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#FinanceDaily: Fiscal Responsibility Act | Student Loan DEBATE
Recorded: May 30, 2023 Duration: 2:00:02Space Recording
Short Summary
The discussion highlights significant developments in the AI and Web3 sectors, including IBC's investment strategies, Nvidia's market growth, and Tesla's advancements in autonomous driving technology. The narrative around AI's potential for margin expansion is influencing market trends, while innovations in AI-generated services and self-driving technology are paving the way for future growth.
Full Transcription
Happy Tuesday.
I was, hold on, I'm just going to spend a few minutes bringing everybody else up.
So I was, has anybody seen this, like, account, the Alexandria Ocasio-Cortez press release?
It's a parody account, but it is freaking hilarious.
Like, literally.
Is it the one where she declared her love for Elon?
Yeah, it's like...
This might be the wine talking, but I've got a crush on Elon Musk.
And it's funny because it's a parody account, but the way that the name is written, you wouldn't know.
And so, I mean, you have to like click on it to know.
But then Elon Musk replied back with like the fire emoji.
And then somebody, I don't know if people have watched the video of.
Like where they took AOC's out date, AOC's interviews, and then took Elon Musk's interviews, and they made it seem like they, they were like talking to each other, but it was like with like Spanish guitar in the background.
It is one of the funniest videos.
I did see that.
It was really funny.
It is so funny.
It's like...
I think there's like a weird...
It's a weird tension between the two of them
because they clearly, like,
massively disagree,
but quite like disagreeing with each other.
So there's something in that,
the parody of that,
which is probably true.
That's so true.
It's like,
it's as if they both enjoy the process of...
you know,
nagging each other.
It's like when you had a crush
at school, right?
I hate her.
She's the worst girl in the world.
They're like, yeah, he's the,
he's the grimyest boy.
It's worse.
And they're always the ones that are like,
most in love with each other.
Yeah, possibly.
The internet demands that they go on some kind of date.
No, but it's just really funny because I actually disagree.
I don't think they have...
This is the power of the internet that they can make something seem real.
There's zero reality behind it.
I bet you they absolutely don't even know each other and probably would disagree with...
Oh, no, they definitely do.
They refer to each other all the time and they refer to videos.
No, no, I mean like in person.
Like, I can talk about somebody, but, like, not know them.
Cool, wouldn't it?
Like, why wouldn't you do, like, for AOC and for Elon,
why would you do, like, a charity thing where you buy them dinner
and have to go on a date for charity?
Because neither one of them cares.
Oh, my gosh. Oh, my gosh.
Rob, that is the best thing I've ever heard.
Hi, Rob, it's time for you.
By the way, people that are listening...
Rob is going to tweet this out from his account as an idea.
I want everybody, and then Rob, can you post it in the comments?
I'm not going to put it up on the nest.
I just can't do that.
But if you can put it in the comments, just a quote tweet in the comments,
I want everybody who's listening to us to go in to Rob's comment,
retweet it, comment on it, make sure that Elon sees it.
and AOC sees it.
Rob, make sure to tag the right AOC account.
And we'll see if we can make some magic happen.
This is going to be a space for good.
We're going to do some good today.
If you call that good, sure.
We shall see.
But I'm just waiting a couple of minutes.
I think I'm not sure if Neely was supposed to join us.
I'll just double check.
We have a lot to have run through.
Yeah.
I don't know, actually.
She might be, actually, waiting on the team to get back to me.
One second.
She cannot join today.
All right, no worries.
Well, let's get started.
We had a very eventful weekend on Friday.
On Thursday night, there was a general agreement on what was going to happen.
It was then confirmed on Saturday.
We did break some of it here on Friday morning, specifically that the deal, and again, again,
The theatrics were great, but we all knew the deal was going to be done on Friday.
And the market knew.
The market went up 300 points on Friday.
Clearly, what we learned was what the market learned pretty quickly as well.
On Saturday, a deal was officially announced.
But, you know, still, just want to be very, very clear for anyone listening.
I will say this in the beginning.
I'll probably say it a few times throughout the,
that while we do have financial experts on stage,
and they will share some of their thoughts and their learnings,
it does not mean that they're providing financial advice.
So as people are speaking, please, for the love of God,
please do not take it as financial advice.
We're better than this, right?
You guys are listening to us every morning at 8 a.m. Eastern.
You know...
that this is not financial advice so uh hilariously over the weekend as you get started i have to
tell you we got um um that there was there was an entire space that was dedicated to how we were
manipulating the markets and by the way the audio that they played the first thing that was said
was my voice saying this is not financial advice i'm
I'm just some random dude on Twitter.
I kid you not.
And they then still said that we were trying to manipulate the markets.
If a roomful of a few thousand people on Twitter spaces,
I think at that time we had like maybe 10,000, 15,000 when we did announce it.
But, you know, if a roomful of, you know, a few thousand people can manipulate the entire market,
then, man, we are in deep trouble.
But in reality, that was never our intention.
We are, in fact, we had a pretty deep discussion internally about should we even release it.
But we had so many sources and so much confirmation that we thought it was the right thing to do, especially since people come to us for breaking news.
But anyways, let's jump right into the actual deal.
I have shared with our team internally the details of the Fiscal Responsibility Act.
I'm actually going to go, I'm going to go post it in the comments on the bottom right.
I want people to tell me, as they're reviewing it, please reply to the tweet that I'm about to
to post, it's posted in the comments in the bottom right.
I want you to reply to that with different parts of it
that you think, you know, that there are learnings from.
So I'm going to also, hold on,
I'm going to start tweeting a little bit more internally.
So again, if you want to know what we're talking about,
I just tweeted in there the specifics of the fiscal responsibility act.
First of all, how about branding?
Justin, how's that branding for you?
Fiscal Responsibility Act.
Is it just as accurate as the Inflation Reduction Act?
I mean, it's just as accurate as every bill name that was ever proposed.
It's so not so accurate.
So I have now...
Like you said, though, Bill, I think that is important to point out.
The bill name has almost nothing to do with the...
I mean, no, I'm not...
Yeah, the bill names rarely have anything to do with the name.
Okay, I'm just going to interrupt this important thing before you can continue, Danish.
I have tweeted the OCE Elon thing, and I've pinned it in the comments.
Go and retweet it.
I do want to see that happen.
That's the last time I mention of it, but in the comments, go find my tweet, go retweet it.
I want to actually see if they'll do that.
Everybody, you can go down and do that.
No, I love it.
It's great.
All right.
So just wanted to let people know.
What I want people to do is now that tweet is up in the nest.
I want people if there are, and I put some of the main points in there so people can follow along.
If people find anything in the text of the act.
that they think we're missing and that's worth discussing please go in there reply to it
comment on it let us know and also if you have any thoughts about specific provisions if we like
your tweet we will bring it up and put it in the nest uh you know mickle is up here uh because he
puts out a lot lots of really interesting uh responses so uh be like mickle uh
and go in there and put in your answers.
We will bring somebody up if their tweet is good.
And regardless, we'll discuss your tweet.
So really appreciate it.
Let me just bring Eugene up.
All right.
So we have now, at least internally, most of the team has gone through it.
I'm going to run through the basics of the act.
Um, you know, some of it we discussed on Friday when we, but some of it has come on come out ever since. So number one, the debt limit has been extended to January 1st, 2025.
So just to be clear, this does not include the extraordinary measures.
With extraordinary measures, it could be expanded to essentially be a two-full-year debt ceiling extension.
We can talk to what they mean by extraordinary measures.
Does that mean that literally just after the first hundred days of the next president or Biden's in the second term,
he's now back into debt-sealing negotiations again?
Yes.
Right.
Yeah, that's how we do it around here, Rob.
No, it's literally, literally purely clarifying.
I was just trying to get the dates lined up in my head.
No, this is the shit show that is the U.S. compliment.
All right, so...
Yeah, I was joking if that wasn't clear.
Sorry, I'd probably need to have another cup of coffee.
You don't have your inflection in yet.
I don't know if you know, but on spaces, you have to really enunciate your sarcasm.
Because, again, just to be clear, often...
The United States government's doing really well.
Really well.
Exactly. Thank you. Thank you, Rob, for demonstrating.
So, okay, next, they did put in spending caps for 2024 and 2025.
There was a 3% increase, which is what we reported on Friday, in military spending for next year.
They were rescinding $28 billion in unspent COVID relief funds.
They did decide to eliminate $1.4 billion in IRS funding.
They were planning on, so this is a big one.
We're going to be discussing this one and the implications of it for the general economy,
which was restarting federal student loan payments after this lengthy pause that began at the start of the pandemic.
They are requiring work requirements for the SNAP benefits program.
For people that don't know, it's the Supplemental Nutrition Assistance Program.
which is essentially food stamps
For a while, the SNAP program, current threshold is 50 for worker requirements.
Now they moved it up to 55 years old.
But they did have carve-outs for veterans and homeless people.
Very interesting.
This is a pretty, this was an interesting one because it got a lot of play on MSNBC
about how we're doing this.
But the biggest one on the Democrat side that I'm
I'm surprised that as compared to the student loan pause and others, this is the one that I heard a lot about for Maria Joyapal brought up, which was that NEPA, which is National Environmental Policy Act, which streamlines permitting for projects, was overhauled.
This was like a big deal on the left.
Of note, there were no changes to Medicare, Medicaid, or Social Security.
They preserved the climate and clean energy provisions of inflation reduction act.
They did preserve the student debt forgiveness executive order.
But, you know, I wanted to go to Neely.
Neely, thank you for joining us.
I was told earlier, Neely, that you weren't going to be able to join us.
So I'm so happy you did.
You know, I wanted to get your thoughts on the first look at this fiscal responsibility act
and the details of it, especially some of the provisions that may have an economic impact.
It seems like it was largely in line with what the Democrats wanted.
So it's very interesting if there was any true austerity.
What are you looking at, Neely? Let us know your thoughts.
You know, we've been very focused just on the student loan components.
Just as a high level...
understanding for background since the pandemic,
we have had approximately 40 out of 43 million loan borrowers
who have not been paying on their student loans
because of pandemic provisions, basically.
And it's the last, it's literally the last
of all the pandemic provisions that has been dealt with.
And it has been kind of pushed out of how long
you can repay these student loans.
And just as again, a little bit of the background, this past fall, the presidential administration decided to say, hey, we're going to come up with a forgiveness plan.
conveniently that was right before elections. They actually had a portal and everything else that said,
just go ahead, fill out all your information and we're going to let you know when you are forgiven
from your student loans. So they do that. 26 million people out of the 40 or so million loan borrowers
or 43 million in total filled out their paperwork.
And 13 million were given an email that said, oh, by the way, you're forgiven from your student loans.
Stand by.
And then the Supreme Court got involved.
Some lawsuits were filed on an emergency basis.
And back in February, at the end of February, the Supreme Court of the United States of America heard arguments related to the student loan forgiveness executive order that's currently in place.
They have not yet delivered their ruling.
So this is what's key.
So they could have kept that intact, Donish, right?
However, it's really in the Supreme Court's hands.
So it's a little bit of political theater at this point to say it's in or it's out on the forgiveness side.
But regardless of that forgiveness provision, we can come back to that because it's again in the Supreme Court's hands.
We're probably going to hear from them just in weeks on this decision.
there is student loan repayment.
So even if you had some loans forgiven, hypothetically,
you might have other loans that still need to go back into repayment.
And that is what was center stage on the debt ceiling.
On the debt ceiling,
they have moved effectively a 60 day kind of wait period,
which was originally going to go into effect June 30.
It's now going to go into effect the day that they sign this deal.
If they sign this deal on Wednesday, then all of a sudden student loans don't start getting
repaid on August 30.
It will be pushed up effectively to July 31.
And that is where we were focused wholly over the weekend, is really thinking through the
implications on the economy.
I'll take a breath there, but I want to make sure everyone understands kind of the background
of because forgiveness is thrown out there and repayment is thrown out there and
I think people conflate the two and they're actually totally different decision paths.
Yeah, sounds like I'm just going to summarize really quick and make it, I'm going to dumb it down a little.
Not that our, not that our crowd is dumb, more that I need to dumb it down for myself and confirm that I actually understood what Neely just said.
And so, you know, August 31st,
student loan pause,
which was going to be coming to an end,
August 30th,
is now going to be July 31st.
And there was nothing,
no touch,
no one touched the student loan forgiveness stuff
because they're assuming that the Supreme Court's going to bring it down anyway.
Or they're going to,
Is that fair? All right, perfect.
So, so, so, so, and this is important because it's all happening as we are expecting, uh,
a broader economic outlet. I mean, depends on who you talk to. The bulls are saying,
hey, you know, things have bottomed out and they're on their way up. The bears are saying,
this, the market is still hyperinflated. We still have sticky inflation.
Yeah.
The, you know, the FOMC meeting is coming up and it will be covered live on our spaces, but, you know, that, you know, that they're going to continue to do rate heights, even if they're small or continue to go longer, you know, pause, pause rates, but go higher for longer.
Jay, thank you for joining us.
Wanted to get your thoughts on, you know, first of all, the, you know, what Neely just mentioned with the student loans, you know, the one month change in repayment, the impact of that.
And then, you know, also broadly, what do you think this means for the economic outlook?
Sure thing. Good morning. I agree with a lot of what Neely says. She tends to focus on the data.
And the interesting thing that we were looking at last week is that, you know, this is going to have a pretty major impact on the average consumer just on average, including master's degrees.
The average consumer has a $393 per month outlay. You know, the average student loan is...
Debt outstanding is 40,000 per American.
The median is 20,000.
And the percentage of borrowers with a growing loan balance is 47.5%.
So we're in an environment right now where student loan balances have been growing.
You know, people haven't been paying down their principal and interest rates are high.
So at this point in time, it's also very difficult, it's going to be more difficult to refinance.
And you are going to be stuck paying this bill for, you know, the next several months on top of your higher rent, your higher health care, your higher grocery bill.
And I think that consumer cyclicals, you know, consumer discretionary stocks are fully priced.
You know, what's really funny is when Home Depot and Lowe's reported,
and they reported pretty bad outlooks and the stocks were down and then they rebounded.
And it's funny that, you know, we've had this market where institutional managers are very, very confused.
You know, they are all crowding in the same six stocks.
And, you know, the average mutual fund is actually underperformed because the equal weighted S&P 500 is actually close to flat on the year.
And you have a situation where value funds that are long, things like energy, industrials, and financials are obviously down because of what happened with the bank receivership and the weak China reopening.
So you have this vast and, you know, the guys at Millennium Ballyazni Citadel, the big, you know, hugely levered hedge funds.
They're not paid to buy treasuries.
They're not paid to buy bonds.
They're not paid to buy the 11% prefs that I'm buying.
They're paid to buy liquid stocks.
So they're crowding into the invidias of the world, the Googles of the world, the
Microsofts of the world.
And this AI thing might be real, but there's also a pull forward component.
So obviously, you know, if we do see a positive vote,
in Congress, you're going to see a bit of a, you know, a bit of a relief rally, but you're actually,
you know, in the back half of the year, I think you're looking at a pretty sharp economic
slowdown, you know, from a consumer perspective. And, you know, now that this is part of the debt ceiling,
it's going to be a lot harder for, you know, it's, Biden's not going to be able to push this
for a seventh time. So, you know, I agree with Neely. I think it's a very difficult situation that
that we're in.
And I also think that it's going to affect all big ticket items purchases, whether it's autos, homes, big vacation outlays.
Everyone, everyone's going to be thinking about, oh, I have to pay my loan now in the back of my mind.
We've done some calculations, Donish, on this.
You know, Jay and I have been vibing on the whole student loan thing for a while now.
Trying to, you know.
remind people that this is an inevitability, right? And I think this is the thing that's interesting.
If you read through some of Jay's posts on it, my posts, I recently posted in support to Craig Fuller at Freight Waves, who's very well followed on the trucking industry.
He was messaging me too, saying like, do you think it's odd that, you know, so many people are
seemingly in disbelief, you know, that this is happening.
But not just that, on your post, they were really angry.
Yes. And I'm like, hey, I'm not the game maker, first and foremost. Okay, I'm just the observer. Thank you, Rob. I appreciate that.
Because, you know, we're not trying to say like, no, no, no, boo-boo. Like, you have to pay loans now. That is not it. It's rather like...
If you are reading this, get ready, right? Like, it is, it is happening. And I am so sorry that our U.S.
government gave you 13 million of you an email that said your, your glones are forgiven out of
political theater. Like, I'm sorry that that happened, but that's, that's feelings and we need to focus on
facts. And this is happening. It's almost like,
watching this, you know,
100 car pile up that we can see coming around the corner
and it's a sharp turn and all these other people are like just driving gleefully,
you know,
with their recently purchased in financed,
high expense car, right?
Into this 10 car,
100 car pile up.
And all we can do is like throw flares or those orange cones at them.
Just, you know, caution, caution.
So it's not trying to be a doomy bear.
It is literally like it's,
happening. And it's not just Twitter, Rob. It's also, you know, C-suite executives are like,
I'm sorry, come again. What is this thing happening? Like, what's going on? Like, boards aren't
talking about this. C-sweets aren't talking about this. And we've done some calculations. We think
that this could lower retail sales by about 100 basis points, which doesn't seem like a lot.
But the difference between, you know, with retail sales having recently
come in at flat in the most recent month, the difference between flat and another 100 basis headwind is a decline.
And that's when store payrolls get cut.
That's when, you know, for the retail sector, that's when bonuses don't get paid.
Now we're going to start seeing some of those unemployment numbers catch up on the other side of this.
That's what we think.
Well, but just to be clear, going back to the Fiscal Responsibility Act,
I know that you're saying in general, this is a bad thing.
And we can talk through that.
We're going to talk through that a little bit.
But the Fiscal Responsibility Act pushed it back 30 days.
I don't think you're saying that that part of the Fiscal Responsibility Act is that notable, right?
Why are these 30 days so critical?
Two things.
It's a really, really good question.
Okay.
No, we've been saying all of this caution and concern prior to the, yeah, absolutely.
Jay's been saying it, we've been saying, you know, we've been saying this.
There's two things about moving it up.
First and foremost, it removes basically the ability for the presidential administration to do anything differently.
Like, it's an understanding that it's in fact going to go back into repayment.
No more executive orders, no more pushing the can down the curb.
Like, it is...
it is a sign and a signal that it's happening that you know that this repayment and even
McCarthy's statement around like hey we're going to have five billion dollars back into the
coffer from a deficit perspective i mean it is very clear that they want to no longer fund
further deficits related to this issue okay so that's first and foremost secondly the timing
is interesting to retail to
to the retail sector. And again, two-thirds of the U.S. economy is based on consumption. So this is why we're focusing on the retail sector.
If you have this shock that occurs at the front end of, let's just say, of August versus in the middle of August to September, you've missed like one whole month of back-to-school selling.
Because back to school selling starts in August 1st.
And that is what becomes extremely disruptive.
It's almost like saying, hey, yeah, everything that you thought you're going to get paid in the middle of December, right?
right?
Doesn't get paid anymore.
And that's right in the middle of holiday.
Like,
it will fundamentally change
how the Christmas
or the holiday selling season
would act.
It's the same for back to school.
Because I feel like
there's too much agreement
on this stage.
Somebody has to play the opposite side.
Unless somebody else,
this is a call for anybody else
to play the opposite side,
that this is actually a good thing.
Jordan Fernando,
thank you for joining us.
You know,
just wanted to...
play the...
Is there anybody here that thinks
that resuming student loan payments
is actually good for the economy?
I'm going to give the opposite side
if nobody raises their hand.
Going once...
going to my Jesus Christ
Well I'm not sure I agree
But I'll play the devil's advocate
Even though it's not a position
I think somebody's going to I was about to
Well I think it's just I mean maybe this is too simple
I had connections issues earlier so I wasn't able to hear everyone's earlier comments
But I think just the obvious thing is the moral hazard argument right
I mean there's debts to be paid
And you know I think some people in certain camps of Paul
politics, I think that there's a moral hazard, which means that, you know, if you allow people to be forgiven their debts, you know, that in the future, you know, those debts might not be paid again. I think there's some merit to that, so it shouldn't be overlooked. But at the same time, you know, I think there,
there's at the same time a bubble in higher education
that's been going on for quite some time
you know one can see how you know real wages have risen
since the 70s not very much
versus how education has inflated
um so you know
Eugene you're not speaking with conviction
my friend you are not
you are not
no I'm the opposite
I'm going to put back on Neely.
I think World Hazard's a real thing.
No, no, I'm going to just missing.
I apologize.
It was too nuance of an argument.
I want a fight.
Look, Donish, I appreciate it.
Why do we need an opposite opinion on it?
Because it's quite clearly mathematics.
No, but the opposite side of the, you know,
there is something to be said about the revenue side.
of the US government.
There is something to be said about the,
oh man,
I'm getting a lot of hands up here.
Yeah,
so I don't think that's an opposite opinion, though, right?
So you're absolutely right in terms of revenue benefits,
benefit to the taxpayer.
That money coming in is a benefit.
Somebody's paying for this.
It's not like it's coming out of nobody's account.
I'm happy to say that, but it's also
inflation is hurting everybody.
The individual will be massively affected.
So there's a, there's like, it's, it's not an opposite opinion.
It's just the, you know, the United States government will benefit from the fact that loans are being repaid earlier.
Actually, the average consumer may benefit from that.
So that's what I'm trying to get to.
Justin, go ahead.
Give me the opposite side.
Yeah, I mean the opposite side is kind of simple economics.
You repay your debts and you repay what's owed as much as it sucks.
I understand the argument against it.
I understand why people are mad.
I understand that they're like, well, I was pulled into this when I was a kid.
But you repay your debts or the economy tumbles into chaos.
And that's what we're, I mean, that's what we're seeing.
Again, I don't think that's the opposite.
I don't think any of us are saying you shouldn't repay your debts or people should be allowed to not repay the debts.
I'm saying, what nearly is saying is that people aren't prepared for all that means to them individually.
From a financial standpoint, that's all that she was...
We're making a value judgment here that may or may not be true.
So I do want, Justin, keep going, because I gave Neely and the Neely camp that side.
So I want to give you that side, too.
Go ahead, Justin.
Yeah, so again, like we saw what happened when we printed a bunch of money, fake money and injected it into the economy.
That's where we're currently at.
And we're, you know, if we do that again to the student loan repayment program or whatever they're going to call it, we're going to be in an even worse situation.
So like it and you know, don't get me wrong.
It sucks.
We had a lot of student loans and we paid them off and we were aggressive and we did the rice and bean thing.
Not kidding, you know, cut down on no vacations, no spending to get them paid off.
But, you know, you have to go that route.
It's, you know, and you can't also, like, I think what's lost in this discussion is, like, who's going to repay that?
Like, is it really the burden of all of society to repay that?
And let me give you a few examples.
I think of kids in poor areas that decide to, and I know a bunch of kids in this poor area.
My wife teaches at a poorer school.
And I hear these conversations of kids that are like, no, I'm going to skip college because I don't have the money to afford all of that.
So I'm just going to go get a job.
And so we're telling that kid, you know, screw you.
We understood you actually made a good financial decision.
We understand that you're a poor kid, but screw you, you're going to have to repay everyone else's loans, including these rich people that went.
Or to people who enlist in the military and people who enlist in the military under threat of their own life.
Like we just had Memorial Day here in the U.S. yesterday.
And we're telling them, you went and enrolled under threat of your own life.
Many of them were killed, by the way.
And some of them went to get their college paid for.
We're telling them, you know, that was cute.
You know, thanks for getting your leg blown off.
But, you know, we're sorry.
We're going to give the same benefit to everybody now.
Good luck.
Can I just ask, like by show of hands or something, how many people actually think we should forgive student debts?
Because I'm not in that camp.
Yeah, I don't think anybody's going to put their hand up.
Just because, to be fair, we do have a specific type of personality that comes up here, right?
And so I do want to be thoughtful about that.
Josh, I can give the opposite argument.
That's what I'm looking for in here.
I don't want this to be an echo chamber.
No, go ahead.
Yeah, absolutely.
And look, I'm a huge fan of the 10-man rule.
Okay, I teach it, you know, in college.
I think this is extraordinarily important.
The opposite side is...
you know, the payments have become untenable.
and therefore I'm simply not going to pay.
So you're going to be stuck with my default to begin with.
And taxpayers are going to go ahead, have to pay for the defaults anyway.
Right.
I mean, that is, and you can see that Rob's seen it in my responses in some of my tweets, right?
Like there are people like, hey, you know what?
We're just going to, what happens if we just don't pay?
And I'm like, well, I guess that means that you want to ruin your credit history.
Like I don't respond and engage necessarily on that.
but you know that there is that argument and so and and that's that's a very valid potential
outcome here i mean we've got we're talking about 27 million of the 43 million loan holders 27
million are direct loan owners which are essentially backed by the u.s government and they represent
1.1 trillion dollars in notional value okay like that is huge if all of a sudden they decide to like
not pay
not only have we destroyed, you know, a bunch of 27 million credit histories, et cetera,
which is its own conversation around, to your point, you're done for consumption.
You're never going to consume again, right, in any sort of meaningful, constructive way in the economy.
If you allow people to do that from a credit perspective, but, you know, we can...
talk about whether or not that's right or wrong.
That's a whole other issue.
That's just what would happen.
And then all of a sudden,
we're still on the hook for $1.1 trillion of defaults.
I mean, that is the opposite side.
you have ruined consumers and you still have to have taxpayers pay.
That would be the opposite side of this argument.
I'm hoping that we don't head down the past.
It made me more uncomfortable, no, really.
But that is the opposite side of the argument.
Isn't a slowdown in the economy, possibly a good thing here?
Sorry, Cody, you were about to jump in. Go ahead.
Yeah, Donna Shah, congratulations, by the way, for breaking the story of being pretty dead on.
That's awesome.
So I am a little bit afraid that this whole debt ceiling resolution is kind of breaking a point in the economy.
You know, we've seen a lot of tweets and a lot of Reddit posts talking about the individuals in the cohort of people that are going to be having to spend
all this money on their student loan debts saying that, oh, now my, I haven't looked at my debt
payments in six, seven, eight months. Now my debt payments are somewhere near what my mortgage
payment is, what my rent payment is. And not only that, but for the past eight months,
yeah, roughly eight months, the treasury has been unwinding their general accounts and
effectively discounting the QT that the Fed has been inputting. And
And so what we're going to see is a huge liquidity suck out of the markets at the same time as bringing down a lot of this inflation, which is possibly a good thing.
But this is going to cause massive, massive tightening across the board of the markets.
Yeah, you know, we haven't talked about liquidity yet.
But Mickle, what are your thoughts on this commentary?
Yeah, I just wanted to make a quick point because I think a lot of the people currently graduating with these loans are around my age group.
So I think I have some good firsthand experience on it.
And I'll tell you right now, these people are not focusing on paying loans.
Right now, it's kind of just like living your normal lifestyle as much as possible.
and just putting off those payments in hopes they get forgiven.
So I am fully in the camp of what Neely is saying here.
I think as soon as these loans kind of come to reality
and these people realize that these massive debts they accrued,
they actually do have to pay.
I think it's going to be a massive shift in the sentiment because I'll tell you right now from
first-hand experience, I probably have 25, 30 friends with these loans just sitting on the
back end. And I would say 90% of them, 99% of them just act like they don't even exist. So for
my firsthand experience, that is exactly what I'm seeing. And I'll tell you right now, without giving
it away, all these people are very smart people and they have high paying jobs. So it's not some subset
of the people who are graduating,
I think even some of the smartest people
coming out of good schools all have this mentality
kind of built into them.
But they'll pay for it and it'll be okay.
Like, that's my...
Are we assuming that people are idiots?
Is that what's happening right now?
Are we all...
Has somebody done the data on how many of these 27 million people will be put into negative monthly cash flows because of this repayment?
Because it won't be all 27 million even close.
I think the job market is hot enough.
Go ahead, Neely.
Go ahead.
I was just going to say, there's...
I just put it up in the nest.
There's a working paper...
that came out of a university of Chicago, maybe Michigan, one of the two. And it was just published
in the last like 30 days. So it's very, very recent. It's the only, it's the only academic study I've
seen of any sort of merit on who are these loan holders and what did they do when they went
into forbearance. And essentially, the punchline is as soon as they literally, as soon as they went
into forbearance, and they did like a panel of like,
Millions. Okay. I mean, not just like two people. It was, it's a very, it's a very credible working paper.
These people went straight into debt.
They bought cars.
They bought homes.
They went on vacations.
Okay.
So, and I'm not trying to vilify that consumption.
Oh, well, I mean, Neely, they'll do income-based repayment.
It's not the end of the world.
I do want to say the other side, we're starting to assume that there's no other.
As people know, Neely, you know this.
The large majority of Americans are on income-based repayment.
I know that they're...
They did dumb things. We are Americans. That is our God-given right to do stupid things. That's what we do. That is actually the definition of American consumer. But Neely, are you concerned about default risk? I just wanted to understand that. I am. I am concerned about default risk because you already saw default risk and default calculations. We can have a whole other separate space about this. But the Wall Street Journal basically uncovered back in 2010.
like pre-pandemic activity, the way we were even accounting for defaults in our student loan pool of loans was, let's just say it wouldn't pass the test to the private sector.
And our default rates were actually even higher, even pre-pandemic.
So I am concerned that this could trigger us.
On that, his income-based defaults.
I just don't understand.
You can be income-based payments, but if you've loaded your income-up with other expenditure,
you're still going to be negative.
Then you'll get rid of the car.
You'll downsize.
Again, I know that sounds crazy.
I'm not, I'm not pro.
I'm just trying to work out what the,
yeah.
So the challenge is what, you know,
you can get forbearance by the way outside of just.
We'd have to pay for that as a taxpayer, right?
You know, we'd have to pay for the default rate.
So if the default rate is 20% or 10% or 5,
I mean, that's a lot of money that the government's going to have to,
the taxpayers are going to have to wear on the shoulder.
So for people that they're not aware,
the way it works in the,
with student loans in the U.S.,
you know, is that you don't just go straight to default, right?
There's a lot of steps around that.
Now, you can go straight to default.
It does happen for people.
But the point is that you start with things like actual forbearance, not pause.
You can actually apply for forbearance.
Usually you have to have some reason to do that.
You know, income-based repayments, you know,
look at a lot of the different
when you look at income-based repayment,
it's actually quite affordable.
That's my opinion.
Again, for some people,
it might not be,
and I do want to be thoughtful about that.
I would love to see the form where it's like my Porsche.
Then people will sell the Porsche.
I've got high Porsche numbers.
Rob, people will sell the Porsche.
That's what I'm trying to say.
They'll take a huge hit, though.
They'll take a huge financial hit on that
because you're not selling it from here what you bought it on.
That's assuming you own the Porsche, Donish.
That's the point.
They might just be leasing the Porsche.
Or that your payments, you have payments on the Porsche.
That's the point.
Like if you have to sell that and, you know, use car pricing is coming.
I don't know what that feels like because I buy all my cars cash.
Sorry.
Same.
Same.
same and no mortgage.
No, but it is, it's, look, there, I think that the presidential administration has signaled this through their Department of Education head.
He was in testimony with Congress just in the last couple weeks, and he basically said, yep, we're going into repayment.
Like, you know, that's the other thing.
When people are like, oh, they'll just keep kicking the can down the car.
I'm like, under testimony, the Department of Ed said that they're going into repayment.
you can see that they've actually added,
they added a fifth vendor to their loan processor group
just in the last few weeks as well.
So, you know, look at what they're doing,
not what they're saying.
They've actually added a fifth,
knowing that they're going to have more people
that they need to kind of push these repayments through.
They have canceled actually,
largely their customer service function
over at Department of Education under, quote, budget cut concerns.
And they've pushed that responsibility down to their five vendors.
to do the loan processing.
Like, they know that they're about to get a bunch of angry phone calls,
and they basically push that responsibility.
Yeah.
100% agree with Neely.
Now, an income-based repayment, I mean, there's a formula, right?
It's the number of people in your family and your annual income.
even if you're making like median annual income in the u.s like 55 000 and you're single you still
have to pay three hundred eight dollars a month it's not like you're getting out of it i mean
that's factored into the average payments that we shared earlier let's say you have a family of
three and you're making 55 000 you still have to pay 203 a month that's a very large amount of your
percentage of your disposable income right that
that's, you know, over 2,400 a year on a $55,000 income.
And, you know, let's say you're making $70,000, right?
Which is, by the way, you know, a little bit more, a tiny bit more than average, like a starting salary out of college, you know, you're $3.80.
If you have a couple, if you're a couple and your wife's not working, that's $3.80 a month.
It's not, you know, it's not as easy as you think.
It's a pretty big payment.
So perhaps this will slow down consumption.
Perhaps it might affect inflation because people will stop consuming as much.
And perhaps inflation will become less sticky.
It could be deflationary, yes.
Caleb, go ahead.
Yeah, I mean, you learn this in basically econ one.
It's the, you know, it's an income effect, right?
So as your spending gets reoriented towards things that have a higher price or, you know, things that you didn't previously have to spend on, your consumption of everything else must come down.
Right.
So if we approach markets from a Keynesian perspective, which is what the Fed does.
then, you know, they're in a way somewhat pleased that student loan payments are being brought back out again.
I think Jay had mentioned it earlier. I've seen similar data basically ranging from, you know, $280 to $390 a month for the average or median payment on student loans.
And so if that spending power is now being reoriented...
away from consumption and towards debt repayment, all else being equal, that will reduce inflation, right?
So continuing to kind of fit within my overall model of disinflation, I'm not super confident that it's going to be outright.
I mean, I guess in and of itself, it is deflationary, but, you know, we're in a multivariate economy, as we all know.
So my opinion is that it's going to produce more disinflation, not actually deflation.
And so I think...
Again, that's just going to be another catalyst to reduce inflationary pressures.
And, you know, I'm not of the opinion that inflation has been sticky.
Even though the PCE data came in slightly higher than expected and increased for one month, I've done some data on this.
We've seen upticks in PCE within a broader year-over-year disinflationary trend.
So I'm not going to fall for the head fake on the PCE.
And I think that when we're looking at both PPI and CPI and the alternative metrics, whether they're mean, or excuse me, median or trimmed mean, all of these are coming down much lower.
And I think this is only going to exacerbate the trends that we've already seen proven in the data.
Exactly. I mean like doesn't that sound, Caleb just put out a really good picture, you know, wanted to get, this is what I was trying to get to. So I appreciate the other side. Mickle, go ahead.
Yeah, I thought those were some excellent points.
I guess the only side I could really push back on because I do agree this will be great to get rid of inflation is how many more catalysts do we really need to get rid of inflation?
Something I've been watching and something I know get brought up on this panel a lot is just a true inflation numbers, which have us at 2.8%.
And if those really are more up to date than what the Federal Reserve is reporting, then the catalyst might already be in to get inflation in that 2% range.
I completely agree.
This hasn't been sticky.
I mean, we watched inflation go from high 8, high 10%, and it's plummeting down to 4.
And it's only been two years.
So I really do question how many more catalysts do we need before this becomes deflationary?
But a lot of that thesis is assuming that those true inflation numbers are up to date.
And we are going to see the Federal Reserve reporting that 2.8% number in two to three months.
On that point really quick, you know, I'm...
connected with the guys over at Wisdom Tree, and they kind of have this alternative CPI model where they swap out the shelter component of CPI.
They leave everything else the same, but they swap out the shelter component and they put in something like the Zillow Home Price Index.
And based on that data, headline year-over-year CPI is at 2.8% as of the most recent data.
And so, you know, I think those are spot on points there, Mickle.
And you're right, the truflation data.
is already showing us that we're rapidly approaching the Fed's target.
I think all of us on this call and the people who are listening are well aware that the Fed is using
lagging data and looking at the shelter components, 33% impact on the overall CPI.
And, you know, it lags the housing and rental market by 8 to 12 months.
And so if that market peaked in June of 2022, we're just entering the window right now of it slowing down.
So this is all great news for more and more disinflation.
Yeah, and as people graduate, you know, we are in graduation season.
As people graduate, student loans, you know, they don't expect student loans to be paid off.
Mickle was mentioning this, or they do, but it's not really going to be, so sorry.
I was going to say that, you know, as people are looking at renting loans,
suddenly they don't have the money to pay for that.
You know, maybe if you graduate college,
you know, maybe you shouldn't expect to live in a $3,000 apartment.
Jesus Christ, maybe they need to be living in a $1,500.
A $3,000 apartment with Jesus Christ, I mean, that must be good.
I know you're in London, so it's a lot more expensive there.
But go ahead, Amy.
No, it's not actually.
We're way cheaper than America, but we also have half the median income.
Yeah.
Well, yeah, Amy, go ahead.
So someone who knows more about it.
Justin, one second.
Just in one second.
Ladies first.
Amy, go ahead.
Thanks.
No, to your point on the rents, though, I mean, in a lot of, I mean, I'm in Dallas,
which is a more, quote, affordable region, a lot of places in Dallas, a one-bedroom apartment
starts at $2,000 a month.
And that is not a fancy apartment, depending on what part of Dallas you're in.
So, I mean, I think that rents have run away.
from reality in the last couple of years.
And a lot of it has to do with possibly the student loan payment pause,
but also we had people getting stimulus checks
and what happened with the lower income cohort of the country
that received those stimulus checks is most of them handed them
right over to a landlord.
And we've been on this sort of,
we've been in this cycle where a lot of this money
that's been funneling through the economy
from the stimulus has his funneled upwards towards, towards landlords.
And that is going to start to change.
And I think also, I don't know if we've talked about the housing component of how this is going to play out.
But to me, there's no way that this is going to be disinflationary.
This is going to be deflationary for housing.
We are already coming up against...
so many things just with the fact that we have interest rates back again over 7%
and the majority of people who buy a home take out a mortgage.
So now you've got an even though lenders have been considering student loans, they have
over the last three years, even though the loans were deferred, lenders have been taking
them into consideration when they originate your loan.
that hasn't really, it's not the same feeling for a borrower who goes, who a lender says,
here, you can borrow here up to almost 50% DTI at whatever level.
And the borrower is like, okay, and they say, the lender said I could afford this, they go out,
they're not currently making that payment.
They don't feel the financial impact of it because they're not paying it.
So maybe they stretched and they bought a home that was something they really couldn't afford.
If they were making that payment because it was paused, it was out of sight, out of mind.
They didn't think about it.
They didn't care.
So they bid up these homes.
And now when reality comes back in, I think you're going to find all these people that are maybe still on the sidelines, like making these payments again.
They're going to look at the affordability and they're just going to be like, I can't do it.
like this isn't going to work i'm not paying these prices at these mortgage rates and then you're going to
have even less demand which by the way mortgage demand is currently already pretty rock bottom levels
right now as it is even before these payments reason amy this is a good thing
How is this a bad thing?
It is a good thing.
We have a problem.
It is a good thing.
But I think if it snowballs all at once, and especially with the stuff we have brewing with
CRE, I know everybody probably saw Elon's tweet yesterday, warning about the commercial real estate market.
If we have so many deflationary factors snowballing all together at once, it could be incredibly
deflationary, which is bad for the overall economy.
But it would be good for housing prices.
So I get your-
And it'll be good for consumers.
Yeah, I'm going to ask you a question.
The average consumer can't afford
eggs anymore.
I mean, like,
let's, can we just be honest?
Those have come down,
Donnell.
I know, I know.
But, really, I have to play,
really, you know where I stand on these things.
I have to play the opposite side.
Okay.
So go ahead, Neel.
I'm going to ask me a question.
So you and I've talked about this, whether or not the loans have been considered.
I mean, when you are in forbearance, it doesn't actually show in your credit reports.
So it's only if it's self-reported, right?
And asked about is my understanding.
So there's that.
But, but, but, but everyone's credit score has re-rated higher because of this loan forbearance as well.
And FICO's talked about this.
You know, others have talked about this.
My sense has been that people have been like rushing to try to get that deal done on their home if they've been on teetering on the edge over the spring.
You know, some people are like, oh my gosh, like, you know, home sales like peaked up higher than expected or whatever it was, like these tiny little micro moves.
And I just keep on thinking it's people who are trying to rush for the gates before their credit report starts to re-rate lower.
on the loan component side, that they're trying to lock in whatever they can on rates.
How much does credit score and rates have play?
Yeah, I mean, we saw, and this is something that we've seen a lot of people that have been bullish on housing over the last...
couple of years point out over like again and again they pointed out that credit scores are so
much higher across the board with the loans that have been originated in the last several years
versus the 2005 to 2007 crisis where people with terrible credit scores were getting these crazy
loans and you know that caused the whole crisis the the point this time around was no everybody's has
these great credit scores but there are people who have been questioning how valid are these great
credit scores which is you
you were kind of alluding to this when you were saying, you know, these these payments were on pause and all these other things.
And I think that's a really valid point. And I,
I just want to say that there's been a FOMO aspect to the housing market, especially over the last three years, of people like maybe like you were saying, they're teetering on the edge of affordability, whether it was due to their credit score, whether it was due to the prices in their region just rapidly starting to run away from their minimum ability to afford one.
There's been this sort of rush.
Like, I've got to get in now before it's too late before I get priced out.
Right.
So anybody in the last three years that bought with that mentality is somebody that could be, could have been more a fragile borrower where they're going to be right on the edge of that ability to pay.
So something like this that maybe they took on the loan thinking, oh, maybe, you know, Biden's going to forgive these or I'm not going to have to worry about these payments later or maybe my income will go up by the time I have to pay this back or whatever.
I mean, people rationalize all kinds of crazy ways with debt and this kind of stuff.
So, you know, I think it's those people.
that we're going to see at risk, especially because there's also that inflationary component where, you know, maybe people stretch to buy a home in 2021.
Well, inflation didn't really hit the economy until 2022.
And then the prices of everything else went up, like you said, eggs, even though they're back down.
You know, all the food went up.
all of the cost of child care went up, all of the, everybody's regular budget line items that they budgeted, you know, say in 2021 to purchase a home, those are all higher now in 2022 and 23.
And their mortgage payment is still the same.
But if they made that mortgage calculation based on the other things being as low as they were in 2021, they're going to.
It's too bad because those things are all higher now.
And then now you're sticking to student loan payment back on it.
Yeah, but so are their incomes.
So are their incomes.
So you have to factor that in as well.
Caleb, maybe.
I mean, you know, the BLS just revised down their wage expectations, right?
I mean, through the QCEW.
I mean, so some of the data has been coming down on revisions.
We just passed.
I will say, I will say, 2022 was.
Go ahead, Caleb.
In 2022, we saw historic nominal wage growth.
And that was revised down last week.
By how much?
I don't have it right in front of my fingertips.
But go look up the QCEW.
It was just revised.
It was so underplayed last week.
So what's interesting, though, is there is the reality of what's happening in the market.
And then there's the expectation of the graduating senior.
I'm going to bring this up because you know who's been getting screwed the most?
Millennials, Amy and I talk about this all the time.
I'll explain to you why.
The graduating senior, okay, how about this?
We're going to play a game on stage because I can't,
nobody's Google this shit because I will be upset.
All right.
What do you think their expectation for salary is for a graduating senior?
Is it above 80,000?
Yes? Hands raised, please.
Oh, yeah, give me the thumbs up if you think it's about 80,000.
Sorry.
Thumbs up, thumbs up.
Oh, a lot of people.
Perfect.
Okay.
Do you think it's above 90,000?
Thumbs up if you think it's above 90,000.
Oh, yeah.
Oh, yeah.
Here we go.
Do you think it's above $100,000?
Yeah.
graduating senior from college.
Yeah, I can't comment because I know the answer as well.
Definitely.
There you.
You're not allowed, Jay.
Just just, it's above a hundred thousand dollars.
These kids are losing their minds.
As a millennial, they're expecting to be paying, you know,
they're expecting their student loans to be paid off for them.
I'm sorry, as Gen Z, they're expecting their student loans to be paid off for them.
They're expecting $100,000 coming out of college with like a bullshit degree.
And I'm just saying it's getting out of control.
Maybe they get a reality check.
Well, the average salary coming out of college is $55,000.
So the average salary is actually half of what the expectations are.
The average salary coming out of college is actually half of what the expectations are.
Exactly.
Well, I'm happy that they're getting to learn that the real world is not so simple.
I mean, like, I'm sorry, but, you know, millennials have been screwed on every step.
And then everybody blames us.
You know why millennials are getting screwed?
Because people are coming out of college expecting to make 100K,
getting into rent into $3,000 apartments the millennials should have had with their one or two kids now.
Like, can we just be honest that the boomers plus Gen Z is kind of killing the millennial?
Just a thought.
Go ahead, Jeff.
Yeah, I was going to get into this.
I mean, the business case of a four-year degree, and again, the last 30 years, either public four-year or private four-year costs have gone basically tripled or more than tripled, but the average starting salary is only doubled.
Right.
And Jeff in particular to that, the courses are extended.
So I do a lot of stuff in the education sector, particularly in the US.
Courses are deliberately extended out because students, you know,
they stretch modules over additional years that wouldn't need to be there.
Faculty has the time to do them in a shorter period of time,
but they earn more money on an annual basis that way.
So not only they're getting, the costs are going up,
the time it's taking is getting longer and they're getting less net on net.
to how to file your point?
Yeah.
So you're saying it could even be worse.
I mean, just,
and so this is the fundamental problem.
If you just do like,
just fundamental economics,
like this business case is shrinking.
And this is all the percentages game.
Like what percentage of these areas of study
are actually a good business case?
But if you're just looking at the averages of averages,
like it was 25K was a starting salary.
about, you know, 25, 30 years ago, and now it's 55K, as Jay said, but the cost have actually
tripled. So the starting salaries have double the cost of tripled to go to school. So I hope actually
like kind of peeling this back and like going back this kind of more of a normal thing of like
you take a loan out, you have to pay for it. Hopefully this starts to dig into like, hey,
what's happening with these costs? Is there a way to do? Is there anything that can be done
to actually get to the root cause of like and make this a better business case.
Yeah, I mean, not everybody should be going to college, but go ahead. I'm sorry.
Eugene.
Sure.
Yeah, this might sound radical, but I have to cite Milton Friedman, who wrote about this decades ago.
So I guess about a decade ago, actually exactly a decade ago, I wrote an article in the
Wall Street Journal about how universities should invest in students the way that BC's
invested in startups.
Milton Friedman, about 70 or so years ago, proposed the idea that,
you know, with the cost to educate students going up,
what university should do is, you know, have free education for all,
but legally they had a right to the future student's income,
you know, some percentage that was pre-agreed upon,
similar to how these investments in startups.
And I think it's kind of an interesting idea, right?
Because then basically a university is, you know, talk about moral hazard.
They actually are incentivized to educate the students well to produce
you know, productive gains for the economy
so that they can then participate in the profit
and the upside of that.
So I tended to the nest up top,
this article, which I literally just Google
because I didn't have it on hand.
But yeah, I heard about about a decade ago.
I think it's an interesting idea.
I still think it's an interesting idea,
especially given how much, you know,
they cost to educate students go up.
I think this is actually maybe a win-win for all.
I think it might be politically difficult to pull off, but conceptually, I think it's...
Kind of has a feeling of indentured servitude.
But yes, I agree with you overall.
Well, then, we're both indentured servants, Donish.
We're both indentured students' servants then as a startup entrepreneur, right?
That's true.
But I was going to say that, you know, talking about VC's investing, our sponsor today, IBC...
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So do...
Do subscribe. All right. Done with my... Sorry.
You made it too easy, bro. I did not even expect that coming. That was smooth.
Thank you. I am getting smoother by the day. Thank you. And now they will stop bothering me on the back end. I appreciate that.
All right. Who was... Somebody else was... Oh, Alan. Right there. Go ahead.
You know, this is very reminiscent of when I graduated to college, which is
before most of you, maybe even most of your parents were born.
My wife, myself, had both at Student Lones, and we did what we had to do to pay our obligations.
Interestingly enough, under the social media marketplace that we have and the dynamics that we have with our...
citizenry now, it appears that you get your exempt from following the laws and the rules that you've signed up for.
So I, and for people who are paying excessive amounts for four-year colleges in most urban areas,
community colleges are very affordable.
I don't understand why myself, who are paid off my student loans,
and people who didn't go to college and have been working from the time they graduated high school,
have to bear the responsibilities of people just walking away from their laws,
just as people who are walking into stores now, installing merchandise.
I equate the same.
Alan's on the fence.
Sorry, I didn't mean to just laugh into the speaker.
I was, I was thinking about what I should say.
Do you think that anything that I said is wrong?
No, not till.
It was a merely crude and cheap morning joke.
No, it was great. It was very British of Rob, actually. That was the most British comment of all time. No, I appreciate it, though. You know, Alan, actually, I have to say that in principle, I do agree that there is going to be, let's use the word justice because it's over, you know, it's used inappropriately all the time. I'm going to try to use it inappropriately again, which is it feels...
unjust or it feels like there's some injustice here where people that took year after year after
year to pay off their student loans are now responsible for people that feel entitled to paying
the student loan there's nothing wrong with that feeling the question though is that there's also a lot
of other injustice that occurs in this world one of the best examples of that is tax cuts for corporations
right but
like, which is in tax cuts for people that have tons of net worth already,
you know, that is pretty unjust as well.
And I'm not here, like, as a diehard liberal.
It's more just that there are, there's a lot of injustice that happens,
that the government does, you know,
the government really doesn't have surgical instruments.
They have blunt instruments, right?
And so this is another blunt instrument to help solve some of these challenges.
Maybe, just maybe,
Alan, your student loans were a lot more affordable than the average person is graduating college today.
Maybe, just maybe, that there's a...
No, I did that study.
I did that study.
What I graduated college, and my salary was $19,000 a year.
And where we are now, we are...
My starting salary were
B. Zivis where I was in.
38 to 40,000 now, right?
I think I've seen this number.
Yeah, a little bit higher than that,
probably 45 to 50.
Yeah, the average salary for a graduating senior
from college is 55,000, Alan.
It's been a lot of years.
And the difference in the cost, sorry,
not to make it seem like you're very old,
but more just,
I am.
I put himself out, which is good.
I am old guys.
But, you know, people will take that clip out and make me sound like I'm ageist or something.
But I was going to say that, you know, Alan, ultimately, this is the argument that has existed between generations after generations.
And by the way, I will remind people, this is not me putting myself on a pulpit, but somebody needs to stand up for the millennials.
We're the ones that got screwed the most, by the way, by like a lot of bit.
Not only were there no jobs.
Why are you complaining about us being, you know, about millennials when it's the universities you should be blaming?
It's the universities that were raising tuition at 7% a year.
Correct.
Well, you're blaming boomers and, you know, you're making it seem okay.
If I buy, if I buy Maserati, I don't make the loan payments.
I did not blame anyone. I did not blame boomers. Hold on. Hold on. I did not blame.
We did earlier. You did mention that. No, I blame Gen Z.
Are boomers at fault.
What I was saying was that Gen Zs were entitled and that I, and this is the problem.
People always think it's between the generations.
What I'm saying is that when you're comparing suffering, the suffering amongst millennials,
in my opinion, is higher than for boomers.
That is what I was trying to say.
So if I said something different, I agree.
I think the suffering, you know, for Gen Z is frankly actually worse.
They're going to have to live through climate change.
They're going to have to live through much higher tuition than we've seen.
But.
You know, I think the blame game, if you want to play the blame game,
but it's not the blame game.
I was just okay.
I've heard it from a lot of people.
It's not you.
If you want to play the blame game, then focus on the universities.
They're not private institutions, right?
Why does Harvard have, you know,
A multi-billion dollar endowment. Why aren't they subsidizing students that qualify for financial aid?
This is a complete cluster. And there have been private institutions, online institutions that give you
bullshit degrees that charge hundreds of thousands of dollars for education. And that's fraud.
So I think that there needs to be education reform and no one wants to do it because of the lobby.
But that is the main issue right now.
As my alma mater, I have to depend Harvard.
I think there are plenty of other universities that charge a lot of money,
but Harvard was very smart in its investments and probably had access due to the fact that it's Harvard.
I do want to say one thing to follow on.
Is that information?
No, no, no.
It's public that their venture capital and alternative investments were very good.
But go ahead.
They were very talented and sponsored.
But, yeah.
But I do want to say about one.
It wasn't compounding that created that endowment at Harvard.
I mean, you look at the money multiplier.
There's still billions of dollars that came in.
Same thing goes for any private university, right?
If you have a very large endowment but you're charging students that qualify for financial aid, you know, $60,000 a year to attend, there's something wrong with your model.
I'm very excited about whoever is going to be the presidential candidate that comes out, because we are walking into a campaign year, like a big campaign year, right, right before a presidential election.
Whoever comes out and says the most obvious thing and money and vision, I will come to you in a second.
I brought you up for a reason because you do have a different point of view here.
And Eugene, I'm sorry.
Just give me one second.
So the point that I was going to make is that this is a campaign year that's coming up.
And the campaign year that's coming up, we're going to see no one addressed this.
The student loan issue is essentially going to be put to the back burner.
But whoever is the first one to say, hey, we should do both.
We should both reduce student loan debt and...
hurt the universities.
Whoever is willing to do both is the one that I think wins.
But money, go ahead.
What do you think about that idea?
That universities should be paying.
They have increased prices and they have more administrators today than students.
Tell me why that's wrong.
There's a reason for that.
I am a student loan justice activist.
And I have been at this for 38 years.
I graduated in 1976.
And I know some of you boomers on this call know that time period.
That time period in Milwaukee, Wisconsin, my peers could go right out of high school
into a factory job or they could go right out of high school into college.
They would come home.
I'd be sitting in the city of Milwaukee working a factory job.
They'd come home for their summer job as a lifeguard or holidays they'd come home and work.
But that was it.
They graduated with minimal debt.
I was in Milwaukee, Wisconsin.
The 80s came.
And guess what happened then?
After I got a high school and graduated and went to factory work,
guess what?
The factories left Milwaukee, blue-collar town, right?
So here's the 80s, and I'm sitting here going,
where am I going to go work?
I don't have a degree.
Am I going to go work at McDonald's and try to live a life?
In the 1980s, I'm talking.
So no, I chose to go to college is what I did.
But the 80s came and Ronnie Reagan changed everything.
And the meaning of education changed as well.
So I got stuck in a very, very complex situation.
And I agree with you, the universities need to be addressed.
Right.
The whole financial student loan industry needs to be addressed.
And guess what?
Students need to be addressed.
And let me tell you about that.
I don't know if any of you realize this,
but students in this financial relationship have no power at all.
And what I mean by that is, you know, your car loan that you take out and your mortgage?
You've got protections.
You've got rights.
You've got bankruptcy.
We don't.
We have nothing.
That was taken away by, guess who?
President Biden.
He removed that.
And then they removed it again from 2005.
They removed it from the bankruptcy from the private loans.
So, yes, it's a complicated situation.
And when they remove bankruptcy from us, guess what the universities did?
They had a free reign of money, didn't they?
Easy peasy for them, the university.
So yeah, they charged a whole bunch of money because they could get away with it.
So thank you.
And I just want to let you guys know.
I did the public service loan forgiveness.
And they did not count any of my payments in the 1980s and 1990s.
And that's why I've been stuck for 38 years.
But I am happy to tell you, they finally canceled them.
And they owe me money.
So thank you for listening.
No, I appreciate that.
It's so interesting to hear that side.
Because, again, on Twitter spaces in general, we don't ever hear that side.
So, yeah.
Thank you for sharing that.
You're most welcome.
Tom, you know, I know you're potentially on the other side of this debate around canceling student loans.
You know, would love to get your thoughts.
Tom, I can't hear you.
Can everybody else hear Tom?
Can't hear, Tom.
No, he's muted.
No, okay.
Tom, I'm going to take you down and bring you back up.
Okay.
All right. Jordan, what are your thoughts?
Actually, Eugene was waiting.
Eugene, go back.
Sorry, and then we'll go to Jordan.
Yeah, sure.
So I think the one thing to consider about this debate is, you know, we're talking about, you know, generational conflict.
And, you know, ever since Aristotle and even before that, you know, there have been issues with generations talking about the future generations.
Can you hear me now?
One thing.
Yeah, sure.
Yeah, Tom.
Let me finish my point.
And then we'll go to you.
Oh, sure.
Okay.
I'll go to you.
Yeah, sure. So, you know, what they say about death forgiveness in the Bible, right?
Which is an interesting thing, you know, it's an old historical artifact. It's a religious
artifact. It's wholly, you know, regardless of your opinion about it, it's been around for a long
time. And, you know, it has some interesting tidbits from history. So debt, debts would be
forgiven every seven years in the Bible. And every seventh saboteer, which is 50 years,
they would just forgive all debts and all indentured servants like you and me, Donniff, in the
startup world from VCs, are.
our EC overlords would get released and be free.
So there's actually a precedent for, you know, there's actually a precedent for debts being forgiven.
And actually coincides very nicely 50 to 70 years with the long-term debt cycle,
which is a finance thing.
If folks have read about it, you know, Ray Daly has written about the long-term debt cycle
and, you know, how it goes for 50 to 70 years and how we're at the end of one now,
which means the future will probably not look a lot like the present.
But it's very interesting to think about how for, you know, for millennia we have been talking about debt forgiveness.
Just on that, Eugene.
In the UK, we have forgiveness at 30 years.
So on student.
Oh, only 30 years.
Tom, sorry.
All right.
All right.
Jeez.
Shoot the messenger.
Tom, Tom, what are your thoughts on, first of all,
actually, now that I have you up here,
let's start with the student loan side.
What are your thoughts in the fact
that payments are being resumed earlier than before?
And McCarthy did fight for that, I mean, a month.
But there's nothing around all the student loan forgiveness work.
And what are your thoughts overall around this debate
you know, we did hear from someone who's been paying student loans for 38 years,
and,
you know,
her,
her,
her plight on it.
What are your thoughts on it?
well,
I was popping in to talk about the bill generally,
but,
so to go back to that,
I'm not quite sure whether it's actually,
yeah,
we can talk about the bill generally.
Would love your thoughts.
But,
you know,
general,
on the student loan issue,
I'm kind of old fashioned.
You engage in an agreement with someone to pay them back, you pay them back,
and you don't ask other people to pay your debts for you.
And we have to remember those who have student loans are a significant part of the population,
but many of them are working.
And secondly, other parts of the population don't have student loans who are also working.
And so you have to recognize that their tax dollars are being skimmed under this theory to pay the student loans of others who voluntarily engaged in that debt with the advice I would think in counsel of adults around them as well.
And then secondly, you know, the big issue at least policy-wise is that we can all talk about whether Congress should authorize this type of debt forgiveness, you know, which I would, you know, would counsel against.
But, you know,
You know, the question we have now before the Supreme Court in recent years is that Joe Biden just decided to spend money on this debt forgiveness without any authorization from Congress.
So I hope we could all at least agree, you know, that the rule of law and, you know, a Republican form of government requires that, you know, presidents can't be spending money without authorization by Congress.
Right.
That way
lies dictatorship.
Why do you think McCarthy
didn't go after
student loan for forgiveness?
I mean, that's a pretty large number.
I mean,
it sounds like...
Well, a lot of it, you know,
they see that.
I mean,
McCarthy,
it's likely to be overturned
by the Supreme Court.
So there was not,
you know,
there's no big deal there.
It was like,
you know,
the payments in part
were likely to resume anyway
under the current law.
So I didn't think he saw
you know, much energy to be spent there.
But generally, this is a big victory for the Democrats.
I don't know how anyone could suggest otherwise.
I understand Democrats are being told not to crow about it because it's, it ratifies so much
of what they did over the last two years and, uh, cements it into place.
Uh, this any, any funding cuts, any spending cuts are immaterial.
And, um, uh, it's, it's so bad that,
It may not pass.
I mean, you know, it, you know,
Washington being Washington, terrible legislation,
especially when it comes to spending money,
you know, that's almost guaranteed to succeed.
But this is so bad, it may not pass.
And certainly it won't pass with the majority.
It looks like of Republicans,
if things keep on going the way they are,
which would be a terrible slap in the face of McCarthy,
who slapped in the face, who slapped...
Every conservative will put him in a speakership in the face with this cave to the left.
You know, so today it goes to the Rules Committee.
It seems like three of the people on the Rules Committee are likely going to be against it,
three of the Republicans.
I don't know that.
You know, Thomas Bassi hasn't said one way or the other, whether he is,
and he spent a lot of time promoting the one aspect of the bill he likes,
which requires...
Congress to any, any bill passed by Congress that, for to fund government that results from
the failure to go through regular processes and fund government through 12 appropriation bills
results in an automatic 1% haircut, which I understand can be waived. So I know he's excited about it.
It's not a bad idea in principle. But, you know, anyone who thinks that, um,
the promises for cuts in the future that will happen that you should bank that now,
doesn't know Washington very well.
I mean, sounds like overall, and this is what I've been hearing from the Republican side of the aisle over and over that this was...
You know, this, that McCarthy may have signed his speakerships, that sentence with this, with this bill.
This is like a bainer move.
Do you think that there's certainly he's a vote of no confidence in the next few weeks?
Yeah, I mean, certainly he's broken the trust.
I mean, whether he's removed from speaker, obviously, that's a much more.
challenging issue. But, you know, I think what will happen here is that, you know, McCarthy's going to have to retreat to relying on Democrats to get this bill passed. And, you know, I don't think that's what Republicans signed up for. And that's not what conservatives signed up for. Remember, he went into negotiations with an extraordinary development, 218 votes for debt, you know, debt ceiling limit.
And what did he walk out with? Virtually no cuts.
An unlimited debt ceiling. And people say $4 trillion, but when you look at the numbers,
well, actually, when you look at the text of the bill, there is no number.
And it ratifies all of the money that was spent through this Inflation Reduction Act,
which many of your listeners may support, but most conservatives and sensible budget hawks don't.
I would encourage any listeners are lean right.
They just love coming every morning and hating on me.
That's actually like.
Oh, yeah, yeah.
Well, you know, I would encourage any listener who's concerned about this to call into the, you know, today's the day to call.
2.2-2-2-3-1-212.
Call your member of Congress.
202-253-1-21.
It's today and tomorrow.
Today's the Rules Committee vote.
you know, that that's kind of a, that's kind of like that you got.
Isn't it too late now to go down that road because, no, it's not.
Because if Congress, if members of Congress start reverting away from this, we could get to the
X date, June 5th, couldn't we?
And that would be catastrophic for the economy, catastrophic for the consumers and catastrophic
for this country.
At this point, the deal has been made.
We have to live with the deal and legislate our way out of this.
We can't.
you know, break the economy our way out of this, can we?
I don't think it's going to lead to the breaking of the economy.
I mean, the bills are going to be paid.
Certainly the debt's going to be paid.
That's not a question.
And the question is, is there going to be a partial government shutdown that arises
as a result of the prioritization?
for debts and you know the fact they they changed the date based on political expediency it went from
june 1st to june 5th they make it up as they go along and if i were if i were in the hill and i'm
just thinking out loud here you know i'd pass a temporary debt limit uh to get past this time and and
and start up negotiations with the house white house again
this time having a more reliable negotiator other than McCarthy. But it's not going to pass as it currently stands if I were betting. But one of the reasons I'm always outraged is because my optimism is always betrayed by reality.
Yeah, Neely, did you have a question for Tom?
I do.
Tom, it's a privilege.
You're my FOIA request hero.
If someone could have that, you are that for me.
Thank you.
And so the question I have for you,
it's like the biggest question I've had in my head
around this whole debt ceiling next day issue.
How is it possible that the IRS, a bureau of the Treasury,
So they're not wholly disconnected, right?
They're fairly connected.
How is it that the IRS decided that it was okay for the state of California,
generally speaking, to pay their required taxes all the way into mid-October?
Usually when we have natural disasters, you'll get like a month, two-month extension.
I mean, even when we had a global pandemic, the United States of America had a three-month extension.
Because we would not be in this issue if we actually had California's tax payments.
I'm just curious, like, have you wondered that?
Have you thought about that?
You know, what are those conversations internally?
I'm not aware there was an extension.
My guess is there was some sort of emergency declaration they issued internally that allowed the change.
I wouldn't necessarily meet.
I don't think the DAC state necessarily has much to do with the government revenue.
The revenue just tends to come in on a regular basis.
You know, it's not like on June 5th, for instance, you know, revenue ceases
ceases entering the federal government's coffers.
It just continues.
So, you know, as many of us know, you know, tax returns are just ratification of what
has already happened, meaning your money's been taken out of your paycheck.
And you're just, you know, balancing the books more or less on the tax forms.
So I don't see it as a major issue in terms of stopping revenue from moving forward.
It's about $32 to $37 billion.
So it's not insignificant out of California.
You're right.
I mean, there may be payments that are put off, but it's not material to this debt ceiling fight.
So going back to student loans for a second.
So I did want to get money to weigh in on the opposite side of this.
And then we'll go to Justin.
Money, what were your thoughts around, what Tom was saying?
I know you unmuted.
And then I muted you because of the background noise.
But, but, you know, do you agree?
Because this is the underlying conversation.
Shouldn't people be required to pay off their deaths?
Well, yes, I agree that they're required to pay off their debts, but if they can't, that's the key word, can't. How can they? I mean, I can tell you, I've had cancer twice during these 38 years, and it's when you have a ball and chain around your neck for that long of time, you are impacted physically and mentally. So,
You know, life, I never had a crystal ball to let me know when I signed those loans back in the 1980s, early 1980s, that all this was going to happen to me in my life.
So when those things happened to me, I got penalized with interests.
So like life didn't stop with student loans when I got cancer both times.
No, the interest and capitalized interest and negative amortization, that all continue to happen.
And the Department of Education eventually recognized the fact around the cancer stuff because they did create a cancer forbearance form later on when I got cancer the second time.
So there are a lot of things that policy-wise that the Department of Ed has done and they have changed on us, like removing bankruptcy rights.
I mean, I signed these loans before they remove the bankruptcy rights, okay?
But they remove them.
And so is that correct?
Is that just anybody that signs a car loan?
And they remove bankruptcy rights from your car loan?
Aren't you going to be a little bit upset?
Yeah, Tom, what do you think about that?
That's a pretty fair point, which is we do have a model for people that take out loans
to be able to go through bankruptcy if they can't afford it anymore.
It's a right for Americans across pretty much every loan, except for student loans.
Isn't that unfair in some ways?
Tom, are you there?
stronger argument if the government didn't take over backstop and got student loans so you know
we're we're the creditor the taxpayer is the creditor you know we can't go and get your car back um you know
there's no equivalent in the student loan um i i don't know how to respond to someone who's had
student loans for 38 years and thinks that um they should get a a a
a benefit from taxpayers
for it. I just don't.
I mean, yeah.
We all have debts.
And we're responsible
for incurring them in the end.
I will be impacted as well.
I am a taxpayer.
Okay.
That's fine.
That's fine.
You'll get a direct benefit
for your tax from your taxes
that others won't.
Isn't it?
I mean,
should they should.
All right.
All right.
Everybody, we're going to have
I mean,
we're going to have one person speaking at a time.
money feel free to respond i'm going to unmute everybody but one person at a time and then we'll go to
eugene and justin go ahead you're now unmuted so you got to go to the bottom left and unmute go ahead
money okay um i i just i just don't agree with that i i don't think when i signed those loans
bankruptcy rights were in place at that time oh that's a good point
Later on, they were removed.
I think that's a fair point.
Maybe that should have been grandfathered in.
100% agree with that.
Eugene?
I'd be able to retroactively change a debt without both parties agreeing.
I agree with that.
It's just, you know, for new loan issuance, that would be fine, wouldn't it?
It's the retroactive nature.
You know, I will push back that these college students are getting loans and have no idea what they're doing.
Like when I was 18, I was doing a lot of dumb things.
I was not thinking about, well, hold on.
I'm about to get these loans.
And these loans are going to be, you know, like no one's reviewing the fine print.
Everybody's getting the loans.
We've built this sort of state of the economy where people just trust
that they're getting the right thing.
People don't have to go to university.
I didn't like the level of Lodette.
I didn't go to university.
I just got on with stuff.
So I'm just throwing back to the fact
that people have a choice not to go into that type of education.
Yeah, but Rob, in the US, the culture is very, very different.
It's the same here, 90% of students go to university here.
I have a question. I don't understand the law to prohibit discharging student loans through bankruptcy.
I mean, there are standards to meet, but it's dischargeable through bankruptcy.
So let's just be careful about saying it's bankruptcy can't.
Bankruptcy has certain standards you have to meet in order to discharge debt.
Now, you can point it those standards, but let's not say, oh, bankruptcy doesn't allow you to discharge loans.
This is a question about what our policy should be in terms of federal spending.
Should we allow people who voluntarily took out loans to get a massive wealth transfer from those who didn't because they regret those loans or they don't even not regret them?
It's just a benefit.
And they're going to take them because it's available.
And the answer is most people, there's a reason it hasn't passed Congress.
It's because no one really agrees with it in any substantial way that they would put their vote to it.
I mean, the problem is the universities, right?
Like, the problem is the universities.
You know, university tuition has gone up far more than inflation over the last several decades.
That's a problem.
And, you know, the theory is education is so great because when you don't have education,
you don't have an educated society and you have an educated society, productivity gains
on a per capita basis on GDP, you know, grows.
But I think many of us here might agree.
And if you don't agree, please let me know that a lot of it.
A lot of times the education that's provided by universities is not worth in terms of GDP per capita productivity gains the amount of money that people spend going into it.
Right. So I think the theory is broken now. I think I think one.
I think one of, there are many problems, right?
And we say the problem is, and I hear what you're saying, but I think the problem is, in terms of the big problem, is that the government is subsidizing student loans that makes them cheap and easy to obtain.
And so when you subsidize something, you get more of it.
So you subsidize the loans.
We get a lot more of the loans.
And of course, university systems and colleges that are going to see there's easy money to be had because there's really no limit as to what the government's willing to subsidize through the student loan programs.
So until there are restrictions and the people actually have more skin in the game,
and aren't backed by the government and don't have unlimited loans they can take out to pay for schooling, then the schooling will rise to meet the demand in terms of increased prices.
You know, it's a vicious cycle in that.
When you have government subsidies or something, it leads to increased pricing.
Yeah, but we see the same thing with health care, don't we?
I mean, Medicare.
And that's why the government should get out of health care.
I think that we shouldn't have Medicare?
Yes, we shouldn't have Medicare, right?
That's my view.
Oh, wow.
Okay.
I mean, I'm not running for office, so I don't have to come out and say I support Medicare.
There are a few points.
Well, you got me there.
I was trying to trap you in a conversation, and that did not work at all.
Well, Tom, what do you propose in, like, what's your proposal instead of Medicare?
I'm curious.
You're responsible for your own health care.
i mean you could have you know the in theory i guess you could have some minimal government support
for indigent uh folks who need support but a medicare is an insurance policy for people of a certain
age and um you know we shouldn't we why should young people be forced to subsidize that
people just beginning their careers who don't have a lot of money being asked to support
people who've worked all their lives and
who know what's coming and still have obligations,
why should we be subsidizing folks who are arguably the well-as-soft part of our society?
So is there...
It's the inverse of the student.
It's the inverse of the student.
All right.
So Tom just threw a bomb in the middle of the show.
I think it does speak a little bit to entitlements.
I know that a lot of people are going to disagree on this.
So I'm going to let Justin go first.
And then we'll go from there.
People that want to speak, please raise your hand.
Thank you.
All right, Justin.
Yeah, like medical, Tom was saying earlier, you know, good point, which is college debt.
There's nothing equivalent.
But I think medical debt's forgivable and you can't exactly go rip out someone's heart, I don't think.
But as far as one of the conversations that I think is often overlooked is a lot of people talk about universities scamming everybody.
Now, I don't actually know if that's true, but if the universities are the ones engaged in a scam, then just tell everybody fine.
Yeah.
you know, the universities have to repay that, right?
The universities, if they scam students, have to pay it.
Now, at the same time, to agree with Tom, yeah, I'm in the camp that if you take out a loan,
it doesn't matter, you have to repay that.
That's how a society works.
And there was one last point where someone brought up...
So I'm sorry, hold on, hold on.
But Tom was consistent, Justin.
Hold on.
You just said it was a little bit inconsistent.
If...
If you take out a loan, you should pay it. If you have healthcare costs, you should pay it.
That is consistent. Are you saying that we, because remember that people are quote unquote
paying in to Medicare and then they get Medicare when they turn 65. Do you think that that is any
different than somebody getting education and paying for the rest of their lives for it? I mean, it's just
One in one you get the payment upfront and the other you do not and both of them are
leading to rising costs Justin, I'll let you respond to that because how is that consistent?
You know, at least it needs to be consistent because both are inelastic in some ways as as goods.
Go ahead, Justin. Yeah, no, I think I'll give you a chance. Yeah, I think it is consistent and here's why.
Because in both cases, I think you should repay your debts, right? That's my principled view.
But I also think it should be true that in both cases, there should be bankruptcy allowed in all cases, right?
So if we're going to have people that can shirk debt and get rid of their debt and declare bankruptcy, I think that should be the case for everyone.
I think I can maintain...
that everyone should repay their debts, but at the same time, saying equal rules should apply to everyone at the same time.
So if bankruptcy applies to one thing, it should apply to everybody.
And then like earlier, really quick to go back to someone else said that...
We're going to move on, Justin. We're not going back to any other comments.
There's like three other people in but waiting. Eugene, go ahead. Eugene.
Going one, Dakota.
Yeah, sorry.
Oh, go ahead.
I had no, I had issues with you.
Sorry, I connected my issues.
Yeah, so, I think this is interesting.
So talking to Tom about Medicare, Medicaid, I see, basically, I think what Tom is saying
is that the productivity or the GDP you generate in society is what you're owed back, right?
So basically, like, basically no credit, like a non-fractional reserve banking system to some degree.
Interesting point.
I get it.
But...
Tom, to address that directly, haven't the young always supported the elderly who are not able to produce anymore?
And haven't the elderly earn their right to, you know, live on the state's dime if they have produced value for society in their lives?
Tom, your thoughts?
Tom, Tom, don't want to answer.
Tom, there's a mute button at the bottom.
I really...
I like that.
I go, yeah.
You know, you...
I don't want to come off more libertarian than I am, but you're causing me to.
No one really has a moral claim on the people's assets.
I mean, it's simply never the case.
You just don't.
And, you know, we can, as a society, be concerned about poverty in the elderly, but that's almost a...
Tom, where'd you stop?
I mean, the fact is, the subsidies for...
Medicare and, you know, the whole Social Security scheme is a Ponzi scheme and it's destroying wealth across generations.
And it's the inverse of the student loan debate we're talking about, where you have this massive wealth transfer.
being suggested for the young.
But for decades, we've had this massive wealth transfer moving from the young to the older
population.
And, you know, there's no claim that anyone has on someone else's money in a sense that they
should be able to take it, you know, barring some important public need other than you need
it personally.
Okay, so Tom, what I like about what you're saying is the idea of self-reliance, right?
Like the Emersonian Ralph Walder, Emerson self-reliance.
Like, I see the spirit of that.
And what you're saying, I think it's, you know, an admirable thing to strive for.
But, you know, earnestly, if you took away Medicare Medicaid in this country, like, how many elderly people could actually survive?
Like, basically, that would be like...
you know, forced euthanasia of some of the elderly, right?
Well, some people get...
You know, that's not, you know, I wish the debate were between taking it away and your position.
We can't get folks to even bend the curve of the costs by increasing eligibility,
make bringing more competition into the system,
to the degree competition has been brought into the Medicare system.
The left is trying to strangle it.
uh... social security there's little effort or concern about
well let's mitigate the cost to taxpayers by
uh... allowing you know private investment and part of the social security
system
you know i i wish you know the libertarians out there will say you know tom's
exactly right but you know the realists out there will say
that uh... you know we're a long way off from removing social security and medicare from
the system
I'd be satisfied with reforms that curtail the cost.
And the fact is that even modest changes would dramatically change the slope of the increased cost, right?
And the fact that we can't even get those passed is so despairing.
You know, we're spending ourselves into bankruptcy on these programs.
So, you know, if the government's not around anymore to spend money, the elderly will have a significant problem too.
Yeah, I mean, I guess we lose either way.
Cody, go ahead.
Yeah, really interesting topic.
A lot to discuss here.
I want to jump back to the student loan portion.
Tom, don't you think that the subsidies in the education sector worked in a way that we needed a rotation into service-level jobs out of manufacturing jobs, you know,
Again, this was decades ago, but I mean, it worked.
It subsidized people.
It pushed people into service sector jobs.
And maybe we're at a rotation, you know, from a working class sector back to some more affordable, you know, educational platforms to get into more manufacturing sector jobs.
Well, you know, I'm not in a position to dispute your analysis, right?
Because there's a lot there.
But you spend enough money on something, something's going to happen, right?
And someone can point to something positive happen.
But those of us who are spending billions and trillions on something will say, well, at what cost did we get that positive result?
And could it have been achieved with more sensible measures?
And, you know, that's almost always the case in federal social spending.
Yeah, we could have done it by just encouraging services and making services jobs more attractive, right?
I mean, I think that's the, that's sort of the point that I think Tom is saying that we threw so much money at this problem to try to solve something.
And in reality, we may have made things worse.
Jim, go ahead and I want to give everybody a warning.
The whole premise of the analysis assumes that the money was spent because there was a problem that was trying to be addressed as opposed to just.
you know, special interest spending.
They don't think through this the way, you know, people of good faith otherwise, and outside of government do.
And talking about the special interest side of things, I do want to, this is the analysis that I always give for healthcare and education is not that different. And again, I don't know where I stand on this. I feel like that's actually the finally there's a positive of me being one of the hosts is that I literally don't know where I stand on these issues. So I'm actually curious to hear both sides instead of just fighting. But I was going to say that, you know, one of the...
interesting things on health care is that we've propped up in talking about Medicare, we've
propped up these non-profit, quote-unquote, nonprofit health care systems that serve as regional
oligarchies. And again, remember that the way that we have elections, these non-profit
nonprofit, again, I'm going to keep saying nonprofit because they're not nonprofit.
That's just a tax exemption.
And these nonprofit health systems, um,
They are usually the largest employer in a specific market, usually right next to education.
Those are two of the largest employers in a market.
They tend to spend a ton of money on lobbying their local districts, a ton of money lobbying their local representatives, and a ton of money lobbying the representatives going to Washington.
They'd then, you know, when the whole world, quote unquote, was falling apart with COVID, guess who got the subsidies?
The healthcare systems did, right?
And it made sense, hey, they're working harder.
They should get subsidies.
But you know what's interesting is that all of these conversations around, hey, we're having losses.
Think about your own local market if you live in the U.S.,
Think about what buildings have been going up.
The whole economy was falling apart for a little bit.
What buildings continued to be built?
It was the hospitals.
The hospitals just kept on getting bigger and bigger.
What other buildings?
It was the education sector.
It was the colleges that kept on getting...
By the way, we should have seen a renaissance of remote learning,
but what we saw instead was that all of these buildings got bigger and bigger,
and kids are now graduating from college thinking they're going to make $100,000 when the data says that they're going to make $55,000.
So who's losing?
You know, people are expecting better access to health care, but instead they're having longer wait times.
Who's losing?
So, you know, Tom, while I disagree with Tom on certain topics, I cannot disagree with him on that.
Jim, go ahead.
Yeah, I mean, just to feed off of what you're saying, let's take a look at this in a broader sense.
I mean, it's a chicken and egg argument.
And.
who injects the egg and the chicken, so to speak.
You know, you go decades back, and we started Pell Grants for the purpose of trying to get more people into college, make a, you know, one way.
And it was a very modest approach.
I mean, it did start to grow college attendance.
But now we're in a, like, one of the weirdest, wildest.
government-supported programs. Like even Pell Grants had a degree of backing from the federal
government, but were subject to bankruptcy and so forth as well, too. And now it's as if nothing
matters. So here's what happened to the workforce along the way.
We felt back then that students needed an opportunity to make as much money as it was perceived college graduates were making back then.
I mean, it was that perception that kids that are from wealthy families get to go to college and those from not so wealthy families and even middle class families weren't able to.
I mean, this all came in after the...
the GI Bill, you know, started to roll in.
You know, they got that benefit and then others wanted it too.
So look at the transition.
We have transitioned away from an economy with more manufacturing and skilled labor
to an economy that is more service job-oriented.
Now, people would argue, well, that's because we send our jobs to China.
Well, okay, I guess eventually that became the case.
But we're back at a place now where Mike Rowe, I think, makes the dirty jobs guy,
makes a great argument for the fact that there are fantastic paying skilled labor jobs
that we need to encourage people to take a look at.
I mean, my argument, I guess, in saying all that just briefly, is that you can see how
government activity played a significant role in radically transforming how we do the economy.
I'm of the opinion.
There's no reason we couldn't.
have manufacturing at a price, certainly not as low as China, but definitely much lower than it is now.
If we did something like, and I argue this on my Twitter profile and people got weird about it,
if we just reduced the minimum wage or even got rid of the minimum wage, we have young people who can
get a skill. So there are many things we do to...
Jim, should we remove Social Security?
Well, so Tom hinted at it.
I mean, everything you say about young people, I'm going to start saying about old people.
That is going to be my new rule on this day.
Well, let me tell you this.
I mean, the Social Security system really is, I mean, technically, no one can argue that it's not a Ponzi scheme when the current payers are paying out the benefits.
But, you know, why can't you have a rational decision ever since George Bush flubbed it up?
you can't have a rational discussion on reform.
So I mean, I regard Social Security as an unconstitutional program.
That said, we've made a lot of promises, so you don't just jump out of it.
Why is it not possible to allow some people at some age line that you draw to say,
okay, everything that's getting paid in by you and your employer through the food attacks?
goes into an account you own, although you must maintain it under government direction.
And it's not a perfect system, but I mean, just you can't jump the shark here.
If people could do that, they would be far better off at their retirement age, and they are now on a really bad system.
So it's just obvious.
So yeah, I mean, you've got to do it on both sides, in my opinion.
I think the real answer here is not to punish the consumer.
It's not to punish the Gen Zers or the millennials or the boomers or the Gen Xers,
who I actually, not only did, does the world forget,
I literally nearly forget to bring them up.
You know, it's not to actually make any of them, quote, unquote, pay.
I actually think it's to make these institutions pay.
They are the ones that are ruining people's lives.
There are college students that have unreasonable expectations.
There are Medicare patients that have unreasonable expectations.
There are Social Security recipients that have unreasonable expectations.
And I think that if we really want to solve this problem,
we need to reform the subsidies for, first of all,
these health systems don't act like nonprofits.
We should remove their tax exemptions.
Well, by the way,
when you go bankrupt?
Just to add to that.
When you go bankrupt,
they don't give a...
The point I didn't make, by the way, and I should have,
is the fact that the cost of education has far outpaced inflation for decades now.
And that also is part of this government subsidy problem.
Like you cannot, you can't even get into college anymore without these student loans.
There was a time.
I know my wife talks about it all the time.
I was fortunate.
My family paid for my college and my dad was able to.
But my wife worked through college.
She paid entirely to get her degree at Indiana University.
Right.
And you could do that.
You cannot do that in this day and age.
And these colleges have reaped the benefit of it.
You know, they're literally resort communities where about somewhere between 30 and 50% of these kids are there for hanging out time.
And they're taking classes and they'll have their degree.
And they might think that like you say, that they're going to make 100,000 and they're not.
But that's all they're doing.
They're massive resort communities.
It's crazy.
Donish, sorry to interrupt real quick.
NVIDIA is soaring at Open up over a trillion-dollar market cap, no.
Oh, great.
Another, I'm really worried about the hype around it.
Time to sell for me, I think.
What do you say?
Time to take profits.
a good time to take profits, possibly.
A lot of stocks are tearing right now.
We got to see what Jim Kramer says.
I'm assuming Jim Kramer is going to, you know, I will, to his credit, hold on.
He said Jim Kramer knew something we didn't know.
He said it was going to be a blast for investors.
He wasn't wrong for the first time ever.
All right, Jeff, go ahead.
This is your topic.
NVIDIA, above a trillion dollars.
Buy or not to buy, not financial advice.
Go ahead, Jeff.
Yeah.
Yeah, I just, you know, a lot of great product announcements from, I mean, they just keep rolling.
It's just the timing of like how they managed earnings, how they managed the beaten rays.
And then these, you know, these updated product announcements, you know, are just going to keep the momentum going.
I watch the keynote, Jeff.
Holy cow, for people that don't know about the keynote.
Holy cow, it was unreal.
There was one part of the keynote where there was a video game and the character was met a NPC, like literally like a random character and sat down at the bar and had a full conversation with that character.
None of which was scripted.
It was literally AI generated.
That was nuts.
It was insane.
So now you have these virtual world
where each character has a backstory
and you just can now start having conversations with them.
And again, they're sort of trained to guide you towards the light.
But it's...
unreal and i have to say i'm really worried about gaming now really being way too immersive but
it was incredible and so do i think that nvedia may in the short term be a little bit overpriced
maybe but again what do i know you know ultimately people could have said that about apple
uh you know if nvedia is the big winner
right in this current in this new
AI world everybody's using
Nvidia to build and videos also build software infrastructure on top of that
which means that their margins are insane
they also have built Jeff they built a really good relationship
with with on the chip side I mean this is
they've kind of set it up perfectly
yeah and just as soon as we started talking about it the NASDAQ
um tipped uh pretty significantly yeah i mean anything over 405 i think for invidia is over the one trillion
mark i think if you remember i mean when tesla was over the one trillion mark one to one point two trillion
you know it's it's you know it's it's multiple was like in the low hundreds and uh even higher
and that was kind of also a sign to to to maybe
take some profits and you know we'll see i mean invidia's growing into its multiple but it's still a
very very high multiple and the question is what will the market for air test let's up five percent
sorry uh because uh elan's meeting with the chinese for foreign minister
tesla's all over the freaking map it was it two what was it at two six now it's back down to
one ninety nine it's all over the place
Yeah, yeah, but what Jeff is referring to is this.
They will remember, markets are built not just on data, but on narrative.
And there seems to be a narrative right now that AI will, I mean, at least this is the narrative I'm hearing, which is AI will lead to margin expansion.
And that is a very interesting narrative because any company that has proprietary data can now start making conversations around.
Well, yeah.
Our proprietary data can allow us to build services.
AI generated services, those services are essentially 100% margin.
Jeff, is that kind of what you're hearing also on your end?
Yeah, I mean, FSD being an example of that, obviously.
Yeah, I mean, the latest release of full self-driving for for Teslas, it just went out wide this past weekend over the holiday weekend.
It's another huge step forward.
There's people that are driving for a couple of hours now with no interventions.
It's still not done.
It's still, if you look at the larger percentages, there's still work to do.
But essentially, there'll be a step between full robo taxis, which is you get in the car.
and you say, hey, all you is talk to and say, hey, I want to go to the supermarket.
And it'll just, it'll just, you know, drive out of your driveway and take you there.
And you just, yeah, you mean, you're in the car, you're in the driver's seat, but you don't
have the, you know, the effort of driving.
So that's the thing they're going to monetize in the interim.
Right now, there's about 1.65 million cars, Tesla's in the U.S.
that have the hardware in and that are, every Tesla that's built now has that hardware in it.
There's,
There's about 1.65 million of them on the road and about a quarter of them have downloaded this full self-driving package, which is $15,000 new if you buy a new car or it's $200 a month if you do it on a monthly plan.
And about one in four people have downloaded.
And right now, the U.S. is the only market and Canada.
that have this and right now they're working with regulators in europe and that's one of the reasons
for must trip in china there's rumors that they're going to allow testing now of that in in china
the other thing you met with the finance or the vice minister the other thing you wrote the person
you met with was the founder and chairman of cattle catl who's the number one battery manufacturer
you know, in the world and Tesla's got some fairly deep partnerships with them.
So technically a close over $200 for Tesla will be over the 200-day moving average,
and it hasn't done that since September, October, Twitter time.
And don't forget about the Waymo and Uber partnership.
I mean, I know that they're behind the ball a little bit compared to where Tesla stands,
but, you know, they're going to be a significant player in this field as well.
Did a lot of people have orders?
Did a lot of people have orders in to sell when it crossed 200, I wonder?
Yeah, possibly.
Just the one thing about just the economics of full-sell driving,
there are auto manufacturers now that are building these cars,
like that have many tens of thousands of dollars of sensors in them
to be able to do a robo-taxie-type service.
The issue that they're going to run into is like, what's the time to value?
Like, what are those things actually paid off?
The self-driving hardware that's in a Tesla is literally under a few thousand dollars.
And it's so inexpensive.
Their whole architecture and approach is so inexpensive that it's literally built into every car.
it's already in every car where there's these I just have a question of scale of these other
this other approach and like how how can they really scale both geographically and economically
and on that I have a day job that's a significant I have a day job that I have to go to
appreciate everybody joining us we will continue this conversation obviously tomorrow is going to be a lot
about AI there's a lot of news coming out Jim you
Eugene, sorry, I got to go, but I appreciate you all.
And thank you so much for joining us.
And please follow everybody that's on stage and follow the room.
Continue to comment.
And we will see you tomorrow at 8 a.m. Eastern with our gang of usuals.
All right, see ya.
Bye.
