Hacker News Reader

Comment by intralizee | Hacker News Reader

Similar to how the US bailed out the banks. How about the citizens are bailed out. It would boost the economy. Restore faith in the system!

View on HN

That might be nice, but... how, exactly?

By writing off the debts? That's not so nice for those who are owed. A bunch of those are pension funds, for example. If peoples' pensions get wiped out by by all debts being forgiven, they won't be so happy.

By the government giving money to people? But where does the government get the money? By taking on debt? Then the government's even more deeply in debt, which means that we the people still are in debt, too.

Or does the government just create more money? This might be the least-bad way of doing it, but it would still be hugely inflationary.

I guess creating more money as you wrote. I believe the government has boosted the economy by giving money to workers to fix things that are not necessarily at the end of life. So to boost the economy by adding more money into the system. I believe it would be a similar strategy.

So hyper inflation is your solution?

You can tell it's bad because of the "hyper"

It's "hyper" because it's "big and fast". Do you honestly believe that printing money to pay of all private citizen debt is a solution to anything?

I think it’s better than continuing to exploit the underprivileged. The persons who were either in one of the categories: uneducated, unfortunate, desperate, deluded/ill, or whatever it may be to how they didn’t have the variables & events needed to succeed compared to the ones that did. Add a forgiveness plan with some financial health classes and the community health will improve or the system is inherently socially poor and needs to adapt for persons who are destined to fail with the system that favors others unfairly.

Good intentions don't save bad policy from causing really bad effects. Venezuela was going to help the poor. Really, that was the intent. They wound up with the poor losing 15 pounds each because they can't get enough food. How did they get there? Well, there wasn't enough money to pay for all the things that the government wanted to do for the poor, so they printed more money. Then the next year, there still wasn't enough money, and prices had gone up, so they printed more money. And they wound up at runaway inflation. It's a real danger, to be taken seriously. Merely saying "it's better than the alternative" does not in fact make it better than the status quo, even for the underprivileged.

But there are two things that might prevent this idea from winding up at hyperinflation. First, it is a one-off. The government prints money to pay off everyone's debt. Now nobody has debt, so the government doesn't need to do it again. Except that having no debt didn't give me enough money to buy a house, so I still have to take out a mortgage, and behold, I'm in debt again. And it didn't give my kid enough money to pay for college, so she's in debt again. And now there's cries for the government to do it again. And if they keep doing it, then we're probably going to wind up in hyperinflation. (Especially because of incentives. If the government paid off all debts, and I think they're going to do it again, my incentive is to borrow as much as I can to buy anything I think I want, because to me, it will be free.)

The second way this might not wind up in hyperinflation is because of deleveraging. A bank has $100 on deposit. They lend out $90 (fractional reserve banking), and now $190 exists, but someone owes $90, so the net is still $100. Now the government prints $90 and pays off the bank. Now $190 exists, which is no change, but the net is now $190 instead of $100, which is a change. Is that inflationary or not? I don't know.

> By the government giving money to people? But where does the government get the money? By taking on debt? Then the government's even more deeply in debt, which means that we the people still are in debt, too.

But it's a lot easier to pay off, especially if you prioritize high risk debt to nationalize, so the government has a lower cost of borrowing (especially if the government, instead of paying off distressed debt, instead purchases it at current fair market value, since then the cost will be below the face value; “healthy” debts don't need a correction.)

That actually makes sense economically. Politically, though, what's going to happen is that people aren't going to want to pay taxes to service the government's debt (even if in advance they said they would). The consequences of the much-larger government debt without increased taxes could be anywhere from "somewhat negative" to "catastrophic".

Didn't work out so well in Mr. Robot.

I didn't watch it, what happened in the story?

They wipe out pretty much all debt and financial history. Although it doesn't apply to actually doing it because it was uncontrolled and caused the collapse of the dollar and was done in a way more like a terrorist attack than a debt forgiveness.

Reply on news.ycombinator.com