Is canceling student loan debt considered stealing?
Is canceling student loan debt considered stealing?
I have an economics teacher that made this claim in class yesterday. I wanted to know other people’s thoughts about it.
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No.
Stealing is usually defined as taking something that exists in a way that denies the original owner its use and grants the illegitimate owner its use.
This is how loans work in fractional reserve banking: loan provider has assets of $1 million, they loan out $10 million, having wholesale created the additional $9 million. If those loans are forgiven, but the original assets did not change, what has been stolen?
A fictitious amount of theoretical money.
If I make up an image, and I make a copy of that image that i send to you and you delete, but I get to keep the original, is that theft? No. Obviously not. Made up money is no different.
You can't just destroy money. With fractional reserve banking any bank can create money, but they can't destroy it. Only the Fed can "destroy" money by buying bonds back and not reselling them. Forgiving a is a loss to the lender, in the case of student loans, the government guarantees them, so the lender gets made whole and the government assumes the debt on behalf of the borrower.
The image is a poor analogy because unlike when someone creates an image or any form of art, when a borrower takes out a loan, the lender records a receivable as an asset and the borrower's account as an offsetting liability. Once this happens, the loan cannot then just be magically erased—somehow, some way, the lender must be made whole again. In the case of loan forgiveness, it comes out of the tax payers' pockets. Whether that's theft or not is a separate topic, and I think another commenter covered it well by comparing it to any other government program or subsidy.
No it can be 'magically' erased, it was 'magically' created out of thin air with nothing backing it. The money doesn't actually exist, the asset for non existent money can simply have zero value. Loans are erased this way literally constantly. In fact more loans are erased this way than actually paid, if only by volume and not purported value. This is what happens when you default and no value is reclaimed on a loan, or when one defaults on a healthcare bill with an arbitrary price tag.
There is absolutely no reason, whatsoever, the lender has to be made whole. That's not a thing in other circumstances where loans lose all value and the money created for them disappears.
When a borrower becomes insolvent and the loan cannot be repaid, the lender records it on their books as a loss. They cannot just pretend the loan never happened.
Of course, now we're mixing subjects because OP asked about student loan forgiveness, which would necessarily come out of tax payers' pockets (not the same as when a lender takes the L because the loan cannot be repaid).
It doesn't have to come out today tax payers pockets, that's the entire thing. The money doesn't exist, the debt doesn't exist.
We made up this system specifically so we didn't have to keep exact books, that's the point of fiat currency over backed currency. If we don't use its primary feature for good, ever, we may as well go back to the gold standard which would elimate nearly all banks and lenders at this point in the capitalist finite curve.
Fractional reserve banking does not mean the debt does not exist. The debt very much exists. Nobody takes out a loan and just sits on it. As soon as the loan is created, goods and services are traded. At the end of the day, each party to downstream transactions can go to the bank and withdraw the balance of their account in cash. The fractional reserve system only works as long as not everyone does this at once.
Except it's new money that's made up, and in the case of student loans, most of that money isn't traded for goods and services, instead more than 3/4s of the money created goes back to the lender.
Looks like we are not going to agree on this, which is okay—I enjoyed the discussion nonetheless. Have a nice day.