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This is a dangerous line of thinking, although it's not even clear what Doctorow is proposing. It appears he may be advocating just erasing debt - meaning if I

by D13Fd 6y ago

This is a dangerous line of thinking, although it's not even clear what Doctorow is proposing. It appears he may be advocating just erasing debt - meaning if I owe the bank $300k on my mortgage, I don't owe it any more and the bank has a $300k hole in its balance sheet. That would be absolutely insane, and would destroy our modern system of finance as we know it. That means interest rates will go absolutely through the roof, because lenders would bear the risk of complete default if the government randomly forgives loans again (are we even going to allow loans any more in that scenario?). It also means that everyone who is in debt will receive a massive windfall, while those who have lived frugally will be punished. Most banks would instantly be out of business. So I guess he means that the government will "forgive" debt by repaying it for you? That's like half a step better, but would result in disastrous inflation. Even if we're just talking about consumer debt (we're not, since he also mentions bonds), that amount is around $14T, not far below the total money supply (~19T). So either the government is going to more or less double the money supply by printing currency, or it's going to add nearly 50% to the national debt. If it doubles the money supply, then everyone will be hit with massive inflation, meaning the money you have right now will be worth about half as much. If it ratchets up the national debt, then we'll all be repaying it eventually in the form of taxes and lost government services. All because he doesn't want people to have to pay for for the Tesla or Samsung smartphone that they bought (his examples)?

cryptica 6y ago
If they double the money supply by putting the new money in the hands of regular citizens, the resulting inflation will be much, much worse than just halving of buying power. Because given extremely high inequality, 100% of the total money supply might very well represent 1000 times the money supply which is actually in the hands of average citizens. Most of the current fiat is concentrated in very few hands and it's not being spent on consumables - That's the only reason why we don't already have massive hyperinflation in consumables.
solresol 6y ago
It's called the year of jubilee. It's not insane, and it has been applied to developing nation debt. A lot of thinking has gone into what wide-scale debt forgiveness might look like.
- D13Fd 6y ago
  Are you talking about the Jubilee Debt Coalition's efforts? Those are directed towards "the unjust and unpayable debts of the poorest countries," per Wikipedia, and have zero to do with Doctorow's post about forgiving consumer debt in the United States.
hakfoo 6y ago
"Most banks would instantly be out of business". "would result in disastrous inflation". Boohoo. We should stop thinking of finance as an end in and of itself, and more for the purposes of achieving other goals, whether individual or social. In that case, it's both acceptable, and probably in some cases desirable, to lose money in the venture. If the private banking industry is vapourized, the state can step in, and gains an incredible new leverage to achieve policy goals. It would be the turbocharged version of things like green pledges. Rather than saying "we convinced some big banks to not back new coal projects, so you'll have to pay a few percent more interest/deal with second tier lenders to build the plant" it's simply "there's only one lender, and they said no to coal effective 2021, so you'd better start a bake sale to raise $400 million." or "The state will give you a 1% rate loan to build your new job factory in a downtrodden rust-belt city, or a 15% loan to build it in San Jose." Even inflation, I think we maybe need to think about it less as an abstract badness indicator. As they say, "money can be exchanged for goods and services", so let's figure out how to ensure access to goods and services even in economic turmoil, rather than worry about the numbers on the notes. On the short term, if you're not Zimbabwe or Venezuela, inflation is noise. If I'm saving for a few months to buy a RTX3080 or the down payment on a car, even if it's 20% per year inflation, that's not going to be a huge damper on my plans, so long as wages trend with it. There's plenty of things we buy with that degree of price volatilty already. Subsidized staple goods can help further damp the social consequences. On the medium term, inflation is basically a hedge strategy for everyone who took out non-jubileed debt. In some ways, this could kickstart some consumer demand to exploit it. Every year, your fixed-rate mortgage or car payment gets cheaper, again, so long as we index wages. I suspect we already see this-- how many people don't move because they don't want to leave their 15-year-old $120k mortgage on a house now worth $400k? On the longest terms, we have things like home deposits, college funds, and retirement plans. A state intervention could provide risk-mitigation strategies-- for example, broad deployment of inflation-indexed investment programs for consumers. Something like the old "Series I" savings bonds, but with bigger subsidies and better marketing. Or development of "guaranteed benefit" prepaid programs. Sign up now, pay for 15 years, and you're guaranteed a condo in Boca Raton when you turn 60/tuition at Harvard for your kid when he turns 18, no matter what they would cost on the open market at that time.

by D13Fd 6y ago

cryptica 6y ago

If they double the money supply by putting the new money in the hands of regular citizens, the resulting inflation will be much, much worse than just halving of buying power. Because given extremely high inequality, 100% of the total money supply might very well represent 1000 times the money supply which is actually in the hands of average citizens. Most of the current fiat is concentrated in very few hands and it's not being spent on consumables - That's the only reason why we don't already have massive hyperinflation in consumables.

solresol 6y ago

It's called the year of jubilee. It's not insane, and it has been applied to developing nation debt. A lot of thinking has gone into what wide-scale debt forgiveness might look like.

D13Fd 6y ago
Are you talking about the Jubilee Debt Coalition's efforts? Those are directed towards "the unjust and unpayable debts of the poorest countries," per Wikipedia, and have zero to do with Doctorow's post about forgiving consumer debt in the United States.

hakfoo 6y ago

"Most banks would instantly be out of business". "would result in disastrous inflation". Boohoo. We should stop thinking of finance as an end in and of itself, and more for the purposes of achieving other goals, whether individual or social. In that case, it's both acceptable, and probably in some cases desirable, to lose money in the venture. If the private banking industry is vapourized, the state can step in, and gains an incredible new leverage to achieve policy goals. It would be the turbocharged version of things like green pledges. Rather than saying "we convinced some big banks to not back new coal projects, so you'll have to pay a few percent more interest/deal with second tier lenders to build the plant" it's simply "there's only one lender, and they said no to coal effective 2021, so you'd better start a bake sale to raise $400 million." or "The state will give you a 1% rate loan to build your new job factory in a downtrodden rust-belt city, or a 15% loan to build it in San Jose." Even inflation, I think we maybe need to think about it less as an abstract badness indicator. As they say, "money can be exchanged for goods and services", so let's figure out how to ensure access to goods and services even in economic turmoil, rather than worry about the numbers on the notes. On the short term, if you're not Zimbabwe or Venezuela, inflation is noise. If I'm saving for a few months to buy a RTX3080 or the down payment on a car, even if it's 20% per year inflation, that's not going to be a huge damper on my plans, so long as wages trend with it. There's plenty of things we buy with that degree of price volatilty already. Subsidized staple goods can help further damp the social consequences. On the medium term, inflation is basically a hedge strategy for everyone who took out non-jubileed debt. In some ways, this could kickstart some consumer demand to exploit it. Every year, your fixed-rate mortgage or car payment gets cheaper, again, so long as we index wages. I suspect we already see this-- how many people don't move because they don't want to leave their 15-year-old $120k mortgage on a house now worth $400k? On the longest terms, we have things like home deposits, college funds, and retirement plans. A state intervention could provide risk-mitigation strategies-- for example, broad deployment of inflation-indexed investment programs for consumers. Something like the old "Series I" savings bonds, but with bigger subsidies and better marketing. Or development of "guaranteed benefit" prepaid programs. Sign up now, pay for 15 years, and you're guaranteed a condo in Boca Raton when you turn 60/tuition at Harvard for your kid when he turns 18, no matter what they would cost on the open market at that time.