Saturday, November 1

Leftist: Hey, here's a great idea! Let's forgive all personal debt!

Most people on the political Left seem only slightly familiar with logic--which is no disadvantage when it comes to leading what passes for thought on the Left.

A writer for the Vox blog illustrates this perfectly, in a post commenting on an article written by Russell Brand--who I gather is some sort of entertainer--about what a great idea it would be if the government ordered that all personal debt was immediately cancelled.

Of course neither Brand nor the Vox blogger actually uses the phrase "...if the government ordered..."  Because of course who else would have the power to do that?  Instead they couch it in the passive tense:  "What a good idea cancelling personal debt would be," as if it just happened all by itself.

Gosh, this seems oddly familiar.  Have we seen this before?

Why yes, we have!  It's the same basic idea as Obamacare ("you can get free health care"), Obamaphones or any other liberal/"progressive" program:  If you elect us, our party will have the government give you free stuff.  All you want.

Here's the core 'grafs:
The key issue is...if a debtor gets an extra dollar he's likely to spend it on current consumption, whereas a creditor is likely to save it. In a full-employment economy, reducing the creditors' savings reduces the pool of capital available for investment. That raises interest rates and slows investment, even as the new money in the pockets of debtors raises consumption. The economic impact is neutral in the short-term, and by reducing investment you get a negative long-term impact.

But if the economy isn't at full employment — i.e., it's in need of stimulus — then this works differently. Because inflation is low, the central bank will keep interest rates low regardless of the diminished pool of capital. But the newly enriched debtors will still raise their level of consumption, boosting the economy. Even better, with more demand for consumption goods in the economy, companies may even be inspired to invest more. That boosts the economy's long-term prospects.
It's hard to cram as much ignorance into a single paragraph as the writer did in that second 'graf.

There's no doubt that forgiving all debt would unlease a torrent of consumer spending.  And the guy correctly sees that wiping out creditors' investments would "reduce the pool of capital available for investment."  He concludes in a full-employment economy" the long-term impact would be negative.

But see how deftly he waves away that profound negative in the second 'graf:  He argues that "the central bank will keep interest rates low regardless of the diminished pool of capital."  But of course even rock-bottom interest rates only help if a bank is willing to loan money to borrowers.  If the government has just forgiven all debts, how eager does he think banks will be to loan more money?

If the government is powerful enough and ruthless enough to forgive all personal debt once, what would keep it from doing so again?  But no matter--with "newly enriched debtors" flooding the markets with spending, all will be just super.

Ponder that phrase "newly-enriched debtors" for a moment.  One wonders if the writer would use the same euphemism for a bank robber or mugger:  Not violent or lawbreaking, merely...newly enriched.  This tells you almost everything you need to know about the guy's worldview.

One wonders if the writer has heard of Venezuela:  The socialist government of that country decided businesses were making too much profit, so they simply seized half a dozen businesses that they accused of setting prices too high.  This caused all businesses to double their efforts to sell goods at no profit, and now Venezuela is awash in products and the country's economy is roaring.

Just kidding, of course:  Other businessmen saw the trend and said "I don't think we should be doing business under this lawless government--let's go somewhere else!"  The supply of virtually everything got smaller and smaller.  Even the price of coffee went through the roof--in one of the world's largest coffee-exporting nations!  Now the government has started rationing food.

Yeah, that worked reeeally well.

But to leftists/socialists/"progressives" all such programs are a great idea, and in Left-thinking they should work.  So if they fail it's either because they were sabotaged by mysterious forces ("reactionaries", "counterrevolutionaries") or because they didn't go far enough.

It'll be interesting to watch this proposal gain momentum in chic leftist circles.  Hey, if you're a leftist/Democrat how can you not like something that give everyone thousands of dollars to spend, while penalizing only "rich" savers and banks?

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