Why student loans are needless and harmful. The terrible Oregon mistake.

Twitter: @rodgermitchell; Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell

Mitchell’s laws:
●The more federal budgets are cut and taxes increased, the weaker an economy becomes.
●Austerity is the government’s method for widening the gap between rich and poor,
which ultimately leads to civil disorder.
●Until the 99% understand the need for federal deficits, the upper 1% will rule.
●To survive long term, a monetarily non-sovereign government must have a positive balance of payments.
●Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
●The penalty for ignorance is slavery.
●Everything in economics devolves to motive.


Part of America’s ongoing economic crisis is labeled “student loan debt.”

From Scribd
The Economics Of Student Debt

Stafford Loan Interest Rates Are A Short-Term Problem Reflective of A Long-Term Tension

As Congress returns from its recess, it hopes to address the rising interest rate on federally subsidized Stafford (student) loans, provided interest free until six months after graduation to students with a financial need.

The overall issue of student loan debt has the potential to become a significant drag on the economy, with debt now totaling nearly a trillion dollars and 17 percent of borrowers delinquent in their repayment.

Student loan debt is not just an economic drag, but as is standard procedure for this Congress and this President, the middle and lower income groups are the ones punished.

But here’s a solution proposed by the State of Oregon:

No tuition or loan for college? No problem

(MoneyWatch) Can you imagine attending grade school and high school without paying tuition or taking out a single school loan?

Wait a minute. You probably did have the opportunity to attend grade school and high school without paying tuition or taking out a single school loan. American children already are entitled to a free K-12 education .

Why? Because many years ago, America (and much of the civilized world) realized that a nation’s growth and prosperity depended on an educated populace — including not only an educated rich, but an educated everybody.

Today, every child in America can have a free K-12 education courtesy of their local governments. And this despite the fact that all local governments are monetarily non-sovereign, i.e. they do not have the unlimited ability to create dollars, so must rely on taxpayers to foot the bill.

Now, we have arrived in the 21st century, and universal K-12 education is not sufficient to grow America. College and post-graduate educated students are needed, from the rich and from the middle and lower income groups, too.

Not that everyone should have a college education. Some brains and ambitions are not up to the task, and many jobs don’t require it. But a college education should be available to everyone, rich or poor.

So, O.K., the above-mentioned article actually was talking about college, and really read:

Can you imagine attending college without paying tuition or taking out a single college loan?

For millions of college students in Oregon, this could soon become a reality.

Last week, the Oregon legislature unanimously passed a bill that could lead to students attending one of the state’s seven public universities without incurring any upfront costs.

Students would agree to designate a small percentage of their future income to repay the state for their education.

Former students would contribute about three percent of their income during a 24-year repayment period.

Oregon is trying to solve a serious problem:

Huffington Post
Student Loan Debt Will Exceed Median Annual Income For College Grads By 2023: Analysis
By Caroline Fairchild, Posted: 07/10/2013

The policy and communications consulting firm Hamilton Place Strategies found that while average student debt at graduation has skyrocketed by 200 percent since 1993, income growth has stagnated.

From 1993 to 2010, the typical graduate’s monthly student loan payments grew roughly 300 percent, from $100 to nearly $300. In 2011, two-thirds of college students graduated with debt equivalent to about 60 percent of their annual income.

The Oregon plan is based on the rich paying more than the poor and presumably nobody would incur those massive school loan debts, now plaguing America.

(But, the rich wouldn’t need to participate, since they can afford to pay their college bills. So as usual, the full burden would continue to fall on the middle and lower income groups).

The question is: Why should America’s students be required to pay anything for their education? Why doesn’t the logic of free K-12 extend to 13+?

Since educating our young people will help grow the American economy, and keep us competitive with the rest of the world, why do we make it difficult for our young people to get an education? Why do we impoverish the very people upon whom we depend to lead our nation upward?

Why don’t the local governments simply pay for grades 13+, just as they pay for K-12? And the simple answer is: They can’t afford it. They are monetarily non-sovereign.

Who can afford it? Our Monetarily Sovereign federal government.

The U.S. federal government being sovereign over the dollar, never can run short of dollars. In fact, it actually creates dollars every time it pays a bill.

The federal government can and should pay for educating America’s children, not just in grades 13+, but for all grades, and it wouldn’t cost taxpayers one cent. (A Monetarily Sovereign government does not use taxpayer dollars to pay its bills. See: Monetary Sovereignty: The key to understanding economics)

Our Monetarily Sovereign federal government should remove the education burden from the monetarily non-sovereign state and local governments, most of which are in financial stress.

(The rich will object, and falsely claim the government can’t afford it. The rich want to be America’s only educated group. It gives them power over the middle- and lower-classes.)

The Oregon plan, which because it seems like a solution, actually is a step backwards. It eliminates discussion of federal payment, and cements the liability to the backs of the students.

Complex, convoluted solutions that involve payment by monetarily non-sovereign entities (i.e states, counties, cities and private citizens) only turn eyes away from the real solution: Federal support for American education at all grade levels and all income levels.

For that reason, student loans are needless and harmful, and the Oregon “solution” is a terrible mistake.

Rodger Malcolm Mitchell
Monetary Sovereignty


Nine Steps to Prosperity:
1. Eliminate FICA (Click here)
2. Medicare — parts A, B & D — for everyone
3. Send every American citizen an annual check for $5,000 or give every state $5,000 per capita (Click here)
4. Long-term nursing care for everyone
5. Free education (including post-grad) for everyone. Click here
6. Salary for attending school (Click here)
7. Eliminate corporate taxes
8. Increase the standard income tax deduction annually
9. Increase federal spending on the myriad initiatives that benefit America’s 99%

10 Steps to Economic Misery: (Click here:)
1. Maintain or increase the FICA tax..
2. Spread the myth Social Security, Medicare and the U.S. government are insolvent.
3. Cut federal employment in the military, post office, other federal agencies.
4. Broaden the income tax base so more lower income people will pay.
5. Cut financial assistance to the states.
6. Spread the myth federal taxes pay for federal spending.
7. Allow banks to trade for their own accounts; save them when their investments go sour.
8. Never prosecute any banker for criminal activity.
9. Nominate arch conservatives to the Supreme Court.
10. Reduce the federal deficit and debt

No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia.
Two key equations in economics:
1. Federal Deficits – Net Imports = Net Private Savings
2. Gross Domestic Product = Federal Spending + Private Investment and Consumption – Net Imports


3 thoughts on “Why student loans are needless and harmful. The terrible Oregon mistake.

  1. Great piece, Rodger. Thanks.

    Now, off topic and just a bit more lunacy from those scribes over at the Daily Bell:

    Drumbeat of Monetary Sophistry
    By Staff Report

    By the way:
    “Effective July 16, 2013 The Daily Bell is no longer accepting feedback. Thank you to all who have contributed to the positive educational effort undertaken by Daily Bell editors.” Educational effort?


  2. Thanks Steve,

    Yes, those folks have a different definition of inflation from the norm. If I understand correctly, they define inflation as an increase in the money supply, which if true, is a meaningless definition.

    Does anyone object to an increase in the money supply? When we go to the store, are we upset that the money supply is increased? Has anyone gone broke because the economy has more dollars?

    And the sad part is, the QE they mention not only doesn’t cause (real) inflation, it doesn’t increase the money supply. If anything, QE reduces the money supply by reducing the amount of interest the government pays into the economy.

    Some might suggest that with the Daily Bell going out of business, the world is a better place, but they were fun to criticize.


    1. Yes, as of today July 17, 2013, they’ve left the blog-sphere. That recent piece on “memes” was brilliant though.


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