Lifeboat Foundation: Safeguarding Humanity
Toggle light / dark theme

Blog

Category: economics – Page 232

AI scientist Hugo de Garis has prophesied the next great historical conflict will be between those who would build gods and those who would stop them.

It seems to be happening before our eyes as the incredible pace of scientific discovery leaves our imaginations behind.

We need only flush the toilet to power the artificial mega mind coming into existence within the next few decades. I am actually not intentionally trying to write anything bizarre- it is just this strange planet we are living on.

http://www.sciencedaily.com/releases/2012/08/120813155525.htm

http://www.sciencedaily.com/releases/2012/08/120813123034.htm

http://phys.org/news/2012-08-impact-crater-arctic.html

They found yet another reason to build nuclear interceptors to deflect asteroids and comet impact threats.

Sooner or later something is going to hit us. It could be like Tunguska in 1908 and destroy a city instead of a forest in Siberia- or it could be like what hit the Yucatan 65 million years ago.

Except just a little bigger and nothing larger than bacteria will survive. There is nothing written anywhere that says it will not happen tomorrow.

The wailing and gnashing of teeth over spending money on space never seems to cross over to DOD programs where obscene amounts of tax dollars are spent on cold war toys used to fight mountain tribesmen with Kalashnikovs.

For example:
http://www.bloomberg.com/news/2012-02-13/navy-disclo…rrier.html

The completed initial aircraft carrier, the first of three in the $40.2 billion program, is projected to cost at least $11.5 billion.

It’s the centennial year of the Titanic disaster, and that tragedy remains a touchstone.

The lifeboat angle is obvious. So is the ice hazard: then it was icebergs, now it’s comets.

But 100 years of expanding awareness has revealed the other threats we’re now aware of. We have to think about asteroids, nano- and genotech accidents, ill-considered high-energy experiments, economic and social collapse into oligarchy and debt peonage, and all the many others.

What a great subject for a Movie Night! Here are some great old movies about lifeboats and their discontents.

Lifeboat Triple Feature: https://lifeboat.com/blog/?p=3764

They’re full of situations about existential risks, risk assessment, prudential behavior, and getting along in lifeboats if we absolutely have to. The lesson is: make sure there are enough lifeboats and make darn sure you never need to use them.

Anyway, I finally got my review of the show done, and I hope it’s enjoyable and maybe teachable. I’d welcome additional movie candidates.

Creative Commons License
Party LIke It’s 1912… by Clark Matthews is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License.
Based on a work at https://lifeboat.com/blog/?p=3764.
Permissions beyond the scope of this license may be available at https://lifeboat.com.

- From Integrationalism

In April of 2010 the Library of Congress announced that it will acquire all of the public tweets for future generations to review. It’s quite the ambitious effort from a technological standpoint, considering all of the data migration and storage as the micro-blogging social network grows. The initiative also has some uncovered ethical and democratic potential that are currently being overlooked.

Twitter as a platform is empowering the creators of the world to understand how their co-conspirers and consumers are affecting the discovery, development, and delivery of new goods & services to be brought to market. For instance, Marketing and other R&D departments across the globe at the enterprise scale are using social networks like Twitter to monitor and improve their CRM (Customer Relationship Management) processes. These aren’t rigid customer service initiatives, but also customer discovery initiatives. Social networking is giving new meaning to the idea that supply & demand are never ending sphere of interaction; further, confusing the philosophical ideal of who might our creators and consumers be.

This is important because ownership is allocated to creators of sorts, regardless of initial or latter impact.

At current, the world is enduring a series of spiking economic crisis, and as the engineers and economists try and root-cause to remedy our problems, the political conservatism that we all possess at some extent is making it difficult to justify spreading the wealth. Moral and Political arguments haven’t been working over the millennia or most recently. The books/rants/calls for gifting larger amounts to working-poor, nor distributing wealth at high rates to compensate the lesser valued have yielded a change in the gap between those with an immense value and those without. This crisis is not one of lost value, or population growth, or technological change. It is (and has always been) one of poorly allocated ownership. Those causes can be debated separately.

Ownership is paramount in distributing value to individuals and institutions, outside of charity. I don’t think it necessary to elaborate on how miniscule charity is in the known world. It’s legally defensible and mathematically quantifiable. One of the missions of the Library of Congress is to log intellectual property; further, so that it may (if necessary) be defended on the behalf of stakeholders. The initiative to capture tweets for the future generations should not only be technologically charged, but it should be economically charged to assign ownership to authors. This effort would assist greatly in identifying the degrees of separation between the various stakeholders in the discovery, development, and delivery of things.

“If the rate of change on the outside
exceeds the rate of change on the inside, the end is near”
- Jack Welch

Complex societies are heavily addicted to expensive, vulnerable and potentially hazardous infrastructure. We rely on a healthy environment for production of food and access to clean water. We depend on technological infrastructure for energy supplies and communications. We are deeply addicted to economic growth to support growing populations and consumption. If one of these pillars of modern society crumbles our existence will collapse like a house of cards.

The interdependencies and complexities of the system we call modern society has become so intertangled that finding a robust and simple solution to our problems has become close to impossible. Historically the cold war gave us the logic of a “balance of terror”. This logic, originally concerned with a balance of U.S. vs. Soviet military capacities, has lead to an increasingly expensive way of reducing risk and ever expanding bureaucracies to keep us “virtually safe”.

With the onset of a global economic recession, drastic climate change, deadly natural disasters, raging civil wars and diminishing natural resources we need a new logic. A set of moral laws for reducing risk and mitigating consequences applicable at a low cost from the bottom up of entire societies.

The concept of resilience is based on the idea that disasters are inevitable and a natural part of existence. Our best defense is preparedness and engineering systems that not only can withstand heavy strains but also absorb damage. The Institute for Resilient Infrastructure at the University of Leeds gives this definition of “Resilience”;

Resilience can also be explained in terms of durability. A durable material, component or system is one which can cope with all the known, predictable loads to which it will be subjected throughout its life. As well as physical loads – stresses and strains – we include environmental loads (e.g. temperature, weather), economic loads (e.g. the scarcity of resources or financial turmoil) and social loads (e.g. changes in legislation or of use, terrorist attack, changes in demography or society’s expectations and demands).

In the 1970s about 100 disasters were recorded worldwide every year. According to the International Disaster Database an average of 392 disasters were reported per year in the last decade. In 2011 we saw record greenhouse gas emissions, melting Arctic sea ice, extreme weather and the earthquake in Japan resulting in the world’s second worst nuclear disaster. Current systems for mitigation of risk are obviously not capable of handling the overwhelming challenges confronting us.

The price tag for disasters in 2011 reached a record high of $265 billion. Most of that cost ($210 billion) came from the tsunami in Japan, but flooding in Australia, tornadoes in the United States and earthquakes in New Zealand contributed substantially. The increasingly turbulent weather patterns wreaking havoc across the planet may only be the beginning of a period of drastic climate change.

In addition to climate change industrial society faces depleted natural resources, degradation of infrastructure and systemic limits to growth. The ongoing economic crisis is a symptom of a deeper structural failure. Governments are running out of options when solving a debt crisis with more debt is the last resort. We rely on short term solutions for long term problems.

We are facing a different type of threat originating from within the system itself, an endogenous and internal failure of our civilizational paradigm. Growing populations stress our dependency on non-renewable resources supported by potentially hazardous nuclear power. The case of the Fukushima nuclear accident illustrates that large population located on limited land is extremely vulnerable to unpredictable events like earthquakes or other catastrophic “wild cards”. From the perspective of risk analysis the state of Japan is a model of the entire planet.

To make the situation even more acute the horizon of Homo Sapiens is full of threats like global pandemics and emerging technologies that could permanently wipe us off the face of the earth. Nanotechnology, synthetic biology and geoengineering hold the promise of a quick fix but also have the potential to cause irreversible harm to the biosphere and human life.

Technology is without a doubt a part of a permanent solution for sustainable life on the planet. The bottom up approach to resilience is about awakening a culture that rewards autonomy and self-sufficiency. Resilience is more than durable engineering. Resilience has to become an obligatory way of thinking and eventually a way of life.

10 robust resilient strategies:
1. Sustain a culture that rewards autonomy and self-sufficiency.
2. Share practical solutions and stockpile resilient ideas instead of canned food.
3. Support intra-generational sharing of knowledge on how to live in accord with nature.
4. Develop alternative economic systems; use Bitcoins and barter when possible.
5. Refine high-tech solutions but favor low tech; HAM radios beat cell phones in emergencies.
6. Grow your own food; become an urban gardener or start a farm revival project.
7. Reduce energy consumption with geothermal energy, local water mills, wind mills and solar panels.
8. Use a condom; think eugenically — act passionately.
9. Keep a gun; if you are forced to pull it – know how to use it.
10. Stay alive for the sake of the next generation.

This article is co-published on Interesting Times Magazine.

The unknown troubles and attracts us. We long to discover a reason for our existence. We look out to the stars through the darkness of space to observe phenomena incredibly far distances away. Many of us are curious about the things we see, these unknowns.

Yet, many of us look skyward and are uninspired, believing that our time and resources best be kept grounded. Despite our human-centered ideologies, our self-assured prophecies, our religious and philosophical beliefs, no existential rationale seems apparent.

We as people welcome technology into our lives and use it constantly to communicate and function. Scientific discoveries pique the interest of every citizen in every country, and technological revolutions have always preceded social and political revolutions from the creation of the internet back to man’s first use of simple tools. Leaders of nations proclaim the importance of science and discovery to our welfare to be utmost.

But what we have seen done recently contradicts these proclamations: space programs are closed; science funding for schools always falls short; and we see no emphasis of the significance of science in our modern culture. Our governments call for the best but provide capital for only the satisfactory, if even. We no longer succumb to the allure of learning simply for the sake of knowing what we once did not know. We have stopped dreaming.

The exploration of space is as related to earthly affairs as any trek, perhaps even more so, because what we learn along the way directly affects the knowledge we apply to our politics, our religions, societies, and sciences. We learn about ourselves, our dreams, our fears. We learn about our strengths and our weaknesses as nations and as a species. In searching the void all around us we learn how to interact with each other and bridge differences between races, religions, genders, and ideologies. The societies of Earth need to emphasize the importance of discovery and innovation to the longevity of mankind, as well as the very human need for the pursuit of challenge.

We are and always have been an adaptable species capable of creating dreams and accomplishing them. We should seek to explore our new frontier and chase ideas yet to even be conceived. The exploration of space has lifted our human spirit, enlightened us, and has made lucid and close our fragility and responsibilities. Perhaps our inhibitions and worries, and our craving to overcome them fuels our explorative ambitions.

If we desire greater purpose then let us earn it; through hardship to the stars! The sky is no longer a limit, but a starting point. We can define our lives, and our existence, by how we accept and handle the unknown; our significance as humans set forth by our bravery and intelligence. Regardless of our qualms and fears, exploration of the unknown is an intrinsic passion of mankind. Why not remind ourselves of what has advanced us thus far?

As the astrophysicist and activist Carl Sagan said, “We were hunters and foragers. The frontier was everywhere. We were bounded only by the earth and the ocean and the sky.” Let us now explore the boundless, and go forth into the starry-night, fresh and inspired, ready to accept any challenge, just as those before us did, when they first set sail for the unknown.

Read the original post at bmseifert.com.

ENVIRONMENT & BACKGROUND

China is a rising world power with: increasing international economic power; improving military strength; tumultuous social issues. Exiting from the recent global economic and financial crisis, China sees itself strengthening and growing while America (and much of the ‘Western’ world) struggles to recuperate. This recovery disparity has given support to Chinese sentiment suggesting the superiority of Chinese policy and social culture.

China’s newfound (or newly revived) superiority complex has complicated American interaction with the government, where China now appears to be doing everything it can to avoid looking weak and to resist US/Western influence. With China’s rise, incentives for America to pressure democratization, establishment of free market economics, and improvement of human rights have grown in intensity. The US has very direct interests in the ‘Westernization’ of China and China does see benefits to cooperation, however they seem to resist or avert most American challenges to the Sino-status quo.

AVAILABLE OPTIONS

America can become aggressive, passive, apathetic, or cooperative in its relationship with China. The US could seek to dominate China, let China strengthen its own dominance, ‘step out of the picture’, or work with China to grow and develop both countries simultaneously.

It is more likely that the US will work to cooperate with China, perhaps doing so with a passive-aggressive bias that asserts American interests without direct systemic attempts to alter Chinese institutions. China and the US have committed to positive and cooperative relations, however it can be expected that such a commitment will only be honored as long as it serves the interests of both states.

INFLUENCES

Differences over human rights, domestic/foreign policy, democratization, and economic/financial theory and practice will greatly influence how the two states interact. Economically and politically it behooves both states to cooperate in the short and long runs. Also, much of Asia supports and welcomes American presence in the region. As long as the US restrains itself from imperializing the region and overthrowing China’s presence, and as long as China does not attempt to oust America, a relatively stable base that assures permanent presence of both parties in the region can be used to develop further policy on.

America is influenced by its democracy, free market policies, and strong human rights, as well as its desire to impose these principles on other states. The base previously described provides the US with a simple supportive argument; ‘if we’re both going to interact in the same place, we better learn how to interact productively’. The simple presence of such an argument influences America’s decisions as it provides a point China cannot ignore.

The US is very economically interested and invested in the greater Asian region. America will surely seek out policy that improves US — China relations, however it will levy importance on policy that enhances economic efficiency and effectiveness in the region (perhaps at the expense of US — China relations).

Another great influence on America’s decision making process is the power China has in the international system. As a permanent member of the UN Security Council, China’s ability to veto measures and resolutions greatly affects America’s (perceived) international power. Learning to effectively interact with China would improve international US — Chinese efforts.

FINAL DECISION/RECOMMENDATION

US — Chinese relations should focus around three main points: policy cooperation; healthy economic competition; political and cultural respect.

The US should help China grow as a world power, including it in international issues and decision making processes as well as new and/or existing trade organizations. By helping China to grow it shows America is interested in seeing the country develop rather than restraining it. This will make negotiation easier and will help to keep China from making extremist policy decisions. Cooperation shows desire for mutual progress.

Provision of challenging economic competition motivates economic improvement and progress. China artificially inflates its currency, dramatically boosting its exports. However, China has realized it cannot grow/mature on export economics. The US should focus on aiding China to develop its own domestic market. As China’s economy develops, its growth rate will slow as it begins to peak its international efficiency under current economic conditions. China will not remain a manufacturing economy forever. When export-based economic policy no longer supports the country the way it does now China will have to consider new ways to compete efficiently and effectively, and the best way (and currently only way) to do so is to enact free market economic policies. Establishing and continuing healthy economic competition (with reduction of protectionist barriers) will naturally drive China towards free market economics over time as China becomes dissatisfied with its socioeconomic disparities, low GDP-per capita, lack of economic diversification, and constant threat of unemployment-related unrest.

Henry Kissinger stated, “Lecturing a country with a history of millennia about its need to ‘grow up’ and behave ‘responsibly’ can be needlessly grating”. Including China in important international and regional decision making processes shows respect to Chinese policy makers and culture. China is attempting to assert new power domestically, regionally, and internationally. Though the US is concerned with China’s growing power and influence, America needs to realize the main challenge for China has been to maintain domestic stability while simultaneously maintaing sustainable economic development. By respecting Chinese sovereignty and withholding from direct intervention and overly-aggressive assertion, Chinese policy makers are less likely to become defensive. China is intent on showing the world its strength and capability as an important and powerful international and regional actor. Allowing China to develop respect will give America a long-term edge in policy making. The US does need to constantly voice its stance on human rights, economic development, and democratization, though. Failing to maintain its stance would render the US as weak/defeated in Chinese eyes.

DECISION EXPLANATION/RATIONALE

China does not desire poor relations with the United States. Both the US and China want good, stable relations that maximize the capabilities of the two states to seek their own interests while allowing a degree of economic, political, and social cooperation to exist. However America is the regional hegemon. China seeks to displace America. In seeking to displace America, China will resist American influence.

There is a common Chinese perception that the US is damaged/weakening while China is growing and becoming stronger. China will do anything to prevent itself from appearing weak, influenceable, and without regional/international political, economic, and social clout. Therefore, the US should refrain from attempting to directly influence and intervene in Chinese policy as this will only galvanize Chinese self-inflated power and make current and future cooperation more difficult. China will not accept foreign ideas, suggestions, or demands as this would make it look inferior to and impressionable by foreign states. If the US wants to change China it needs to make China believe itself that US-desired reform is in its best interest.

The US needs to get China to come to democratization, free market capitalism, and associated levels of human rights on its own accord, as US intervention will only make these doctrines less attractive to Chinese policy makers. By cooperating on policy development, continuing economic competition, and respecting Chinese sovereignty (and dignity), the US puts itself in an advantageous long-term relations position.

Read the original post at bmseifert.com.

America has been a spacefaring nation since 1958. Over the past fifty-three years, America overtook its first rival, the Soviet Union (spacefaring since 1957), and maintained its supremacy in the aerospace and aeronautical industries, having the most developed and successful space program, the strongest private aerospace/aeronautical industry, and the most intelligent engineers and scientists. During times where space exploration and advanced scientific research programs seem inappropriate to publicly fund and continue where economic difficulties, contested military actions, and other civil/financial issues seem to demand precedence, it needs to be promoted that NASA (National Aeronautics and Space Administration) is of immense importance to the security and welfare of the United States of America and must remain a national priority. NASA drives STEM (science, technology, engineering, and mathematics) education as well as the development of commercial and defense technologies and works with private engineering and science companies across the country, employing thousands of brilliant engineers, scientists, and technicians to ensure the safety of the American people and maintain the technological and explorational prestige this country has always possessed.

NASA’s accomplishments are inspirational to students. It is capable of orbiting people around the planet in minutes, building a space station, and placing man on the moon, and in doing so powerfully inspires individuals to aspire for careers with the organization. In order to become involved with NASA, a student must study science, technology, engineering and/or mathematics, and by creating a strong incentive for people to study these topics, demand for STEM education increases. As demand increases, more STEM programs will develop and more people will become involved in STEM disciplines. Students studying STEM subjects develop critical thinking skills and strong senses of logic to overcome various problems and conflicts. New generations of engineers and scientists will rise to replace the retiring generations and surpass them in their accomplishments, but only will do so if opportunities to take such careers exist. Should NASA decay, it won’t only be NASA careers disappearing. Jobs at firms like Lockheed Martin, The Boeing Company, Northrop Grumman, Raytheon, and SpaceX among others will be lost as well and some of these firms will face immense downsizing or possibly even be forced to shut down, severely harming motivation for younger American students to pursue a degree or career in STEM related fields.

One of the greatest positive externalities of NASA is the technology developed as ‘spin-off’ used in the commercial and defense industries. When NASA was tasked with putting man on the moon, NASA realized the Apollo capsule would need computing systems installed within it that were far greater in power and far smaller than those currently in use and therefore tasked private industry with the development of compact computing devices that later became the PC and laptop. Without NASA funding, heart rate monitors, thermal video imaging, light emitting diodes, and velcro among many other technologies would not have been developed. While current domestic debate surrounds whether or not NASA should be downsized, enlarged, or completely phased out over time, foreign countries and blocs such as China, India, and the European Space Agency are investing even more time and money into improving their programs, their educational efforts, and plan to surpass American capabilities within the near future. Technological innovation, though still very prevalent within the United States, is beginning to grow very rapidly in foreign countries and more new technologies are being imported rather than exported every day. Instead of questioning whether or not NASA is necessary, America should be questioning what seemingly impossible task NASA should be working on next. Originally, the Apollo project seemed insurmountably difficult. But when national security threats (Soviet technological capabilities during the Cold War) met technological challenges (the Apollo program), NASA proved to be an irreplaceable source of innovation and wonder that united a nation, inspired a generation with dreams of space exploration, and provided a feeling of security to millions of people who feared another devastating war.

Which is also why NASA is critically important in the defense industry as a customer. NASA helps improve private and public defense and communication technologies. The relationship between NASA and the private industry is very symbiotic. NASA develops a plan or project and administers/contracts production and testing tasks out to the private industry, challenging thousands of engineers and scientists to improve their designs and inspires technological and manufacturing developments, which in turn allow NASA to complete its mission in an efficient and effective manner. China has proven it is capable of destroying our satellites by destroying one of its own and has announced its desire to develop a space program separated from America’s influence and plans to land on the moon in 2020. India, Israel, Iran, Pakistan, Romania, Japan, and Ukraine among others have all had confirmed launches and are working to become space powers themselves, developing their own aerospace industries and programs. Iraq and North Korea have also both touted successful launches, though their success are unconfirmed. NASA helps to keep America competitive by constantly challenging private industry and by making sure its goals for space and technological development are always beyond those of other countries, which helps to prevent enemies from defeating our technologies, thus keeping us safe.

NASA’s importance as a national priority is great. It inspires and motivates American students to study math, science, and engineering, expands our knowledge of physics, chemistry, biology, psychology, economics, geography, and oceanography, develops unimaginable technologies, promotes international teamwork with a healthy amount of competition, and unites a nation under a common passion and history for exploration of the unknown. We were once afraid of what may have been beyond the edge of the ocean. Now we’ve become curious about what lies beyond the edge of the universe, and NASA’s journey to explore our reality has so far improved our quality of life, improved our technological advantages, and solidified our defenses against national threats.

Read the original post at bmseifert.com.

The biggest challenge to the ‘ecosystem’ of world economics that keeps society ticking over is how to overcome our inability to regulate a sustainable economic model. In Europe at present we are undergoing the difficult measures in setting about rules of austerity to ensure that government borrowing never gets as out of hand as it has done on our watch. I post on this topic now as it is topical to me — back home here in my native Ireland we are voting on a referendum this week to ensure we no longer borrow from our children to fuel indulgences today — a referendum on rationality and responsibility.

The topical of austerity reminds me of an opinion I blogged on a crisis in the Obama administration last August on national debt in the light of striking comments from foreign figureheads amid the storm from the ‘Tea Party Taliban’. I share with you for to see if anyone cares to comment on an operandi of living like parasites off the global economy:

Living Like Parasites Off The Global Economy, originally written 3 Aug 2011:

With the US in turmoil over its national debt, and held to ransom by a ‘Tea Party Taliban’, last week China publicly mocked American democracy. Yesterday, the world witnessed the humbling of America after a trillion-dollar deal marked the end of an era for the US. The US now faces a shift in its relations with creditor nations, and it was not all too surprising to hear Vladimir Putin, the Russian Prime Minister, yesterday accusing Americans of living “like parasites off the global economy”. If America had defaulted on its international debt obligations, that is exactly what it would be. While America continues to service it’s debt, it is quite the opposite — for now at least- as is perpetually paying interest to its creditors.

However, one needs to look at the bigger picture. In 1980, the size of US debt was $1 Trillion. It stabilized in 1995 at $5 Trillion until 9/11 after which the gross military spending on combating dubious wars saw it rise to where it is now — $15 Trillion and rising rapidly out of control. An 11th hour rescue deal that was far less than the Obama administration wished for sees its debt ceiling rise further, though perhaps finally brought to account.

The US debt is the largest in the world. Purchasers of Treasury bills still reasonably expect the US economy to recover enough to pay them back and foreign investors like China and Japan, the US is such a large customer it is allowed to run a huge tab so it will keep buying exports. The debt is 95% of GDP, and interest alone on the debt was $414 billion in Fiscal Year 2010. One wonders when the US is going to pay it all back. It is reasonable to anticipate that sooner or later, an 11th hour rescue package, like the one negotiated with The Tea Party Taliban this week, will not be there to save the US from defaulting on its debt, at which point the US will have proven itself to be a parasite on the world stage — one that borrows and declines to pay you back.

The alternative scenario paints a parasitic picture of only a different hue — if the US government and similars do eventually pay back all their borrowings in recent decades via raised taxes and spending cuts, we are in a situation where ones children have to collect the invoice for the excessive indulgences of today. A falsis principiis proficisci…

Note: This article originally appears on WealthLift.com and can be seen here.

In 2006, the underpinnings of the American financial system began to crack from a speculative bubble in the country’s housing market. Fueled by irrational exuberance in which homeowners believed their home prices would rise forever, this was made worse by Main Street and Wall Street, both of whom repackaged mortgage loans for sale to everyday investors through a process called securitization. That’s right, this was a multipronged problem, not the hell-bent desires of a few financial fat cats, as Occupy Wall Street would have you believe.

When the bubble burst and home prices began to decline, this not only hurt the original lender, but also every investor that held a piece of a mortgage-backed asset. Imagine this process like a moldy pie that no one realizes is bad. Originally, the entire pie is held by one bank. Next, pieces of this pie are sold to other banks, pension funds, hedge funds, and anyone else that has an appetite. Soon enough, however, everyone holding this pie has gotten sick. Well, this happens with all kinds of assets, including car loans, credit cards and student loans. The benefit of securitization is that it allows organizations to grant more loans to people like you and me, but the downside is that it exposes the entire economy to the financial woes of an individual market. Without securitization, what happened in the housing market would have likely stayed in the housing market.

Six years later, many people are crying that the same thing will happen to the student loan market. While disbelievers can claim that these are just ‘cynics’ whose views are skewed by the world’s ongoing economic turmoil, a basic investigation into the matter yields some worrying results.

1. A college education has more in common with a house than you would think. Currently, the average cost of a single-family home in the United States is just above $150,000, while the average tuition of a private institution’s four-year degree program is around $130,000. Moreover, it is common practice for students to employ the use of debt to cover 20 to 50 percent of their costs, depending on the state. Just as homeowners once expected home prices to rise every year into infinity, students are undertaking loans with a shared expectation of a future income that exceeds the value of the loan. Unfortunately, historically high rates of unemployment have made this a pipe dream for an increasing number of students. In fact, the latest nationwide student default rates stand at 9 percent, up two percentage points from the previous year.

2. The student loan bubble has been growing faster than the housing bubble. According to a recent study by the New York Fed, the volume of student loans in the American economy has increased 500 percent over the past decade to a current value of $1 trillion. While this amount is less than the value of the mortgage volume peak before the recession, the growth rate is twice as high.

3. SLABS may be this crisis’s nuclear bomb. The acronym SLABS stands for student loan asset backed securities. In many ways, they are similar to the mortgage backed securities that played a hand in breaking the financial system in 2008. It is estimated that there are over $250 billion worth of SLABS in the markets today. This is a whopping 1,000 times the amount of SLABS in the American economy 20 years ago. More troubling, these investments have been viewed as the safest asset backed security in the post-recession era. While securitizes backed by mortgages, auto loans, and credit cards have been cut in half over the past few years, SLABS activity has continued to grow. In fact, they are marketed to individual investors, pension funds, and anyone else seeking an economic safety net.

4. Student loan debt is unforgivable. This ‘safety net’ belief is held partly because student loans are currently the only form of debt that is unforgivable even in bankruptcy. From investors’ eyes, this is good news because their return is generated from students making their loan payments. From a broader perspective, though, this spells bad news for the American economy. See, students can still default on their loans, which simply means that they are unable to make payments. Unlike mortgage debt, however, students who default are not given the option of leniency in the form of principal or interest rate reduction.

Instead, defaulting students are economically punished, as they are unable to receive any IRS tax refunds or federal benefits. Moreover, the government is entitled to take up to 15 percent of a student’s disposable income, and may even sue in some cases. In a world teetering on the edge of a double-dip recession, all of these actions would only make the situation shoddier. In fact, the worst thing that can happen to a mortgage defaulter is the loss of their home, but they can move on, economically speaking. Students who default on their loans, however, are not offered the same route. Moreover, this incentivizes lenders to offer loans to any and all students since there is no risk of payment loss in the long run. Tell me, do we trust our lending institutions enough to think that this would not be the case? Of course not; besides, it is arguably up to the government to provide an economic structure for banks to follow. If businesses are profit maximizing, which we’ve all learned in school that they are, then they are not to blame for taking advantage of this situation.

5. Unlike all other debt holders, students are not classified based on their ability to repay. Okay, most lending institutions look at the credit worthiness of a student’s parents, but this is insufficient. What lenders should be doing is rating students based on the probability that they can repay after graduation. Whether we like it or not, the only way to do this is to classify students based on their future earnings potential. Think about it – a student with an Engineering degree will be entering a field where the median salary is $90,681. Moreover, the unemployment rate in this field is around 2 percent. Compare this with a student majoring in English. This student is only expected to earn around $40,000 in a field with 7 percent unemployment.

Clearly, the student with the lower expected salary entering the riskier field should be granted a lower amount of student loans. While some may argue that this disincentives students to follow their dreams, it is common sense economics. Moreover, a student rating system would likely improve the U.S.’s fallback in the global Math and Science race, in which the country is currently ranked 23rd and 31st respectively. As college students would realize that they could only attend the best institutions if they chose the highest-earning majors, this problem could be corrected over the next decade. Now, doubters may cry that the most affluent students would not be subject to this plan, but this is an advantage that persists in any scenario. In fact, the implementation of this system could reduce a growing wealth gap, as a higher percentage of lower-income students shifted to the most fruitful career fields.