Canceling debt isn’t inflationary or costing tax payers
Despite popular belief, canceling a government loan doesn’t leave someone holding the bag. The debt is wiped out, tax payers do not have to cover the shortfall - it just is cleared from the books completely. There isn’t an increase in the money supply, no new bills are printed to clear the costs. The balance sheet is just adjusted. This is very different from your mortgage or your auto loan. There are businesses between these loans that used the notes to secure other finances. Federal student debt notes just exist. It is closer to buying your friend a sandwich and not asking for money back. But, the government didn’t give money to the state university either. The university just didn’t charge tuition and zeroed the account. Digital government money is way more complicated. It’s theoretical.
Are you dumb? Canceling student loans shifts the debt from individuals to the federal govt, so it absolutely increases our national debt, which we are approaching 1 trillion dollars per year in interest payments.
No it doesn’t. The government owned the notes. The debt is gone.
but the lack of those payments from borrowers creates a shortfall to the us govt. coffers. it has to be made up somewhere. either revenue from somewhere else, a cut in expenditures or eventually printing more money. either way, someone else pays.
Op, Are you sure?? Nothing works like what you stated. Some entity(bank) loaned someone certain amount of money, which accrued interest, and in order to clear that, the original loaned money along with the interest need to be paid back. Books cannot me settled to zero without actually paying back the money. For the argument, let's say you are correct. Why is the federal Govt not wiping the debt altogether ? What is stopping them from doing so if they could wipe out the certain debt?
This is worse than printing money, because you’re fixing a symptom rather than the problem. Universities will continue to overcharge, people will continue to take on debt, you’ll punish those who were responsible and paid off their loans while rewarding those who didn’t. All those people who no longer have student debt will go and spend money putting more upward pressure on the price of goods. If you want to cancel student debt, universities should pay for it, or never be allowed to access government subsidized loans or grants again.
If people have debt cancelled, then they have more money now they don't have payments. More $ with same supply == inflation.
This dumbass believes the government can give everyone huge loan to buy houses, cars, yachts, aircrafts, and then just wipe that debt out.
No I don’t. This is only for non-profit universities and public subsidized loans. You are describing private commerce.
but your (incorrect) logic would still apply
Even if you were correct, OP, which you are NOT, it is still unfair to cancel loans. Many people would have gotten a degree and advanced their economic conditions had they known the loan (or a part of it) would be forgiven. If you want to reduce education costs, cap the fees. It is simple. If you still insist that forgiving loans is a good idea, why not start it going forward, so everyone can benefit from it.
I’m not arguing if life is fair. I’m just saying the debt was never real in the first place. Government balances are made up
Well, all of money is imaginary, so what's your point? It has value because we as a society put value in it and individuals trust that this value will be honored. The day they stops being the case the money system will collapse.
How does Fed contracts its balance sheet you think? Or they just let it expand forever?
The best way would be through better accounting. The pentagon can’t account for where $1.9T went last year and is currently spending 25x the market rate on nails because of single bid contracts to ex generals that know they will never get audited for gouging.
It sounds like you get your news from that British guy with a comedy show on HBO
What about payments the student had to make? With the debt wiped clean, the spending power of the student has increased magically.
It IS inflationary. If students pay back the loan, that money is removed from circulation. If the loan is not paid back, they instead use that money to buy goods and services, increasing aggregate demand and driving inflation.
Paying interest on a loan is not zero sum. Loan interest didn’t go out of circulation, it went into the national budget
lol okay marxist
"everything i don't like or understand is communism and marxism"
Tell me you don't understand economics...