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Well it would result in deflation because $1,500,000,000 disappears from the economy overnight. This means that the money supply shrinks and that kicks of a def
by hpoe 5y ago
Well it would result in deflation because $1,500,000,000 disappears from the economy overnight. This means that the money supply shrinks and that kicks of a deflationary cycle.
- thatfrenchguy 5y agoI would argue this would actually cause inflation: all of those folks who have to pay for those student loans will start buying more goods, houses and services, increasing demand, which could increase prices in turn.
- hpoe 5y agoWell you would be wrong. Inflation doesn't just happen because people are buying more things. Inflation occurs when more money is brought into the system but the amount of goods remains constant.
- AnimalMuppet 5y agoI think you may have that backwards. There are two scenarios. In the first, the government simply prints the $1.5T. That's newly created money. $1.5T has been added to the economy overnight. It's been created, not destroyed. The second scenario is where the government takes the money from somewhere else (maybe taxes). The money is removed from somewhere (someone's assets), but the exact same amount of debt is also removed. The net is zero - neither creation or destruction, just rearrangement.