Ep. 503: How Government Inflated the Student Loan Bubble

Don’t miss my upcoming appearances:
The Las Vegas Trading Conference, Oct. 4-5
The Dallas Money Show October 13-14
and the New Orleans Investment Conference, Nov. 1-4

These two videos were referenced in today’s podcast:
How government programs drive up college tuitions
Is a college degree worth the cost? You decide

Fed Proving Me Right

As I surmised, when I recorded my podcast on Wednesday, it seems pretty clear that the Federal Reserve has already returned to quantitative easing.  And that didn’t take long, because they just ended QT (quantitative tightening) and they’ve already begun QE. – Although, the Fed is not going to admit that that’s what they’re doing. Apart from proving me right, which was one of my forecasts from the very beginning, even before the Fed was talking about ending QE, I said they could never end it before they even started it.

Monetary Roach Motel

I had forecast what the Fed was going to do before they did it. And when they announced quantitative easing, not only did I say it was a mistake, but I said the Fed was checking us into a monetary roach motel from which we could never check out.  It was the delusion that we could check out – the Fed was able to convince the markets that it was a temporary policy and that they would only be doing it in an emergency, then they would unwind the policy and shrink their balance sheet and the market believed them.

QE Plus Zero Interest Rates Equals Bigger Problem

I didn’t believe them, and I was warning everybody that the Fed was either lying or didn’t know what they were talking about or foolish, but the markets bought into this nonsense.  So, clearly, if the Fed were going to go back to quantitative easing, they would basically be admitting that the policy was a failure. Because the policy was intended to be temporary, not permanent. If they have to do it again, then it proves that it wasn’t temporary.  Again, what I said, by doing quantitative easing in conjunction with lowering interest rates to zero, they were simply taking a debt problem and making it much bigger by encouraging even more debt. So once you load up with debt, once you encourage everybody to lever up, then you can’t pull the rug out from under them.