Tag Archives: Student Loans

Against Usury

On Twitter Hurlock took a swipe at distributism. I’m not going talk too much on distributism. I heavily sympathize with it but do not think it is something that would work out. I also find that many distributists simply use distributism to try to disguise their socialism. I must admit that the romantic side of me really likes the idea of repersonalizing production and property, however impractical that might be.

I came not to talk about distrbutism though, but rather usury. At some point in that discussion Hurlock and SB got onto the topic of interest and usury. Essentially, Hurlock thinks that interest should be a free-for-all and SB wants limits on interest. About two years ago, I would have been heavily in Hurlock’s camp; I remember defending payday loan outfits a number of times. Yet now, not so much. Now I fully support a ban on usury.

The problem with discussions of usury is that, as it seems to be in this particular exchange, the focus is almost always on the interest rates being charged. SB focuses on a 400% rate, while someone else implied usury is interest over 10% and should be banned. It’s not the particular rates that are the problem and rates should not be the focus. (Not to mention a focus on the rates is rather arbitrary: ex: why 10%, not 9.5%?)

Zippy has written a lot on usury over the last half-year or so and usury has nothing to do with particular interest rates. A loan is usurious if it is for profitable interest and is full-recourse. To break it down to a more practical level, any loan is usurious if it is for expenditure on consumptive activities (no matter the interest rate), while it is non-usurious if it being spent on capital and real property and that capital is the only recourse for the loaner should the debtor default.

It is a fact that some people are less intelligent and neoreactionaries very much accept this fact. Compound interest is not something that a significant portion of the population will be able to comprehend and even among those who do comprehend it, a significant portion of them will have too low a future-time orientation to make rational decisions. Compound interest makes sense to people like Hurlock, but I’ve lived among the working classes most of my life, and I’ve seen the hardships usury can bring to the lower classes. Now it is possible to take the position of screw them, debtor slaves are natural slaves, but I don’t think the mass debt slavery is healthy for society.

To illustrate, let’s look to the biggest example of modern usury, one that tend to get the attention of the reactosphere: student loans. Unlike most forms of usury, this one is primarily impacting the right half of the bell curve, so its not just the stupids that are being taken for the ride. Thanks to the ease of obtaining this particular form of usury we have a situation of massive amounts of young people going into debt slavery for near worthless pieces of paper, then squandering their potential in underemployment to get of it.

Do these people deserve their debt slavery? Yes, they did take out a loan, then waste it on worthless degrees, and they did promise to pay it back. They fully deserve their debt slavery.

But this is not the right question to ask. The better question is: is it healthy for society to have a large portion of the most intelligent people of an entire generation permanently in hock for a worthless degree? The obvious answer is no, this is a disaster for society. The entire corrupt edifice of the modern college system is built on and enabled by usury. Remove the usury and the entire corrupt structure falls.

We can now look at the national level. The federal government has taken out massive amounts of usurious loans*, enough that 7% of the US budget is devoted to interest payments. Usurious loans (along with inflation) are what keeps the decaying government going. Usurious loans are what allow the uninterrupted growth of the bureaucracy and they are what allow the corruption of the people by said bureaucracy. The corruption of the USG we so hate depends on usury.

If we look back to what constitutes usury, debt for consumption is usurious, while debt for productive purposes is (usually) non-usurious (as long as it is not full-recourse). If we banned usury, if would not hurt the economy. Productive activities would still be able to get themselves funded, while consumptive ones would not. This would be in the best interests of long-term, natural economic growth. Allowing usury draws potentially useful capital away from production towards consumption.

Keynesian nonsense is based on usury. The endless cycle of consumption to keep those GDP numbers high is funded by usury. Without usury, keyensianism would die. There would be no stimulus because there would be no way to fund stimulus.

Usury drives the degenerative ratchet. Cut away to the heart of any degeneracy and inflation and usury will almost always be funding it.

Every reactionary should oppose usury (in its proper sense).


* Technically, bonds are sold to ‘investors’ by the government as debt instruments and blablabla. But throw away all the extra garbage, and essentially a bond is a usurious loan to the United States government given by ‘investors’.

Repost: Tuition Bubble

Don’t have a new post for you today, so here’s a repost from the early days.

Here’s the New York Times running only a bit behind in reporting on the tuition bubble. I thought this would be a decent time to weigh in on the issue.

the average debt in 2011 was $23,300, with 10 percent owing more than $54,000 and 3 percent more than $100,000

To be honest, this is not that bad. $23k is a lot, but livable, even 54k is not insurmountable, but for the 3%, $100k is a serious commitment. In some areas equivalent to a mortgage on a starter home.

The problem though, is that these are ok only if there is employment for those taking the loans. The NYT doesn’t cover this in this article, but the real problem is half of these people graduating are not going to have jobs or will be underemployed.

$23k in debt is doable if you make $40k a year, even $120k ($900/month according to the article) is doable if you make $60k a year coming out of university and live frugally for a few years.

But, if you are unemployed or working part-time as a barrista, there is no way to keep payments up on much more than a few thousand dollars worth of debt and still be able to advance in life.


The NYT misses that the tuition bubble is not a bubble because tuition costs are high; an expensive degree can be an excellent investment for both the lender and borrower if it increases future earnings.

The whole article is off-base as high tuition costs are irrelevant if the economic benefits of the degree match or exceed the cost of the degree.

The tuition bubble is a bubble because a lot of these degrees are worthless.

So why are they worthless? Part of it is simply the transition to post-scarcity, even highly educated and skilled people may simply be replaced by machines. Some of it is because these degrees teach no useful skills, such as Master of Puppetry, an awesome album but a crappy degree. But there is another, even more fundamental, problem that the NYT ignores almost completely.


The main problem is touched upon later on in the piece, but only very obliquely:

the main job of the admissions staff, after all, is to admit students

An off-hand reference in the second half of a sentence at the bottom of a paragraph is all the NYT devotes to the  crux of the tuition bubble.


Huh? Isn’t admissions staff’s job to admit students?

No, the admissions staff’s job is to screen out students for whom university (or college) is not appropriate.


Doesn’t admissions already do this?

No. It doesn’t. 68% of high school graduates go to college.

Thank about that for a second.

The average graduate is going to college

Remember back to your high school graduation; think about your average classmate.

The guy who wasn’t particularly bright or particularly stupid.

Do you think he would benefit from spending 4 years learning political theory or reading Rousseau?

Do you think it would benefit anyone else that he “learned” this?


The evidence says he doesn’t.

One-third of those entering college drop-out.

They pay the expense of a couple years of college and do not even get the dubious benefits of a degree.

The college system is taking advantage of these people who shouldn’t be in college.


One-third of college students are dropping out, at the same time, grade inflation is running rampant.

College is becoming increasingly easy, yet still a third of students still can’t hack it.

The admissions people are failing their job. One-third of people entering university are not capable of completing even the dumbed-down modern university curriculum.

Think about how many more would not be capable of completing college if standards were similar to those 50 years ago.


Look at this post from Adacious Epigone on IQ by intended major from a few years ago.

Look at education, public admin, business, psychology, legal professions, health professionals, etc.

The average incoming student for all of these is only around average intelligence. About half of them are of below average intelligence.

This is why there is a tuition bubble.


It used to be that a college degree meant you were a cut above the rest; that you were a competent, intelligent individual.

Now all a college degree shows is that you are able to stomach a university’s bullshit for a few years and are not a complete dullard.

That’s why your degree is worthless.

It doesn’t signal you’re a superior intellect with a strong knowledge of your specialty.

All it shows is that you’re not completely incompetent and are able to parrot BS back to the BS’ers. How much is not being completely incompetent worth to an employer?

Even a high GPA doesn’t mean much. With grade inflation everybody’s GPA is fairly high, how can an employer trust that you actually earned yours?


As an aside, look at public admin and social services: 96.3.

Do you want to know one reason why your government doesn’t work very well? The people in public admin are being educated to run the government. Do not think that these are not going to be the front-line clerks at the DMV, or even their supervisors; these are actually the people who are going to university to learn how to create public policy. They are the ones who will be creating government policy and regulations that will control your life.

Most of them are of  below average intelligence.

Think about that for a minute. Please don’t weep.

Of course, the average business major is not much better, barely scraping by at 101. 2.

And we wonder why the US economy is stagnating?

Teachers are at 99.3. Half of all teachers are of below average intelligence. Here’s where you can start weeping for the future.

Your kid is likely being taught by someone of average or below average intelligence.

If you’re reading a post about the economics of post-secondary education on a blog for leisure (like say, this post you’re reading right now), it’s highly likely the large majority of these teachers, bureaucrats, and businessmen running things and teaching your children are much more stupid than you.

Aren’t you feeling comforted?


Thankfully the drop-out rate is so high. I’d hate to think what the school system and government would be like if a third of these sup-par students didn’t fail to finish their degrees.


So, after all that, you’re probably understanding why the tuition bubble exists.

It exists because too many people are getting a degree.

Everybody wants to enter the road to the professional, white-collar, middle-class, which is what university is thought of as now.

But not everybody is capable of being a white-collar professional.

Of course, modern liberal dogma can’t admit that some people are just not capable of being white-collar professionals, after all, we are all equal. The Bible (or Stephen Gould, depending on your religious beliefs) and the Constitution (or your sociology professor, depending on your political beliefs)  say so.

So those in charge, those who would read the NYT, can not and will not prevent those who shouldn’t be going to college from going to college.

Instead, they’ll encourage them to go. They’ll give these marginal students huge, government-backed loans they’ll never be able to pay back. They’ll lower academic standards as far as they can go, then lower a them a bit more, destroying any academic, economic, or signalling value of your degree in the process.

Doing otherwise would expose their ideology for the lie it is and their ideology takes precedence over the good of these marginal students, not to mention the other students whose degrees are made worthless.

So, as these marginal students flood colleges, demand for college education increases, so tuition goes up.

The academic value of the degree erodes, as grade inflation and lowered academic standards become necessary to keep these people in college, and maybe (hopefully) let them graduate.

The economic values of these degrees plummets. Your degree no longer signals competence, knowledge, and intelligence to an employer; all it signals is a lack of incompetence. Why should he pay well for that? Why should he hire the marginally competent at all?

Thus a bubble. Paying more and more for less and less.

One thing though, bubbles can’t last forever. Reality always wins in the end.

Eventually, the post-secondary education system will run into reality.


Economists do not predict a collapse of the student loan system, which would, in essence, mean wholesale default.

NYT’s economists never fail to be amusing. I wonder if this was Krugman or Friedman, maybe both?

Those who are blinded by ideology will run full tilt into the wall of reality. They will then act surprised.


With more than $1 trillion in student loans outstanding in this country

$1 trillion, that’s almost 7% of GDP. If a large percentage of these loans default, this will be a major economic catastrophe. It may be possible for the US government to forgive them, but that will be a significant increase in national debt.

Students are likely stuck with this debt.


So what can we do?

Short answer: nothing.

Long answer: That’s a question for another post.


One last note:

Leaders of the for-profit industry defended themselves

I’m usually a staunch defender of the free market, but in this case, all I can say is:

Fuck them.

The for-profit college industry is a brood of blood-sucking parasites taking advantage of students who should never set foot near a college for their own benefit, and the student loans programs in a disgusting display of parasitic corporate welfare. May their whole industry rot.