A Costly Gamble: The Good, the Bad, and the Ugly of College Education

 

Governments have long touted college as a golden staircase to social mobility and economic growth, but with rising tuition fees and stagnant graduate earnings, the disillusionment with higher education is growing like a dark cloud on the horizon.

 

It is graduation season again, but is college still a boon for social mobility and economic growth? At one time, the answer to that question appeared to be obvious. Over the past several decades, increasing numbers of young adults in both developed and less developed countries have been enrolling in higher education programs. College has been lauded by governments as a means of improving both social mobility and economic prosperity. Recently, disillusionment is growing as a result of rising tuition costs and graduates' incomes remaining flat or static. There is a significant body of scholarly material that points to a worsening confidence problem. For instance, a survey that was conducted and published by the Wall Street Journal, which is a newspaper that focuses on business news, found that 56% of people in the United States currently believe that earning a degree is no longer worth the effort and expense that it requires.

At least for a normal college freshman, this doesn't fit with the facts. In most places and for most students, getting a college degree still brings in a lot of financial benefits. Yet getting a degree has become riskier. The benefits for the best students are getting better, but a worryingly large number of students aren't getting anything financially good out of their studies.

New data sets, like tax records, are shedding more light on this than ever before. They can basically keep track of how much students who take certain classes or pursue certain degrees at specific colleges earn in the future. In the long run, this information will help students avoid the worst payoffs and grab the best ones. Choice of college degree and time of graduation are very important, but choice of college or university isn't as important. It could also help states who want to stop people from getting low-value degrees.

In the rich world, college graduates started making more money in the 1980s. The college-wage premium, which is what people call the difference in pay between people with at least a bachelor's degree and those without one, started to grow at that time. In the 1970s, an American with a college degree made 35% more than an American with a high school diploma. This edge had grown to 66% by 2021.

In many countries, the pay premium has either stopped going up or is starting to go down. Costs have also gone up in places where students have to pay for their degrees (see Table 1). In the late 1990s, there was no tuition in England. Now, it costs £9,250 ($11,000) a year, which is the most in the rich world. From about $2,300 a year in the 1970s to about $9,000 a year in real terms, the out-of-pocket costs of a bachelor's degree in the United States have gone up, according to the available published evidence. Most of the time, students at public universities pay a lot less than those at private non-profits.

Still, the average degree is still worth something. Studies have given a rough estimate of how much money an average American earns each year after getting a bachelor's degree. There is a lot of other published data that shows the average rate of return for a bachelor's degree in 2019 is around 14%. In the early 2000s, that was as high as 16%. But it's still a lot of money. And it's a lot more than the 8–9% that American graduates made in the 1970s, before pay for graduates and tuition fees started to go up. These figures take into account both fees and the amount of money a person could make if they worked full-time instead.

But the averages hides a wide range of results. Until recently, polls were the main way for economists to figure out who won and who lost when it comes to getting college degrees. Governments, like those of Britain and Norway, are now more likely to offer large, anonymous records that show the real earnings of millions of college students. This makes it much easier to compare people who has various degrees. The broken-down numbers show that a lot of students get degrees that aren't worth the money they cost.

The Institute for Fiscal Studies (IFS), a research group, says that in England, 25% of male graduates and 15% of female graduates will make less money over the course of their jobs than their peers who do not get a degree. America has less complete data, but they have started putting out information about how many students  at thousands of colleges don't earn more than the average high school graduate early on. Researchers at Georgetown University in Washington, DC, have found that 27% of students who start at a normal four-year college do not finish it six years later. More than half of the people who enroll in the long tail, which is made up of the worst 30% of two- and four-year schools in the U.S., don't meet this standard.

 

Table 1: Estimated Average Cost of Bachelor’s Degree (Tuition Fees) by Country

 

Country	Tuition (International)	Living Expenses
Argentina	Free to $15,000	$2,800 - $5,000/year
Australia	$20,000 (public) - $45,000 (private)	$16,700/year
Canada	$20,000 - $45,000	$15,000 - $17,000/year
Brazil	Free to $15,000	$4,200 - $17,800/year
U.K. (England)	$17,000 - $43,000	$21,700
U.K. (Scotland)	$25,000	$20,000
Denmark	$8,000 - $21,000	$13,500/year
Germany	Free to $35,000	$14,400/year
Spain	$850 - $28,000	$12,000
China	$4,700 - $46,000	$14,600
France	$3,400	$12,200
Japan	$7,200 - $16,000	$10,500
India	$$350 - $5,500	$4,600
Russia	$1,300 - $6,000	$6,800
South Korea	$16,800	$9,500
Dubai	$7,800 - $32,000	$12,500 - $45,000/year
Italy	$1,200 - $7,500	$9,600
United States	$9,377 - $37,000	$16,300

 

Source: Culled from Education Data Initiative (Hanson, 2021; Hanson, 2023)

 

Dropping out without finishing is a clear way to lose a lot of money. Taking longer than normal to finish college also reduces value because it wastes years that could have been spent working full-time. Both of these things happen often. Less than 40% of people in the rich world who are working on their first degrees finish them in the time they are supposed to. Three years later, about a fifth of them still don't have any qualifications.

Choosing the right course or degree is very important if one want to make more money with their college education.  According to The Economist, a news magazine, Britons who study creative arts (less than 10% of men make a good return), social care, and agriculture are most likely to have negative returns. Engineering, computer science, and business degrees are by far the most valuable in the United States. Most likely to have bad results in terms of earning power are music and the visual arts. Trying to guess a person's total earnings by program based on the data we have about America is a stretch. But Preston Cooper, who works at a think tank called FREOPP, thinks that more than a quarter of bachelor's degree programs in the United States will not pay off for most of the students who graduated from college.

Most of the time, what you learn is more important than where you do it. That's true, but there are caveats. The worst colleges and universities don't offer much value to their students, no matter what they teach. But the best available data shows that people who go to public universities in the U.S. make more money over their lifetimes than those who go to the more prestigious private non-profit universities. One reason for this is that the non-profits have high tuition fees.

Earnings figures from Britain call into question the idea that smart college students  will always do better if they are forced to go to very selective schools. Some young people apply for the easiest subject, even if it doesn't normally bring in a lot of money, in order to get into the college or university  they want. Parents who want their kids to go to Oxford or Cambridge no matter what should pay attention to this problem of earning power after graduation. But there is also proof that taking a high-paying course just for the sake of it can backfire. Academic research shows that students who want to study arts but end up studying science make less money after ten years than they probably would have if they had studied what they really wanted to study.

Men have more reason than women to worry that the money they put into college won't pay off. This is because they are more likely to make a good living without a degree. If one didn't do well in school, going to college is a risk because they might end up making less money than people who got the same degree but were better prepared.

In Britain, the return on a degree is usually higher for South Asian students than for white students because they tend to study business. On the other hand, the return on a degree is usually lower for black students compared to what people of the same race earn if they don't go to college. Compared to white and black students, Asian students in America seem to have the least trouble paying off their student loans.

 

Changing Landscape

 

What do you think the takeaways are from all of this analysis? Already there are indications that the market for higher education is beginning to change. At varying points in their education, individuals are already initiating their own searches for lucrative investment opportunities. Between 2011 and 2021, there was a roughly one-third decrease in the number of degrees that were awarded annually in English and in history in the United States. During that time period, the number of people graduating with degrees in computer science more than doubled. Others are choosing not to attend college at all. Since 2011, the number of persons who signed up for college programs has decreased annually.

Additionally, institutions are undergoing change by eliminating humanities departments. Recent decisions by the board of Marymount University in Virginia have resulted in the elimination of degree programs in nine disciplines, including English, history, philosophy, and theology. There are several universities, like Calvin University in Michigan and Howard University in Washington, DC, that have stopped teaching their students the classics. Additionally, the future of archaeology at the University of Sheffield in Britain appears to be uncertain.

Employers are also adjusting their practices. Companies are showing a trend toward becoming less likely to insist that job applicants possess degrees as well. Tight labor markets and the demand for people with a wider range of experiences and perspectives both contribute to explain why. It is worth pointing out that just a few years ago approximately 80% of the jobs that the technology giant IBM advertised in the United States required a degree. At this point, it is close to 50%. As a result, having a degree is no longer the sole indication of the skills that a someone may possess.

Should governments put more emphasis on these tendencies? In Estonia, the percentage of students who complete their degrees within the allotted time is one of the several metrics that determine how much funding an educational institution receives. There are also systems like this in place in Sweden, Finland, Israel, and Lithuania. The Australian government is making an effort to encourage students to make decisions that are beneficial to society. The tuition for undergraduate students studying social sciences, political science, or communications was increased by a factor of two in 2021, while the tuition for nursing and teaching was decreased by a factor of two. Students do not appear to be particularly moved by the recent changes, which may be due to the lenient terms under which student loans are repaid in Australia. The government of Britain believes that it can change people's behaviors with respect to choosing the right college degrees by providing each resident of England with an online account that details the maximum amount of money they are permitted to borrow from the state for the purpose of furthering their education over the course of their lifetime. The goal is to instill thriftiness in those who have graduated from high school.

Others continue to overspend. The  President of the United States, Joe Biden, is optimistic that the Supreme Court would soon give its blessing to a proposal that was introduced  to forgive a sizeable portion of the student debt in the United States. He also wants a more forgiving payback method. Over the course of the next decade, the expenditures associated with this might add up to hundreds of billions of dollars. Additionally, Mr. Biden pledges to compile an official list of classes of "low-financial value." The argument for barring weak programs from receiving funding from the federal government for student loans is more compelling. However, if Congress does not take action, this will mostly impact for-profit colleges, which only enroll a small portion of the total number of students in the United States.

Many people find it offensive that more and more attention is being paid to the financial benefits of higher education. Graduates who go into public service will almost certainly make less money than those who work on Wall Street. There are many fields of study that are valuable in and of themselves. However, many students respond to surveys by stating that increasing their earning potential is one of their top priorities. For students who come from the most disadvantaged backgrounds and for whom the cost of higher education is the greatest, satisfactory returns are of the utmost importance. A startling number of people today have the so-called bad degrees It is possible for their prevalence to be reduced by the implementation of improved knowledge, market forces, and  smarter policies.

The bottom line is this: Valuable fields of study are like a good book – you can't judge their worth by the number of pages or the thickness of the cover. In the meantime, let's hope the prevalence of bad degrees decreases faster than the time it takes for a student to realize they accidentally enrolled in a medieval basket weaving course.

 

 

Notes

 

BBC News. (2021, May 21). University of Sheffield Archaeology Department Threat 'Blow to UK'. Retrieved from https://www.bbc.com/news/uk-england-south-yorkshire-57199118

Belkin, D. (2023, March 31). Americans Are Losing Faith in College Education, WSJ-NORC Poll Finds. Retrieved from Wall Street Journal: https://www.wsj.com/articles/americans-are-losing-faith-in-college-education-wsj-norc-poll-finds-3a836ce1

Britton , J., Dearden, L., Waltmann , B., & van der Erve, L. (2020, February 29). The Impact of Undergraduate Degrees on Lifetime Earnings. Retrieved from The Institute for Fiscal Studies: https://ifs.org.uk/publications/impact-undergraduate-degrees-lifetime-earnings

Carnevale, A. P., Cheah, B., & Van Der Werf, M. (2020). ROI of Liberal Arts Colleges: Value Adds Up Over Time. Retrieved from Georgetown University's Center on Education and the Workforce: McCourt School of Public Policy: https://cew.georgetown.edu/wp-content/uploads/Liberal-Arts-ROI.pdf

Cooper, P. (2022, March 31). How to Hold Colleges and Universities Accountable for Prices and Outcomes. Retrieved from FREOPP: https://freopp.org/improving-return-on-investment-in-higher-education-principles-for-reform-e6ed38c50ae5

Getahun , H., & Snodgrass , E. (2023, March 10). Catholic Liberal Arts College in Virginia Courts Backlash After Cutting Several Majors, Including Religious Studies, English, and Math. Retrieved from Insider: https://www.insider.com/marymount-university-to-cut-9-majors-including-english-math-2023-3#:~:text=Trustees%20at%20Marymount%20University%2C%20a,student%20concerns%20about%20the%20decision.

Hanson, M. (2023, April 3). Average Cost of College & Tuition. Retrieved from Education Data Initiative: https://educationdata.org/average-cost-of-college#:~:text=The%20average%20cost%20of%20attendance,or%20%24218%2C004%20over%204%20years.

Hanson, N. (2021, August 9). Average Cost of College By Country. Retrieved from Average Cost of College By Country: https://educationdata.org/average-cost-of-college-by-country

Hardy , A., & Tuttle, B. (2023, March 31). Most Americans Say College Is No Longer Worth the Cost. Retrieved from Money: https://money.com/college-costs-no-longer-worth-it-survey/

Horton, A. P. (2020, July 28). Why Australia is Doubling Fees for Arts Degrees. Retrieved from BBC Worklife: https://www.bbc.com/worklife/article/20200728-why-australia-is-charging-more-to-study-history

Inskeep, S. (2021, May 10). Howard University's Decision To Cut Classics Department Prompts An Outcry. Retrieved from NPR: https://www.npr.org/2021/05/10/995389117/howard-universitys-decision-to-cut-classics-department-prompts-an-outcry

National Center for Education Statistics. (2022). Fast Facts: Most popular majors. Retrieved from https://nces.ed.gov/fastfacts/display.asp?id=37

Nova, A. (2023, April 22). Supreme Court Will Rule Against Biden’s Student Loan Forgiveness Plan, Legal Experts Predict. Retrieved from CNBC: https://www.cnbc.com/2023/04/22/bidens-loan-forgiveness-to-be-blocked-supreme-court-experts-predict-.html

OECD. (2023). The Allocation of Public Funding to Higher Education Institutions. Retrieved from OECD Library: https://www.oecd-ilibrary.org/sites/e1f2d1b5-en/index.html?itemId=/content/component/e1f2d1b5-en

Pew Research Center. (2011, mAY 15). Is College Worth It? Retrieved from PRC Executive Summary: https://www.pewresearch.org/social-trends/2011/05/15/is-college-worth-it/

Ruggeri, A. (2019, April 1). Why ‘Worthless’ Humanities Degrees May Set You Up for Life. Retrieved from BBC Worklife: https://www.bbc.com/worklife/article/20190401-why-worthless-humanities-degrees-may-set-you-up-for-life

The Economist . (2023, April 3). Useless Studies: Was Your Degree Really Worth It? Retrieved from https://www.economist.com/international/2023/04/03/was-your-degree-really-worth-it

Townsend , R. B. (2021, February 23). Has the Decline in History Majors Hit Bottom? Retrieved from American Historical Association: Perspectives on History: https://www.historians.org/research-and-publications/perspectives-on-history/march-2021/has-the-decline-in-history-majors-hit-bottom-data-from-2018%E2%80%9319-show-lowest-number-since-1980

 

 

Bakhmut's Defense: A Thorn in Russia's Parade

 

 The fall of Mariupol eluded Putin's grasp like a slippery eel, for one simple reason: his so-called “special military operation” was nothing but a Trojan horse, filled with false hopes and broken dreams.

Vladimir Putin's hopes of a victorious parade have been consistently deflated by Ukraine's stubborn resistance. I mean, it is obvious to anyone who is paying attention to the news: Vladimir Putin is a showman who likes parades. When he invaded Ukraine on February 24 of last year, he thought that his "special military operation" would bring victory within days. Some units were said to have dress uniforms already packed. Later, he hoped that the fall of Mariupol, a port city on the Azov Sea, would happen on May 9, the same day as his yearly Victory in Europe Day parade. But Ukraine held out for one more week, and the Moscow show was a bust. This year's parade looks like it could be dangerous because on May 3, Russia said it had shot down two Ukrainian drones that were headed for the Kremlin. Ukraine said it was not responsible for the attack.

The show probably wouldn't have had much to celebrate anyway. This year, Mr. Putin's goal is a lot smaller than Mariupol, and he hasn't reached it yet. Russia has been trying to take over Bakhmut, a town in the eastern Donbas area that had 70,000 people living there before the war. This has been going on for over ten months. Fighting is getting worse, which suggests that Russia's generals are doing everything they can to get it to the Kremlin by May 9—no matter what it costs. On May 1, the White House said that since December, over 20,000 Russians soldiers had been killed. A large number of them probably died in or near Bakhmut, making it the most expensive fight since Iran attacked Basra 36 years ago. Public evidence shows that outgunned Ukrainian troops are moving back 50–75 meters per day. They are now only in the western parts of the city.

When the textbooks about this war are written in the future, they will definitely talk about why the town was fought over in the first place. Bakhmut isn't that important when it comes to war strategy. The hills to the west of the town are a better natural defense. The city has been turned into a pile of burning ruins. According to papers that were recently leaked from the Pentagon, the U.S. has been privately telling Ukraine's leaders to retreat since January. But Bakhmut has gained political significance  that seems to be stronger than its military necessity. Since the fighting started last July, it has become a sign of defiance for the Ukrainians. Even though the town is small and in bad shape, the Russians are eager to take it. Since late summer, it has been the main place where they have been fighting. For Ukraine, it's important for pretty much the same reason: to keep Russia from getting a win that would boost its morale and to wear down the Russian forces - the enemy - in the process.

Russian forces have been slowly moving forward thanks to their superior artillery, waves of convicts who were put to work, and the use of special airborne assault units, which are now stationed on the sides of the city. On April 25, a top member of the Ukrainian military's intelligence service said that Ukraine only held 30% of the city. At that rate, Russia could take Bakhmut in a few weeks.

In private, Ukraine's generals say that the way the battle has gone has still shown that they were right to keep defending Bakhmut. Some Ukrainian leaders say that Russia has lost ten times as many soldiers around the town as it has won. Observers who aren't part of the group say this is way too high. The number of people who die in Bakhmut has changed over time, according to most recent data. But at a low point in January and February, when Russian forces threatened to encircle the Ukrainian deployment, the ratio probably hit parity. Now, it is almost one Ukrainian loss for every Russian loss, which is a worrying situation given that Russia has more soldiers.

Things got a little bit better in March, but only after Ukraine sent in special troops to protect the north and south. The last three weeks have been especially hard because Russian strength has been getting worse at the same time. Andrei, an artilleryman in the 93rd Brigade, one of the two responsible for defending Bakhmut, told the news magazine The Economist that Russian troops can now blow up the two remaining Ukrainian roads into the town, making it hard to re-supply.  He further explained that the way in from the north-west is now impassable. The one to the south is constantly shelled.

 

A Victory in Name Only

The battle has not been won yet. In Bakhmut, Ukraine has performed beyond anyone's wildest dreams, clinging to life for much longer than analysts from the American intelligence community anticipated it would. Yevgeny Prigozhin, the leader of the Wagner mercenary group, which has been responsible for supplying the vast majority of the Russian army's cannon fodder in Bakhmut, is publicly protesting that his forces do not have enough ammo. It's possible that the Russian commanders are limiting supply on purpose. It is not entirely obvious if they are acting in this manner in preparation for a counteroffensive on the part of the Ukrainian military or as a result of infighting between Mr. Prigozhin and the regular armed forces.

A spokesman for Ukraine's eastern command named Serhiy Cherevaty indicated that Wagner is still the only significant offensive force in Bakhmut. The vast bulk of the 30 to 40 waves of attacks that occur daily there are carried out by their forces from locations that are already established within the city. It is essential to take into account the fact that Russian commanders in that region have not been reluctant to send their soldiers into "meat-grinder attacks." They fire artillery practically at their own men each time Ukrainian soldiers attack their trenches, which indicates that Russia and Wagner truly don't care about their soldiers at all.

Even if Russia were to succeed in capturing Bakhmut, the victory would be nothing more than a hollow one. If Russia makes a big deal out of capturing a regional town of questionable strategic relevance, it may draw attention to how little progress the country has made after 10 months of combat. As a result of this process, it has wasted its offensive potential, making it more susceptible to being attacked by the Ukrainian Army. On May 9th, Mr. Putin will hold a spectacle in Red Square, and it will only serve to highlight how little he has to show for his invasion.

 

 

 

 

 

 

 

 

 

 

 

 

 

Notes

Cordell, J. (2022, December 31). Putin Uses New Year Address for Wartime Rallying Cry to Russians. Retrieved from Reuters: https://www.reuters.com/world/europe/putin-says-new-year-message-west-is-using-ukraine-destroy-russia-2022-12-31/

Osborn, A. (2023, April 6). Explainer: Bakhmut: Why Russia and Ukraine are Battling So Hard for One Small City. Retrieved from Reuters: https://www.reuters.com/world/europe/bakhmut-why-russia-ukraine-are-battling-so-hard-one-small-city-2023-03-14/

Quinn, A. (2023, May 3). Kremlin Says Putin Survived Overnight Assassination Attempt. Retrieved from Yahoo News: https://www.yahoo.com/news/kremlin-says-putin-survived-overnight-114602738.html

Smith, A., Fobes, G., & De Luce, D. (2023, May 2). 20,000 Russians Killed in Ukraine Since December, U.S. Says. Retrieved from Yahoo Life: https://www.yahoo.com/lifestyle/20-000-russians-killed-ukraine-160816934.html

The Economist. (2023, May 3). No Victory Day: An Unhappy Anniversary for Vladimir Putin. Retrieved from https://www.economist.com/europe/2023/05/03/an-unhappy-anniversary-for-vladimir-putin

 

 

 

 

 

 

Consolidation Tsunami: Mergers Looming Over American Banking Landscape

 

 

Bank collapses such as Silicon Valley Bank, Signature Bank, and now First Republic Bank are omens of impending crisis. To survive, American banks, particularly small ones, will have to combine, like they have in previous crises.

 America's banks are in hot water as competition and funding costs rise, leaving them struggling to stay afloat. According to earnings reports that have been posted after April 14th, behemoths such as JPMorgan Chase and Bank of America attracted deposits while providing modest interest after the failures of Silicon Valley Bank (SVB) and Signature Bank in March. In contrast, many smaller and medium-sized banks are facing increasing competition for customers as well as rising expenses associated with obtaining credit. On the 18th of April, Western Alliance, a lender that has assets totaling $71 billion, stated that it has lost 11% of its deposits so far this year. Banks will need to offer higher interest rates on deposits in order to entice customers to return; in the interim, many financial institutions have resorted to short-term loans, including those from the Federal Reserve, which are subject to the high interest rates that are currently prevalent. On the other hand, many of the assets that banks hold have low yields and cannot be sold without triggering losses. There will soon be a significant hit to profitability.

According to the best evidence available, additional banks were scheduled to report their earnings this month. However, the market has already rendered a verdict: the combined book value of America's banks is roughly equivalent to their current market value, despite having opened the year trading at a nearly 40%  premium. Consolidation is a tried-and-true solution to financial crises that has been used repeatedly over the past four decades. This is likely to be the outcome of their low valuations, along with an environment in which size matters.

 

Bigger, Better, and Bailouts

 

There are 4,700 financial institutions, which equates to one for every 71,000 people living in the United States. This looks excessive to people living in the European Union, where there is only one bank branch for every 85,000 inhabitants. However, this number is at an all-time low: in 1984, when comparative data were first collected, the population was significantly lower, and there were nearly four times as many institutions. Since then, there has been practically nonstop consolidation throughout the banking industry. After a prolonged crisis among savings and loan associations (S & Ls), which are lenders that specialize in mortgages, which reached its apex in the late 1980s, the industry experienced the most significant wave of mergers. It left behind a lot of carcasses, which the more powerful banks could pick over. Alterations to the rules, such as the elimination of limitations placed on financial transactions that crossed state lines, were another factor that contributed to the expansion of banking institutions.

There are a number of similarities between that time and the present. The rise in interest rates caused many S & Ls to fail since their funding costs increased at the same time, but their mortgage-loan books brought in low, fixed rates of interest. If their assets had been marked to market at one point, over two-thirds of  S & Ls (savings and loan associations) would have been declared bankrupt. The difficulties with the banks' balance sheets of today are not as serious as they were in the past, but their nature has not changed. At the end of the year 2022, more than 400 banks with a total asset value of nearly $4 trillion had unrealized losses on their securities portfolios that were worth at least fifty percent of their primary equity. If you take into account their fixed-rate loan books as well as the potential future losses that could result from lending against commercial property, the hole would be even larger.

At the same time, smaller financial institutions run the risk of having the regulatory advantages they currently enjoy taken away from them. Even the securities that the bank considers to be "available for sale" and that are designed to be a source of quick cash in an emergency are often exempt from having to be marked to market when it comes to the calculation of the regulatory capital that the bank must have. This exemption applies to banks that have assets that are less than 700 billion dollars. Those with a market capitalization of less than $250 billion are excluded from some of the more stringent liquidity regulations, stress tests, and failure preparation. This regulatory regime, which is very light-touch, is currently being examined by both domestic and international regulators. The Basel Committee on Banking Supervision, which is responsible for writing the worldwide banking rulebook, is currently doing research to determine what may be learned from the failure of the SVB bank. The depositors of the SVB bank were rescued despite the fact that the bank was too small and concentrated on the local market to be subject to the most stringent regulations. In the nation's capital, the Congress and the Federal Reserve are carrying out  a fresh scrutiny on the loosening of the restrictions for medium-sized banks in 2018 and 2019.

It is likely that the banks that are on the cusp of substantial regulatory thresholds will be the ones to drive the most dramatic changes in the structure of the market. There are 20 banks that have assets ranging from one $100  to $250 billion. If the penalty for exceeding the $250 billion threshold is decreased, many banks may determine that merging together is beneficial. By doing so, they would be able to reduce the impact of the rising expenses of complying with regulation across a larger enterprise, while simultaneously increasing the likelihood that their depositors would be rescued in the event of an emergency. The strategy of gambling for resurrection by taking enormous risks was one of the factors that contributed to the severity of the S & L (savings and loan) crisis during the 1980s, and regulators are likely to look favorably on mergers and acquisitions that gobble up zombie banks. If this is the case, the most recent financial crisis will serve as the most recent stimulus for banks to expand their operations.

For American banks, the message is very clear: when the market's in flux and the rules are unclear, banks that merge will have nothing much to fear. Regulators will smile upon a merger that's sound. So, it doesn’t make any sense to be the one left standing alone, unbound.

 

Notes

 

Azhar , S., & Nguyen, L. (2023, March 14). U.S. Banking Behemoths Attract Flood of Deposits After SVB Collapse. Retrieved from Reuters: https://www.reuters.com/business/finance/us-banking-behemoths-attract-flood-deposits-after-svb-collapse-sources-2023-03-14/

Banco de España. (n.d.). The Basel Committee on Banking Supervision (BCBS). Retrieved from https://www.bde.es/bde/en/areas/supervision/actividad/BCBS/El_Comite_de_Su_13e462eab2e4961.html

Corporate Finance Institute. (2023, March 10). Savings and Loan Crisis. Retrieved from https://corporatefinanceinstitute.com/resources/commercial-lending/savings-and-loan-crisis/

Cox, J. (2023, May). The First Republic Deal Has Come at a Crucial Point for the Markets and Economy. Retrieved from CNBC: https://www.cnbc.com/2023/05/01/the-first-republic-deal-has-come-at-a-crucial-point-for-the-markets-and-economy.html

Saini , M., & Siddarth , S. (2023, April 5). Western Alliance Bancorp's Deposits Fall 11% on U.S. Banking Crisis Fallout. Retrieved from Yahoo News: https://www.yahoo.com/lifestyle/western-alliance-bancorps-deposits-fall-173509606.html

The Economist. (2023, April 20). The Prize of Size: Why America Will Soon See a Wave of Bank Mergers. Retrieved from https://www.economist.com/leaders/2023/04/20/why-america-will-soon-see-a-wave-of-bank-mergers

 

 

Medication Overload: Breaking the Pill-Popping Cycle

 

The current medical paradigm in America and Europe is centered around keeping people hooked on medication, rather than helping them kick the habit. It is as if doctors are incentivized to continuously write prescriptions, rather than focusing on preventative care or holistic wellness.

 

It seems like some patients are carrying a whole pharmacy in their pockets these days. Just take into account the following scenario: Dr. Juanita Williams (her name has been changed to protect her anonymity), worked as a pharmacist in a large hospital in Adelaide, and she frequently witnessed patients feeling overwhelmed by the quantity of medications they used on a daily basis. She made the observation that such patients frequently report to her that they take so many medications that their bones basically rattle as they walk is one of the side effects. In addition, she was concerned that some of the medications that these patients were taking did not appear to be doing any good and may perhaps be doing  damages on their bodies.

Patients, like Dr. Williams' patients, don't stand out, at least not among those living in wealthy countries. It is estimated that approximately 15% of the population in England takes five or more prescription medications on a daily basis. As do 20% of those aged 40 to 79 in both the United States and Canada. The quantity of medicines that a person takes typically increases with age due to the fact that older people tend to be sicker. Two thirds of elderly people in the United States take at least five different medications on a daily basis. A quarter of people over the age of 65 in Canada take ten or more.

Not all of those medications are in the patients' best interest. The majority of older Canadians, or 50%, take at least one that is improper in some way. After conducting an investigation into the practice of overprescribing in England in 2021, researchers came to the conclusion that at least 10% of prescriptions that were filled by general practitioners, pharmacists, and other medical professionals probably should not have been filled. And even medicines that are prescribed correctly can have unwanted side effects. The more medicine a person consumes, the greater side effects they will feel from those medicines.

The use of many medications at the same time by a patient to treat their illnesses is referred to as polypharmacy, and it can have a significant negative impact on a person's overall health. According to the findings of a recent study conducted at a hospital in Liverpool, adverse medication reactions are responsible for approximately one in every five hospital admissions. According to the evidence that has been released, the excessive use of medications in the United States could result in about 150,000 premature deaths and 4.5 million admissions to hospitals between the years 2020 and 2030.

Getting people to stop using  medicines or drugs is an uncharted territory for today's medical systems, which are primarily designed to prescribe medication to their patients. On the other hand, that is starting to change. De-prescribing networks are being organized by medical professionals such as physicians, pharmacists, and nurses in an effort to disseminate the necessary information in that regard. (Dr. Williams, who is currently teaching at Monash University in Melbourne, is in charge of the one that is administered in Australia.) In 2021, the National Health Service of England unveiled a proposal to cut down on inappropriately prescribed medications. The previous year saw the first ever international conference on the subject, which took place in Denmark.

Patients are burdened in multiple ways by taking an excessive amount of medication. One is the sheer amount of work that goes into the logistics.  People get the impression that their entire life are determined by the prescriptions they take. The more drugs a someone consumes, the greater the likelihood that some of those drugs may be consumed in an improper manner. Other issues can be explained more simply by medical conditions. Certain individuals wind up having to take multiple medications, each of which affects the same biological route. Anticholinergics are a good illustration of this type of drug because they inhibit the function of the neurotransmitter acetylcholine. This mechanism of action is shared by a number of medications, such as some anti-allergy medicines, anti-incontinence meds, and tricyclic antidepressants. However, according to Dr. Williams, physicians are not always aware of that fact.

 

Breaking the Cycle

 

That might lead to overdose. Anticholinergic drug abuse can severely inhibit acetylcholine, rendering patients unconscious or confused. Such effects are frequently mistakenly attributed to aging or disease. According to scholarly study, it will be able to correct the misdiagnosis of some diseases (such as dementia) by eliminating hazardous medicines.

From a medical perspective, excessive prescription may start to reinforce itself. Serotonin, another neurotransmitter, is blocked by a number of widely used medications. Overdosing can result in tremors, sleeplessness, and jerky arm and leg movements. These signs are frequently confused for Parkinson's symptoms. As a result, Parkinson's medications are added, creating a prescribing cascade. These can then lead to delirium and low blood pressure, both of which are naturally treated with further medications.

The issues can overlap in other ways. It is more likely that some medications will interact negatively the more pills a person consumes. Pharmacy technicians scan reference databases for harmful medication interactions. But since clinical studies typically only evaluate one medicine at a time, knowledge is constrained. When various medications are filled at separate pharmacies, pharmacists are unable to detect dangerous combinations. Additionally, anything purchased over the counter is entirely invisible.

The aged, whose bodies are less effective at metabolizing medicines, experience all these symptoms in even greater intensity. For instance, taking sleeping drugs the night before could leave a child feeling groggy the next day. They can produce brain fog in elderly people, which makes doing daily chores impossible. Finding the proper dose is challenging for the obvious reason that elderly individuals are typically not included in clinical trials for new medications.

For a variety of reasons, medication overload continues. One is overselling the advantages of drugs in advertising, especially in America. Another is the absence of standard personal health records. Therefore, it is feasible for a doctor to prescribe medication for a patient, let's say a cardiologist, without knowing what medication the doctor treating his lungs may have prescribed.

The most frequent cause may be that patients either forget or are not instructed when to cease taking a medication. One in five Americans who receive the powerful painkiller gabapentin after surgery continue to take it 90 days later (the recommended duration is four weeks). Other doctors frequently automatically renew prescriptions because they see them in a patient's notes and presume they ought to be kept.

Many medical professionals assume that patients are not particularly motivated to discontinue taking their medications. That is likely incorrect; according to research from various nations, eight out of ten patients are willing to stop taking a medication if their doctor recommends it. But those medical professionals have their own issues. There is little funding for de-prescribing investigations. Drug companies, who often sponsor clinical studies, have little interest in participating.

Nevertheless, evidence concerning the best course of action is beginning to accumulate. In Canada, brochures have been created to assist patients in weaning themselves off of a variety of popular medications. They detail various options, such as cognitive behavioral therapy in place of sleeping medications for insomnia, among other things. Trials show they are effective.

In recent years, automated de-prescribing tools and recommendations for various medications have also been created. Medsafer, one of these electronic tools, boosted the proportion of hospital patients for whom medications were deprescribed from 30% to 55%, according to numerous studies. Another technique is the Drug Burden Index, which totals the cumulative dosages of medications with sedative or anticholinergic effects.

In other words, a medical movement is only getting started. It might have a significant influence. In 2021, Keith Ridge, England's top pharmaceutical official, made an amusing yet poignant contrast. If the health authorities can only get this right, he claims, millions of people's health may be improved—equal to a new "blockbuster" drug—due to the fact that well over a billion products are dispensed annually.

Overprescribing medicines is like throwing pills at a problem in hopes that one of them will stick. The problem is that this method could cause patients to take too many medicines, which could lead them to take even more medicines to treat side effects from other medicines. Because of this, it is important for doctors to find a new way to treat patients that puts an emphasis on lowering the number of  medicines drugs they take.

 

 

 

 

Notes

 

Bortolotti, J. (2023). One in Four Canadian Seniors on 10 or More Prescription Drugs. Retrieved from Hospital News: https://hospitalnews.com/one-in-four-canadian-seniors-on-10-or-more-prescription-drugs/

Department of Health and Social Care. (2021, September 22). Government Pledges to Reduce Overprescribing of Medicines. Retrieved from UK Government Press Release: https://www.gov.uk/government/news/government-pledges-to-reduce-overprescribing-of-medicines

Gregory, A. (2021, September 21). Government Review Finds 10% of Drugs Dispensed in England Are Pointless. Retrieved from The Guardian: https://www.theguardian.com/society/2021/sep/22/government-review-finds-10-of-drugs-dispensed-in-england-are-pointless

Hales, C. M., Servais, J., Martin, C. B., & Kohen, D. (2019). Prescription Drug Use Among Adults Aged 40–79 in the United States and Canada. Data Brief , Center for Disease Control and Prevention, National Center for Health Statistics . Retrieved April 28, 2023, from Center for Disease Control and Prevention: https://www.cdc.gov/nchs/data/databriefs/db347-h.pdf

Hayward, E. (2021, September 21). Doctors Are Urged to Issue Fewer Prescriptions as it Emerges 15% of Adults Take Five or More Medications Every Day. Retrieved from Daily Mail: https://www.dailymail.co.uk/news/article-10014917/Doctors-urged-issue-fewer-prescriptions.html

Health Policy Institute. (2023). Prescription Drugs. Retrieved from George Town University's Health Policy Institute: https://hpi.georgetown.edu/rxdrugs/

Masnoon, N., Shakib, S., Kalisch-Ellett, L., & Caughey , G. E. (2017). What is Polypharmacy? A Systematic Review of Definitions. BMC Geriatrics, 17(230). doi:https://doi.org/10.1186/s12877-017-0621-2

McPherson, M., Ji, H., Hunt , J., Ranger , R., & Gula, C. (2012). Medication Use among Canadian Seniors. Healthcare Quarterly, 15(4), 15-18.

O'Connell, J., Burke, E., Mulryan, N., O'Dwyer, C., Donegan, C., McCallion, P., . . . O'Dwyer , M. (2018). Drug Burden Index to Define the Burden of Medicines in Older Adults With Intellectual Disabilities: An Observational Cross‐Sectional Study. British Journal of Clinical Pharmacology, 84(3), 553–567.

Odense Deprescribing Initiative . (2022, September 5-7). 1st International Conference on Deprescribing. Retrieved from https://www.conferencemanager.dk/icod2022

Perri, G., Bortolussi-Courval, E., Brinton, C. D., Berall, A., Santiago, A. T., Morcos, M., . . . McDonald, E. G. (2022). MedSafer to Support Deprescribing for Residents of Long-Term Care: a Mixed-Methods Study. Canadian Geriatrics Journal, 25(2), 175-182.

The Economics. (2023, April 26). Overprescribing Drugs: Too Many People Take Too Many Pills. Retrieved from https://www.economist.com/science-and-technology/2023/04/26/too-many-people-take-too-many-pills