marți, 3 septembrie 2013

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis


Future of Education is At Hand: Online, Accredited, Affordable, Useful

Posted: 03 Sep 2013 01:18 PM PDT

I have long been in the camp that the price of education is so expensive as to make college a poor choice for many who attend, and a downright bad choice for those who go heavily in debt for degrees in little demand.

The entire education system is and has been for some time unsustainable. The cost of education keeps rising along with ...

  1. Government aid
  2. Union contracts
  3. Pension benefits
  4. Salaries of coaches
  5. Competition for the most elaborate dorms
  6. Fundraising

Dylan Matthews at the Washington Post has a 10-part series called "The Tuition is Too Damn High". The first seven articles in the series are already available. Part-10 is the writer's proposed solution.

I have talked about most of the points above except point five. Matthews discusses "dorm competition" in Part VI — Why there's no reason for big universities to rein in spending.
Freddie de Boer is a grad student at Purdue University, one of Indiana's flagship public research institutions. Purdue has a new gym – excuse me, a new "sports center," the France A. Córdova Recreational Sports Center, to be exact. When de Boer went to check it out, he found treadmills that each featured a TV and an iPod dock, a bouldering wall and a 55-foot climbing wall, a spa with Jacuzzi function that can fit 26 people, six racquetball courts, and a "demonstration kitchen" for cooking lessons.

The Córdova Center wasn't an expense that needed to be paid for. It was an expense made because it could be made, because the nonprofit university rewards those who spend money, not those who save it.

I suggest the problem with the education system is largely that of government throwing more money at the problem. Just as hundreds of affordable housing programs raised (not lowered the price of homes), the same happened in the education system.

Throw in union graft, pensions, sports, and you have the problem in a nutshell. The solution is simple.

Three-Part Solutions

  1. Stop all student aid programs
  2. Increase competition via accredited online programs
  3. End the preposterous pension plans of educators and administrators

Of my three proposals, number two above is now at hand, in the form of more accredited online education, at reputable institutions, giving advanced degrees at affordable prices.

The MOOC That Roared

Reader "Tom" pinged me today with this email:

Hi Mish,

I've read your thoughts and comments on higher education and the future of college degrees. I agree with most of your ideas, but I would have guessed we were 5-10 years away from some of that stuff. Nope. Georgia Tech has a Master's in Computer Science that is going to bust higher education wide open. Check it out:

Maybe I'll get that PhD after all.

Best.... Tom
Radical Change

Tom sent a link to a Slate article The MOOC That Roared, subtitled "How Georgia Tech's new, super-cheap online master's degree could radically change American higher education".
Georgia Institute of Technology is about to take a step that could set off a broad disruption in higher education: It's offering a new master's degree in computer science, delivered through a series of massive open online courses, or MOOCs, for $6,600.

The school's traditional on-campus computer science master's degree costs about $45,000 in tuition alone for out-of-state students (the majority) and $21,000 for Georgia residents. But in a few years, Georgia Tech believes that thousands of students from all over the world will enroll in the new program.

The $6,600 master's degree marks an attempt to realize the tantalizing promise of the MOOC movement: a great education, scaled up to the point where it can be delivered for a rock-bottom price. Until now, the nation's top universities have adopted a polite but distant approach toward MOOCs. The likes of Yale, Harvard, and Stanford have put many of their classes online for anyone to take, and for free. But there is no degree to be had, even for those who ace the courses.

George Washington University's online MBA Healthcare degree, for example, costs the same $1,485 per unit (52.5 units gets you to the finish line) as the standard program. The reasons for this are many, but perhaps the most important is that universities are terrified of debasing the value of their diplomas.

Drop the price of the online degree, the logic goes, and you could have a Napster-like moment sweeping college campuses. Revenues spiral down as degree programs are forced to compete on tuition. That's a terrifying prospect for universities, which have depended on steadily rising tuition—growing at more than twice the rate of inflation—to cover costs.

Georgia Tech's new program, though, throws a monkey wrench into the system by reordering the competitive landscape. U.S. News & World Report ranks the computer science department among the nation's top 10. The new degree—which is a partnership with MOOC pioneer Udacity—is intended to carry the same weight and prestige as the one it awards students in its regular on-campus program.

Uncharted Territory

Someone at Georgia Tech is thinking, and that person is Zvi Galil, the head of Georgia Tech's school of computing.

"This is uncharted territory," he says. But, he warns, if Georgia Tech doesn't do this someone else might come along and do it first—grabbing the notoriety, the students, and the revenue. "There is a revolution. I want to lead it, not follow it".

As I have stated repeatedly, someone was bound to do this, and here we are. And it will not stop with advanced degrees, but rather spread like wildfire to lower degrees.

I have warned parents with kids in grade school to not lock in education costs at today's rates because I expected costs to come down. And they will, dramatically, within a few years.

Unfortunately, this will not do much for high school seniors right now. And it certainly will not do anything for those buried in student debt with no job and no way to pay it back.

But relief is coming for those still in grade school.

Welcome Deflationary Event

College dorms will be for kids of the wealthy, but even then, expect costs to mitigate somewhat when parents decide there is no extra "value" in spending an additional $40,000 a year for education.

Yes, this is a deflationary event, and one that everyone will welcome (except those who benefit from the current system of waste and graft).

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Exploring the Impossible: India Seeks to Expand Trade in Rupees; India Stock Market Sinks; Rupee Decline Continues

Posted: 03 Sep 2013 10:26 AM PDT

The desperate act of the day comes from Foreign Minister Salman Khurshid who says India Looking to Expand Rupee-Payment System.
India is exploring possibilities of a rupee-based trade-payment mechanism with several countries, Foreign Minister Salman Khurshid said Tuesday, a move that may help stabilize the local currency and reduce the country's current-account deficit.

India already has a rupee-based payment mechanism with Iran, which was worked out by New Delhi and Tehran to skirt Western sanctions against Iran. Under that, Iranian oil would be purchased with Indian rupees, which Iran would use to buy Indian goods, which include food, drugs, consumer products and auto parts.

India imports more than three-fourths of the crude oil it requires and a depreciating rupee has increased its energy costs in the local currency, adding to the government's fuel subsidies. The Indian rupee has fallen nearly 20% against the U.S. dollar since early May.

"Our commerce [trade] minister is in touch with many countries. Let's see where it is possible," Mr. Khurshid told reporters here. "If it is possible, than it would be of help to us right now," he added.

Exploring the Impossible

The only reason Iran accepts Rupees is because of embargoes by the US and Europe on trade with Iran. As a result, Iran is shut off from trade in dollars and euros, and in a desperate move of its own is willing to accept rupees.

No one else wants the damn things including India citizens who would rather own gold. See India in Serious Trouble (and Gold at the Heart of It).

Such reality does not stop foreign ministers from exploring the impossible, and wasting more time in the process.

The real world does not stop on such foolishness. For more on the real world, please see DeLong-in-Wonderland.

Also note the Rupee itself.

Rupee vs. US Dollar



The Rupee has declined 35% against the US dollar since July 2011.

Asia Pacific Stock Market



BSE is the India stock market.

That India's Foreign Minister is on a mission to explore the impossible is sure sign that desperation has set in, and India has no idea what to do.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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