Financial System & Cost of Education
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As I studied global financial crisis and tried to delve deep into it to find the causes for the crisis and also its effects I observed some financial relations unseen so far. It is what, a “fallout” of a situation that is going to have its impact on social, family and individuals’ financial health of individuals & countries.
I happened to observe something which was so far ignored or overlooked or was not touched upon.
My analysis took the matter to a completely unexplored area so far, “the relation between financial system & cost of education”.
Even great economists by “miss” perhaps, could not catch it or may be it escaped all eyes as it remained in disguise of a social or holy cause, so was hard to perceive, but when one analyses it on hard rocks of fact, it gives in.
Here may I point that Joseph.e.Stiglitz & others got shortsighted by dwelling too much on U.S.
As I studied educational systems, educational institutions, primary to higher to vocational levels and most importantly “the cost of education” and “connection of financial system with education”, more precisely “cost of education” for two years, I came up with some absolutely new revelations & analysis. The research or the analysis was not envisaged or done by anyone before.
That there could be a connection between financial system & cost of education is quite a new concept, but the deeper the analysis & the research were done, the more it was found, it is not only true but a fact and a mathematical & theoretical TRUTH.
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I start the analysis at point blank range.
I start the analysis at point blank range.
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Why even after job market is crashing, the educational institutions are doing well, why are they unaffected by the crisis? Are they above all? Above the financial system?
Rationally everything is governed by the “demand supply rule” but, it appears educational system does not come under this rule, and then if it is governed by the universal rule, why cost of education has not crashed or at least come down or mellowed? Surprisingly has gone up.
But, deeper research reveals that the relation is there, but that is beyond ordinary perception, perceiving this requires a unique analytical approach.
Once you reach there you begin to see a lot of things, can analyze the present financial & social situations & coming (future) financial system & economy and the effect it is going to have on the economy & most importantly the social damage this will ultimately do.
Contemplating on this I have struck a unique analysis. I summaries this below:-
1. High cost of education (be it any) Rs20lac or more, (for example, in Indian context & in Indian rupees):- cost of education is (on other words extortion by educational institutions) very high even in a very bad job market. And surprisingly the cost of education is so high from preliminary level to higher level to vocational level. That is, too high at every level.
Contemplating on this I have struck a unique analysis. I summaries this below:-
1. High cost of education (be it any) Rs20lac or more, (for example, in Indian context & in Indian rupees):- cost of education is (on other words extortion by educational institutions) very high even in a very bad job market. And surprisingly the cost of education is so high from preliminary level to higher level to vocational level. That is, too high at every level.
All the institutions charge too high and they have so many avenues to charge, so many ways to milk the students & the families.
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This high cost of education is completely “irrational” compared to the job market (the availability of jobs or in other words non availability of the same) & affordability to meet the high cost of education by families & students.
As most families & students grope frantically to finance the education and end up broke (who bother about broke, bankrupt families? all scratch their heads on failed corporates.
But must one know broke families are far more devastating, damaging for a nation than the broke corporates. Broke corporates cause financial crisis, job loss, share price fall, but, broke families deplete the economy of a nation & break the backbone of a country & impoverish a nation. It is a very dire consequence.
2. Cost of education is so high but, there is no job security. Although all vocational institutes claim 100% placements, but people are actually losing jobs.
2. Cost of education is so high but, there is no job security. Although all vocational institutes claim 100% placements, but people are actually losing jobs.
In developed countries situation is very bad.
Job market is directly related to educational institutes, (any, vocational or the other). But it (cost of education) is totally defying demand supply rule.
If job market is down so the cost of education should be down, but really is not.
As if educational institutions are heavenly bodies, are floating in the space, not earthly things, so what, if global financial system crashes! They will not come down (with their heavenly costs) you have to reach out to them. Cough up what you have.
3. To meet the cost of education, savings of families are vanishing. Now the situation is so, that families plan (save) from the day child is born or even before the child is born and begin to arrange money for the unborn child’s education.
3. To meet the cost of education, savings of families are vanishing. Now the situation is so, that families plan (save) from the day child is born or even before the child is born and begin to arrange money for the unborn child’s education.
It causes strain on their finance, as income is always limited of a family so will resort to squeeze the spending, get ready more for future expenses & reduce present expenses.
These reductions & squeezes are not enough to meet the educational costs, so they have to unlock their savings (being a banker myself, I come across so many cases).
But alas! savings alone can not meet this high cost of education (like offering bunch of grass to the elephant for food) so only recourse now left is to “borrow” & please mind it, this “borrowing” is not the first borrowing of the family, but borrowing by an already indebted family, it is a borrowing by a family who already has availed of many loans, so the repercussion of this on the economy is huge.
4. As the high cost of education is generally met by savings & debts, so families borrow huge sums for education of their children and become ultimately debt ridden and fall in debt trap.
4. As the high cost of education is generally met by savings & debts, so families borrow huge sums for education of their children and become ultimately debt ridden and fall in debt trap.
As they have already squeezed their personal expenses, so either they have to cut many more expenses or take more loans & divert debts (the loans taken for one purpose go to meet the other urgent obligations and the education cost), this will, naturally, create a catastrophic effect on the economy.
5. Results of above situation lead to household financial crisis.
5. Results of above situation lead to household financial crisis.
Families take recourse to austerity; they spend less on all items & goods, so viability of the economy is adversely affected.
If families start to squeeze expenses, some families even go to the limit of starving themselves on many items; one can envisage that such an economy is not a healthy economy, rather a sick economy, an economy with shrinking growth, having a negative GROWTH variance.
6. Less buying power of families due to this situation causes a huge effect on the economy & results into a depleted economy. An economy with “less buying power of people” is an impoverished economy. It is a SIGN of a nation becoming poorer.
6. Less buying power of families due to this situation causes a huge effect on the economy & results into a depleted economy. An economy with “less buying power of people” is an impoverished economy. It is a SIGN of a nation becoming poorer.
A nation with less buying power is a poor nation, though it sounds harsh, but is an undeniable fact, an absolute truth.
To counter it you (the govt) pump huge money into system, run a dangerous deficit financing, following a Keynesian policy, but you forget Keynes’ theory succeeded as there was 2nd world war & America Greece
7. Less spending spree (less extravagancy), please don’t mix it with less buying power, affects the economic boom.
7. Less spending spree (less extravagancy), please don’t mix it with less buying power, affects the economic boom.
It is a very dangerous syndrome (mind it), because it prevents buoyancy of an economy & flourishing of an economy. An economy with such a syndrome is obviously heading for the doom. Just as a healthy body has an ample RBC count in the blood & with a lesser count one is anemic so for a vibrant economy, vibrant spending by people (not by handful ones, they neither build the economy nor shoulder the economy, only they are at the fringe, ride on the given infrastructure of the economy) is required. And if people are unable to do this then economy is bound to become anemic.
8. Obvious results of above are slowing down of the economy. Job creation gets on a hold and ultimately results into job losses. And a financial crunch begins.
8. Obvious results of above are slowing down of the economy. Job creation gets on a hold and ultimately results into job losses. And a financial crunch begins.
This financial crunch leads to loan defaults, and loans defaults are in every area of the debt market, be it credit card loan, consumer loan, home loan, education loan.
9. This results into a total financial crisis, a total economic slow down. Total economy comes under this grip. A vicious cycle, which affects all gamut of financial activities & businesses.
10. Ultimately financial institutions are affected as loan defaults happen & off take of loans is slowed, putting financial institutions in trouble.
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This analytical approach about the relation between cost of education & financial system has not been pointed out before.
Then, why educational institutions are still getting long queues?
Because the lesser jobs are the more is the competition, so longer is the queue. As in hot summer days in African terrains animals vie for food & water & gatecrash.
Example of this, is that if one knows only a few will get jobs then all will naturally strive more. This is a law of nature.
More will try for the best institutes so one can be a cut above others. All most all educational institutions claim to be great & all the aspirants can’t make it to the elite ones so all institutes, be that of lesser reputations will get aspirants.
Therefore educational institutions are not affected by the slow down immediately, but “this remaining unaffected” is for the time being only.
The effect of failing economy, the job losses will catch them gradually, as they will be in the mood (rather in the mode) of sucking money but the depleted, disabled families, any more could not cough up that.
This syndrome will gradually eat up entire society from inside.
Now, we have seen a financial crisis but, then we are going to see a collapse of society. a depleted society, a social rot.
Subhro Das
Araria (
(This research took me two years. and I took three months to summarize this analysis. now I publish it and make it public.
S.K.Das.
Written 22/03/2010
(My theories & concepts
I write my theories & concepts in short as I am a banker & have little time to write in a book like or research file like form, but I do feel these theories & concepts must be circulated for the good of the world & people, anyone is free to elaborate or write on them or point out if any flaw or deficiency in the same.)
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