1 sat \ 1 reply \ @cryptocoin 26 Aug 2022 \ on: Actually, Canceling Student Debt Will Cut Inflation bitcoin
Here's my take.
If money is created when a bank issues a loan, then money is destroyed when the loan is repaid.
"Canceling student debt" actually means the debt is being paid by the government to the borrower. Which alone would mean that money is destroyed (i.e., it is removed from circulation).
But ... where does the government get the money? Most of government spending comes from taxes but this is an extra amount of spending, which means it is deficit spending. Deficit spending is then a loan (because the government borrows that money), and that means money is created.
So essentially the money that is destroyed by the government repaying the borrowers is then re-created by the government. So it's entirely a wash, as far as inflation of the money supply goes.
in my opinion It creates inflation (dont know how much) because
- The students now have more money for consumption increasing demand for goods and services
- Students could also take on new debt and use that for consumption unless they are specifically prohibited from borrowing money again for a while which i doubt
- As you mention, where did the money to repay the loans come from? Its most likely created out of thin air which is a privilege the government has had for a while.
so yea, inflation all the way, sad :)
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