Re:Student Debt Payback Far Worse Than Believed
by alexpetralia on Thursday January 19, 2017 @08:47AM
(#13435686)
I think (3) is a very important and debatable point.
Important because, as you mentioned, there is a very large difference in marginal propensity to consume between 'hand-to-mouth' consumers and savers - this affects the velocity of money and GDP. Debatable because at the zero-lower bound, how much effect the Fed really have is very much in question (see: excess reserves at https://goo.gl/NQG2O5).
I personally would disagree - money funneled to creditors rather than in the hands of consumers is more harmful to the economy than the reverse, but is that money passed to capitalists (low consumption) or used for business investment (high investment)? That being said, consumption is about 70% of GDP.
Important because, as you mentioned, there is a very large difference in marginal propensity to consume between 'hand-to-mouth' consumers and savers - this affects the velocity of money and GDP. Debatable because at the zero-lower bound, how much effect the Fed really have is very much in question (see: excess reserves at https://goo.gl/NQG2O5).
I personally would disagree - money funneled to creditors rather than in the hands of consumers is more harmful to the economy than the reverse, but is that money passed to capitalists (low consumption) or used for business investment (high investment)? That being said, consumption is about 70% of GDP.