Economically, things are looking better in the U.S. Car sales are up. Inventories are being replenished. And people are spending. It may not be a perfect scenario just yet, but even a candle is welcome in a dark tunnel.
Of course everything is now more expensive, so greater spending is to be expected. Brent oil is running around $125 per barrel and prices at the gas pump are scrambling towards the $4 per gallon mark. Companies are now routinely buying other companies for billions (rather than millions) of dollars. It makes me wonder if the bright picture isn't being artificially brightened ... a kind of economic Photoshop. No one has changed the fundamentals of the banking industry that pushed the world over the edge in 2008. Now the very culprits -- Goldman Sachs, for example -- are back in the saddle, handing out sound financial advice. Ditto Standard and Poors, Moody's and the rest of the rating agencies whose income was derived partly from the stocks they 'rated.'
In Washington, the managing director of the International Monetary Fund, Christine Lagarde warned her audience Tuesday that whatever recovery was afoot worldwide was still on very shaky ground. "We should not delude ourselves into a false sense of security," she said.
As if to put meat on that bone, an Associated Press story points out that the more than $1 trillion in accumulated U.S. student debt could easily become the next elephant in the living room -- one capable of trampling even the most optimistic projections. Where are former students who cannot find jobs supposed to find the money to pay off the loans they deferred in order to get a college education? Maybe from mom and dad ... but mom and dad may be living on fixed incomes and be unhappy to learn that they too can be impoverished. Well, if mom and dad can't pony up, there's always the federal government: Eight out of 10 student loans are issued or guaranteed by the federal government. Currently, three in ten student loans have past-due balances. Which could leave Uncle Sam on the hook if grads Sally and Peter default.
.Nigel Gault, chief U.S. economist at IHS Global Insight, said the student loan crisis may not torpedo the financial sector as the mortgage meltdown nearly did in 2008, but it could slam taxpayers and the still-ailing housing market.