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Cancelling student debt is essentially printing money

81 points by bko 4y ago

mynameishere 4y ago
I think we should just let Democrats bribe voters from the public purse. Lots of deadbeats would have voted a straight Dem ticket for 10 dollars. Ten thousand is really inefficient, even if it wasn't rotten in so many other ways.
- clavalle 4y ago
  I'd rather politicians bribe voters than donors. Less chance of oppressive oligarchy that way.
  - Alenycus 4y ago
    Tell that to the Romans and the patronage systems.
  - Mountain_Skies 4y ago
    Where in the loan transference program does it state that campaign donations are being made illegal?
    - clavalle 4y ago
      You're barking down the wrong tree. We're talking about the prediliction of one party in the US to bribe one group relative to another, not the other way around. But since you asked, Democrats have well established intention of getting big donors out of the camapaign game. It's in their national platform and everything.
      - pessimizer 4y ago
        Democrats have a well-established pattern, however, of taking the most they can from the largest donors they can find.
        clavalle 4y ago
        That's the trouble with playing a game with changable rules, isn't it? Ignoring advantages because of the rules you wish were in place seems like a great way to consistently lose. Then how do the rules get changed?
- pessimizer 4y ago
  If a free market was opened for votes, 1) the price wouldn't be anything like 10 dollars, it would be thousands of times that, 2) people would be satisfied with government, because they would have been paid to be screwed, and 3) the environment would be destroyed and the US would be at war with every country all the time. 3) is a no-op, so I'm genuinely sympathetic to letting politicians buy votes. > bribe voters from the public purse. You're referring to bribing voters from the purse of the voters. That's the only function of government.
- gremlinsinc 4y ago
  yeah, I'd much rather politicians give that money to their friends via way over-priced government contracts that will never benefit the majority of us, and probably end up 'lost' by the Defense Department ten years down the line, than actually doing something that might make people's lives better, and actually give a damn about this country because they don't feel like politicians are constantly bleeding them dry and selling that blood to rich blood thirsty oligarchs. /s - I would definitely rather we tackle homelessness, poverty, debt, and create upward mobility for the lower classes, because I'm not a narcissistic greedy bastard.
- AlexandrB 4y ago
  Ah yes. The Bush and Trump tax cuts were not bribes from the public purse. Just sound fiscal policy.
etchalon 4y ago
Literally everything the Federal government funds is essentially printing money.
- seiferteric 4y ago
  Don't taxes exist?
  - pessimizer 4y ago
    The money from taxes is burned, not spent. The government doesn't need your money any more than I need the paper I wrote an IOU to you on. The government taxes to control inflation and to intentionally change the relative cost of different activities in order to encourage or discourage them.
    - Jensson 4y ago
      That is unique to the US, normally the central bank prints money and the government can't just print whatever they want. Giving money presses directly to the people who try to win elections isn't a good idea, only reason USA can get away with it is because their currency is the world currency at the moment.
      - etchalon 4y ago
        The US Federal Reserve "prints money" in the US, and is insulated, as best as possible, from immediate partisan influence. Obviously, our elected leaders can influence the decisions of the Fed by appealing their case, but they lack a legal mechanism to make the Federal Reserve "print money". They do, however, have the authority to incur "debt" through spending. Which … is basically printing money. But this is true for any system which does not have legal guidelines which constrain spending to revenue capture. Which is a good deal more than "just the US".
    - seiferteric 4y ago
      > The money from taxes is burned, not spent. > The government taxes to control inflation You say these things like they art not related. Obviously taking money out of the system controls inflation. We could eliminate tax entirely and simply print money to pay for everything, but that would likely lead to runaway inflation.
Group_B 4y ago
I’m sorry, but this has to be one of the dumbest things the Biden administration has ever done. He needs to pull a George H. W. Bush and just say he over promised and not go through with this. The intention is great and all. Helping out students that were affected by the pandemic. But the execution of this is horrible.
- bko 4y ago
  My biggest issue that it's effects are hidden. If he wanted to just send everyone 10k i would be more okay with that as it would have to go to Congress and come from somewhere. Not to mention that it's going to relatively well off college educated students that made poor decisions. And it doesn't change the underlying problem with higher ed prices. If anything, it'll build the expectation of debt forgiveness, allow people to borrow more and schools could charge more. This is just the worst of all scenarios
  - mikeyouse 4y ago
    Unfortunately anything addressing the underlying problems is going to take congressional action and our politics are completely broken at the moment so only executive action is possible. This dramatically limits the levers that can be pulled.
    - weej 4y ago
      > This dramatically limits the levers that can be pulled. I don't disagree, but this feels like slapping a bandaid on a bullet wound. It's unclear to me how this will fundamentally make improvements at the source of the problem vs. temporary forgiveness. What do you think it would take to gain some majority alignment to actually move the needle effectively?
    - wszfahwbwbaha 4y ago
      > at the moment Sorry pal, but they won't be getting any better. You're seeing the slow decline of a country.
- qqqwerty 4y ago
dougmwne 4y ago
Sure is. Governments are so addicted to printing and spending at this point that not even inflation can slow them down.
yesUgotit 4y ago
This is just more proof that a federalized society is untenable. The wealth of the elders is due to many years of printing money. Of course tacit ageism against the youth to protect old people who cannot do the work of keeping themselves alive is perfectly acceptable. Everyone everywhere being on the hook to prop up dying people will never be an equitable system. Deference to the past needs to go. I don’t owe believing other peoples grannies are worth the value printed on government totems of power (coins) and private bank statements (scripture of power with no real power if we don’t accept their validity). It’s hilarious anti-government types are perfectly accepting of their spreading the gospel of the dollar; that somehow is not government conspiracy to co-opt agency. Cancel the past. Their spoken traditions need not be ours.
- clavalle 4y ago
  Then again, all the stuff people put together in the past is pretty convenient. Maybe we should consider keeping the good stuff.
  - yesUgotit 4y ago
    - clavalle 4y ago
      You don't intend on ever becoming an aged meat bag?
- tsukikage 4y ago
  Can you expand a little more on how having young students owe money to old people's pension funds instead of just forgiving those debts helps combat "the wealth of elders"?
  - pointIsThus 4y ago
- 4y ago
elzbardico 4y ago
The same can be said about financial sector bailouts, agricultural subsides and the outrageous 800 billions for “defense”. Cancelling student debt is a lot cheaper than the F-35 program, more democratic and has a better return in terms of welfare. I am all in for a more streamlined and lean State, but until that time, I think that Raytheon stock holders and Wall Street can share a bit of the current pie with the People
- devmunchies 4y ago
  > has a better return in terms of welfare maybe. If it becomes normalized, it would alter the cost-benefit dynamic in degrees even more and not place as much pressure on pursuing a more valuable degrees. Hopefully this is a one-and-done and we can be more creative going forward, like providing more grants for deeper, more fundamental degrees like chemistry, math, computer engineering, manufacturing, etc. > same can be said about financial sector bailouts, agricultural subsides agree. we need to let companies properly decompose. It unintuitively creates more growth, and new companies are created from the ashes. Injecting old companies with formaldehyde creates sclerotic monoliths.
  - QuarterReptile 4y ago
    >Hopefully this is a one-and-done and we can be more creative going forward, like providing more grants for deeper, more fundamental degrees like chemistry, math, computer engineering, manufacturing, etc. I hate to stomp on your hope, but this is a late-stage step on the road to 'free' public K-16 in the US. Graduate degrees are already needed to provide the signal you could generate 40 years ago with undergrad. As to actual learning apart from the signal of a degree, the bulk of undergraduate educations, now that there is such a bulk, will provide progressively less value compared to top institutions where students are ready to learn, just as most public schools fall behind the well-known magnet schools that we all wish were more than exceptions to the rule.
    - Volundr 4y ago
      > Graduate degrees are already needed to provide the signal you could generate 40 years ago with undergrad. Honest question, are they? At least as someone hiring for software engineering BS in CS is generally something I look for in a junior level candidate (I rarely pay attention to the education of a candidate with a few years under their belt), but no matter the experience level a masters has never added much, barring some really interesting projects. Other fields might be different, but I don't think I'm the exception for software engineering.
tenebrisalietum 4y ago
Don't care as long as I don't have to pay it. I didn't make the monetary system that requires the slow burn of everything getting more expensive as time passes, rich people did - the non-rich are always the losers no matter what. At least inflation isn't going to result in legal judgements against me for not paying. Also maybe TPTB shouldn't have created the system where $80K+ of undischargeable debt was seen as necessary by many just to have a job. That's not my fault either.
- edgyquant 4y ago
  Rich people fought controlled inflation every step of the way dude. It’s a tax on then and a way to ensure they keep their capital at work. This is an uninformed talking point
kitanata 4y ago
Anytime the government spends money on anything it prints money to do so. This is how governments work. You aren’t against the government printing money. You are against why they are printing money. It makes sense to print money and spend that money into the economy to accomplish a task if the result of that has a positive ROI. Can we debate the ROI of the activity, rather than “inflation bad”, “printing money bad” or “politician bad”? Using monetary policy as your point of disagreement is intellectually dishonest when your actual problem is with what the government is spending money on… and not the fact that the government is spending money at all.
- bko 4y ago
  Traditionally US government proposes a spending program and some means to pay for and congress votes on it. How you pay for it could be through debt, existing funds or increase in taxes. This is something different. It also muddies the water because it's not explicit how much it will cost, who will bear the burden not to mention no congressional oversight. This isn't like proposing a budget to build bridges. The is unilateral action by one person with unknown consequences.
  - pessimizer 4y ago
    You're calling something "traditional" (PAYGO) that didn't exist until 1990, was killed in 2000, and was recreated in 2010. Also, that something is "traditional" doesn't make it rational.
  - pnutjam 4y ago
    I thought you guys wanted government to be run like a business?
- tiahura 4y ago
  Anytime the government spends money on anything it prints money to do so. This is how governments work. In the US when the government spends on things money it comes from taxes or is borrowed. The Treasury doesn't print money. Printing money is done by the Federal Reserve, but it is not done to finance general expenditures (bonds are different).
nextstep 4y ago
So was giving millions away to wealthy people as forgiven PPP loans.
- umvi 4y ago
  Right, but this seems like a "two wrongs make a right" argument.
  - neves 4y ago
    No, it is a demonstration that the "printing money" argument is completely empty and that we show argue about the impact of the decision.
  - MisterBastahrd 4y ago
    Except it isn't. PPP loans were offered as a stopgap measure to stem unemployment during a pandemic. Most people just pocketed the money because they weren't actually doing that badly. I could have taken one and didn't and I regret it now, but that's water under the bridge. It's just funny that all of the opportunists out there who are crying about student loans had no problem taking many multiples worth of PPP loans to line their pockets. The comparison between a student loan and consumer debt at the end of that article though? Utter braindeadedness.
    - bcassedy 4y ago
      I feel like so much of the sentiment boils down to some people objecting to someone else benefiting from government spending and some other people having suffered so they think everyone else should suffer too.
    - AlexandrB 4y ago
      Indeed. I recently heard that many conservative podcasts - businesses that would have benefitted from the lockdowns - took PPP loans. Railing against student loan forgiveness is just "fuck you, got mine".
  - blipvert 4y ago
jrm4 4y ago
No one can predict with certainty what's going to happen -- but I find that a LOT of these discussions are not very smart, owing to missing basic theoretical considerations. The only thing that matters is goods and services. People getting stuff they want or need, the rest is accounting. So then: When the government "prints money" (which happens a LOT) watch who it's going TO. If it's e.g. these larger biz PPP loans, probably not helpful because the rich get richer. Student loans? Will probably go to real people buying real things, so probably a better idea. Still might be long term problems eventually, but historically -- no one (especially economists) has ever actually been remotely accurate in being able to predict this.
WhatsName 4y ago
To me what is missing from this debate is the long time effects of letting this increasingly loose wheel of education for profit gain further momentum. If you let your educational institutions squeeze every last penny of your future well-educated doesn't that also limit your countries ability to innovate? If my paycheck would go entirely towards rent and debt payments, I for sure would look for a high paying corporate job instead of startup or freelance work.
- tiahura 4y ago
  To me what is missing from this debate is the long time effects of letting this increasingly loose wheel of education for profit gain further momentum. What are you talking about? For profit education is nearly dead - ITT, etc., Do you mean private schools?
  - jawns 4y ago
    There's a distinction to be made between how the schools are organized as business entities and how they actually bring in and spend money. You're correct that schools organized as for-profit business entities have a bad name and are dying back. But even state schools and universities that are nonprofits on paper can conduct themselves in ways that are profit-driven in practice. It's kind of like the Hollywood accounting practices where a movie that has brought in an enormous box-office haul is treated as only breaking even on paper. As long as the numbers line up right, you can be a "nonprofit" where salary and perks for top figures are exorbitant.
  - deepdriver 4y ago
    The massive run-up in tuition prices has not been confined to just private or for-profit schools. Public and private universities alike have gorged themselves on federally-guaranteed student loans. Whether the loan gets repaid or not doesn't matter to the school. They get all the money up front; the feds are the ones who must later try to collect. Schools have used this money to drastically increase the scope of their bureaucracies and facilities, often while paying teaching staff less: http://www.nytimes.com/2015/04/05/opinion/sunday/the-real-reason-college-tuition-costs-so-much.html http://www.nytimes.com/2015/04/05/opinion/sunday/the-real-re... (https://archive.ph/Ju3ro https://archive.ph/Ju3ro)
ur-whale 4y ago
> Cancelling student debt is essentially printing money And printing money is essentially an invisible (boiling the frog) tax which hurts the lower rungs of society the most. Historically, it has never ended well, in spite of what all the Krugman sycophant types keep trumpeting to please and enable the power that be.
- AlexandrB 4y ago
  What about The New Deal? It seems it have saved the lower rungs of society and worked out pretty well.
Eddy_Viscosity2 4y ago
As many of the comment here point out, you can view ALL government spending as money creation and All taxation as money destruction. The total money supply is the balance between the two. Except that banks and other credit issuers also generate new money. So there's that. The whole worried hand-wringing over student debt as being terribly bad, but tax cuts, industry subsidies, and rich people loan forgiveness being intrinsically good is all very classist if you ask me.
- rufus_foreman 4y ago
  >> As many of the comment here point out, you can view ALL government spending as money creation No, you can't. Collecting taxes is not printing money.
edmcnulty101 4y ago
One is not able to bankrupt out of student loans, unlike any other loan in existence. So the problem is not the student loan amounts. It's how they're treated. Life is long and filled with unforseen circumstances, that's why bankruptcy exists. Businesses bankrupt all the time, Trump bankrupted I think 7 times?, We bailed out the banks for their faulty financial decisions. But somehow we think it's ok to trap students who made the decision at a young age, and needed an education/job skills to survive, into a world of debt? I understand that it's a way to be able to give loans to young people with low or no credit. However, there's so many OTHER ways to deal with this, other than making students slaves to debt for a huge part of their life. There's a bill introduced to address exactly this.. however it's been stuck in committee for over a year and is probably pretty hopeless. https://www.congress.gov/bill/117th-congress/senate-bill/2598 https://www.congress.gov/bill/117th-congress/senate-bill/259...
- Mountain_Skies 4y ago
  You're confusing secured debt and unsecured debt. Student loans would almost not exist if they weren't secured by assets or guaranteed by someone with the assets to pay them off should there be a default. Since student loans have no collateral and most student don't have a credit record that makes loaning them $50,000 a rational risk, the only way for them to make sense from a risk point of view is for them to not be dischargeable. If you disagree, you are free to lend out your assets to every and anyone who wants to take college classes and as a personal loan, they will be dischargeable in bankruptcy. When they default, you will have no way to get your money back. Since you're advocating for others to take this risk, why haven't you done it yourself?
  - edmcnulty101 4y ago
    > Since you're advocating for others to take this risk, why haven't you done it yourself 35% of my paycheck is spent taking risks. My taxes fund risky business loans via SBA. My taxes fund risky first time home buyers via FHA. My taxes fund risky PPP loans that got forgiven via COVID laws. My taxes fund Financial institutions making risky decisions leading to bank bailouts. My taxes fund risky bombing of brown people in middle east for literally no reason risking losing costly military equipment. My taxes fund losing literally billions in the middle east wars with ZERO accountability. My taxes fund old peoples healthcare and welfare who spent their whole lives, not exercising and eating poorly. Student loans shouldn't exist. And universities should just be either funded as much as all these other areas or subject to the laws of supply and demand like the rest of the world.
neves 4y ago
Every time a bank makes a loan and increments the number in your bank account, they are printing money. This is an empty argument.
- Cwizard 4y ago
  It’s true that they are creating new money but only temporarily. Forgiving a loan is truly creating money (permanently). Not saying it’s bad to forgive the loans but there is clearly a difference. My stance on it (although I am not a US citizen) is that without adding some law that restricts prices for college tuition this actions will do nothing good and only helps to perpetuate a system that moves the money from a younger generation to the pockets of a select few.
- rufus_foreman 4y ago
  The Fed is currently trying to get banks to print less money. If the government was enacting a new policy that led the banks to make hundreds of billions of dollars in additional loans, that would also be a terrible idea as long as inflation is as high as it is.
irrational 4y ago
It is insane how much more expensive college is now than when I went to college back in the 90s. I was able to pay off my student loans within 10 years of graduating because they were so much less than what current students are graduating with. And salaries certainly haven't increased enough in that same time span to make the pay off equivalent. But, I think $10k or $20k is not enough. I think they should have looked at how much the cost of college has increased over the past 2+ decades and forgiven that percentage from every student loan. Then they should fix the cause of tuition inflation by getting rid of the federal student loan program.
- johncessna 4y ago
  > But, I think $10k or $20k is not enough. I think they should have looked at how much the cost of college has increased over the past 2+ decades and forgiven that percentage from every student loan. Your assumption is they were trying to fix a problem with tuition costs. They aren't. Fix the root problem to stop the bleeding and then treat the existing injuries.
  - drewcoo 4y ago
    > Fix the root problem to stop the bleeding and then treat the existing injuries. Stopping the bleeding is not fixing the root problem. You stop the bleeding so that the victim doesn't bleed out while the paramedics arrive and can take them to a hospital. https://www.mayoclinic.org/first-aid/first-aid-severe-bleeding/basics/art-20056661 https://www.mayoclinic.org/first-aid/first-aid-severe-bleedi... What's happening reminds me of Trump's throwing paper towels to hurricane victims - a misguidedly symbolic photo op that accomplishes nothing but distracts us all. https://www.nbcnews.com/politics/politics-news/trump-defends-throwing-paper-towels-hurricane-survivors-puerto-rico-n808861 https://www.nbcnews.com/politics/politics-news/trump-defends...
- yeeyeeyee 4y ago
  > forgive that percentage from every student loan This would be unfair to students who were frugal and chose a 20k-25k/yr COA state school with the assumption that their debt must be repaid. Going to college is an investment that you ideally should plan for and weigh the benefits of the education vs the cost. If you don't think it's worth the 20-25k/yr COA at state schools (or whatever ridiculous amount at private schools) than just don't go. It absolutely is, but okay. This is an incentive to make good choices about college and be educated and productive post-college. But cancelling more debt would remove this positive externality.
larrik 4y ago
> More money available to debtors means more money to pay for rent, cocktails and avocado toast. So this could drive inflation. It won’t necessarily drive inflation but increasing disposable income of young people without much savings will likely increase their spending and the overall price levels. Seems like this is the stuff that the economy is built on. The inclusion of "avocado toast" makes me think I know exactly where this guy stands on basically every political issue without looking any deeper into him, though. > Or it could inflate asset prices as we’ve seen with the $12 trillion from Covid relief. I'm not an economist (thank God), but there's no way that's what happened here. Asset prices increased due to restricted supply. There's no way that lumber prices tripled in mid 2020 due to "covid relief funds". Besides, a ton of people were suddenly able to work from home and couldn't go out for fun. That meant saving huge amounts on gas and wear and tear on vehicles (or public transportation) and no more fun nights out to spend money on.
- deleted 4y ago
  [deleted]
- Volundr 4y ago
  The inflation thing is hugely complicated. People like to blame it on the COVID checks like giving people a couple months rent over the course of 3 years is really sufficient to have a large effect on the economy. In reality COVID stimulus didn't help (inflation specifically), but you can't just look to individual stimulus to see it, you also have to look at all the stimulus targeting businesses. Even then it's just one small factor. Supply shocks, Russia, sudden changes in consumer behavior, low interest rates and more all play in. It's not a simple problem with a single cause, but it's more satisfying to point and blame one factor some else is responsible for, so most discourse on the topic, even from those we'd hope would know better since they are in charge of fixing it, is worthless.
gjsman-1000 4y ago
I had an opportunity to go to college, and decided to do my own thing. This cancelling of student loan debt plan, although I understand the plight of young people in debt, it is also infuriating. Myself: Was in college, left, did my own thing, becoming successful, now am paying taxes for everyone else who is getting bailed out. I already have state income tax to pay as well, and with housing prices and inflation being insane, saving for a down payment is miserable enough! Everyone else in college: Often didn't know what they were doing, get free money that myself and others are paying for. Most people in my college weren't there for STEM. Anyone who paid off their debt within the last few years: Screw you. Didn't matter if you were eating ramen to pay off that $10K for a few years, we just took care of it! Future generations: Where is my bailout? They were so lucky a few years ago! Colleges: Let's raise prices to get another bailout! In fact, let's repeat the cycle, feed the fire, and hope the government just starts handing out free universal college money every year! Then, we'll just adjust prices higher to compensate, the real college price will be basically the same, but our margins will be bigger! It's bonkers. I don't like the debt, but this is a terrible plan. Why not (for example), just declare no federal income tax on a single cent of earned income for people making under $100K a year who have student loans and pay promptly? Or, let's say the degree I took has not been working out and I'm not getting jobs, maybe after a certain point I can declare bankruptcy on that debt. There are plenty of other methods to help. That's perhaps my biggest problem with the bailout proposal. It targets the symptoms, not the cause, which makes it a de-facto Band-Aid on cancer.
- ok123456 4y ago
  You left out when exactly you went to college. Tuition increases have been ticking at around 2x-3x inflation for the past 25 years. It's not like the 70s or 80s when you could work during the summer and cover most of your expenses and then possibly take out a modest loan to cover the shortfall. There ultimately needs to be some form of price control on tuition. Otherwise it just turns into, "well elite schools charge X so if we don't charge X*.95 people will think this is a school for rejects" since the only real signals in the market place are the price, average standardized test scores, and "prestige." Maybe in exchange for getting government grants and loans, they have to negotiate tuition rates with the federal government. They would be in a much better position to collectively bargain on behalf of the students, since the only option now is to either withdraw or grin and take it when they decide to hike the tuition. Employment outcomes and default rates could be used in these negotiations. Lower than average employment prospects should be tied to lower than average tuition. Also, the overhead rates could be considered. This would put pressure on universities to curtail the sprawling administrative industrial complex.
bena 4y ago
Except due to the nature of student loans, it's possible an amount equal to the principal has been paid by now. Especially for those who have been paying for a while. Capitalization, deferment, the initial high interest rates, and the focus on "income based repayment" are a recipe for "forever loans". Which would please the lenders to no end. But we don't talk about that when we talk about cancelling student debt. Because doing so points out just how fucked the entire racket is. This is not allowing various companies to essentially seek rent in perpetuity from people. It's putting people's production back into their own hands.
am1on 4y ago
technically it is destroying money due to the way loans are treated on bank balance sheets. a loan is an asset to a bank and a liability to a borrower. forgiving a loan destroys it as an asset (money-like) and causes deflation from a money supply standpoint even if it does increase the buying potential of a borrower. Since all federal student loans are still in payback pauses for covid this will have negligible effects
sn0w_crash 4y ago
If I paid back my student loans in 2019 does that make me a sucker?
- walkhour 4y ago
  Yes, now that you don't have debt yourself you can help other's pay theirs. Meanwhile you'll be informed of how fair this is.
madrox 4y ago
The one sentence of this article I zoom in on is that this increases the money supply over time. Well...yes it does, but that's not bad. The question is how much, who is getting that extra supply, and how is that changing things? I have no problem with people under lots of student debt getting a 10k shot in the arm. We've spent more on projects that feel less good than this. However, it won't affect consumer behavior any time soon. Unless people's debts are ended, their spending habits won't change and this won't stimulate the economy. However, it does sound like democrats followed through on something, so it's a great political gimmick during election season. I say this as someone who tends to vote democrat.
- danaris 4y ago
  The program does more than just knock 10k off their debts. It changes how interest and minimum repayments work, in a way that will, for many people, drastically reduce their monthly payments. That's definitely enough to affect consumer behavior.
  - madrox 4y ago
    That's a detail I didn't know about. I guess it will remain to be seen. I still assert it won't stimulate the economy unless debts are completely repaid, but I am open to being wrong.
- walkhour 4y ago
  The increase in money supply may not be bad but it's obviously bad now, when inflation is so high. So even if you're in favour of these policies you must think the timing is bad. The fact that's it's happening despite inflation is further proof that this is a political gimmick.
jhallenworld 4y ago
Yes, it is. But keep in mind that the USA traditionally has been able to print a lot of money without having horrible inflation. USA can get away with this due to the petrodollar system and the fact that it's the world's reserve currency. Defense companies are an integral part of the petrodollar system: Iraq priced its oil in Euros, look what happened to them. https://www.cse.unsw.edu.au/~norman/CurrentAffairs/DeeperNew.html https://www.cse.unsw.edu.au/~norman/CurrentAffairs/DeeperNew... https://www.investopedia.com/articles/forex/072915/how-petrodollars-affect-us-dollar.asp#:~:text=Petrodollars%20are%20dollars%20paid%20to,dollar%20holdings%20of%20foreign%20producers https://www.investopedia.com/articles/forex/072915/how-petro.... Anyway, with this as a given, why should only the rich benefit? Printing some money for the rest of us is only fair.
- okdood64 4y ago
  > petrodollar system What happens to the US dollar once, let's say optimistically, the world is mostly on renewables by 2050?
  - jhallenworld 4y ago
    https://www.reuters.com/article/us-global-petrodollars-column/column-does-a-greener-world-need-less-greenbacks-mike-dolan-idUSKBN2AA0NC https://www.reuters.com/article/us-global-petrodollars-colum...
the_solenoid 4y ago
It's important to note that money is fake, and is given value by destroying it (through taxes as a major part of it) This action doesn't change the supply of money in the system, just where it ends up, so really it cant have an effect on inflation. the schools already got paid, and now the money will go into more than likely base economy spends like food and housing instead of the the end of monies lifecycle at a bank or investment. edit: of note, money is introduced into the system by in large through gov spending (roads, gov, military) - so as much as it would be nice to spend less on military - you can't really cut it off without spending it elsewhere, which I am all for, but you can't just have the government spend less. edit-edit: this is also kind of the least they can do, and doesn't fix the problem in the future which is why I give it a half-hearted golf clap. It's almost like they want an a class of people to be over-debted....
bigdollopenergy 4y ago
I'm so conflicted about this move. On one hand you've got a generation that is being held back by these loans. The very people that are supposed to be starting businesses/building up capital/starting families and whom are the foundation of the future economy. When you view it through the lens of being an economic stimulus, it's actually a pretty good one and will likely be a net-positive in the long term. On the other hand. While everyone is focused on the people who already paid theirs or who didn't get student loans to begin with, no one including this author ever properly addresses the impact on future students. As far as i can tell all future students are still going to have these huge loans (likely bigger) and this is a one time payout for current loan holders only. Those students are going to look back to now, see we got a one-time 10k payment courtesy of the taxpayer (which will be them) and rightly demand the same treatment. If they don't get it, they will view us as being just the same as the boomers were, cradle robbers that take advantage of the system and then take away the ladder once they are done. We've essentially set in stone one of 3 paths. One, we periodically do these bailouts, probably blowing up tuition prices further so the students don't really benefit and the only winners are the loan companies+universities. Two, we commit to heavily reforming the system and fully paying for higher education. Or 3, we never do the bailout again and have future students not only pay for their own loans but service the debt we created just for ours as well. While i'd like for us to go with option 2, i don't think this is the likely path, it's too difficult and controversial to be done in the current political climate. The likely path, is that we're going to end up being just as morally bankrupt and selfish as the boomers collectively were.
recursivedoubts 4y ago
Cancelling debt is a jubilee, which is necessary when the debt load becomes so onerous that it nukes the productivity of your economy. It isn't printing money, nor is it essentially printing money. Money just sits there. Debt grows exponentially. It is extinguishing debt, in order to allow young people to make financial progress, which will incentivize them to actually work, which will produce actual wealth that we can all enjoy, since, as Marx and Smith both correctly said: labor is the source of value. Steven Keen was right all along and professional economists should be sent to agrarian communes to work and think about things.
archhn 4y ago
Billions of dollars in military aid given to a foreign country where Biden had shady interests. Response: I stand with Ukraine <3. Billions spent in failed foreign wars, which created seas of generational enemies. Response: I support our troops <3. A little bone thrown to debt slaves. Response: This is outrageous! We will never recover from this recklessness spending! This is a joke country.
Brian_K_White 4y ago
College tuitions and the special nature of student loans vs all other loans have been printing money. A correction is not only fair but overdue. The only thing unfair about it is what about all the people that were more responsible and determined that they can't afford it and went without rather than go into that much debt? It does flatly screw them. And as one of them, I still say do it, because that's still better and more fair than what been going on for the last 20 or more years.
dinom 4y ago
"Printing money" makes it sound like an education was manifested out of thin air. Semantically, I think cancelling student debt is much more of a "transfer payment".
- walkhour 4y ago
  Transfer payment from the debtor to the government? If the government pays it printing money, then printing money will happen, if it's payed with tax payer's money, well then the tax payers will pay it. Given money is fungible it will be a mixture of both. Semantically you can name it whatever you want.
kitsunesoba 4y ago
Even though I will not be benefiting from this student debt forgiveness, I support it. The past generation or two of students essentially had the rug pulled out from under them — they were told by all the adults around them that going to college was the surefire path to a well-paid job in a world where well-paid jobs were becoming increasingly rare, making racking up the debt to do so worth it. So they went to college and took on that debt since that was the "right" thing to do, only to come out on the other end to find that getting a degree had little to no bearing on their ability to find a quality job after all and dooming them to working minimum wage jobs and barely scraping by for an indefinite period. The biggest problem is that it isn't being paired with strict price caps on higher education, or at least restrictions on financial aid that render schools with unreasonable prices ineligible. Without that we're going to have another batch of kids-turning-adults in the same pickle in a few years.
deleted 4y ago
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t_mann 4y ago
This guy is very wishy-washy with his definitions and research, considering how strong his headline is. In order to fully answer the question of how cancelling student debt actually impacts money supply over the full lifetime of the loan, we'd have to know how exactly those loans were granted, as well as how the proceeds from collection are generally being used. If those loans were granted through banks (effectively, regardless of what the sticker said) and those loans won't be repaid after the cancellation, then yes, this would be inflationary. If, however, the loans were originally paid out from the federal budget and the proceeds also went into the federal budget, then effectively this would result in an increase government deficit (resulting in an increase in government debt or reduction in government spending, or both, depending on your behavioral model of the government). The same goes if the loans were initially granted through banks and the government repays the bank loans even after cancelling the debt - it's not inflationary, it's deficitary.
orwin 4y ago
So the author is right on most thing. Money is only destroyed when debt is repaid or taxes are collected, so it is printing money. He might not be right in his chapter on inflation (but he correctly put caveats, inflation is probably one of the most complex economic happening and our current models feel a lot like Ptolemy geocentric model). The chapter following that is wrong imho. He put caveats but read like it will hurt the poorest. It won't, not in the US at this moment. Not everything is fungible. (I'm on a phone, sorry for not developing my thoughts)
musicale 4y ago
This is true. Canceling student debt is basically like printing money, and is likely to lead to inflation. Student loans themselves were like the government handing out money to banks (guaranteed interest on large amounts of secured debt) and universities (empowered/incentivized to raise tuition and fees drastically for decades with impunity.)
lcall 4y ago
Instead of bribing for votes, IMO, it's much better, and more effective, to let individuals and families decide for themselves how their charitable donations will be allocated. Local decision-making yields less fraud & waste, and it's just ... right to have charititable donations be unforced. Do fundraising, for the the hand out/up, etc. Local efforts can be both more effective and more frugal, and compatible with the freedom to use our donation $ as we see fit. The federal government has constitutionally assigned responsibilities that no other entity can fulfill. Becoming further indebted and paying individually-acquired debts, is not among them.
- walkhour 4y ago
  Allowing local efforts is not how you win federal elections.
lcall 4y ago
2 previous discussions: https://news.ycombinator.com/item?id=32551475 https://news.ycombinator.com/item?id=32551475 https://news.ycombinator.com/item?id=32584745 https://news.ycombinator.com/item?id=32584745
RickJWagner 4y ago
Inflation, or even the threat of inflation, is fought with rising interest rates. Rising interest rates mean less money going to business expansion, which means fewer jobs and less competition for employees, which means lower paychecks. In the end, it's the poorest people that get dumped on. If you can't afford $1000 rent, you surely can't afford the adjusted $1400 rent. And without a job, you'll be homeless soon. Short term gain, long term loss.
beej71 4y ago
Seems like on this trajectory the debt will all be forgiven anyway, since eventually virtually everyone who goes to school will die with more debt than they started with.
lr1970 4y ago
Student debt forgiveness only makes sense if accompanied by a broader reform that regulates how the participating universities can charge for tuition. Without such constrains on schools, debt forgiveness is an invitation for the educational institutions to jack-up tuition even more.

81 points by bko 4y ago

I think we should just let Democrats bribe voters from the public purse. Lots of deadbeats would have voted a straight Dem ticket for 10 dollars. Ten thousand is really inefficient, even if it wasn't rotten in so many other ways.

clavalle 4y ago
I'd rather politicians bribe voters than donors. Less chance of oppressive oligarchy that way.
- Alenycus 4y ago
  Tell that to the Romans and the patronage systems.
- Mountain_Skies 4y ago
  Where in the loan transference program does it state that campaign donations are being made illegal?
  - clavalle 4y ago
    You're barking down the wrong tree. We're talking about the prediliction of one party in the US to bribe one group relative to another, not the other way around. But since you asked, Democrats have well established intention of getting big donors out of the camapaign game. It's in their national platform and everything.
    - pessimizer 4y ago
      Democrats have a well-established pattern, however, of taking the most they can from the largest donors they can find.
      - clavalle 4y ago
        That's the trouble with playing a game with changable rules, isn't it? Ignoring advantages because of the rules you wish were in place seems like a great way to consistently lose. Then how do the rules get changed?
pessimizer 4y ago
If a free market was opened for votes, 1) the price wouldn't be anything like 10 dollars, it would be thousands of times that, 2) people would be satisfied with government, because they would have been paid to be screwed, and 3) the environment would be destroyed and the US would be at war with every country all the time. 3) is a no-op, so I'm genuinely sympathetic to letting politicians buy votes. > bribe voters from the public purse. You're referring to bribing voters from the purse of the voters. That's the only function of government.
gremlinsinc 4y ago
yeah, I'd much rather politicians give that money to their friends via way over-priced government contracts that will never benefit the majority of us, and probably end up 'lost' by the Defense Department ten years down the line, than actually doing something that might make people's lives better, and actually give a damn about this country because they don't feel like politicians are constantly bleeding them dry and selling that blood to rich blood thirsty oligarchs. /s - I would definitely rather we tackle homelessness, poverty, debt, and create upward mobility for the lower classes, because I'm not a narcissistic greedy bastard.
AlexandrB 4y ago
Ah yes. The Bush and Trump tax cuts were not bribes from the public purse. Just sound fiscal policy.

etchalon 4y ago

Literally everything the Federal government funds is essentially printing money.

seiferteric 4y ago
Don't taxes exist?
- pessimizer 4y ago
  The money from taxes is burned, not spent. The government doesn't need your money any more than I need the paper I wrote an IOU to you on. The government taxes to control inflation and to intentionally change the relative cost of different activities in order to encourage or discourage them.
  - Jensson 4y ago
    That is unique to the US, normally the central bank prints money and the government can't just print whatever they want. Giving money presses directly to the people who try to win elections isn't a good idea, only reason USA can get away with it is because their currency is the world currency at the moment.
    - etchalon 4y ago
      The US Federal Reserve "prints money" in the US, and is insulated, as best as possible, from immediate partisan influence. Obviously, our elected leaders can influence the decisions of the Fed by appealing their case, but they lack a legal mechanism to make the Federal Reserve "print money". They do, however, have the authority to incur "debt" through spending. Which … is basically printing money. But this is true for any system which does not have legal guidelines which constrain spending to revenue capture. Which is a good deal more than "just the US".
  - seiferteric 4y ago
    > The money from taxes is burned, not spent. > The government taxes to control inflation You say these things like they art not related. Obviously taking money out of the system controls inflation. We could eliminate tax entirely and simply print money to pay for everything, but that would likely lead to runaway inflation.

Group_B 4y ago

I’m sorry, but this has to be one of the dumbest things the Biden administration has ever done. He needs to pull a George H. W. Bush and just say he over promised and not go through with this. The intention is great and all. Helping out students that were affected by the pandemic. But the execution of this is horrible.

bko 4y ago
My biggest issue that it's effects are hidden. If he wanted to just send everyone 10k i would be more okay with that as it would have to go to Congress and come from somewhere. Not to mention that it's going to relatively well off college educated students that made poor decisions. And it doesn't change the underlying problem with higher ed prices. If anything, it'll build the expectation of debt forgiveness, allow people to borrow more and schools could charge more. This is just the worst of all scenarios
- mikeyouse 4y ago
  Unfortunately anything addressing the underlying problems is going to take congressional action and our politics are completely broken at the moment so only executive action is possible. This dramatically limits the levers that can be pulled.
  - weej 4y ago
    > This dramatically limits the levers that can be pulled. I don't disagree, but this feels like slapping a bandaid on a bullet wound. It's unclear to me how this will fundamentally make improvements at the source of the problem vs. temporary forgiveness. What do you think it would take to gain some majority alignment to actually move the needle effectively?
  - wszfahwbwbaha 4y ago
    > at the moment Sorry pal, but they won't be getting any better. You're seeing the slow decline of a country.
qqqwerty 4y ago

dougmwne 4y ago

Sure is. Governments are so addicted to printing and spending at this point that not even inflation can slow them down.

yesUgotit 4y ago

This is just more proof that a federalized society is untenable. The wealth of the elders is due to many years of printing money. Of course tacit ageism against the youth to protect old people who cannot do the work of keeping themselves alive is perfectly acceptable. Everyone everywhere being on the hook to prop up dying people will never be an equitable system. Deference to the past needs to go. I don’t owe believing other peoples grannies are worth the value printed on government totems of power (coins) and private bank statements (scripture of power with no real power if we don’t accept their validity). It’s hilarious anti-government types are perfectly accepting of their spreading the gospel of the dollar; that somehow is not government conspiracy to co-opt agency. Cancel the past. Their spoken traditions need not be ours.

clavalle 4y ago
Then again, all the stuff people put together in the past is pretty convenient. Maybe we should consider keeping the good stuff.
- yesUgotit 4y ago
  - clavalle 4y ago
    You don't intend on ever becoming an aged meat bag?
tsukikage 4y ago
Can you expand a little more on how having young students owe money to old people's pension funds instead of just forgiving those debts helps combat "the wealth of elders"?
- pointIsThus 4y ago
4y ago

elzbardico 4y ago

The same can be said about financial sector bailouts, agricultural subsides and the outrageous 800 billions for “defense”. Cancelling student debt is a lot cheaper than the F-35 program, more democratic and has a better return in terms of welfare. I am all in for a more streamlined and lean State, but until that time, I think that Raytheon stock holders and Wall Street can share a bit of the current pie with the People

devmunchies 4y ago
> has a better return in terms of welfare maybe. If it becomes normalized, it would alter the cost-benefit dynamic in degrees even more and not place as much pressure on pursuing a more valuable degrees. Hopefully this is a one-and-done and we can be more creative going forward, like providing more grants for deeper, more fundamental degrees like chemistry, math, computer engineering, manufacturing, etc. > same can be said about financial sector bailouts, agricultural subsides agree. we need to let companies properly decompose. It unintuitively creates more growth, and new companies are created from the ashes. Injecting old companies with formaldehyde creates sclerotic monoliths.
- QuarterReptile 4y ago
  >Hopefully this is a one-and-done and we can be more creative going forward, like providing more grants for deeper, more fundamental degrees like chemistry, math, computer engineering, manufacturing, etc. I hate to stomp on your hope, but this is a late-stage step on the road to 'free' public K-16 in the US. Graduate degrees are already needed to provide the signal you could generate 40 years ago with undergrad. As to actual learning apart from the signal of a degree, the bulk of undergraduate educations, now that there is such a bulk, will provide progressively less value compared to top institutions where students are ready to learn, just as most public schools fall behind the well-known magnet schools that we all wish were more than exceptions to the rule.
  - Volundr 4y ago
    > Graduate degrees are already needed to provide the signal you could generate 40 years ago with undergrad. Honest question, are they? At least as someone hiring for software engineering BS in CS is generally something I look for in a junior level candidate (I rarely pay attention to the education of a candidate with a few years under their belt), but no matter the experience level a masters has never added much, barring some really interesting projects. Other fields might be different, but I don't think I'm the exception for software engineering.

tenebrisalietum 4y ago

Don't care as long as I don't have to pay it. I didn't make the monetary system that requires the slow burn of everything getting more expensive as time passes, rich people did - the non-rich are always the losers no matter what. At least inflation isn't going to result in legal judgements against me for not paying. Also maybe TPTB shouldn't have created the system where $80K+ of undischargeable debt was seen as necessary by many just to have a job. That's not my fault either.

edgyquant 4y ago
Rich people fought controlled inflation every step of the way dude. It’s a tax on then and a way to ensure they keep their capital at work. This is an uninformed talking point

kitanata 4y ago

Anytime the government spends money on anything it prints money to do so. This is how governments work. You aren’t against the government printing money. You are against why they are printing money. It makes sense to print money and spend that money into the economy to accomplish a task if the result of that has a positive ROI. Can we debate the ROI of the activity, rather than “inflation bad”, “printing money bad” or “politician bad”? Using monetary policy as your point of disagreement is intellectually dishonest when your actual problem is with what the government is spending money on… and not the fact that the government is spending money at all.

bko 4y ago
Traditionally US government proposes a spending program and some means to pay for and congress votes on it. How you pay for it could be through debt, existing funds or increase in taxes. This is something different. It also muddies the water because it's not explicit how much it will cost, who will bear the burden not to mention no congressional oversight. This isn't like proposing a budget to build bridges. The is unilateral action by one person with unknown consequences.
- pessimizer 4y ago
  You're calling something "traditional" (PAYGO) that didn't exist until 1990, was killed in 2000, and was recreated in 2010. Also, that something is "traditional" doesn't make it rational.
- pnutjam 4y ago
  I thought you guys wanted government to be run like a business?
tiahura 4y ago
Anytime the government spends money on anything it prints money to do so. This is how governments work. In the US when the government spends on things money it comes from taxes or is borrowed. The Treasury doesn't print money. Printing money is done by the Federal Reserve, but it is not done to finance general expenditures (bonds are different).

nextstep 4y ago

So was giving millions away to wealthy people as forgiven PPP loans.

umvi 4y ago
Right, but this seems like a "two wrongs make a right" argument.
- neves 4y ago
  No, it is a demonstration that the "printing money" argument is completely empty and that we show argue about the impact of the decision.
- MisterBastahrd 4y ago
  Except it isn't. PPP loans were offered as a stopgap measure to stem unemployment during a pandemic. Most people just pocketed the money because they weren't actually doing that badly. I could have taken one and didn't and I regret it now, but that's water under the bridge. It's just funny that all of the opportunists out there who are crying about student loans had no problem taking many multiples worth of PPP loans to line their pockets. The comparison between a student loan and consumer debt at the end of that article though? Utter braindeadedness.
  - bcassedy 4y ago
    I feel like so much of the sentiment boils down to some people objecting to someone else benefiting from government spending and some other people having suffered so they think everyone else should suffer too.
  - AlexandrB 4y ago
    Indeed. I recently heard that many conservative podcasts - businesses that would have benefitted from the lockdowns - took PPP loans. Railing against student loan forgiveness is just "fuck you, got mine".
- blipvert 4y ago

jrm4 4y ago

No one can predict with certainty what's going to happen -- but I find that a LOT of these discussions are not very smart, owing to missing basic theoretical considerations. The only thing that matters is goods and services. People getting stuff they want or need, the rest is accounting. So then: When the government "prints money" (which happens a LOT) watch who it's going TO. If it's e.g. these larger biz PPP loans, probably not helpful because the rich get richer. Student loans? Will probably go to real people buying real things, so probably a better idea. Still might be long term problems eventually, but historically -- no one (especially economists) has ever actually been remotely accurate in being able to predict this.

WhatsName 4y ago

To me what is missing from this debate is the long time effects of letting this increasingly loose wheel of education for profit gain further momentum. If you let your educational institutions squeeze every last penny of your future well-educated doesn't that also limit your countries ability to innovate? If my paycheck would go entirely towards rent and debt payments, I for sure would look for a high paying corporate job instead of startup or freelance work.

tiahura 4y ago
To me what is missing from this debate is the long time effects of letting this increasingly loose wheel of education for profit gain further momentum. What are you talking about? For profit education is nearly dead - ITT, etc., Do you mean private schools?
- jawns 4y ago
  There's a distinction to be made between how the schools are organized as business entities and how they actually bring in and spend money. You're correct that schools organized as for-profit business entities have a bad name and are dying back. But even state schools and universities that are nonprofits on paper can conduct themselves in ways that are profit-driven in practice. It's kind of like the Hollywood accounting practices where a movie that has brought in an enormous box-office haul is treated as only breaking even on paper. As long as the numbers line up right, you can be a "nonprofit" where salary and perks for top figures are exorbitant.
- deepdriver 4y ago
  The massive run-up in tuition prices has not been confined to just private or for-profit schools. Public and private universities alike have gorged themselves on federally-guaranteed student loans. Whether the loan gets repaid or not doesn't matter to the school. They get all the money up front; the feds are the ones who must later try to collect. Schools have used this money to drastically increase the scope of their bureaucracies and facilities, often while paying teaching staff less: http://www.nytimes.com/2015/04/05/opinion/sunday/the-real-reason-college-tuition-costs-so-much.html http://www.nytimes.com/2015/04/05/opinion/sunday/the-real-re... (https://archive.ph/Ju3ro https://archive.ph/Ju3ro)

ur-whale 4y ago

> Cancelling student debt is essentially printing money And printing money is essentially an invisible (boiling the frog) tax which hurts the lower rungs of society the most. Historically, it has never ended well, in spite of what all the Krugman sycophant types keep trumpeting to please and enable the power that be.

AlexandrB 4y ago
What about The New Deal? It seems it have saved the lower rungs of society and worked out pretty well.

Eddy_Viscosity2 4y ago

As many of the comment here point out, you can view ALL government spending as money creation and All taxation as money destruction. The total money supply is the balance between the two. Except that banks and other credit issuers also generate new money. So there's that. The whole worried hand-wringing over student debt as being terribly bad, but tax cuts, industry subsidies, and rich people loan forgiveness being intrinsically good is all very classist if you ask me.

rufus_foreman 4y ago
>> As many of the comment here point out, you can view ALL government spending as money creation No, you can't. Collecting taxes is not printing money.

edmcnulty101 4y ago

One is not able to bankrupt out of student loans, unlike any other loan in existence. So the problem is not the student loan amounts. It's how they're treated. Life is long and filled with unforseen circumstances, that's why bankruptcy exists. Businesses bankrupt all the time, Trump bankrupted I think 7 times?, We bailed out the banks for their faulty financial decisions. But somehow we think it's ok to trap students who made the decision at a young age, and needed an education/job skills to survive, into a world of debt? I understand that it's a way to be able to give loans to young people with low or no credit. However, there's so many OTHER ways to deal with this, other than making students slaves to debt for a huge part of their life. There's a bill introduced to address exactly this.. however it's been stuck in committee for over a year and is probably pretty hopeless. https://www.congress.gov/bill/117th-congress/senate-bill/2598 https://www.congress.gov/bill/117th-congress/senate-bill/259...

Mountain_Skies 4y ago
You're confusing secured debt and unsecured debt. Student loans would almost not exist if they weren't secured by assets or guaranteed by someone with the assets to pay them off should there be a default. Since student loans have no collateral and most student don't have a credit record that makes loaning them $50,000 a rational risk, the only way for them to make sense from a risk point of view is for them to not be dischargeable. If you disagree, you are free to lend out your assets to every and anyone who wants to take college classes and as a personal loan, they will be dischargeable in bankruptcy. When they default, you will have no way to get your money back. Since you're advocating for others to take this risk, why haven't you done it yourself?
- edmcnulty101 4y ago
  > Since you're advocating for others to take this risk, why haven't you done it yourself 35% of my paycheck is spent taking risks. My taxes fund risky business loans via SBA. My taxes fund risky first time home buyers via FHA. My taxes fund risky PPP loans that got forgiven via COVID laws. My taxes fund Financial institutions making risky decisions leading to bank bailouts. My taxes fund risky bombing of brown people in middle east for literally no reason risking losing costly military equipment. My taxes fund losing literally billions in the middle east wars with ZERO accountability. My taxes fund old peoples healthcare and welfare who spent their whole lives, not exercising and eating poorly. Student loans shouldn't exist. And universities should just be either funded as much as all these other areas or subject to the laws of supply and demand like the rest of the world.

neves 4y ago

Every time a bank makes a loan and increments the number in your bank account, they are printing money. This is an empty argument.

Cwizard 4y ago
It’s true that they are creating new money but only temporarily. Forgiving a loan is truly creating money (permanently). Not saying it’s bad to forgive the loans but there is clearly a difference. My stance on it (although I am not a US citizen) is that without adding some law that restricts prices for college tuition this actions will do nothing good and only helps to perpetuate a system that moves the money from a younger generation to the pockets of a select few.
rufus_foreman 4y ago
The Fed is currently trying to get banks to print less money. If the government was enacting a new policy that led the banks to make hundreds of billions of dollars in additional loans, that would also be a terrible idea as long as inflation is as high as it is.

irrational 4y ago

It is insane how much more expensive college is now than when I went to college back in the 90s. I was able to pay off my student loans within 10 years of graduating because they were so much less than what current students are graduating with. And salaries certainly haven't increased enough in that same time span to make the pay off equivalent. But, I think $10k or $20k is not enough. I think they should have looked at how much the cost of college has increased over the past 2+ decades and forgiven that percentage from every student loan. Then they should fix the cause of tuition inflation by getting rid of the federal student loan program.

johncessna 4y ago
> But, I think $10k or $20k is not enough. I think they should have looked at how much the cost of college has increased over the past 2+ decades and forgiven that percentage from every student loan. Your assumption is they were trying to fix a problem with tuition costs. They aren't. Fix the root problem to stop the bleeding and then treat the existing injuries.
- drewcoo 4y ago
  > Fix the root problem to stop the bleeding and then treat the existing injuries. Stopping the bleeding is not fixing the root problem. You stop the bleeding so that the victim doesn't bleed out while the paramedics arrive and can take them to a hospital. https://www.mayoclinic.org/first-aid/first-aid-severe-bleeding/basics/art-20056661 https://www.mayoclinic.org/first-aid/first-aid-severe-bleedi... What's happening reminds me of Trump's throwing paper towels to hurricane victims - a misguidedly symbolic photo op that accomplishes nothing but distracts us all. https://www.nbcnews.com/politics/politics-news/trump-defends-throwing-paper-towels-hurricane-survivors-puerto-rico-n808861 https://www.nbcnews.com/politics/politics-news/trump-defends...
yeeyeeyee 4y ago
> forgive that percentage from every student loan This would be unfair to students who were frugal and chose a 20k-25k/yr COA state school with the assumption that their debt must be repaid. Going to college is an investment that you ideally should plan for and weigh the benefits of the education vs the cost. If you don't think it's worth the 20-25k/yr COA at state schools (or whatever ridiculous amount at private schools) than just don't go. It absolutely is, but okay. This is an incentive to make good choices about college and be educated and productive post-college. But cancelling more debt would remove this positive externality.

larrik 4y ago

> More money available to debtors means more money to pay for rent, cocktails and avocado toast. So this could drive inflation. It won’t necessarily drive inflation but increasing disposable income of young people without much savings will likely increase their spending and the overall price levels. Seems like this is the stuff that the economy is built on. The inclusion of "avocado toast" makes me think I know exactly where this guy stands on basically every political issue without looking any deeper into him, though. > Or it could inflate asset prices as we’ve seen with the $12 trillion from Covid relief. I'm not an economist (thank God), but there's no way that's what happened here. Asset prices increased due to restricted supply. There's no way that lumber prices tripled in mid 2020 due to "covid relief funds". Besides, a ton of people were suddenly able to work from home and couldn't go out for fun. That meant saving huge amounts on gas and wear and tear on vehicles (or public transportation) and no more fun nights out to spend money on.

deleted 4y ago
[deleted]
Volundr 4y ago
The inflation thing is hugely complicated. People like to blame it on the COVID checks like giving people a couple months rent over the course of 3 years is really sufficient to have a large effect on the economy. In reality COVID stimulus didn't help (inflation specifically), but you can't just look to individual stimulus to see it, you also have to look at all the stimulus targeting businesses. Even then it's just one small factor. Supply shocks, Russia, sudden changes in consumer behavior, low interest rates and more all play in. It's not a simple problem with a single cause, but it's more satisfying to point and blame one factor some else is responsible for, so most discourse on the topic, even from those we'd hope would know better since they are in charge of fixing it, is worthless.

gjsman-1000 4y ago

I had an opportunity to go to college, and decided to do my own thing. This cancelling of student loan debt plan, although I understand the plight of young people in debt, it is also infuriating. Myself: Was in college, left, did my own thing, becoming successful, now am paying taxes for everyone else who is getting bailed out. I already have state income tax to pay as well, and with housing prices and inflation being insane, saving for a down payment is miserable enough! Everyone else in college: Often didn't know what they were doing, get free money that myself and others are paying for. Most people in my college weren't there for STEM. Anyone who paid off their debt within the last few years: Screw you. Didn't matter if you were eating ramen to pay off that $10K for a few years, we just took care of it! Future generations: Where is my bailout? They were so lucky a few years ago! Colleges: Let's raise prices to get another bailout! In fact, let's repeat the cycle, feed the fire, and hope the government just starts handing out free universal college money every year! Then, we'll just adjust prices higher to compensate, the real college price will be basically the same, but our margins will be bigger! It's bonkers. I don't like the debt, but this is a terrible plan. Why not (for example), just declare no federal income tax on a single cent of earned income for people making under $100K a year who have student loans and pay promptly? Or, let's say the degree I took has not been working out and I'm not getting jobs, maybe after a certain point I can declare bankruptcy on that debt. There are plenty of other methods to help. That's perhaps my biggest problem with the bailout proposal. It targets the symptoms, not the cause, which makes it a de-facto Band-Aid on cancer.

ok123456 4y ago
You left out when exactly you went to college. Tuition increases have been ticking at around 2x-3x inflation for the past 25 years. It's not like the 70s or 80s when you could work during the summer and cover most of your expenses and then possibly take out a modest loan to cover the shortfall. There ultimately needs to be some form of price control on tuition. Otherwise it just turns into, "well elite schools charge X so if we don't charge X*.95 people will think this is a school for rejects" since the only real signals in the market place are the price, average standardized test scores, and "prestige." Maybe in exchange for getting government grants and loans, they have to negotiate tuition rates with the federal government. They would be in a much better position to collectively bargain on behalf of the students, since the only option now is to either withdraw or grin and take it when they decide to hike the tuition. Employment outcomes and default rates could be used in these negotiations. Lower than average employment prospects should be tied to lower than average tuition. Also, the overhead rates could be considered. This would put pressure on universities to curtail the sprawling administrative industrial complex.

bena 4y ago

Except due to the nature of student loans, it's possible an amount equal to the principal has been paid by now. Especially for those who have been paying for a while. Capitalization, deferment, the initial high interest rates, and the focus on "income based repayment" are a recipe for "forever loans". Which would please the lenders to no end. But we don't talk about that when we talk about cancelling student debt. Because doing so points out just how fucked the entire racket is. This is not allowing various companies to essentially seek rent in perpetuity from people. It's putting people's production back into their own hands.

am1on 4y ago

technically it is destroying money due to the way loans are treated on bank balance sheets. a loan is an asset to a bank and a liability to a borrower. forgiving a loan destroys it as an asset (money-like) and causes deflation from a money supply standpoint even if it does increase the buying potential of a borrower. Since all federal student loans are still in payback pauses for covid this will have negligible effects

sn0w_crash 4y ago

If I paid back my student loans in 2019 does that make me a sucker?

walkhour 4y ago
Yes, now that you don't have debt yourself you can help other's pay theirs. Meanwhile you'll be informed of how fair this is.

madrox 4y ago

The one sentence of this article I zoom in on is that this increases the money supply over time. Well...yes it does, but that's not bad. The question is how much, who is getting that extra supply, and how is that changing things? I have no problem with people under lots of student debt getting a 10k shot in the arm. We've spent more on projects that feel less good than this. However, it won't affect consumer behavior any time soon. Unless people's debts are ended, their spending habits won't change and this won't stimulate the economy. However, it does sound like democrats followed through on something, so it's a great political gimmick during election season. I say this as someone who tends to vote democrat.

danaris 4y ago
The program does more than just knock 10k off their debts. It changes how interest and minimum repayments work, in a way that will, for many people, drastically reduce their monthly payments. That's definitely enough to affect consumer behavior.
- madrox 4y ago
  That's a detail I didn't know about. I guess it will remain to be seen. I still assert it won't stimulate the economy unless debts are completely repaid, but I am open to being wrong.
walkhour 4y ago
The increase in money supply may not be bad but it's obviously bad now, when inflation is so high. So even if you're in favour of these policies you must think the timing is bad. The fact that's it's happening despite inflation is further proof that this is a political gimmick.

jhallenworld 4y ago

Yes, it is. But keep in mind that the USA traditionally has been able to print a lot of money without having horrible inflation. USA can get away with this due to the petrodollar system and the fact that it's the world's reserve currency. Defense companies are an integral part of the petrodollar system: Iraq priced its oil in Euros, look what happened to them. https://www.cse.unsw.edu.au/~norman/CurrentAffairs/DeeperNew.html https://www.cse.unsw.edu.au/~norman/CurrentAffairs/DeeperNew... https://www.investopedia.com/articles/forex/072915/how-petrodollars-affect-us-dollar.asp#:~:text=Petrodollars%20are%20dollars%20paid%20to,dollar%20holdings%20of%20foreign%20producers https://www.investopedia.com/articles/forex/072915/how-petro.... Anyway, with this as a given, why should only the rich benefit? Printing some money for the rest of us is only fair.

okdood64 4y ago
> petrodollar system What happens to the US dollar once, let's say optimistically, the world is mostly on renewables by 2050?
- jhallenworld 4y ago
  https://www.reuters.com/article/us-global-petrodollars-column/column-does-a-greener-world-need-less-greenbacks-mike-dolan-idUSKBN2AA0NC https://www.reuters.com/article/us-global-petrodollars-colum...

the_solenoid 4y ago

It's important to note that money is fake, and is given value by destroying it (through taxes as a major part of it) This action doesn't change the supply of money in the system, just where it ends up, so really it cant have an effect on inflation. the schools already got paid, and now the money will go into more than likely base economy spends like food and housing instead of the the end of monies lifecycle at a bank or investment. edit: of note, money is introduced into the system by in large through gov spending (roads, gov, military) - so as much as it would be nice to spend less on military - you can't really cut it off without spending it elsewhere, which I am all for, but you can't just have the government spend less. edit-edit: this is also kind of the least they can do, and doesn't fix the problem in the future which is why I give it a half-hearted golf clap. It's almost like they want an a class of people to be over-debted....

bigdollopenergy 4y ago

I'm so conflicted about this move. On one hand you've got a generation that is being held back by these loans. The very people that are supposed to be starting businesses/building up capital/starting families and whom are the foundation of the future economy. When you view it through the lens of being an economic stimulus, it's actually a pretty good one and will likely be a net-positive in the long term. On the other hand. While everyone is focused on the people who already paid theirs or who didn't get student loans to begin with, no one including this author ever properly addresses the impact on future students. As far as i can tell all future students are still going to have these huge loans (likely bigger) and this is a one time payout for current loan holders only. Those students are going to look back to now, see we got a one-time 10k payment courtesy of the taxpayer (which will be them) and rightly demand the same treatment. If they don't get it, they will view us as being just the same as the boomers were, cradle robbers that take advantage of the system and then take away the ladder once they are done. We've essentially set in stone one of 3 paths. One, we periodically do these bailouts, probably blowing up tuition prices further so the students don't really benefit and the only winners are the loan companies+universities. Two, we commit to heavily reforming the system and fully paying for higher education. Or 3, we never do the bailout again and have future students not only pay for their own loans but service the debt we created just for ours as well. While i'd like for us to go with option 2, i don't think this is the likely path, it's too difficult and controversial to be done in the current political climate. The likely path, is that we're going to end up being just as morally bankrupt and selfish as the boomers collectively were.

recursivedoubts 4y ago

Cancelling debt is a jubilee, which is necessary when the debt load becomes so onerous that it nukes the productivity of your economy. It isn't printing money, nor is it essentially printing money. Money just sits there. Debt grows exponentially. It is extinguishing debt, in order to allow young people to make financial progress, which will incentivize them to actually work, which will produce actual wealth that we can all enjoy, since, as Marx and Smith both correctly said: labor is the source of value. Steven Keen was right all along and professional economists should be sent to agrarian communes to work and think about things.

archhn 4y ago

Billions of dollars in military aid given to a foreign country where Biden had shady interests. Response: I stand with Ukraine <3. Billions spent in failed foreign wars, which created seas of generational enemies. Response: I support our troops <3. A little bone thrown to debt slaves. Response: This is outrageous! We will never recover from this recklessness spending! This is a joke country.

Brian_K_White 4y ago

College tuitions and the special nature of student loans vs all other loans have been printing money. A correction is not only fair but overdue. The only thing unfair about it is what about all the people that were more responsible and determined that they can't afford it and went without rather than go into that much debt? It does flatly screw them. And as one of them, I still say do it, because that's still better and more fair than what been going on for the last 20 or more years.

dinom 4y ago

"Printing money" makes it sound like an education was manifested out of thin air. Semantically, I think cancelling student debt is much more of a "transfer payment".

walkhour 4y ago
Transfer payment from the debtor to the government? If the government pays it printing money, then printing money will happen, if it's payed with tax payer's money, well then the tax payers will pay it. Given money is fungible it will be a mixture of both. Semantically you can name it whatever you want.

kitsunesoba 4y ago

Even though I will not be benefiting from this student debt forgiveness, I support it. The past generation or two of students essentially had the rug pulled out from under them — they were told by all the adults around them that going to college was the surefire path to a well-paid job in a world where well-paid jobs were becoming increasingly rare, making racking up the debt to do so worth it. So they went to college and took on that debt since that was the "right" thing to do, only to come out on the other end to find that getting a degree had little to no bearing on their ability to find a quality job after all and dooming them to working minimum wage jobs and barely scraping by for an indefinite period. The biggest problem is that it isn't being paired with strict price caps on higher education, or at least restrictions on financial aid that render schools with unreasonable prices ineligible. Without that we're going to have another batch of kids-turning-adults in the same pickle in a few years.

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t_mann 4y ago

This guy is very wishy-washy with his definitions and research, considering how strong his headline is. In order to fully answer the question of how cancelling student debt actually impacts money supply over the full lifetime of the loan, we'd have to know how exactly those loans were granted, as well as how the proceeds from collection are generally being used. If those loans were granted through banks (effectively, regardless of what the sticker said) and those loans won't be repaid after the cancellation, then yes, this would be inflationary. If, however, the loans were originally paid out from the federal budget and the proceeds also went into the federal budget, then effectively this would result in an increase government deficit (resulting in an increase in government debt or reduction in government spending, or both, depending on your behavioral model of the government). The same goes if the loans were initially granted through banks and the government repays the bank loans even after cancelling the debt - it's not inflationary, it's deficitary.

orwin 4y ago

So the author is right on most thing. Money is only destroyed when debt is repaid or taxes are collected, so it is printing money. He might not be right in his chapter on inflation (but he correctly put caveats, inflation is probably one of the most complex economic happening and our current models feel a lot like Ptolemy geocentric model). The chapter following that is wrong imho. He put caveats but read like it will hurt the poorest. It won't, not in the US at this moment. Not everything is fungible. (I'm on a phone, sorry for not developing my thoughts)

musicale 4y ago

This is true. Canceling student debt is basically like printing money, and is likely to lead to inflation. Student loans themselves were like the government handing out money to banks (guaranteed interest on large amounts of secured debt) and universities (empowered/incentivized to raise tuition and fees drastically for decades with impunity.)

lcall 4y ago

Instead of bribing for votes, IMO, it's much better, and more effective, to let individuals and families decide for themselves how their charitable donations will be allocated. Local decision-making yields less fraud & waste, and it's just ... right to have charititable donations be unforced. Do fundraising, for the the hand out/up, etc. Local efforts can be both more effective and more frugal, and compatible with the freedom to use our donation $ as we see fit. The federal government has constitutionally assigned responsibilities that no other entity can fulfill. Becoming further indebted and paying individually-acquired debts, is not among them.

walkhour 4y ago
Allowing local efforts is not how you win federal elections.

lcall 4y ago

2 previous discussions: https://news.ycombinator.com/item?id=32551475 https://news.ycombinator.com/item?id=32551475 https://news.ycombinator.com/item?id=32584745 https://news.ycombinator.com/item?id=32584745

RickJWagner 4y ago

Inflation, or even the threat of inflation, is fought with rising interest rates. Rising interest rates mean less money going to business expansion, which means fewer jobs and less competition for employees, which means lower paychecks. In the end, it's the poorest people that get dumped on. If you can't afford $1000 rent, you surely can't afford the adjusted $1400 rent. And without a job, you'll be homeless soon. Short term gain, long term loss.

beej71 4y ago

Seems like on this trajectory the debt will all be forgiven anyway, since eventually virtually everyone who goes to school will die with more debt than they started with.

lr1970 4y ago

Student debt forgiveness only makes sense if accompanied by a broader reform that regulates how the participating universities can charge for tuition. Without such constrains on schools, debt forgiveness is an invitation for the educational institutions to jack-up tuition even more.