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Author: tjscott0 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 459228  
Subject: World Long Term Austerity in Our Future? Date: 4/2/2013 1:02 PM
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Stratfor's "Beyond the Post-Cold War World" report has METAR elements that if true does not bode well for the world economy.

http://www.stratfor.com/weekly/beyond-post-cold-war-world?ut...

In this new era, Europe is reeling economically and is divided politically. The idea of Europe codified in Maastricht no longer defines Europe. Like the Japanese economic miracle before it, the Chinese economic miracle is drawing to a close and Beijing is beginning to examine its military options. The United States is withdrawing from Afghanistan and reconsidering the relationship between global pre-eminence and global omnipotence. Nothing is as it was in 1991.

Europe primarily defined itself as an economic power, with sovereignty largely retained by its members but shaped by the rule of the European Union. Europe tried to have it all: economic integration and individual states. But now this untenable idea has reached its end and Europe is fragmenting. One region, including Germany, Austria, the Netherlands and Luxembourg, has low unemployment. The other region on the periphery has high or extraordinarily high unemployment.

Germany wants to retain the European Union to protect German trade interests and because Berlin properly fears the political consequences of a fragmented Europe. But as the creditor of last resort, Germany also wants to control the economic behavior of the EU nation-states. Berlin does not want to let off the European states by simply bailing them out. If it bails them out, it must control their budgets. But the member states do not want to cede sovereignty to a German-dominated EU apparatus in exchange for a bailout.

In the indebted peripheral region, Cyprus has been treated with particular economic savagery as part of the bailout process. Certainly, the Cypriots acted irresponsibly. But that label applies to all of the EU members, including Germany, who created an economic plant so vast that it could not begin to consume what it produces -- making the country utterly dependent on the willingness of others to buy German goods. There are thus many kinds of irresponsibility. How the European Union treats irresponsibility depends upon the power of the nation in question. Cyprus, small and marginal, has been crushed while larger nations receive more favorable treatment despite their own irresponsibility.


Strike One

I have already said much about China, having argued for several years that China's economy couldn't possibly continue to expand at the same rate. Leaving aside all the specific arguments, extraordinarily rapid growth in an export-oriented economy requires economic health among its customers. It is nice to imagine expanded domestic demand, but in a country as impoverished as China, increasing demand requires revolutionizing life in the interior. China has tried this many times. It has never worked, and in any case China certainly couldn't make it work in the time needed. Instead, Beijing is maintaining growth by slashing profit margins on exports. What growth exists is neither what it used to be nor anywhere near as profitable. That sort of growth in Japan undermined financial viability as money was lent to companies to continue exporting and employing people -- money that would never be repaid.

Strike Two

And the United States has emerged from the post-Cold War period with one towering lesson: However attractive military intervention is, it always looks easier at the beginning than at the end. The greatest military power in the world has the ability to defeat armies. But it is far more difficult to reshape societies in America's image. A Great Power manages the routine matters of the world not through military intervention, but through manipulating the balance of power. The issue is not that America is in decline.

The United States has emerged into the new period with what is still the largest economy in the world with the fewest economic problems of the three pillars of the post-Cold War world.


I disagree with the author's conclusion. First, the USA is in decline. We can no longer afford foreign adventures as future unfunded entitlements weight heavily on our country.*
Second, combine #1 above with poor future economic growth [-2% GDP growth**] in USA.

Strike Three. We're Out!

*http://www.politifact.com/virginia/statements/2012/apr/23/fr...
June 2011 report from the CBO detailing the agency’s latest long-term outlook on the nation’s fiscal fitness.

Tables in the report contain projections showing that by 2025, payments for Social Security, Medicaid, Medicare and debt interest will exceed all federal revenues going into the budget.


The above applies if no reform is undertaken.

**http://www.gmo.com/websitecontent/JG_LetterALL_11-12.pdf
Going forward, GDP growth (conventionally measured) for the U.S. is likely to be about only 1.4% a year,
and adjusted growth about 0.9%.
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Author: qazulight Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 419515 of 459228
Subject: Re: World Long Term Austerity in Our Future? Date: 4/2/2013 2:07 PM
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The issue is not that America is in decline.

I don't see that as an issue. Typically issues are in doubt. Yes the American century is over.

However, we are seeing the end of the world as we knew it when Reagan told Gorby to tear down a wall.

We were running out of energy, Cray built super computers. 300 dollars would get you digital watch that you had to push a button to turn the LED display on.

There was no cheap long distance, Russians were bad guys who might invade our nation and the Chinese were all wishing they had some of our left over broccoli.

I say adios to that time and don't let the door hit you in rear on the way out. Today we have a low and dropping need for capital. Partially because of demographics and partially because we (the world) are so rich compared to a quarter century ago.

The imbalance of trade from Asia to the west is subsiding, energy production is less centralized and advances in alternate energy and material science is moving along at an amazing clip.

Additionally false ideas about the evils of government, and false ideals about the infallibility of democracy and capitalism have been proved false.

More and more quality human capital is being brought online and not wasted every day. While we see failings in the U.S. School system, the U.S. is small compared to the rest of the world and the rest of the world is bringing human capital on line at an amazing rate.

The U.S. and world has endured baby booms. The U.S. in the 1950's and the rest of the world in the 1970's. These are over and the excess labor in the U.S. is washing out of the system. The rest of the world will follow. But not before it sees a real golden age like our period from 1980 to 1999. (People like to say the policies made that happen, I believe that demographics made the policies not the other way around.)

Remember back in the late 1970's, the end of the age of youth. The "Urban Cowboy" put on film for all to remember by, the excesses of the baby boomers. The excesses where young men would work all day, get paid a fair wage and then spend the night at Gilly's turning wages into urine.

The same sort of thing is happening in the "developing world" first they have their 1960's, flower power, upheavals, demonstrations, then their 1970's, then once all the hormones and excess energy is washed out of the system, wealth creation like crazy.

Austerity? Yes if you hide under a rock and attempt to keep the old world.

Cheers
Qazulight

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Author: whafa Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 419520 of 459228
Subject: Re: World Long Term Austerity in Our Future? Date: 4/2/2013 2:50 PM
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Austerity? Yes if you hide under a rock and attempt to keep the old world.


Brilliant. The world is getting better and better every day if you want to see it. So many people don't want to see it.

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Author: flyerboys Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 419531 of 459228
Subject: Re: World Long Term Austerity in Our Future? Date: 4/2/2013 4:08 PM
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Qaz, you hit another one out of the park.

david fb

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Author: bjchip Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 419532 of 459228
Subject: Re: World Long Term Austerity in Our Future? Date: 4/2/2013 4:15 PM
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Optimist

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Author: flyerboys Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 419535 of 459228
Subject: Re: World Long Term Austerity in Our Future? Date: 4/2/2013 4:24 PM
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Hey Whafa! Cool balloons! The big ten.

Glad you're around.


david fb

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Author: sykesix Big gold star, 5000 posts Top Recommended Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 419550 of 459228
Subject: Re: World Long Term Austerity in Our Future? Date: 4/2/2013 7:11 PM
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Brilliant. The world is getting better and better every day if you want to see it. So many people don't want to see it.

My name for the 20th Century is the "bad old days."

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Author: GalinAZ Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 419551 of 459228
Subject: Re: World Long Term Austerity in Our Future? Date: 4/2/2013 9:15 PM
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The conclusion being, invest internationally?

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Author: whafa Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 419561 of 459228
Subject: Re: World Long Term Austerity in Our Future? Date: 4/3/2013 6:16 AM
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Hey Whafa! Cool balloons! The big ten.

Glad you're around.


Thank you! It was actually 12 years yesterday. That's 1/3 of my life, on TMF. Where does the time go?

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Author: qazulight Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 419564 of 459228
Subject: Re: World Long Term Austerity in Our Future? Date: 4/3/2013 7:42 AM
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The conclusion being, invest internationally

Invest carefully. But invest.

Cheers
Qazulight

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Author: bjchip Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 419565 of 459228
Subject: Re: World Long Term Austerity in Our Future? Date: 4/3/2013 8:43 AM
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"Time flies when you don't know what you're doing" - some nerd at NASA

:-)

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Author: whafa Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 419569 of 459228
Subject: Re: World Long Term Austerity in Our Future? Date: 4/3/2013 9:15 AM
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"Time flies when you don't know what you're doing" - some nerd at NASA

I've been having too much fun to really figure out what I'm doing :P Maybe 12 more years...

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Author: tjscott0 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 419574 of 459228
Subject: Re: World Long Term Austerity in Our Future? Date: 4/3/2013 11:52 AM
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Hello Gazilight

First a look at tj. I do have a pessimistic/cynical bent; though I call it realistic bent.<g>

Now a few questions/thoughts of your response.

We were running out of energy


I would counter that, we were running out of cheap oil/natural gas. We still are. We do have a temporary glut of natural gas, but I anticipate that will be sopped up with with conversion of coal power plants from coal to natural gas. While alternative energy will help alleviate oil/natural gas demand it cannot take the place oil/natural gas in certain instances. The price of gasoline & still poor state of our econmy has done a beter job in reducing gasoline usage.

The imbalance of trade from Asia to the west is subsiding, energy production is less centralized and advances in alternate energy and material science is moving along at an amazing clip.

Trade link:http://www.census.gov/foreign-trade/balance/c0015.html

In looking at the data; yes trade improved. But it looks to me that was a function of 2009 recession. The trade balance is rising again as the economy improves though I expect remain lower than the heights of 2006 due to reduced number of middle income jobs thru 1-technology; 2-demand combined with an 3-education bubble as large as the real estate bubble of that recently burst.
1-technology
http://boards.fool.com/middle-classincome-jobs-aint-coming-b...
2-demand
http://www.arnoldkling.com/blog/
Paul Beaudry, David A. Green, and Benjamin M. Sand have a paper with an intriguing abstract, which says in part,

Many researchers have documented a strong, ongoing increase in the demand for skills in the decades leading up to 2000.
In this paper, we document a decline in that demand in the years since 2000, even as the supply of high education workers continues to grow. We go on to show that, in response to this demand reversal, high-skilled workers have moved down the occupational ladder and have begun to perform jobs traditionally performed by lower-skilled workers. This de-skilling process, in turn, results in high-skilled workers pushing low-skilled workers even further down the occupational ladder and, to some degree, out of the labor force all together.

http://www.nytimes.com/2013/02/20/business/college-degree-re...

The college degree is becoming the new high school diploma: the new minimum requirement, albeit an expensive one, for getting even the lowest-level job.

Consider the 45-person law firm of Busch, Slipakoff & Schuh here in Atlanta, a place that has seen tremendous growth in the college-educated population. Like other employers across the country, the firm hires only people with a bachelor’s degree, even for jobs that do not require college-level skills.

This prerequisite applies to everyone, including the receptionist, paralegals, administrative assistants and file clerks. Even the office “runner” — the in-house courier who, for $10 an hour, ferries documents back and forth between the courthouse and the office — went to a four-year school.


3-education bubble
A personal example. My first quarter[1969] tuition @ Ohio State University was $220/quarter or $660/year. Minimum wage jobs paid $1.60/hour.
Currently that university is on a semester system. A student taking a full load in Bus Adm pays $5,781.60/semester or $11,563.20/year*. Minimum wage jobs pay $7.25/hour. Methinks it does follow that fewer can pay those fees without taking on significant debt. And many of those will end up doing low pay jobs not utilizing their education.

a chart of education bubble:
http://3.bp.blogspot.com/-dqm5PIPoC58/Ti8HKy2jjrI/AAAAAAAAPg...

The U.S. and world has endured baby booms. The U.S. in the 1950's and the rest of the world in the 1970's. These are over and the excess labor in the U.S. is washing out of the system.

Many boomers have insignificant retirement savings & will remain in their jobs as long as possible negating somewhat the exodus from the workforce. They will however be utilizing entitlements. And without reform of those unfunded future liabilities will be the total of entire US budget.

http://www.politifact.com/virginia/statements/2012/apr/23/fr...
Wolf said the CBO projects that by 2025, every penny of the federal budget will go to interest on the debt as well as spending on Medicare, Medicaid and Social Security.

Now a quuick return to trade. I find disturbing is our trade in regard to Advanced Technology Products.
http://www.census.gov/foreign-trade/balance/c0007.html
It has been negative since 2001 and accelerating.

I take your point of demographics.

I believe Americans bought into our economic & moral superiority due to our 30 year preeminence[1945-1975] That preeminence was due to the fact our nation had an intact manufacturing base as our nation was physically untouched by WWII. And there was a huge pent up demand waiting to explode as Americans were forced to saving as many items were rationed during the war. And they created the baby boomer generation that further generated economic growth for another 20 year period even though our nation faced much competition. [1980-2000]
And now the bill has come due as the boomer make claim on promises made. Those claims=high energy prics=high education cost=more techology=reduced number of middle income jobs does lead to a decline. Certainly not to a third world status; but a less generous future.

Thank you for your thoughtful reply to my original post.


*http://registrar.osu.edu/FeeTables/Web_AU12_Fee_Table/FeeTab...

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Author: qazulight Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 419585 of 459228
Subject: Re: World Long Term Austerity in Our Future? Date: 4/3/2013 2:21 PM
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Tj,

And thank you for your reply.

I do not deny the data. There are many problems, and there always will be. But, I point you to the historical charts of the Dow. Look at 1942.

"victory at Dunkirk" and not getting crushed in the Battle of Britian were the high points of the war for freedom. The Pacific fleet was on the floor of Pearl Harbor and Amercan soldiers were making the Bataan death march.

1942 was the last best chance to buy stocks in the 1929 bear market.

Yes we have problems, in fact the U.S. has a lot of problems, so many that I may live long enough to see it considered a second rate country.

Countries come and go, societies come and go. This is a good thing, the old gets torn down and the new gets built on top of it.

This often unpleasant. When Bridge City flooded during Ike, I had to take anti-depressants. One day I was at Wal-mart picking still more cleaning supplies and I saw a blood mobile. I asked the lady running the place if I could give blood while taking Prozac, she laughed and said "If that was the case we wouldn't be able to get blood anywhere in the county." It was that hard on people.

If you go back today, Bridge City is a renewed place for the most part, houses and businesses that should not have been built or had outlived their usefulness are gone, but what remains is renewed.

So, yes the dangers and problems are real, but I see them as storms of opportunity and winters of renewal.

Norman Vincent Peal said "If man can conceive it and believe it, he can achieve it." While most of his stuff might be considered fluff, the things I dreamed of and was laughed at for being a "dreamer" are considered common place now.

I had a Codoba that got 15 miles to the gallon when the speed limit was 55 miles per hour. I studied on engines and relalized that we need a way to vary the valve timing, the fuel loading and ignition timing based on any given atmosperic density and load demands.

We have that now, it is called a GDI engine. Gm puts one in its soccer mom car that produces about 1.5 horse power per cubic inch. My Cordoba produced 0.5 horsepower per cubic inch.

I dreamed of many other things, I am surrounded by them now as a ignore SIRI and type this out on the I-pad. There are young men dreaming dreams that would terrify me, to solve problems I don't know about. They have conceived it, if they believe it, they will achieve it.

Cheers

Qazulight

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Author: sykesix Big gold star, 5000 posts Top Recommended Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 419616 of 459228
Subject: Re: World Long Term Austerity in Our Future? Date: 4/4/2013 1:52 AM
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3-education bubble
A personal example. My first quarter[1969] tuition @ Ohio State University was $220/quarter or $660/year. Minimum wage jobs paid $1.60/hour.
Currently that university is on a semester system. A student taking a full load in Bus Adm pays $5,781.60/semester or $11,563.20/year*. Minimum wage jobs pay $7.25/hour. Methinks it does follow that fewer can pay those fees without taking on significant debt. And many of those will end up doing low pay jobs not utilizing their education.

a chart of education bubble:
http://3.bp.blogspot.com/-dqm5PIPoC58/Ti8HKy2jjrI/AAAAAAAAPg......


M.J. Perry either has a political agenda or is an idiot. But I repeat myself. Tuition isn't the same as costs. States don't pay nearly as much of the costs as they used to, therefore tuition has gone up. Students pay vastly more of education costs than they did just 20 years ago.

Question of the day: Why did a degreed economist with an agenda use tuition increases as a proxy of actual cost increases knowing full well they are not the same thing?

Answer: Either he is an idiot or he thinks you are.

Also worth pointing out that a big proportion of educational costs are due to paying teachers and staff. Wage inflation is higher than regular inflation (which is a good thing because that means our standard of living is increasing) and therefore education costs would logically increase faster than inflation.

I think it is worth drilling down and seeing where the cost increases have come from. I also think that if M.J. Perry wants to sell you insurance you should run for the hills.

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Author: steve203 Big funky green star, 20000 posts Top Recommended Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 419617 of 459228
Subject: Re: World Long Term Austerity in Our Future? Date: 4/4/2013 2:18 AM
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And many of those will end up doing low pay jobs not utilizing their education.

Ripped from today's headlines

Massachusetts McDonald's demands bachelors degree and two years' experience for cashiers

In a frightening example of how competitive the job market is for young people right now, a McDonald's outpost in Winchedon, Massachusetts, has just posted a call-out for a full time cashier - but insists only college graduates need apply.


And even they must have 1-2 years of cashier experience before they'll be trusted with the Big-Mac-selling responsibility, according to the advert.


Read more: http://www.dailymail.co.uk/news/article-2303618/Massachusett...
Follow us: @MailOnline on Twitter | DailyMail on Facebook

Steve

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Author: notehound Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 419624 of 459228
Subject: Re: World Long Term Austerity in Our Future? Date: 4/4/2013 6:42 AM
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In a frightening example of how competitive the job market is for young people right now, a McDonald's outpost in Winchedon, Massachusetts, has just posted a call-out for a full time cashier - but insists only college graduates need apply.

This has been the situation in Spain for 10 years or more. During a 2003 trip, I asked a McDonald's cashier about his exceptional command of English and, in a brief conversation that followed, I discovered that he had a Master's Degree in Psychology. He said that unemployment for recent college graduates in Spain (at that time) was very high.

I imagine it's the same in many European countries - and will be so in much of the US eventually, as well.

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Author: tim443 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 419628 of 459228
Subject: Re: World Long Term Austerity in Our Future? Date: 4/4/2013 8:16 AM
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In a frightening example of how competitive the job market is for young people right now, a McDonald's outpost in Winchedon, Massachusetts, has just posted a call-out for a full time cashier - but insists only college graduates need apply.


I suppose the downside is that you would have to train replacements when the economy picks up?

Traditionally a difficult time for highly qualified people to find jobs is a good time for military recruiting but I suspect they are downsizing as well. The profession has gotten a bit of a bad rep over the past dozen years or so. Do you think that the exotic postings to third world countries may have something to do with that?

Stumbled on this a half hour ago, not sure if it would work or not but worth a try I suppose, if there are problems you just shut it down or change it.

http://ca.news.yahoo.com/blogs/canada-politics/immigration-e...

Immigration expert warns that Canada’s new visa program could cost U.S. in “war for global talent”

By Andy Radia | Canada Politics – 13 hours ago

Canada's newest immigration policy — the Start-up Visa Program — is being lauded by analysts in the United States.
As April 1st, foreign start-up entrepreneurs can apply for immigration if they have a start-up business idea and a funding commitment from a designated Venture Capital Organization or Angel Investor in Canada.
The rationale behind the program, of course, is to attract newcomers who can create jobs in Canada.
A writer for CNN Money asks, "on immigration, should America be more like Canada?"



Any <I suppose we will get blamed for that as well> mouse


http://www.youtube.com/watch?v=DBpgcZ1zYJs

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Author: tjscott0 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 419674 of 459228
Subject: Re: World Long Term Austerity in Our Future? Date: 4/4/2013 3:47 PM
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Tuition isn't the same as costs. States don't pay nearly as much of the costs as they used to, therefore tuition has gone up.

Could it be that universities expenditures are wasteful & unnecessarily spent?

http://www.washingtonmonthly.com/magazine/septemberoctober_2...

In 1975, colleges employed one administrator for every eighty-four students and one professional staffer—admissions officers, information technology specialists, and the like—for every fifty students. By 2005, the administrator-to-student ratio had dropped to one administrator for every sixty-eight students while the ratio of professional staffers had dropped to one for every twenty-one students.

Apparently, as colleges and universities have had more money to spend, they have not chosen to spend it on expanding their instructional resources—that is, on paying faculty. They have chosen, instead, to enhance their administrative and staff resources. A comprehensive study published by the Delta Cost Project in 2010 reported that between 1998 and 2008, America’s private colleges increased spending on instruction by 22 percent while increasing spending on administration and staff support by 36 percent. Parents who wonder why college tuition is so high and why it increases so much each year may be less than pleased to learn that their sons and daughters will have an opportunity to interact with more administrators and staffers— but not more professors. Well, you can’t have everything.


The same trend is true in lower education levels.
http://www.arnoldkling.com/blog/two-long-term-trends-in-educ...

1)Administrative positions at K-12 schools increased by 700 percent since 1950 — seven times faster than the growth of student enrollment.

Evidence that such an employment surge positively impacted student achievement is scant, said Scafidi.

2)We’ve gone from 127,000 school districts in 1932 to fewer than 15,000 today


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Author: warrl Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 419809 of 459228
Subject: Re: World Long Term Austerity in Our Future? Date: 4/5/2013 7:03 PM
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Additionally false ideas about the evils of government, and false ideas about the infallibility of democracy and capitalism have been proved false.

Unfortunately these false ideas existed only in the minds of those busy denouncing them.

Actual capitalists didn't think capitalism is infallible - just that it's better than the available alternatives. Meanwhile it was also proven that there really is only one alternative to mostly-honest capitalism, and that alternative is thoroughly-dishonest corrupted capitalism. And the latter is the usual result when government tries to use force to fix or overrule capitalism.

Similarly, no sane person claimed that either democracy or a democratic republic is perfect. The claim is merely that it's better than the available alternatives.

Of course, quite a lot of people were willing to claim that OTHER people thought capitalism and democracy were perfect, in order to prove that those other people are either stupid, blind, or dishonest, and therefore that neither capitalism nor democracy are any good at all.

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Author: warrl Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 419829 of 459228
Subject: Re: World Long Term Austerity in Our Future? Date: 4/6/2013 1:37 AM
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Immigration expert warns that Canada’s new visa program could cost U.S. in “war for global talent”

Any <I suppose we will get blamed for that as well> mouse


Of course! How dare you have a somewhat sensible policy when the US is being a complete idiot!

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