads and the expensive consequences of a poor credit score.
The public education system must take notice of this hole in its programs and address the matter, or many financial lives will continue to be damaged and essentially lost!
Wednesday, August 6, 2008
What Gifts Should We Give to Our Children? -- By Tony Pellegrino
As we struggle to establish a footing in our economic downslide, who has the time to consider what gifts we should give to our children? Do we give them a gift of almost $300,000,000 in debt? Do we give them a better or worse society than the one we have created? Do we merely satisfy all their instant material cravings? Exactly what should we give to our children?
As the father of five children, I am confused as to what gifts we are giving or should be giving to our children. What attitudes are we putting in their minds? When only 200 of our graduating students wish to obtain a higher education, what are the other 600 students going to do without it? Will they either join the military or join the ranks of food stamp recipients? What ideals and ambitions are we, as parents, instilling in our children?
My own parents were immigrants from Sicily who worked hard all their lives. I often reflect on the gifts that they gave to my brother, sister and me as children. The gifts were neither money nor property. Instead, they instilled in us a strong desire to get an education coupled with a fierce determination to succeed at anything we attempted in life.
When my father arrived in America, he had neither schooling nor skills. Somehow he found a job in a small bakery washing baking pans, sweeping the floor and doing other menial chores. Over the years, by watching and asking questions, he learned how to bake and was finally able to open his own bakery.
My mother, also without schooling and skills, found a job in a clothing factory sewing garments. She taught herself how to sew well until she was hired as a seamstress in a ladies’ fashion store. Later, she joined my father in their small bakery and grocery store. My father baked and my mother operated the store.
I cannot recall either of my parents ever being absent from or late to work unless they were so sick that it was almost impossible to rise from their beds. They were thrifty with their earnings, yet provided a clean, decent home and plenty of food for all of us. They showered love and attention on the three of us children. Basically, they lived what they taught us.
As my sister, brother and I enjoyed their love, we somehow picked up their wishes that we obtain a good education and the determination to succeed. My brother became an oral surgeon and my sister received her Bachelor of Arts degree, though late, at age 59. After receiving my Master’s degree in Liberal Arts, I first became a teacher and later a businessman. These are some of the gifts I received from my parents.
Hoping that this article will get us parents thinking about what gifts to give our children, allow me to cite a few. The list may be added to or modified as the reader feels necessary. We, as parents, and society must become aware of the ideals and goals we instill in our children because they will mirror us in a few years! Consider our own parents’ influence on us and how much we think and act as them throughout our lives.
A. I feel that the first and most important ideal to give our children is the following quote:
“The best gift a father can give to his children is to love their mother. And the best gift the mother can give to her children is to love their father.”
Think about why this is so important!
B. The next gift is sound character education, and one of the most important qualities of character education is virtuous behavior. The definition of virtue includes integrity, industry, and responsibility. If our children are not educated about the attributes of character necessary to succeed in life, they will not find happiness.
C. If our young people are going to be successful in meeting the tough challenges facing them in society, we need to instill mutual respect, tolerance, empathy, civility, humility, honesty, and resolution. Space limits the discussion of the above qualities but you already know what they mean if you are displaying good character.
D. Public Service must be taught to our children. We should teach our young people that they can be proud of public service, that it is stimulating and rewarding. Public service can take many forms from elected public office to volunteer service in the community. The active participation of our children in public service will ensure the greatness of our country. They must become interested in the political and social community around them.
E. A sound education must be taught about our alliances. Our children must understand and appreciate that they are citizens of the United States and also citizens of the world. Our children must grasp this relationship and understand their history. If they do not, they will not be able to effectively appreciate or participate in our varying levels of representative government.
Another one of the greatest gifts to give our children is to instill confidence and determination in whatever they attempt to do. Confidence and determination lead to success regardless of the difficulties to be faced.
The above suggestions are merely to jumpstart thinking about our relationships with our children. Your list will have many more, and perhaps will be different from mine, however, if we are diligent in instilling the above ideals in our children they will find their own paths in life easily whether they be in academics or as skilled trades people. What is important is that we carefully consider the gifts we give to our children? Our influence on them is greater than we realize.
Sadly, there is one gift that our government and we parents are giving our children which is unfair and will cause great hardship for years; it is the bestowing of a huge debt (close to $300,000,000.00), on them through no fault of theirs. If we truly value our children, and wish them to have better lives than we have built for ourselves, we have no choice but to stand up, not only for deficit reduction, but for a systematic plan to reduce the burden of debt that we are piling up daily. Today’s parents and grandparents owe it to their children to take care of their own debts. We must not burden our children with our foolish and wasteful ways; they deserve better.
You and I know that we enrich our own lives as we educate our children. From our young people, we refresh our thinking about optimism, enthusiasm, and new ways of looking at old questions. Indeed, from our children, we learn how to scan new horizons. Let us not place the mistakes we have made on their young shoulders. Let them fly free from the nest and seek new goals. When we give them gifts that add to the zest for life, we can rest assured that we have been good parents.
Whatever gifts we give to our children, tell them over and over, “We love your uniqueness. We love you. We want you to grow up to be all that you can be. You don’t have to be like us. You’re bright and creative. You have blessed us by coming. We really love you,” ending with a great bear hug. Isn’t that what you wished your mother and father had said to you but you never heard? What greater gift is there?
As the father of five children, I am confused as to what gifts we are giving or should be giving to our children. What attitudes are we putting in their minds? When only 200 of our graduating students wish to obtain a higher education, what are the other 600 students going to do without it? Will they either join the military or join the ranks of food stamp recipients? What ideals and ambitions are we, as parents, instilling in our children?
My own parents were immigrants from Sicily who worked hard all their lives. I often reflect on the gifts that they gave to my brother, sister and me as children. The gifts were neither money nor property. Instead, they instilled in us a strong desire to get an education coupled with a fierce determination to succeed at anything we attempted in life.
When my father arrived in America, he had neither schooling nor skills. Somehow he found a job in a small bakery washing baking pans, sweeping the floor and doing other menial chores. Over the years, by watching and asking questions, he learned how to bake and was finally able to open his own bakery.
My mother, also without schooling and skills, found a job in a clothing factory sewing garments. She taught herself how to sew well until she was hired as a seamstress in a ladies’ fashion store. Later, she joined my father in their small bakery and grocery store. My father baked and my mother operated the store.
I cannot recall either of my parents ever being absent from or late to work unless they were so sick that it was almost impossible to rise from their beds. They were thrifty with their earnings, yet provided a clean, decent home and plenty of food for all of us. They showered love and attention on the three of us children. Basically, they lived what they taught us.
As my sister, brother and I enjoyed their love, we somehow picked up their wishes that we obtain a good education and the determination to succeed. My brother became an oral surgeon and my sister received her Bachelor of Arts degree, though late, at age 59. After receiving my Master’s degree in Liberal Arts, I first became a teacher and later a businessman. These are some of the gifts I received from my parents.
Hoping that this article will get us parents thinking about what gifts to give our children, allow me to cite a few. The list may be added to or modified as the reader feels necessary. We, as parents, and society must become aware of the ideals and goals we instill in our children because they will mirror us in a few years! Consider our own parents’ influence on us and how much we think and act as them throughout our lives.
A. I feel that the first and most important ideal to give our children is the following quote:
“The best gift a father can give to his children is to love their mother. And the best gift the mother can give to her children is to love their father.”
Think about why this is so important!
B. The next gift is sound character education, and one of the most important qualities of character education is virtuous behavior. The definition of virtue includes integrity, industry, and responsibility. If our children are not educated about the attributes of character necessary to succeed in life, they will not find happiness.
C. If our young people are going to be successful in meeting the tough challenges facing them in society, we need to instill mutual respect, tolerance, empathy, civility, humility, honesty, and resolution. Space limits the discussion of the above qualities but you already know what they mean if you are displaying good character.
D. Public Service must be taught to our children. We should teach our young people that they can be proud of public service, that it is stimulating and rewarding. Public service can take many forms from elected public office to volunteer service in the community. The active participation of our children in public service will ensure the greatness of our country. They must become interested in the political and social community around them.
E. A sound education must be taught about our alliances. Our children must understand and appreciate that they are citizens of the United States and also citizens of the world. Our children must grasp this relationship and understand their history. If they do not, they will not be able to effectively appreciate or participate in our varying levels of representative government.
Another one of the greatest gifts to give our children is to instill confidence and determination in whatever they attempt to do. Confidence and determination lead to success regardless of the difficulties to be faced.
The above suggestions are merely to jumpstart thinking about our relationships with our children. Your list will have many more, and perhaps will be different from mine, however, if we are diligent in instilling the above ideals in our children they will find their own paths in life easily whether they be in academics or as skilled trades people. What is important is that we carefully consider the gifts we give to our children? Our influence on them is greater than we realize.
Sadly, there is one gift that our government and we parents are giving our children which is unfair and will cause great hardship for years; it is the bestowing of a huge debt (close to $300,000,000.00), on them through no fault of theirs. If we truly value our children, and wish them to have better lives than we have built for ourselves, we have no choice but to stand up, not only for deficit reduction, but for a systematic plan to reduce the burden of debt that we are piling up daily. Today’s parents and grandparents owe it to their children to take care of their own debts. We must not burden our children with our foolish and wasteful ways; they deserve better.
You and I know that we enrich our own lives as we educate our children. From our young people, we refresh our thinking about optimism, enthusiasm, and new ways of looking at old questions. Indeed, from our children, we learn how to scan new horizons. Let us not place the mistakes we have made on their young shoulders. Let them fly free from the nest and seek new goals. When we give them gifts that add to the zest for life, we can rest assured that we have been good parents.
Whatever gifts we give to our children, tell them over and over, “We love your uniqueness. We love you. We want you to grow up to be all that you can be. You don’t have to be like us. You’re bright and creative. You have blessed us by coming. We really love you,” ending with a great bear hug. Isn’t that what you wished your mother and father had said to you but you never heard? What greater gift is there?
Sunday, July 27, 2008
Beware of non-accredited schools and courses!
Case history with a twist:
Kimani is a 23-years old, bright young man who wants a college degree. He was recruited into an Equal Education Opportunity program at Kean University in NJ, after high school graduation. His father encouraged him to sign the papers. Neither understood the consequences. Kimani was 17 at the time.
Essentially, this EEO program meant Kimani signed for a low interest loan of $8000+ and was put into non-credit college courses. Apparently under this program all kids have to take these remedial classes whether they need them or not, and end up with big loans to pay back and no college credit to show for their efforts. In addition to the loan, Kimani had $2700+ he had to pay directly to the college. His father had agreed to pay it, but failed to do so.
Kimani has been working jobs on and off to pay down the debt to Kean while trying to take classes at Mercer County Community College. His debt to Kean is now $1800. And here's the kicker: Until this $1800 gets paid to Kean, Kimani can not apply for any type of aid for school.
Kimani went to see a financial advisor who does nothing but help families figure out their options to pay for college. He has agreed to help Kimani free of charge. And, because Kimani will be 24 in November, this financial advisor thinks he can help Kimani tap into opportunities to attend college for little or no cost.
Now, our blogger's collective wisdom and contacts are invited to help try and figure out how to help Kimani get this $1800 bill paid off. So far, $500 has been put towards the bill. What else is needed is ideas about grants, awards, whatever from businesses, organizations, fraternities, churches, whatever. If there are organizations that anyone is affiliated with that make these kinds of awards, would you please forward them on to here within this blog site?
Kimani's predicament needs to be brought to light so others can be better informed of their decisions. Otherwise, this is akin to the mortgage companies selling loans to people who will never be able to handle the financial burden. Why saddle young people with massive debt while not delivering any kind of college credit?
Thanks for your collective wisdom and help as we try to assist Kimani.
Susan E. Ferrara, Ph.D.
Kimani is a 23-years old, bright young man who wants a college degree. He was recruited into an Equal Education Opportunity program at Kean University in NJ, after high school graduation. His father encouraged him to sign the papers. Neither understood the consequences. Kimani was 17 at the time.
Essentially, this EEO program meant Kimani signed for a low interest loan of $8000+ and was put into non-credit college courses. Apparently under this program all kids have to take these remedial classes whether they need them or not, and end up with big loans to pay back and no college credit to show for their efforts. In addition to the loan, Kimani had $2700+ he had to pay directly to the college. His father had agreed to pay it, but failed to do so.
Kimani has been working jobs on and off to pay down the debt to Kean while trying to take classes at Mercer County Community College. His debt to Kean is now $1800. And here's the kicker: Until this $1800 gets paid to Kean, Kimani can not apply for any type of aid for school.
Kimani went to see a financial advisor who does nothing but help families figure out their options to pay for college. He has agreed to help Kimani free of charge. And, because Kimani will be 24 in November, this financial advisor thinks he can help Kimani tap into opportunities to attend college for little or no cost.
Now, our blogger's collective wisdom and contacts are invited to help try and figure out how to help Kimani get this $1800 bill paid off. So far, $500 has been put towards the bill. What else is needed is ideas about grants, awards, whatever from businesses, organizations, fraternities, churches, whatever. If there are organizations that anyone is affiliated with that make these kinds of awards, would you please forward them on to here within this blog site?
Kimani's predicament needs to be brought to light so others can be better informed of their decisions. Otherwise, this is akin to the mortgage companies selling loans to people who will never be able to handle the financial burden. Why saddle young people with massive debt while not delivering any kind of college credit?
Thanks for your collective wisdom and help as we try to assist Kimani.
Susan E. Ferrara, Ph.D.
Sunday, July 13, 2008
A New Addition to Our Educational Blog: Web Site Directory Offering Accredited Online Learning
We would like to welcome a brand new addtion to our educational blog at http://www.straube.org/online_courses.htm with the introduction of a site called Distance Learning College Guide, where they provide information on how you can earn a college degree online with links to over 50 accredited online colleges.
It is our goal to help facilitate awareness to educational sites, such as the one named above, that we believe will help people seek out quality education through distance learning and through online accredited colleges.
Ginger Gertsch
Education Facilitator
ginger@straube.org
It is our goal to help facilitate awareness to educational sites, such as the one named above, that we believe will help people seek out quality education through distance learning and through online accredited colleges.
Ginger Gertsch
Education Facilitator
ginger@straube.org
Thursday, June 26, 2008
Here in Las Vegas - The Nevada Childhood Cancer Foundation will partner with the Torino Foundation and the Clark County School District by creating the
Torino Classroom in Sunrise Children's Hospital.
The program, the third of its kind in the country, ensures in-patient children at the hospital receive classroom education during their hospital stay, including home tutoring.
GOOD For LV
LVKen7@Gmail.com
Torino Classroom in Sunrise Children's Hospital.
The program, the third of its kind in the country, ensures in-patient children at the hospital receive classroom education during their hospital stay, including home tutoring.
GOOD For LV
LVKen7@Gmail.com
Wednesday, June 18, 2008
The day the slacker died!
From Asia Times Online, Front Page, June 10, 2008
By Spengler
Two events on June 6 might denote the death of the "slacker" as an American cultural archetype. The first was the largest monthly jump in the US unemployment rate in two decades, due to an unexpectedly large number of young entrants into the labor market. The second was the release of the film Kung Fu Panda, which transposes the ubiquitous slacker-makes-good story line into the incongruous setting of Chinese martial arts.
America might be the first country in recorded history whose culture celebrates not only indolence but also the sheer absence of ability. Byronic loafing is the birthright of genius, but slacking has become the entitlement of every young American. American popular culture puts a special premium on doing nothing, which is what the protagonists of such popular television series as Friends, Sex in the City, The Office and Seinfeld did. Aristocrats throughout history loafed because they could afford to. Until very recently, so could Americans. That has come to a sudden and ignoble end, on which more later.
The popularity of slacking is evident from the success of films on the subject. Well, they knew their demographics those who crafted Kung Fu Panda, in which a fat and feckless panda who in two easy lessons becomes a kung fu master. As film critic Carina Chocano lamented in the Los Angeles Times, "The slacker panda whose favorite word is 'awesome' is singled out for heroism when all the other characters have worked long and hard (the definition of kung fu) and sacrificed for what they've accomplished. The message - believe in yourself even when all evidence suggests you shouldn't - is annoyingly familiar and frankly overdue for a serious debunking." A young martial-arts practitioner of my acquaintance said it more simply: "Who made this movie? I want to rip out his trachea."
Underlying the seemingly good-natured adolescent humor of this exercise is a nasty streak of resentment. Young Americans profoundly resent the notion that they must subject themselves to the discipline of authority in order to learn and advance - precisely what Asian martial arts propose to teach. The easy success of the panda protagonist (with the annoying voice of actor Jack Black) is a gob of spit in the eye of authority.
The market is teaching Americans better. In a few years, I predict, young Americans will wear neckties to work and say "Yes Sir!" and "Yes Ma'am," and spend their evenings at night school rather than drinking beer with their buddies.
In an essay entitled American idolatry (Asia Times Online, August 29, 2006), I suggested that American music's gradual descent into mediocrity expressed growing resentment against artistic standards. But there is no resentment like well-funded resentment, and it is the tragedy of American adolescents to have had too much money at the worst possible time.
America is the only place in the world where a gaggle of acne-pitted, pizza-gobbling, beer-guzzling mind-altered college dropouts in cut-off jeans and flip-flops could start a website and become billionaires. A decade ago, a couple of ex-hippies sold an Internet greeting card site for US$4 billion. The window for such weird occurrences shut forever with the collapse of the Internet bubble, to be sure, but the memory of rich rewards to slacking persists among American youth.
The Internet bubble presumed that the world would pay staggering sums for future delivery of American popular culture. The world never really liked American popular culture, though; it liked what it thought that culture represented, namely, limitless opportunity and upward mobility. Bloated expectations about the financial future of web-based delivery of pop culture were a case of a bad idea chasing its own tail.
American college dropouts ceased to become Internet millionaires in 2001, but the sense of entitlement continued. As the world's savings washed into the United States, reaching the improbable level of $1 trillion last year, American asset prices rose, and the cost of capital fell. Americans nearing retirement ceased to put money away, assuming that all of them would be able to sell their houses to each other at some future date. Home prices doubled in the decade through 2007.
American families stopped saving for their children's university education, which at a good private institution costs roughly $200,000 per student. Families expected to take cash out of their homes, and students expected to borrow money at low interest rates, to defray these costs. Borrowing rather than saving for college became universal, and the volume of student loans outstanding reached $48 billion last year.
It is hard to think of a comparable case in social history: a country borrows from foreigners to lend money to its young people to spend four years binge-drinking at a university that pretends to prepare them for the world. Textiles to India and opium to China financed the slacking of three generations of British toffs, but the current-account surplus and the student loan securitization markets paid for the slacking of American undergraduates.
Now it appears that a few hundred thousand college-age Americans have fallen off the gravy train. Most American banks who offered student loans have exited the market entirely. It is not that students have ceased to pay back their loans, but rather that the banks are short of resources after the collapse of the mortgage-lending market and associated portions of their asset books. In May, the US government proposed emergency legislation to provide more government loans to students, but this will not make up for what the banks have taken away.
Families that expected to take cash out of appreciated homes had a rude awakening this year. Most American banks have stopped allowing mortgage borrowers to refinance and take out additional cash. So-called home equity loans, or second mortgages on homes, are the cause of the crash of US bank stock prices during the past few weeks. The well is dry. That leaves the youngsters in the lurch, which is precisely where most of them deserve to be.
A profound sense of panic appears to have gripped American youth, which might explain why so many of them are seeking a messiah in Democratic presidential candidate Senator Barak Obama. But there isn't much that Obama or anyone else, for that matter, can do to help the slackers
Americans have to work harder, save more, and defer gratification. Instead of spending four years in a non-stop party at a taxpayer-subsidized state university, the middling American student will work during the day, go to night school, and save for a dozen years to buy his or her first house (at a much lower price than the present owner paid for it). They will stop complaining about boring jobs and oppressive bosses, and feel grateful to have the work. Their parents won't bail them out; in fact, their parents will postpone retirement and work and additional 10 or 15 years.
It's not going to be fun, but there's no helping it. The sooner Americans reconcile themselves to a tighter belt and a longer day, the better.
By Spengler
Two events on June 6 might denote the death of the "slacker" as an American cultural archetype. The first was the largest monthly jump in the US unemployment rate in two decades, due to an unexpectedly large number of young entrants into the labor market. The second was the release of the film Kung Fu Panda, which transposes the ubiquitous slacker-makes-good story line into the incongruous setting of Chinese martial arts.
America might be the first country in recorded history whose culture celebrates not only indolence but also the sheer absence of ability. Byronic loafing is the birthright of genius, but slacking has become the entitlement of every young American. American popular culture puts a special premium on doing nothing, which is what the protagonists of such popular television series as Friends, Sex in the City, The Office and Seinfeld did. Aristocrats throughout history loafed because they could afford to. Until very recently, so could Americans. That has come to a sudden and ignoble end, on which more later.
The popularity of slacking is evident from the success of films on the subject. Well, they knew their demographics those who crafted Kung Fu Panda, in which a fat and feckless panda who in two easy lessons becomes a kung fu master. As film critic Carina Chocano lamented in the Los Angeles Times, "The slacker panda whose favorite word is 'awesome' is singled out for heroism when all the other characters have worked long and hard (the definition of kung fu) and sacrificed for what they've accomplished. The message - believe in yourself even when all evidence suggests you shouldn't - is annoyingly familiar and frankly overdue for a serious debunking." A young martial-arts practitioner of my acquaintance said it more simply: "Who made this movie? I want to rip out his trachea."
Underlying the seemingly good-natured adolescent humor of this exercise is a nasty streak of resentment. Young Americans profoundly resent the notion that they must subject themselves to the discipline of authority in order to learn and advance - precisely what Asian martial arts propose to teach. The easy success of the panda protagonist (with the annoying voice of actor Jack Black) is a gob of spit in the eye of authority.
The market is teaching Americans better. In a few years, I predict, young Americans will wear neckties to work and say "Yes Sir!" and "Yes Ma'am," and spend their evenings at night school rather than drinking beer with their buddies.
In an essay entitled American idolatry (Asia Times Online, August 29, 2006), I suggested that American music's gradual descent into mediocrity expressed growing resentment against artistic standards. But there is no resentment like well-funded resentment, and it is the tragedy of American adolescents to have had too much money at the worst possible time.
America is the only place in the world where a gaggle of acne-pitted, pizza-gobbling, beer-guzzling mind-altered college dropouts in cut-off jeans and flip-flops could start a website and become billionaires. A decade ago, a couple of ex-hippies sold an Internet greeting card site for US$4 billion. The window for such weird occurrences shut forever with the collapse of the Internet bubble, to be sure, but the memory of rich rewards to slacking persists among American youth.
The Internet bubble presumed that the world would pay staggering sums for future delivery of American popular culture. The world never really liked American popular culture, though; it liked what it thought that culture represented, namely, limitless opportunity and upward mobility. Bloated expectations about the financial future of web-based delivery of pop culture were a case of a bad idea chasing its own tail.
American college dropouts ceased to become Internet millionaires in 2001, but the sense of entitlement continued. As the world's savings washed into the United States, reaching the improbable level of $1 trillion last year, American asset prices rose, and the cost of capital fell. Americans nearing retirement ceased to put money away, assuming that all of them would be able to sell their houses to each other at some future date. Home prices doubled in the decade through 2007.
American families stopped saving for their children's university education, which at a good private institution costs roughly $200,000 per student. Families expected to take cash out of their homes, and students expected to borrow money at low interest rates, to defray these costs. Borrowing rather than saving for college became universal, and the volume of student loans outstanding reached $48 billion last year.
It is hard to think of a comparable case in social history: a country borrows from foreigners to lend money to its young people to spend four years binge-drinking at a university that pretends to prepare them for the world. Textiles to India and opium to China financed the slacking of three generations of British toffs, but the current-account surplus and the student loan securitization markets paid for the slacking of American undergraduates.
Now it appears that a few hundred thousand college-age Americans have fallen off the gravy train. Most American banks who offered student loans have exited the market entirely. It is not that students have ceased to pay back their loans, but rather that the banks are short of resources after the collapse of the mortgage-lending market and associated portions of their asset books. In May, the US government proposed emergency legislation to provide more government loans to students, but this will not make up for what the banks have taken away.
Families that expected to take cash out of appreciated homes had a rude awakening this year. Most American banks have stopped allowing mortgage borrowers to refinance and take out additional cash. So-called home equity loans, or second mortgages on homes, are the cause of the crash of US bank stock prices during the past few weeks. The well is dry. That leaves the youngsters in the lurch, which is precisely where most of them deserve to be.
A profound sense of panic appears to have gripped American youth, which might explain why so many of them are seeking a messiah in Democratic presidential candidate Senator Barak Obama. But there isn't much that Obama or anyone else, for that matter, can do to help the slackers
Americans have to work harder, save more, and defer gratification. Instead of spending four years in a non-stop party at a taxpayer-subsidized state university, the middling American student will work during the day, go to night school, and save for a dozen years to buy his or her first house (at a much lower price than the present owner paid for it). They will stop complaining about boring jobs and oppressive bosses, and feel grateful to have the work. Their parents won't bail them out; in fact, their parents will postpone retirement and work and additional 10 or 15 years.
It's not going to be fun, but there's no helping it. The sooner Americans reconcile themselves to a tighter belt and a longer day, the better.
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