6 ms·

> everyone gets the same nominal payout, debtors must use the payout to pay off debt, non-debtors may keep the money and do what they please with it Wouldn't t

by jefftk 4y ago

> everyone gets the same nominal payout, debtors must use the payout to pay off debt, non-debtors may keep the money and do what they please with it Wouldn't this be very inflationary? It's approximately equivalent to "give everyone $X". I don't see any discussion at the link about how people would react to the dollar (and any dollar-denominated savings, wages, etc) suddenly being worth far less?

TheOtherHobbes 4y ago
You mean more inflationary than an economy based on extraction and profiteering which has increasingly impoverished more and more of the population? What's the difference between money suddenly being worth far less [1] and real income dropping so individuals have much less spending power - which is something that has been happening for most of the population since the late 70s? [1] Assuming inflation would be the result, which is debatable.
- jefftk 4y ago
  > real income dropping so individuals have much less spending power - which is something that has been happening for most of the population since the late 70s? This isn't true, though, even if you restrict to the US? Here's inflation-adjusted median individual income: https://fred.stlouisfed.org/series/MEPAINUSA672N https://fred.stlouisfed.org/series/MEPAINUSA672N It's up 40% since the late 70s.
  - rybosworld 4y ago
    The problem with the Fred reports is that CPI is grossly undercalculated.
    - jefftk 4y ago
      How much do think, say, a 1978 dollar is worth in 2021 dollars? Why?
- logicchains 4y ago
  >which is something that has been happening for most of the population since the late 70s This started happening as soon as the US dollar was completely unpegged from gold, allowing unlimited seigniorage to banks (the first spenders of newly printed money) via the Cantillon effect.
- deleted 4y ago
  [deleted]
- shjake 4y ago
  > You mean more inflationary than an economy based on extraction and profiteering which has increasingly impoverished more and more of the population? Yes? I mean that’s sort of what happened during Covid (savings rates increased dramatically in the short term)…
kodah 4y ago
It would be inflationary to anyone who doesn't get a payout, I think. That means, any country which does not get that payout and then distribute it.
- ajmurmann 4y ago
  It would be inflationary to the currency. I don't think "inflation" applies to individuals, it's about the exchange rate of one unit of currency to goods and services. I think you might be conflating "inflationary" and "making poorer" In this case the currency would br hugely inflated, but it would only harm people who didn't get the payment. This might lead to everyone getting a million dollar. Now a carrot might cost $50 which doesn't matter, because you got a lot more dollars. Inflation is a problem when the costs of different things, especially wages, don't increase at the same rate or you have a lot of savings in cash.
  - kodah 4y ago
    I didn't see your reply until today, but I believe you're spot on with my understanding. Thanks for the breakdown.
- jefftk 4y ago
  It's inflationary even just among people who do get the payout. Imagine the income and net worths of a silly model society are: income net worth -------- ----------- A: $20,000 $0 B: $30,000 $1,000 C: $50,000 -$80,000 D: $100,000 $300,000 E: $500,000 $10,000,000 Now you have a "modern jubilie" at $100,000: income net worth -------- ----------- A: $20,000 $100,000 B: $30,000 $101,000 C: $50,000 $20,000 D: $100,000 $400,000 E: $500,000 $10,100,000 You're going to see a huge increase in how much A, B, and C are willing to spend: there are lots of things they've been wanting to buy but couldn't afford. Trying to buy them (nicer food, better housing, etc) will bid up their prices.
  - recursivedoubts 4y ago
    Again, the vast majority of people are debtors, and would be forced to pay down their debt. It isn't free and clear money for everyone: only non-debtors would get that and they are few in number and relatively wealthy, so the additional money would most likely end up saved rather than spent, and be relatively small compared to the extinguishing of debt.
recursivedoubts 4y ago
Ideally, not in real terms: debt will be extinguished, but that debt has already been spent into the economy. The underlying asset equity (say, a house) will be transferred to the debtor. Some non-debtors (not many, in todays economy) will get a big immediate cash influx, but most of them are wealthy and will save, rather than spend that cash. Relatively, the wealth of the poor will increase more because, say, 100k, is life changing for a poor person but not as big a deal for a rich person. The important part is reducing the total debt load and the exponent sitting on top of it. Would it be perfect? Of course not, nothing is. But it's the fairest way I have heard of to broadly reduce the debt load in a manner that addresses the underlying issue of too much debt.
- jefftk 4y ago
  While many people have debt, most people with debt don't have that much. A large enough payment that, say, brings the 90th percentile debtor to debt-free would much more than pay off the debt of the 50th. Leaving most current debtors with large piles of cash that they would be enthusiastic to spend. Additionally people would take on more debt, after freed from their current monthly payments, so you would predict consumption would rise even if the only effect were debt cancellation.
  - PuppyTailWags 4y ago
    I don't think people would take on more debt after being freed from current debt. Usually, the debt that is the most crushing is student, medical, mortgage debt-- it's unlikely people just go on to sign themselves up for more of that.
    - jefftk 4y ago
      I agree that most people aren't going to voluntarily go out and pick up some medical debt, but freed of their monthly payments they might decide to go back to school (student debt) or buy a larger house (mortgage debt). Or they might buy a new car on credit. For the same reasons that people today with no debt often choose to go into debt to fund a purchase, if we wiped out existing debt and didn't change anything else about the financial system I'd expect many people who'd just had their debts erased would also make purchases with new debt.

by jefftk 4y ago

TheOtherHobbes 4y ago

You mean more inflationary than an economy based on extraction and profiteering which has increasingly impoverished more and more of the population? What's the difference between money suddenly being worth far less [1] and real income dropping so individuals have much less spending power - which is something that has been happening for most of the population since the late 70s? [1] Assuming inflation would be the result, which is debatable.

jefftk 4y ago
> real income dropping so individuals have much less spending power - which is something that has been happening for most of the population since the late 70s? This isn't true, though, even if you restrict to the US? Here's inflation-adjusted median individual income: https://fred.stlouisfed.org/series/MEPAINUSA672N https://fred.stlouisfed.org/series/MEPAINUSA672N It's up 40% since the late 70s.
- rybosworld 4y ago
  The problem with the Fred reports is that CPI is grossly undercalculated.
  - jefftk 4y ago
    How much do think, say, a 1978 dollar is worth in 2021 dollars? Why?
logicchains 4y ago
>which is something that has been happening for most of the population since the late 70s This started happening as soon as the US dollar was completely unpegged from gold, allowing unlimited seigniorage to banks (the first spenders of newly printed money) via the Cantillon effect.
deleted 4y ago
[deleted]
shjake 4y ago
> You mean more inflationary than an economy based on extraction and profiteering which has increasingly impoverished more and more of the population? Yes? I mean that’s sort of what happened during Covid (savings rates increased dramatically in the short term)…

kodah 4y ago

It would be inflationary to anyone who doesn't get a payout, I think. That means, any country which does not get that payout and then distribute it.

ajmurmann 4y ago
It would be inflationary to the currency. I don't think "inflation" applies to individuals, it's about the exchange rate of one unit of currency to goods and services. I think you might be conflating "inflationary" and "making poorer" In this case the currency would br hugely inflated, but it would only harm people who didn't get the payment. This might lead to everyone getting a million dollar. Now a carrot might cost $50 which doesn't matter, because you got a lot more dollars. Inflation is a problem when the costs of different things, especially wages, don't increase at the same rate or you have a lot of savings in cash.
- kodah 4y ago
  I didn't see your reply until today, but I believe you're spot on with my understanding. Thanks for the breakdown.
jefftk 4y ago
It's inflationary even just among people who do get the payout. Imagine the income and net worths of a silly model society are: income net worth -------- ----------- A: $20,000 $0 B: $30,000 $1,000 C: $50,000 -$80,000 D: $100,000 $300,000 E: $500,000 $10,000,000 Now you have a "modern jubilie" at $100,000: income net worth -------- ----------- A: $20,000 $100,000 B: $30,000 $101,000 C: $50,000 $20,000 D: $100,000 $400,000 E: $500,000 $10,100,000 You're going to see a huge increase in how much A, B, and C are willing to spend: there are lots of things they've been wanting to buy but couldn't afford. Trying to buy them (nicer food, better housing, etc) will bid up their prices.
- recursivedoubts 4y ago
  Again, the vast majority of people are debtors, and would be forced to pay down their debt. It isn't free and clear money for everyone: only non-debtors would get that and they are few in number and relatively wealthy, so the additional money would most likely end up saved rather than spent, and be relatively small compared to the extinguishing of debt.

recursivedoubts 4y ago

Ideally, not in real terms: debt will be extinguished, but that debt has already been spent into the economy. The underlying asset equity (say, a house) will be transferred to the debtor. Some non-debtors (not many, in todays economy) will get a big immediate cash influx, but most of them are wealthy and will save, rather than spend that cash. Relatively, the wealth of the poor will increase more because, say, 100k, is life changing for a poor person but not as big a deal for a rich person. The important part is reducing the total debt load and the exponent sitting on top of it. Would it be perfect? Of course not, nothing is. But it's the fairest way I have heard of to broadly reduce the debt load in a manner that addresses the underlying issue of too much debt.

jefftk 4y ago
While many people have debt, most people with debt don't have that much. A large enough payment that, say, brings the 90th percentile debtor to debt-free would much more than pay off the debt of the 50th. Leaving most current debtors with large piles of cash that they would be enthusiastic to spend. Additionally people would take on more debt, after freed from their current monthly payments, so you would predict consumption would rise even if the only effect were debt cancellation.
- PuppyTailWags 4y ago
  I don't think people would take on more debt after being freed from current debt. Usually, the debt that is the most crushing is student, medical, mortgage debt-- it's unlikely people just go on to sign themselves up for more of that.
  - jefftk 4y ago
    I agree that most people aren't going to voluntarily go out and pick up some medical debt, but freed of their monthly payments they might decide to go back to school (student debt) or buy a larger house (mortgage debt). Or they might buy a new car on credit. For the same reasons that people today with no debt often choose to go into debt to fund a purchase, if we wiped out existing debt and didn't change anything else about the financial system I'd expect many people who'd just had their debts erased would also make purchases with new debt.