# What if we just Forgive Everyone's Debt? **URL:** \ **Category:** Great Debates\ **Created:** [November 3, 2011, 2:37pm UTC](https://boards.straightdope.com/t/what-if-we-just-forgive-everyones-debt/601743 "2011-11-03T14:37:53Z")\ **Posts on this page:** 14\ **Page:** 3
**Author:** ![Spoke](https://avatars.discourse-cdn.com/v4/letter/s/a88e57/32.png) [@Spoke](https://boards.straightdope.com/u/Spoke)\ **Post date:** [November 3, 2011, 10:21pm UTC](https://boards.straightdope.com/t/what-if-we-just-forgive-everyones-debt/601743/41 "2011-11-03T22:21:25Z")
> [@brazil84](#): > > That’s not true, private student loans were still being made back then. I knew plenty of students who took out private student loans. Lenders were just more careful then than they are now. And tuition was lower because of this. If Congress hadn’t exempted student loans from discharge in bankruptcy, tuition would be at more reasonable levels now. Skyrocketing tuition has been an unintended consequence of that move. ---
**Author:** ![foolsguinea](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/foolsguinea/32/14751_2.png) [@foolsguinea](https://boards.straightdope.com/u/foolsguinea)\ **Post date:** [November 3, 2011, 11:17pm UTC](https://boards.straightdope.com/t/what-if-we-just-forgive-everyones-debt/601743/42 "2011-11-03T23:17:56Z")
> [@Rand\_Rover](#): > > One of the main points of fiscal liberalism is to slow things down so that economic elites who got there in a way they can’t replicate (ie, “limosine liberals”) can stay there. That is a pretty fair description of conservatives & the more cynical Whigs. > [@](#): > > You can see their handiwork in many European countries, with their high unemployment, brain drain, and general economic stagnation. And employment and material progress are booming in more _laissez-faire_ economies? :dubious: ---
**Author:** ![XT](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/xt/32/456_2.png) [@XT](https://boards.straightdope.com/u/XT)\ **Post date:** [November 4, 2011, 2:40am UTC](https://boards.straightdope.com/t/what-if-we-just-forgive-everyones-debt/601743/43 "2011-11-04T02:40:28Z")
> [@](#): > > So presuming God came down to the UN and announced a worldwide debt forgiveness, what would likely happen? It depends…is God going to make good on all the debts by reimbursing all of the holders of debt with something of comparable value? If not, then is God going to provide loaves and fishes when we go into total and complete economic collapse? If so, then perhaps it will have a happy ending. If not then I’d say that it will be pretty grim as every financial institution world wide goes into simultaneous default and collapses. That could be…bad. Or, it could be good, as it’s the dream of some folks to try and survive in a total world wide economic collapse and take up again the noble mantle of hunting and gathering, as humans were meant to be… -XT ---
**Author:** ![ataraxy22](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/ataraxy22/32/307_2.png) [@ataraxy22](https://boards.straightdope.com/u/ataraxy22)\ **Post date:** [November 4, 2011, 3:33am UTC](https://boards.straightdope.com/t/what-if-we-just-forgive-everyones-debt/601743/44 "2011-11-04T03:33:49Z")
The scenario proposed in the OP sounds like hyperinflation to me. ---
**Author:** ![Wesley\_Clark](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/wesley_clark/32/20581_2.png) [@Wesley\_Clark](https://boards.straightdope.com/u/Wesley_Clark)\ **Post date:** [November 4, 2011, 3:49am UTC](https://boards.straightdope.com/t/what-if-we-just-forgive-everyones-debt/601743/45 "2011-11-04T03:49:02Z")
No one would ever loan money again because it would destroy peoples faith in the system. But the assets would still be there. All the houses, cars, commercial buildings, household goods, health care procedures and years spent in college people went into debt for would still have existed. Anyway, I don’t know. It just seems like it would destroy any opportunity for credit in the future, which would badly mess things up. ---
**Author:** ![XT](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/xt/32/456_2.png) [@XT](https://boards.straightdope.com/u/XT)\ **Post date:** [November 4, 2011, 3:56am UTC](https://boards.straightdope.com/t/what-if-we-just-forgive-everyones-debt/601743/46 "2011-11-04T03:56:53Z")
Look at Greece and whats happening with just that situation. Consider that the people who hold their debt are being asked to forgive something like half of their debt, and how just that is causing as much of a fuss as it is…and what a Greek default would mean. And this is just Greece for the gods sake! Consider what would happen if it was the US instead. :eek: Then multiply that by every nation on earth. Then add in all the other debt. Around the time you got to the US it would be time to go back to those joys of hunting and gathering… -XT ---
**Author:** ![Spoke](https://avatars.discourse-cdn.com/v4/letter/s/a88e57/32.png) [@Spoke](https://boards.straightdope.com/u/Spoke)\ **Post date:** [November 4, 2011, 4:33am UTC](https://boards.straightdope.com/t/what-if-we-just-forgive-everyones-debt/601743/47 "2011-11-04T04:33:19Z")
So what happened to personal debt in the wake of the French Revolution? Would that be instructive? (I don’t know the answers, I’m just asking.) (I am pretty sure the French didn’t go back to being hunter-gatherers, though.) ---
**Author:** ![Terr](https://avatars.discourse-cdn.com/v4/letter/t/839c29/32.png) [@Terr](https://boards.straightdope.com/u/Terr)\ **Post date:** [November 4, 2011, 4:52am UTC](https://boards.straightdope.com/t/what-if-we-just-forgive-everyones-debt/601743/48 "2011-11-04T04:52:15Z")
> [@foolsguinea](#): > > And employment and material progress are booming in more _laissez-faire_ economies? :dubious: > **[(05/18/11) Singapore’s Booming Market Blossoms](https://www.moneyshow.com/articles/global-23132/singapores-booming-market-blossoms/)** > > Asia’s—and perhaps the world’s—best-managed economy offers go-go growth with less volatility than its neighbors, writes Yiannis G. Mostrous in > **[KC Chan on steering a booming Hong Kong economy](https://www.telegraph.co.uk/finance/financetopics/profiles/8571106/KC-Chan-on-steering-a-booming-Hong-Kong-economy.html)** > > Robust economic growth. Low unemployment. Largely unscathed from the financial crisis. It's lucky KC Chan isn't one to gloat – he'd be pretty insufferable otherwise. ---
**Author:** ![waterj2](https://avatars.discourse-cdn.com/v4/letter/w/858c86/32.png) [@waterj2](https://boards.straightdope.com/u/waterj2)\ **Post date:** [November 4, 2011, 5:23am UTC](https://boards.straightdope.com/t/what-if-we-just-forgive-everyones-debt/601743/49 "2011-11-04T05:23:09Z")
> [@xtisme](#): > > Look at Greece and whats happening with just that situation. Consider that the people who hold their debt are being asked to forgive something like half of their debt, and how just that is causing as much of a fuss as it is…and what a Greek default would mean. And this is just Greece for the gods sake! Consider what would happen if it was the US instead. :eek: Then multiply that by every nation on earth. Then add in all the other debt. Around the time you got to the US it would be time to go back to those joys of hunting and gathering… > > -XT The people who hold Greece’s debt are largely a bunch of German and French banks who should have known in advance that they were lending money to a bunch of corrupt politicians who were only barely hiding the fact that they were cooking the books in every possible way. Of course, they lent the money believing that the population of Greece would remain on the hook for the debt regardless of what became of the politicians and the money they borrowed. I have no sympathy for the bankers who made these loans. They fucked up, and should take a hit for it. As it turns out, though, those banks are “systemically important” so something is going to have to be done. Good luck to everyone with that. I have no idea how a jubilee would work, but I did recently read David Graeber’s book (I’m pretty sure he’s the guy the OP is referring to) on debt. I think he does make a good case that the general history of lending money at interest has periodically led to debt crises, which are followed by various forms of debt forgiveness. All the way back to ancient Sumeria, the kings felt the need to cancel all debts when things got out of hand. Bankruptcy laws are a form of this as well. Or, there’s always the option of strict laws against usury, such as those that Muslim traders adhered to during the middle ages, which was pretty much their heyday. I like this quote from the book about why it’s important that lenders have real chances of taking losses (unlike our current student loan system): > [@](#): > > If a bank were guaranteed to get its money back, plus interest, no matter what it did, the whole system wouldn’t work. Say I were to walk into the nearest branch of the Royal Bank of Scotland and say “You know, I just got a really great tip on the horses. Think you could lend me a couple million quid?” Obviously they’d just laugh at me. But that’s just because they know if my horse didn’t come in, there’d be no way for them to get the money back. But, imagine there was some law that said that they were guaranteed to get their money back no matter what happens, even if that meant, I don’t know, selling my daughter into slavery or harvesting my organs or something? Well, in that case, why not? Why bother waiting for someone to walk in who has a viable plan to set up a laundromat or some such? Basically, that’s the situation the IMF set up on a global level—which is how you could have all those banks willing to fork over billions to a bunch of obvious crooks in the first place. ---
**Author:** ![Senegoid](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/senegoid/32/6606_2.png) [@Senegoid](https://boards.straightdope.com/u/Senegoid)\ **Post date:** [November 4, 2011, 5:35am UTC](https://boards.straightdope.com/t/what-if-we-just-forgive-everyones-debt/601743/50 "2011-11-04T05:35:58Z")
> [@brazil84](#): > > It reminds me of peoples’ thinking about polygamy. Lots of men seem to think it’s a great idea that they can have multiple wives; it doesn’t occur to them that more likely than not, some other guy (who is more handsome, powerful, richer, etc.) will end up with the girl he would have otherwise married and he will get either nothing or a girl who is far less attractive. > > Or peoples’ thinking about student loans. It seems like a great idea that they can borrow money for their education; it doesn’t occur to them that other students will be borrowing money and bidding up tuition levels. > > Is there a name for this fallacy? I see there have been two suggested names for this in various posts up-thread. Here is what I see: Polygamy sounds really neato-keeno as long as only you (or only a very few) are doing it. But as soon as _everybody_ (or substantially many) start doing it, the advantage is lost. Likewise, if enough students borrow for tuition that tuition really gets bid up, then the advantage of borrowing for tuition could be lost. An example I like to use: Once upon a time, an airline thought they could get a competitive advantage by showing in-flight movies. Of course, they had to pay costs for this. (Installing the equipment in planes, renting the movies.) Next thing you know, EVERY (well, almost every) airline is doing it. Now, nobody gets the competitive advantage any more, while they are ALL still paying those extra costs. Oops. There is a well-known name for this fallacy: It is the [Fallacy of Composition](http://en.wikipedia.org/wiki/Fallacy_of_composition) (Note, though, the examples there either aren’t really what **I** think of as Fallacy of Composition, or are very weak examples. The idea, to me, is really along the lines of “It may be okay if just you, or just a few, do \, but what if everybody starts doing it?” Judges are fond of asking this question in court cases. ---
**Author:** ![brazil84](https://avatars.discourse-cdn.com/v4/letter/b/8491ac/32.png) [@brazil84](https://boards.straightdope.com/u/brazil84)\ **Post date:** [November 4, 2011, 12:34pm UTC](https://boards.straightdope.com/t/what-if-we-just-forgive-everyones-debt/601743/51 "2011-11-04T12:34:10Z")
> [@smiling\_bandit](#): > > As I understand it, until the law changed student loans were almost always required to be cosigned. Changing that law worked in favor of those who didn’t have convenient parents available. Aside from which, the feds are not going to write off a big chunk of money they have coming. Again, that’s just not true. I knew lots of people who took out student loans without a co-signer. And by the way, in the days before student loans it was possible to work your way through college and even law school just by working a minimum wage job part time during the school year and full time in the summers. The vast majority of benefits of student loans goes to colleges and universities who are reaping a massive windfall - not students. ---
**Author:** ![yelimS](https://avatars.discourse-cdn.com/v4/letter/y/54ee81/32.png) [@yelimS](https://boards.straightdope.com/u/yelimS)\ **Post date:** [November 4, 2011, 2:33pm UTC](https://boards.straightdope.com/t/what-if-we-just-forgive-everyones-debt/601743/52 "2011-11-04T14:33:01Z")
> [@Senegoid](#): > > An example I like to use: Once upon a time, an airline thought they could get a competitive advantage by showing in-flight movies. Of course, they had to pay costs for this. (Installing the equipment in planes, renting the movies.) Next thing you know, EVERY (well, almost every) airline is doing it. Now, nobody gets the competitive advantage any more, while they are ALL still paying those extra costs. Oops. > > There is a well-known name for this fallacy: It is the [Fallacy of Composition](http://en.wikipedia.org/wiki/Fallacy_of_composition) I don’t see the connection between the fallacy of composition as it is presented in wikipedia, and the issue with the airliners, student loans, &c. However, there’s a clear parallel to biology, where you get [arms races](http://en.wikipedia.org/wiki/Evolutionary_arms_race) and [runaway selection](http://en.wikipedia.org/wiki/Runaway_evolution). The problem is that the benefit of doing something is relative to what the others are doing, but costs are increasing absolutely. Does anyone know how the jubilees used to work? Was there really a grand scale forgiveness of debts? What consequences did it have then? ---
**Author:** ![smiling\_bandit](https://avatars.discourse-cdn.com/v4/letter/s/e9a140/32.png) [@smiling\_bandit](https://boards.straightdope.com/u/smiling_bandit)\ **Post date:** [November 4, 2011, 3:21pm UTC](https://boards.straightdope.com/t/what-if-we-just-forgive-everyones-debt/601743/53 "2011-11-04T15:21:53Z")
> [@brazil84](#): > > Again, that’s just not true. I knew lots of people who took out student loans without a co-signer. I can’t really respond to your personal experience. > [@](#): > > And by the way, in the days before student loans it was possible to work your way through college and even law school just by working a minimum wage job part time during the school year and full time in the summers. I agree. Grenn Reynolds has a long-running series on that very subject, and it’s a very persuasive case. All the same, I note that the student-loan market exploded after the law came into effect, which tells me that far more people were willing to lend. Insuspect the issue may lie in the fact that it’s not easy to expand the number of credible universities, so that the demand (in money and students) was less constrained than the supply (of schools). ---
**Author:** ![brazil84](https://avatars.discourse-cdn.com/v4/letter/b/8491ac/32.png) [@brazil84](https://boards.straightdope.com/u/brazil84)\ **Post date:** [November 4, 2011, 4:10pm UTC](https://boards.straightdope.com/t/what-if-we-just-forgive-everyones-debt/601743/54 "2011-11-04T16:10:03Z")
> [@smiling\_bandit](#): > > I can’t really respond to your personal experience. Well, you could respond by explaining how you came to believe what you said about co-signers. > [@](#): > > All the same, I note that the student-loan market exploded after the law came into effect, which tells me that far more people were willing to lend. Sure, but it would not be a disaster or even end student loans if we turned the clock back 10 years. [Previous page](https://boards.straightdope.com/t/what-if-we-just-forgive-everyones-debt/601743.md?page=2)