Sanders to propose canceling entire $1.6 trillion in US student loan debt

How about we go back to the gold standard?

 

Wanna?

 

You're going for a half a helicopter ride is what you're doing

 

Who wants a helicopter ride? Planes are the best.

 

I'm implying that someone should Pinochet you because I assume, since you feel entitled to the property of others at the point of a gun, that you're a communist.

 

And someone still owes the money and is is still debt and yea go out and dump $1.6 trillion and see what it does to the value of the currency and yields.

 

The debt involves selling $1.6 trillion in t bonds to pay off the debt, but I focused on what the investor is going to do with their $1.6 trillion they get and need to invest. BEA monthly reports show the investments in the whole nation that are used to calculate GDP.

 

Only the Fed - a private bank - creates currency? Two problems with that:

1. The Fed is not primarily a private entity, it is part of the consolidated government sector, along with the treasury. The Fed governors are elected civil servants.
2. Private banks create money (in the nation's currency) when they write loans to creditworthy customers; and the Fed doesn't create money, as explained already:
<<"When (it is said) the Federal Reserve “creates money,” it doesn’t. It determines the climate whereby banks are able to LOAN people money.
The key word here is LOAN. When you BORROW money from a bank, you get cash right away, but you still have to pay that loan back. It exists as a credit and a debit on a balance sheet – they cancel each other out. So that is not money created, it is simply borrowed">>.

(BTW, someone mentioned the gold standard: a fiat currency has value because citizens require the nation's currency to pay taxes, another MMT insight).

which is disputed by:
<<"When the government “spends,” the Treasury disburses the funds by crediting bank accounts. Settlement involves transferring reserves from the Treasury’s account at the Fed...">>

You are in effect insisting that financial wealth can only be created in the private sector. This claim is 100% wrong, and entirely ignores 'vertical money'. Note this from prof. Bill Mitchell on MMT:

<<Vertical transactions are those between the government sector and non-government sector and they are unique (different to horizontal transactions between entities within the non-government sector) because they alone create or destroy net financial assets in the non-government sector.
A bank loan creates a liability at the same time it creates an asset – nothing net is created.
However, the impacts of vertical transactions show the unique nature of the currency-issuing capacity of the government.">>

So, are you ready to point out how govt. funding (of teachers) via issuance of the nation's currency (with vertical money), is any more inflationary than the same funding via private debt created in the private banking system (using horizontal money)?

 

Wrong

They cant write loans against reserves, up to the reserve ratio. The reserves have grown via the FED, the ultimate creator of currency

The loanable reserves have been created by the FED

And you still have not explained where those funds come from

 

So you say. Let's summarise the debate so far:

1. You reject Sanders' idea of a financial transaction tax, to fund tertiary education so that students are not faced with starting their careers with a debt burden.

2. You reject Warren's idea of funding these students' education with a tax on personal wealth over $50 million (!).

While noting that a significant number of people including posters on this board do support these two policies, I have presented a third policy based on a new (MMT) understanding of how macroeconomics actually works, as opposed to the failed neo liberal orthodoxy that you, as well as Bernie and Warren apparently - though perhaps not AOC and others who are studying MMT- continue to support.

Which brings me to your final point:

.

To cut through all the neoliberal smoke screens, I will repeat the two basic axioms of MMT:

1. All nations face real resource constraints.

2. Sovereign governments with currency issuing capacity face no purely financial constraints.
ie, whereas households (users of the currency) must repay debt at a specified time to avoid bankruptcy,
currency issuing governments can keep rolling over debt ad infinitum (though the complex smokescreens of neoliberal orthodoxy would have us believe otherwise).
For proof of this statement, just look the decades old US 'debt clock' currently indicating $20 trillion and rising, which even Repub admins. happily ignore, except perhaps to employ as a tool to enable false argument against much needed govt. social expenditures, an argument they can present because the general population have been deceived into believing government debt is like household debt.

 

You have not shown how the money gets into the treasury.
For all of your parroting of your wacky professor's material, you can't explain how the money gets into the treasury.

 

Spare us the fundamentalist Randian nonsense please.

 

Anyone who says " look well steal from him because he has more and it wont effect us" is waiting to turn on you. They are lower than an animal.

 

Quite so. A fundamentalism fuelled by her loss of individual privilege, in the collectivist USSR.
But much of her type of conservatism in general is based on misunderstanding the manifestation of reason and instinct in the human psyche. That's another topic...but thanks for alerting us re the foundation of Reality's reality...

 

Can we please stop and examine the validity of your use of the term ‘steal’ in this context and within a democracy?
Do you lie awake at night dreading Wesley Mouch is going to steal your bedroom slippers?

 

Is it voluntary as a taking? No. If not complied with, do nice men with guns come to collect the debt or jail you? Yes.
Taxation is theft.
Also it's a republic.
Theif.

 

(Actually I did continue with that point but I ran foul of the 15 min. timeout limit)

So to the point: let's be clear: private banks create customers' new deposits out of thin air when they write new loans for creditworthy customers; the bank does not need to consider its current level of deposits (which could be zero), before creating the new deposits for new customers, despite neoliberal mythology. Total reserves in the banking system must of course be reconciled with the central bank, via exchange settlement accounts, to prevent insolvency of the individual bank that would result from excessive deposit creation

Now, you still want me to explain "how (the) money gets into the treasury".

So:

<<"When the government “spends,” the Treasury disburses the funds by crediting bank accounts. Settlement involves transferring reserves from the Treasury’s account at the Fed...">>

How?

It disburses the funds by first creating them out of thin air, the difference now being that the government itself guarantees these funds, since a sovereign currency issuing government cannot run out of money, unlike a private bank which requires creditworthy customers to write loans to….. recall Lehman Brothers...OTOH the US govt has a $20 trillion growing debt ….and will remain solvent, even when the next neoliberal recession hits....and meantime real unemployment + underemployment + those who have given up looking for work = at least 15% or more of the working age population, so there is still plenty of slack in the economy.

Now are you ready to explain how teachers funded by the treasury (explained above) will cause inflation, while teachers funded by student debt will not?

 

Ah.. the old Libertarian delusion that individual liberty, not counterbalanced by rule of law, is compatible with community well being, ie, replace rule of law with the Anarchy of 'voluntary co-operation'.

But..... you may be interested to look at MMT, which offers a guarantee of above poverty employment for all those who desire it, without necessarily needing to raise taxes (in MMT, taxation has a different function and is not required before government spends as per policy choice).

 

I’ll leave you to your Galt’s Gulch delusions.

 

The treasury does not create the currency it dispurses. You are sadly misinformed.

 

A sovereign government is the monopoly issuer of the nation's currency. You are sadly misinformed.

And to help you past your ideological blinkers:

http://www.levyinstitute.org/pubs/wp_931.pdf

The advocates of Modern Money Theory (MMT) have similarly sought to change the way that public finance is viewed: the sovereign government’s finances are not like the budgeting by households and firms. Viewed from the MMT perspective, the government uses the monetary system to mobilize real resources and to move some of them to pursuit of the public purpose. Affordability is never an important question for a sovereign government—the relevant question concerns resource availability and suitability. There is thus a natural alliance between MMT and the GND. If we can identify technologically feasible projects that would achieve the GND’s goals, and if we can identify the resources to devote to these projects, then we can arrange for the financing of the programs.
Whatever the financial costs, we already have a financial system that can handle them. What is less certain is that we can mobilize the resources that will be required. This will require a combination of putting excess capacity to work and shifting already employed resources away from existing production to GND projects.

First, we have to shake off the neoliberals who have been destroying our country and our world for more than two generations. They began in 1974 with the argument that an overspending government caused inflation and that too much regulation and coddling of unions caused unemployment and slow growth. In reality, OPEC caused both of our high inflation periods
7
(early and late 1970s), and the adoption of austerity to fight oil price hikes slowed growth and led to unemployment, which, together with inflation, was known as stagflation. Union-busting weakened our middle class, real wages stagnated, and we entered an era dubbed secular stagnation. Deregulation—especially of finance—led to bubble and bust cycles that redistributed income and wealth to the tippy-top while the bottom 90 percent was buried in debt.
The correct policy then—and now—was conservation and conversion to alternative energy sources. Instead, we got austerity and ramped-up dependence on climate-killing carbon. Neoliberals want to continue with the same old policies: more fiscal austerity; more reliance on markets (carbon trading—that is, using the price system to try to resolve a problem created by the price system); more half measures; and more of President Carter’s meow.
At least part of the justification for half measures is that the GND is just too expensive. Our government is already broke. We simply cannot afford survival. But MMT teaches that financial affordability is not the question; we can afford the real MEOW. We already have the financial wherewithal needed to afford whatever is technologically possible. We do not need to go hat-in-hand to rich folks to get them to pay for it. We do not have to beggar our grandkids to pay for it. We do not have to borrow from China to pay for it. We do not have to get the Fed to “print money” to pay for it. All we need to do is to remove the self-imposed constraints, the myths, and the misplaced morality; then budget for it, approve the budget, and spend. No new spending process is required. Follow the normal procedures that the Fed and Treasury have developed. That is how you pay for it.
As the great J. Fagg Foster (1981) said, “Whatever is technologically feasible, we can pay for it."

 

A nation’s currency maybe but today tokens of value are exchanged and function well outside of Federal Treasuries. influence. We might claim such is financial anarchy except for the fact the gold standard or any other objective guarantee vanished some time ago.
We stumble on into the digital unknown pickets bunging with bitcoins - - - - - -

 

Bolshevik Bernie. yep

 

No, but an intelligent comment at least.

The fact is, as noted by MMT: a convertible floating fiat currency has value because citizens require this money (denominated in the particular nation's currency issued by the monopoly issuer of the currency ie the government, in order to pay their taxes. (The gold standard was abandoned in the 70's for various reasons including currency exchange utility re world trade).


[BTW, in my previous post; MEOW stands for Moral Equivalent Of War].

 

The treasury does not create it's own currency.
But please feel free to quote the statute that gives it this power