It is almost truism to say that when you’re young, you are, as rapper Whiz Khalifa once noted, “wild and free.” Youthful exuberance, in popular Western imagination, is epitomized by reckless. But youth, as advertised, isn’t always just about the freedom to be irresponsible. It is also true that when you’re young, you’re most free to explore and inquire in ways that you can’t really do so when you have, say, a mortgage to pay off and kids to feed. Thus, your 20s are potentially your most experimental years. That is, if you are not burdened by debt.

 

Today, students at a four-year public institution pay 213% more for tuition than they would have thirty years ago. For private schools, students pay 130% more Roughly 70 percent of graduates leave college with student debt. Total student loan debt is now at about $1.5 trillion (two-thirds of which are held by woman.).

According to data from the Census Bureau compiled and aggregated by Forbes, annual cost of college, which includes room and board, tuition, and fees, has greatly outpaced median income. Even incomes for males with bachelor degrees are starting to feel the burn.

In a new survey by the Kogog School of Business, about 60 percent of millenials earning less than $50,000 a year are living “paycheck to paycheck”. Even more astonishing, about 60 percent of those earning between $50,000 to $99,000 say it’s still hard to make ends meat.

In another study, conducted by the NBC News/GenForward survey, about 62% of millenials owe more in debt than what they have saved up, with about 30% of millenials having less than $1000 dollars in their savings account and about 24% having no savings at all. Credit card debt and student loans make up the majority of the debt.

And before one jumps prematurely to the “millenials are just lazy, have bad work ethics, buy too much avocado toast etc.” argument, keep in mind, millenials tend to be workaholics, using less of their vacation time than previous age groups.

None of this is to say that these are problems unique to the young. Americans across all age groups face mounting debt. But the fact that the largest generation since the boomers must simultaneously balance debt payments while entering into an increasingly precarious labor market with few options for cheap affordable housing is cause for alarm. This isn’t just a spiritual and cultural travesty but an economic one too.

For example, in a study by the Health Science Journal on “economic growth and the harmful effects of student loan debt on biomedical research”, empirical evidence is found that supports the hypothesis that “indebtedness among young medical graduates affects speciality career choices. This means that, in the future, ceteris paribus, prospective students in biomedical sciences will be strongly incentivised, firstly, to choose the more remunerative career of medical practitioner instead of that of medical (pure or applied) researcher, and secondly to further sub-specialize in those fields that promise higher earnings to offset their higher loan repayments.”

I think this finding could be applied across most creative, professional, and specialized fields. To take just one example, there is a huge shortage (as well as underfunding) of public defenders. It’s highly possible that many attending law schools, even those with deep interests in public defense, go instead into corporate law for reasons similar to those cited in the above study: that is, to offset loan repayments or reduce precariousness in living standards—which is becoming more precarious as wealth inequality continues to widen. What are the consequences of this? A large reserve of lawyers in defense of the most privileged and a shortage of lawyers for the most marginalized, thus furthering racial and class disparity.

So what can be done? A study by the Levy Economics Institute at Bard College proposed a radical idea back in February: cancel the nation’s $1.4 trillion student debt.

The researchers looked at what would happen if the government cancelled all federal loans as a one-time policy. According to their models, this would lead to an $86 billion to $108 billion boost in GDP over the next ten years as well as reduce unemployment by .3%. What about deficit and inflation? The report indicates only “modest” effects.

Although there are many legitimate concerns to this seemingly simple solution, it may be something worth considering—a radical solution for a radical problem.

 

 

 

 

In 2015 it was Greece. In 2018 it has been Argentina, Venezuela, and Turkey just to name a few. Across the globe, those countries unable to execute the delicate ballet of monetary policy have seen staggering inflation, interest rates to match, and devalued currency. Perhaps most urgent, however, is the inability for these countries to pay back loans. Even more, 40% of low-income developing countries (not always sprawled across headlines) are either in a debt crisis or nearly there.

Let’s look at Turkey, for example. Despite raised interest rates (now at 24%), inflation is at 18% and the country doesn’t appear solvent enough to repay the foreign money dumped into the economy over the past few years. GDP is expected to contract in Q3. Just yesterday, Turkey’s Treasury borrowed around $347 million at the interest rate of 25.05%. These numbers scream impending doom. As interest payments come due, Turkey will likely have to refinance the loans or, more probably, borrow more money, this time at an even higher interest rate. This process will increase the deficit again, drive interest rates higher, and propel the positive feedback loop yet again.

It’s easy to sit behind the news headlines, shaking our heads at the recklessness of Treasury officials in Washington or Ankara or Buenos Aires or Athens. The reality is, however, that this insidious cycle happens not merely within governments, but also within a much quieter space—the world’s poorest.

A financial epiphany hit the world in the 1970s: microfinance. As inflation was skyrocketing in the US, nonprofits began to understand and prove that the “poor are creditworthy.” This realization opened the door to a now widely used process that allows individuals who wouldn’t ordinarily have access to capital, such as women in sub-Saharan Africa, to be granted loans to start small businesses. This reinvention of the financial system promised the potential to become a powerful tool in alleviating worldwide poverty.

But people, like governments, have trouble with debt.

Source: CGAP

While the lending interest rate in the United States was about 8% in 2006,  the average microfinance interest rate was about 35%, as shown in the figure above. For individuals in Uzbekistan, that number was 85%. It’s intuitive, practical, and even necessary for lenders to be compensated for risky investments through higher interest rates; this reality, however, leaves individuals trying to start a small business, like Greece in 2015, broke, desperate, and unable to attempt repayment. For microloan recipients in India, the reality was bleaker than desperation. “More than 80 people [took] their own lives in the last few months after defaulting on micro-loans,” reported the BBC in December 2010. These are devastating realities for individuals who fall prey to interest rates that are wildly unsustainable.

Let’s suppose that a microfinance organization has agreed to lend $100 to a woman in Malawi to make and sell resilient water jugs in her community. Completely ignoring start-up costs, she will have to expect returns of 37% ($137) in the first year just to pay off the loan and make a 2% ($2) profit. When this woman cannot pay off her loan at the end of the year, she’s forced to borrow more money at a higher interest rate in order to pay off the first loan. Of course, it’s unlikely that she’ll be able to pay off the second loan either. This is an infeasible system.

When interest rates are highest among individuals with the least amount of power to pay them back, these citizens turn into a personification of Greece or Argentina or Venezuela, desperately looking around, pleading for someone to help pay their debts. There is no IMF for individuals.

Betting and gambling are inherently based on chance, luck, and uncertainty. Because uncertainty is difficult to measure, and we cannot predict the future with one hundred percent accuracy, gambling on an outcome is exciting because no one knows what will happen. So, many people enjoy the thrill. In fact, the betting industry is a multi-billion-dollar industry in the countries of the world where it is legalized. The American Gaming Association estimates that in the United States, whose Supreme Court just struck down an important law making it illegal for states to regulate and allow sports betting, $150 billion is spent on illegal gambling each year. The Professional and Amateur Sports Protection Act (PASPA) was a federal law that essentially restricted sports betting to Nevada for a quarter of a century. And with PAPSA struck down, the American market is poised to become the world’s largest legal gambling market.

Although for a long time betting and gambling was seen as a vice that should be completely outlawed, much like alcohol post-Prohibition it is coming mainstream. Attempts to deny access to it, as with alcohol, brought forth illegal and shady offshore operations. Now, states and Congress are viewing a healthy amount of sports betting as “a potential source of revenue more than a detriment to society,” according to industry experts. Additionally, the rise in daily fantasy sports – considered by many to be a form of betting – has captivated the country, with nearly one-fifth of the country now participating in fantasy sports.

[source: Fantasy Sports Trade Association]

The illegality of sports gambling in the United States (save in, famously, Nevada, as well as a couple of other states) led to the rise in offshore betting sites. They were not legal or sanctioned, yet many managed to evade regulators and lawmakers. They continue to have a head start on much of the industry in America. While that is currently an issue, because states are quickly moving to legalize and regulate the industry, and Congress is moving to pass legislation as well, the legal market should win out. NBA Commissioner Emeritus David Stern declares that “between five and 10 years” from now, we will see a massive, regulated, fully online betting market in the United States.

The future legalized market in the United States could reshape the way sports teams and leagues operates, as well as create more experiences for fans to actually participate in, according to team owners and gambling experts.  Leagues see the revenue from gambling bringing in billions of dollars, money that will modify the way teams market and provide services to fans; this additional revenue could cause salary caps and team payrolls to explode as well.  Already, the Pittsburgh Pirates’ executives have argued that states should allocate sports-gambling revenues to stadium building.

According to Chris Eaton, an integrity monitor and former INTERPOL investigator, “In 10 years’ time … I see the large international conglomerates — Bloomberg, Google, the massive data companies — swallowing up most of the sports betting operations around the world and operating an international platform, with all of sports betting being essentially offered on the mobile device, the mobile platform.”

The large technology corporations are already seeking to implement their services into the betting industry. In the past decade “Google, Yahoo, Microsoft and others in the technology sector made written filings to the Commodity Futures Trading Commission (CFTC) in support of expanding so-called prediction markets into the public sphere.” This opportunity to enter a new market will not only boost revenues for the companies that are prepared, have a first-mover advantage or own large name recognition, but will also provide them with even more data.

Lawmakers and companies need to ensure this data is used efficiently and with respect for privacy; that the athletes are not taken advantage of vis-a-vis point shaving; and that gambling is properly regulated and able to be enjoyed in moderation. That these issues will be firmly addressed, however, much like betting on an outcome, are no sure things; with billions of dollars and lives at stake, it will be fascinating to experience the future prominence of legalized gambling across the United States.