As it stands, money never really sits around doing nothing. It's on some banks balance sheets and so it's loaned out, then repackaged and sold to organizations seeking safe places to park money. This repackaging of debt has been a huge boon to the US economy in the short term. But, it's only a long term gain if people actually default otherwise it's just a long term drain for a short term boon.
The wider problem is there is more 'money' than productive usage for that money which means bad loans, and wealth destruction. Arguably the solution is to have money sit around without being loaned out.
Firstly, the debt burden is only diffused because those "mustache twirling CEOs' decided it should be.
Pensions used to work just fine before they were financialised by sharks. So did insurance.
No one sane should be trying to increase the returns on a pension fund by gambling on student debt, on real estate loans, or on consumer credit.
That was exactly the approach that caused the implosion of 2008 - or more specifically, it was "mustache twirling CEOs" hiding the fact that the investments they were selling as a sure thing were junk loans with a cheap wood veneer.
Secondly, even if this wasn't true, the social and economic costs of an economy that runs on usury instead of productive investment are so predictably crippling that the hair cut, with associated uncontrolled demolition, will happen anyway.
A debt jubilee would do a lot to restore confidence, because everyone will be able to stop looking nervously at everyone else's obligations and wondering if they're going to be able to meet them. Instead, some realism will be restored to book values.
This would still be cataclysmic, because the financial industry needs to understand that it can no longer run on cocaine and bullshit.
But it won't be the financial equivalent of a self-inflicted nuclear strike, which is a real possibility as things stand today.
Oh yeah, I'm sure the creditors will be highly confident about future lending after a jubilee, because they went from wondering if debt will be repaid...to knowing it won't.
Where do people come up with this stuff?
I'll bet most of them already know. Start with nothing, work hard, save money for retirement, lend it to entitled students and have them not only stiff you, but also spit in your face.
That seems fair.
Let's hold the boomers+ to the fire. And the banks.
There are going to be some disappointed Boomers in the next decade, when looking to sell their main asset, upon discovering nobody can or will pay their inflated prices.
Additionally, anyone making loans is already considering the risk of a debt jubilee when making loans now. After a debt jubilee of course the risk of recurrence is higher, but the risk assessment for banks would not be magnitudes different in the medium term.
Oh no no... I don't want people to picture an old hag sucking the blood of infants.
To clarify, I was using "grandparents" as a single example to humanize what a "creditor" was. We have met the creditors and they are us.[0] When society complains about the unfairness of student loan debt, we tend to think of the creditors as something abstract and invisible.
The total student debt is ~1.3 trillion[1]. If forced to picture who is owed that money, maybe college kids would think of some evil mustache twirling CEO of Goldman Sachs or Chase Bank. Sure, some fraction of a fraction of the interest payment does go to executives like them but the vast majority of the money goes to us.
That 1.3 trillion is diffused throughout the economy. The pensions of police officers, firemen, and teachers. The car insurance premiums we pay is priced a certain way based on investments that point to those college loans. Etc etc.
At the moment, the struggling college grads are "visible" and the creditors seem "invisible" but trust me, if a political movement gathers steam to ask Congress to forgive those loans, all those invisible creditors will come out of the woodwork at Congressional hearings and fight it.
Trying to convince millions of us to zero out the balance sheets for those student loans will be a huge uphill battle.
[0]riff on: https://en.wikipedia.org/wiki/Pogo_(comic_strip)#.22We_have_...
[1]http://www.marketwatch.com/story/every-second-americans-get-...