I genuinely don’t get it. My brain says if people don’t have this looming debt they have to pay into, they’ll have more money to feed into the economy via goods and services.
ETA: I only have this question because of what Biden is saying. I have a gut feeling it’s misdirection to avoid cancelling student loans, but figured I check.
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>they’ll have more money to feed into the economy via goods and services.
You answered your own question, if more people have more money to spend then there is less pressure on prices to stay affordable
Maybe because since its borrowed money, it leads bsck to the banks, and if the banks dont get their money back, it means they dont got the moneys in the bank. And to have the “moneys”, the government prints more moneys. But doing that decreases the value of the USD
No debt -> people buy stuff. The more people buy stuff, the more expensive stuff gets.
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lol bro imagine you lend someone half of your life savings and then the government tells you they don’t have to pay you back.. lmao this sounds stupid. Even if the government themselves paid it off, they’d probably do it by printing more money since thats been their recent go-to strategy. Leading to even more inflation. It sounds like a cool idea but super irrational.
I can’t give you a detailed, intelligent answer like others have, but all I know is that it sounds too good to be true and when that happens, it usually is. Democratic politicians are touting this as a saving grace to the economy but as the old saying goes: “the Devil is in the details.”
> more money to feed into the economy via goods and services
You just answered your own question… more money to spend means more demand for goods and services, which could drive up prices.
But it’s likely not going to be effectively, “here’s $10k!” It might shorten the timespan people pay off their loans, so they keep paying for 5 more years, not 8. Or perhaps the loans are re-caclulated so it’s still the same time, but the payment goes down as a result of a lower balance. So the re-allocation of one’s income/spending won’t all hit the economy now if it were to be done.
I’m assuming you’re talking about federal student loans, which are essentially loans from the government. Lack of collection on student loans could potentially be seen as a weakness with tangential effects towards other government obligations, all while increasing balance sheet (debt). Either lack of ability or lack of will to collect on debts is not generally viewed as a good thing.
Imagine a typical movie scenario where a crime boss (Joe) collects debts by playing hardball and not letting anything slide without punishment. Everyone abides by the rules Joe goes by, either out of respect or fear. Now imagine if he goes: “Johnny (customer) doesn’t need to pay me back I’ll let it slide.” From an optics standpoint this looks terribly weak. Next thing you know, his other customers Giovanni, George, and Greg all start thinking “hmm maybe Joe isn’t so tough after all, since he let Johnny slide last week. Seems like he’s getting soft, so I might ask to renegotiate fees or terms, etc.”
Now translate that analogy onto a global scale. Joe is the US issuing sovereign debt and forgives Johnny’s student loans. US sovereign debt holders (other countries) will see this as a sign of weakness in terms of commitment to the USD. Treasuries then adjust accordingly, along with FX and eventually into equities and real output.
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