Sunday, December 27, 2015

Poor and Uninformed Negative Life Choices by America's Undereducated Youngsters and 'Fraud in the Inducement,' aka Government 'Help'

K-12 schools are 'free.' They prepare our youngsters for adulthood and for many of these same youngsters, success in college. At least that's the story being told.

But these same schools don't bother to 'school' our youngsters properly about such mundane matters as competing in a global work environment, personal finance, or engaging in excessive borrowing and personal indebtedness at an early age -- such as government funded student loans for attending college whether prepared or not, as an example.

Accordingly, all too often the trusting student leaves high school unprepared for college academically and equally unprepared to make good decisions about the borrowing and indebtedness to be undertaken to finance that education. See As Graduation Rates Rise, Experts Fear Diplomas Come Up Short.  Due to government 'assistance,' American education all too often ends up being a really bad deal, bordering on fraudulent, for the kids, their families and society.

'Fraud in the inducement' is a legal term which occurs when one party is induced (student and family) by another (government and educator) to enter into a bargain through deceit or trickery and therefore act contrary to that trusting buyer's best interests. In such a situation, the uninformed buyer is fraudulently induced to make the purchase by the much better informed seller who is misrepresenting the value of the offering.

And that's precisely what government does in collaboration with educational institutions when it causes and enables unprepared and uninformed individuals to take out unnecessary and expensive student loans to attend unnecessarily expensive colleges. It's all perfectly legal, of course, when our government is the inducer, but it's still fraud in the inducement. At least that's my view.

So we should avoid making ill informed and life changing unnecessary expenditures as individuals, and we shouldn't be fraudulently induced by our government to take on burdensome and costly debt without receiving appropriate value in return for the time and money expended. But the trusting and uninformed student often is so induced, and the negative effects will be huge for both individual borrowers and society as a whole. Because just as the housing pricing bubble burst due to government loan guarantees stimulating ever greater demand by trusting borrowers and higher prices for sellers, a similar student loan bubble is in clear sight right now. It won't end well.

Individual choices made freely, assuming they are lawful, are an inherent part of living in a free society. But when government induces young and uniformed individuals to make poor choices, these good people can end up in big financial holes which will cause them undue hardship and big problems for the rest of their lives.

Student loans, credit card loans, car loans and home loans are just a few examples of how poor current decisions will limit future opportunities to make better choices.

Nearly 95% of Young Renters Want to Buy, But Many Say They Can't Afford It says this about the voluntary choices we make when young and their effects on later choices we're unable to make:
Nearly 95% of renters 34 years old or younger want to own a home in the future and overall, 83% of renters said they have a desire to own, according to NAR’s new quarterly survey of renter and owner households.
Nearly all young renters want to own a home, even if many are also pessimistic that economic conditions will allow them to, finds a new survey by the National Association of Realtors.

Nearly 95% of renters 34 years old or younger want to own a home in the future and overall 83% of renters said they have a desire to own, according to NAR’s new quarterly survey of renter and owner households. . . .

More than half of renters said they haven’t yet bought a home because they couldn’t afford one, while just 19% said they prefer the flexibility of renting. . . .

An earlier survey by NAR of people who recently purchased a home found that the share of first-time buyers fell to its lowest level in almost three decades. . . .

Sharon Voss, president of the Orlando Regional Realtor Association, said a shortage of inventory and intense competition from investors have locked first-time buyers out of the sub-$200,000 market in her area. Orlando’s median home price has increased 17% since the beginning of the year, while the inventory of single-family homes below $200,000 dropped 23%.

In one case, she said, it took a buyer eight months to find a suitable home for sale in a lower price tier. In another case, she said, she saw a home that had been listed for just an hour and rushed over with the buyers and made an offer right then.

“The lack of inventory for the millennials right now, it hurts,” Ms. Voss said. “There just isn’t anything going on the market.”"

Summing Up

Government 'help' usually harms the purported intended beneficiaries.

It's as simple as 1-2-3 --- (1) a government funded (~$150,000) K-12 'free' public education which underprepares graduates for the competitive global job market, trade school or college, (2) government provided guaranteed student loans for attending college or trade school, and (3) government guaranteed no/low money down loans for buying homes represent three examples of the far reaching and unintended life changing consequences for too many of those 'helped' by government making things 'easy and free.'

And while receiving all that 'education,' a lack of instruction, training and knowledge concerning the basics of personal finance will result in too many youngsters embarking at an early age of unnecessary indebtedness and poor financial choices which will last a lifetime.

It's not fair, it is fraud, but it's all perfectly legal. And it's a tried and true certain vote getter, job protector and wealth creator for the political class.

At least that's my take.

Thanks. Bob.

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