This year, we have witnessed another war begin, mortgage rates rise to 8 percent and five of America’s largest banks lay off 20,000 workers. Economists have identified several bubbles creating economic hardships and how this could develop into an economic recession.
One of these bubbles is our student loan debt crisis. Over two decades, around 44 million American borrowers collectively owe 1.6 trillion dollars in federal loans and 1.7 trillion dollars in private loans. These rates are increasing dramatically due to the rise of students enrolling in higher education than in previous generations. Currently, two-thirds of high school graduates go to college, most take out loans and the average college student takes on more debt. From 2009 to 2021, college tuition rose by 25 percent, and student loans have surpassed income growth. Though most students are less than 20,000 dollars in debt, only around 7 percent of borrowers owe more than 100,000 dollars in student loans.
The second bubble people believe is about to burst is our Federal debt. Typically, a country going into debt is a good thing as long as they have a growing economy, and this is because debt is a percentage of our Gross Domestic Product (GDP). Currently, the United States debt is increasing much faster than our GDP. Our government has cut back on our national taxes but refused to cut down our federal spending. The U.S. debt level impacts and is impacted by everything in our society. It has affected our confidence in the market, leading to less investment and cash flow throughout our economy. Still, it is also the most significant contributor to our high cost of living. The Peter G. Peterson Foundation said, “On the other hand, reducing federal borrowing would counter such effects; according to CBO, income per person could increase by as much as $6,300 by 2050 if we were to reduce our debt to 79 percent of the size of the economy by that year.” It also leads to average Americans having more difficulty buying homes, financing car payments and even financing education. Without skills to bring into the workforce, it could lead to more reliance on a technology-based economy, leading us to falter behind other emerging or established economies.
The third bubble is our employment bubble. The surge in hiring during the COVID-19 pandemic helped the stock market stabilize, as though these cooled-off companies and banks realized that they have too many employees for the amount of business they are conducting. Banks need to issue more mortgages or loans for future home buyers, and corporations are issuing less debt. With an unknown economy, companies are trying to cut costs where they could potentially save money. Research Director at Janney Montgomery Scott, Chris Marniac told CNBC, “They need to find levers to keep earnings from falling further and to free up money for provisions as more loans go bad…By the time we roll into January, you’ll hear a lot of companies talking about this.”
Many researchers believe that the outpouring of college graduates looking to become white-collar workers is more likely to be at potential job risk than those in prior economies. Currently, many applicants are finding it difficult to land a job. With an unemployment percentage of 3.7, the Federal Reserve will increase interest rates, putting more pressure on the stock market, creating an economic slowdown and finally leading to company revenues and profit.
We must evaluate and understand many different parts of our economy to predict which way our economy will go properly. This is just research from various sites that believe this, and others agree or disagree. In the future, we must look at all these different parts and create a better connection on how we will thrive and adapt to any sort of economy that we enter into.
