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Quoting myself back at the beginning, to avoid needless repetition: "As for where the now literally trillions of dollars of lending is having an impact on infl
by somenameforme 3y ago
Quoting myself back at the beginning, to avoid needless repetition:
"As for where the now literally trillions of dollars of lending is having an impact on inflation, it'd depend on what that money was doing beforehand and what it would have done if not lent. Inflation comes down to monetary velocity, which is largely (though not inherently) driven by monetary supply. If trillions of dollars in student loans are increasing these factors then it will drive inflation, the only question being to what degree."
What I was alluding to there is that lending tends to increase both monetary velocity, and the monetary supply. This is what makes lending so much different than normal spending.
- ajross 3y agoSince you like FRED, here's the M2 money supply: https://fred.stlouisfed.org/series/M2SL https://fred.stlouisfed.org/series/M2SL You can clearly see it rocket upwards in 2020 due to the all the covid assistance (of which student loan forbearance was one item), and then begin to fall as the inflation stabilizes. The crest of the peak is six trillion dollars higher than the pre-pandemic starting point. Sorry, but a mere $70B loan program just doesn't figure in that enormous signal. It doesn't. It's not doing what you think it's doing. I'm begging you to take off the political/ideological glasses and look at the real numbers here.
- somenameforme 3y agoA $70B loan program would have small, though measurable, effect on the economy. The issue is that those loans are not just being given to people who cannot repay them, resulting in a wide array of accumulating economic issues. So we're not looking at the impact of one small event, but an avalanche in slow motion now amounting a $1.8 trillion one. As one other aside, inflation doesn't drive monetary supply. It's the other way around.