Potemkin wrote:1] Agreed. Please point out any false premises you think I have used.
2] Our thoughts about the world are not the world itself. They are a map of the world. And like any map, it must be simplified in order to be useful. As Einstein pointed out, our theories about the workd must be as simple as possible, but no simpler.
3] Agreed, but this is a separate issue. It’s a critically important issue, but is not relevant to the truth or falsehood of my argument.
4] Agreed.
5] Those two sentences contradict each other. As I have pointed out, the loans given by a bank are indeed created out of nothing, but to avoid damaging the economy they must be destroyed by being repaid.
6] But for this new money not to ruin the economy, the goods and services it represents must be available. The new money just mobilises those unused resources. It does not and cannot create them.
Lurker, you may need to see the last reply on page 2 to understand my reply here.
1] You keep asserting that forgiving student loans will damage the economy. As an assertion without a proof, it is a premise, and it is IMO, false.
. . It is false because the active economy needs to have the active dollars that it looses replaced in some way. This is just one of the ways this can be done.
. . MMT assumes that the $/capita should not fall, because when it falls it will soon trigger a recession, which will make it fall faster.
. . Dollars can be removed from the active economy in a few ways. They are by borrowers making payments on their loans (you have said as much), being moved overseas by buying more stuff than we sell, being saved with a US bond or parked in a savings acc., and functionally as the population grows, etc. Note that, US deficit spending that is matched with a bond sale doesn't add dollars to the active economy.
[I know that MS Econ. claims that it does. But, from 1990 or so until 2020 (=30 years) there were deficits almost every year (the national debt increased in every year) and yet inflation was low. MMt asserts this was because of the matching bond sales.]
. . Dollars are added to the active economy in a few ways. They are, when a bank makes a loan (you agree with this), when the Fed buys a US bond, when borrowers stop making payments because their loan was forgiven, etc. Also, when a foreigner buys a US a new US bond, because this allows an equal amount of deficit spending, which adds the dollars. This is dollars returning to the active economy.
2] I take Einstein's statement to be that you must not over simplify the model or map in your head or the theory you are making. Since, I have not seen what you are leaving out of you map to make it simpler, I can't say that you have over simplified for sure. However, because you are getting (IMHO) the wrong answer, I must assume that you have left out some important element that would have made your map conform to reality better, and then you would have gotten the right answer.
3] I'll agree, however you did agree that my point was critically important on a different front. And, I still am asserting that you claim that forgiving the student debt will harm the economy is false. BTW -- I have seen where Stephanie Kelton (a leading MMTer) has said that she has done a deep study on the effects on the economy of forgiving all student debt and that the net result was very good for the economy.
4] Skip because you agreed with me.
5] No they do not *directly* contradict each other. If you are referring to the assumed damage to the economy and how it damages someone, then you are assuming the damage which I reject. You have yet to more than assert that there will be damage. In this reply above I asked you to provide a proof of that assertion.
6] Although "ruin the economy" is stronger than your earlier "damage the economy", you are not disagreeing with what I said. I said that excess additions of dollars into the active economy doesn't damage the economy by causing inflation as long as there is unused labor and the other resources to do what the new money is intended to do. But, remember that businesses only invest in new plant to fill a need/demand already exists or they see it to soon exist (perhaps created by the comp. own advertising). So, adding new demands can cause more investment to meet those demands, and this grows the economy.
So, I'm waiting for your proof that the economy is going to be damaged by forgiving the student loans. Without this proof, you assertions carry no more weight than Truth to Power's assertions that increasing CO2 levels aren't causing climate change. After I see your proof, I *will* agree with it or show where it is wrong.
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