The Kids Aren't Alright
Bitcoin and the Burning Village
“A child not embraced by the village will burn it down to feel its warmth.” -African Proverb
In a recent conversation, a friend of mine reminded me of this proverb. He brought it up in the context of Gen Z investing more in crypto than in legacy financial markets, because it has been priced out of most legacy markets/systems in large part thanks to the actions of the Fed over the course of the past 13 years (especially the last year and a half). Because everything from housing to shares of the S&P 500 to consumer goods to college are more expensive, Gen Z is pissed, and rightfully so.
Let’s start with housing prices.
In the chart above, we can see that home prices have risen almost in direct correlation to the expansion of the Fed’s balance sheet, pricing more and more people from the younger generation out of owning a home. The real kicker here is that multinational investment management corporations like BlackRock are now in the business of buying residential real estate. So, now members of Gen Z are competing with institutions that have gazillions of dollars and direct ties to the Fed not only in financial markets, but in their efforts to own a home. Thank you, Fed, for helping to put a sleeper hold on this aspect of the American dream.
But, for argument’s sake, let’s just say that someone from Gen Z chooses to rent so that they can more aggressively invest in maybe an S&P 500 index fund. Well, it’s more expensive than ever to buy a share of one of those, as well.
So, maybe it’s best right now for members of Gen Z to both not buy a house and not invest in something like a S&P 500 index fund. Maybe it’s safest just to keep one’s money in cash. Well, that seems rational in some regards. One just has to keep in mind that consumer goods are now getting more expensive, as CPI jumped up to 5% in May of 2021. So, one’s purchasing power is less when one keeps one’s money denominated in cash.
Maybe one then realizes that they need more skills to earn more cash, since consumer goods are getting more expensive. Well, maybe the ambitious Gen Z’er thinks, “Wait! I have an idea. I’ll go back to college gain some more skills, so that I can earn some more money!” If only it were so simple. I’ll have Rich Roll break this one down for you.
At 1:15:07 of a recent episode of the Rich Roll podcast, Roll pivots from discussing how the NCAA exploits its athletes to more broadly commenting on how colleges exploit their student bodies in general.
Roll: I think there is an argument to be made for shining a light the kind of scammy nature to which the university system and colleges in general are exploiting athletes, but students in general. This is something that Scott Galloway, who is a professor of business at NYU - and also kind of a YouTube and podcast star, has been ranting about for a while, but he makes some really good points, which [are] basically that higher education has been squeezing students for 30 years, tuition has exploded; it’s up 1400% since 1978, which is 15 - it’s a 15x increase in the last 40 years, and the tuition to salary ratio used to be 25%, meaning you pay this certain tuition, but you expect to earn this much when you get out into the workplace, but that 25%-
(Co-host) Adam Skolnick: -25 times, you mean-
Roll: 25x, I mean, has now dwindled to 1.4x. So, these numbers are out of whack. Meanwhile, housing costs have escalated from 2.8x one’s average starting salary to 10x one’s average starting salary, so you can’t make it work.
Skolnick: No.
Roll: And these colleges, to coin Scott’s phraseology, are essentially luxury brands that are driven by artificial scarcity to create irrational margins, and the colleges are drunk on this scarcity, because they can create such massive demand for entrance. Meanwhile, they have these billion dollar endowments.
Skolnick: Mmhmm.
Roll: And when universities used to once aspire to be public servants, they are now just these brands. It doesn’t make sense when you have these massive endowments. Tuition costs are insane. And even when you look at someone like Scott or any university professor, and you compare what a student has to pay to attend a certain class versus what that college professor is being paid to teach that class, it’s also completely out of whack. It’s something like a 90% commission on professors.
And let’s remember that Scott Galloway is a tenured, full-time professor. That 90% commission is likely higher for adjunct professors, which make up over 50% of the professors in academia today. I’m one of the them, and I have done the math.
And let’s remember that Democrats, the party that currently controls all three branches of government, have still done absolutely nothing about students loans, though they had promised to. (Author’s note: I am not necessarily in favor of the government doing anything about student loans. In fact, I believe government intervention will only make the student loan crisis worse in the long run, just as Obama’s policy around student loans made things much much much worse for borrowers. The onus is on the universities here. I, for one, cannot wait for universities to be interrupted by big tech. Continued government intervention is only helping them to continue to get away with murder.)
And, finally, let’s remember that I ran part of a race with Rich Roll two weeks ago, and it was awesome.
Baby boomers, the most selfish generation America has ever known, and their allies at the Fed who keep both their 401Ks and the prices of their homes artificially propped up, tend not to like Bitcoin or cryptocurrency all that much. At the same time, Gen Z is waking up to the fact that crypto is their only way out. And on this frontier right here is where the battle will be fought. I’ve drawn my line in the sand. I stand with Gen Z as they continue to bring the heat to your doorstep. Burn, baby, burn.
Best,
Frank
Twitter: @frankcorva
Currently Listening To: “Kids”, by Beach Slang
“There is anger, but it is just. It is power. The kids are still alright; we’re just too high to fight.” -Beach Slang
Good read as always!