28 November 2018 FT — Articles to Read

28 November 2018


Question: In 2018, how much in student debt did people owe over 50 in the U.S.?


Fed’s Clarida cautious on rates rises – Pg. 3

–          The Federal Reserve will need to be especially attuned to fluctuations in economic data as it gauges how much further to lift short-term interest rates, ….

–          Since this summer, the Fed has been stressing how unsure it is about central banking lodestars such as the neutral rate of interest – the rate that keeps the economy on an even keel


Student debt sales make little economic sense – Pg. 8

–          Student loans were introduced in the UK in 1990.  Unlike regular borrowing, the most recent student loans are income-contingent: graduates pay 9% of earnings above 25,000 (sterling); those earning less do not have to pay until they reach that threshold.  After 30 years, any remaining debt is written off

–          The average graduate from a three-year degree carries over 50,000 (sterling) of debt and faces high interest rates

–          When student loans are sold, net government debt falls by the sale price.  The Treasury claims this enables more borrowing, owing to limits on how much debt can be carried by the government.  Moreover, despite the substantial amounts of money lost in selling low, no write-offs are recorded

–          There are several problems, the most obvious that selling assets to private investors at below face value makes no economic sense.  No investor could find the loan book more valuable than the government, since investors cannot borrow at the low rates the government can.  Given the income-contingent nature of student loans, the private sector would struggle to run such a scheme effectively.  Loans, after all, do not become more “efficient” when sold to private investors

–          A second problem is that the accounting rules create a considerable incentive to sell, which weakens the public finances in the long run by depriving the Treasury of billions in future repayments


Microsoft on cusp of seizing top spot from rival Apple – Pg. 13

–          The last time Microsoft was the world’s most valuable company, in 1998, Bill Clinton had yet to be impeached, Boris Yeltsin was still president of Russia, and Google was less than a month old

–          Apple has been in the top spot for seven years but has faltered in recent weeks on worries the smartphone market has run out of growth

–          Apple has lost 25% of its market value from the peak at the start of October…

–          Overtaking Apple would cap a five-year run that has seen Microsoft’s share price rise nearly three-fold


Answer: $260.0bn