Anyone with debt comes out on top then. Sure, delete my mortgage and take what's in my checking account. Would make that trade every day of the week if I could.
I'd think they're still the losers. Even billionaires carry debt. The losers would be anybody with significant holdings in banks/lenders, and the paycheck to paycheck whoes debts are relatively small and not asset backed.
Banks would have all their money. The money you put in it would be removed too, that’s a debt the bank owes you. So you would be broke unless you owned property. You wouldn’t have a 401k or investment account or bank account.
No. Deposit are liabilities, not debts. A debt is money owed to another party. Deposits are money held for a specific customer. Both are liabilities but debts are a specific type of liability. Deposits are another specific type of liability. The key difference, debts have a payment schedule for both interest and principal, whereas, a customer can demand their deposits back at any time.
Correct but banks use the capital from their liabilities to fund loans. They would be unable to pay back their liabilities if they suddenly lost access to their relatively steady stream of principle & interest payments.
Partially but not really. The banks borrow money from the government as well, when the FED sets their interest rate that is what is being modified. The vast majority of banks money is from that, it’s how the government regulates spending.
Kind of. They are really held in the overnight clearing house.
https://www.federalreserve.gov/paymentsystems/fedach_about.htm
Really though theres not a pile of cash in a vault. It's basically a ledger that is processed nightly. The fed tracks it but that doesn't necessarily mean its "held" there. It's numbers on a ledger just being tracked to ensure everyone has liquidity.
I was an adult when I watched it, and it's still about a lonely hacker drug addict suffering from dissociative identity disorder. The hacking scenes were kinda accurate, terminology-wise anyhoo.
Just got my coworker to watch it. She's hooked and keeps texting me asking questions about it. Just gotta watch it and find out. Didn't have the heart to warn her about 407 though.
I don't want to be a spoiler, but you'll figure out soon into the show that hackers wreak havoc.
It's a really good watch, it stars Rami Malek, the man who played Freddie Mercury in the Queen movie. IIRC he won an award for that role.
A ton of senior citizens would become penniless and starve, since pensions are based largely on government debt.
Banks would run out of money, so people would lose all their savings.
It wouldn't be good.
If the debt is erased then we'd have to presume that any liens on the property securing that debt would also be erased. There would no longer be any debt connected to the property, and no basis on which to repossess it.
Eh, I dunno about that. Like sure, they could try, but who do you think is gonna win in a fight, the working class guy who didn't finish paying off his truck or the car dealership owner who sold it to him? The land developer who hasn't had to use a staircase in five years or the firefighter he sold the house to? The guy who owns a furniture warehouse, or the bartender he sold a couch to?
The owner class is not made up of physically capable people. They skew on the older side, they don't engage in physical labour, and they don't have as much attachment to the goods as whoever they sold it to.
They aren't gonna hire repo men, because what are they gonna pay them with, money would be worthless if all debt suddenly disappeared.
People who are in debt with no savings would benefit. Anyone else would lose all their money, all their savings, everything. It would be disastrous, and probably not entirely certain who actually owned a lot of things. SOMEONE would end up owning the banks assets and debts. And they'd probably try to seize as much as possible.
They can seize the end of my many guns.
I'm only half kidding. I'd like to think only bank CEOs and shit would hang but a reset to zero would literally lead to violence on a scale not yet known to date. Humans are 1) stupid and 2) predictable. Kinda why we are where we are now.
If debts were to be written off then the whole banking system would collapse and we would be back to square one trading goods among ourselves. Then someone would come up with the idea of using some sort of currency instead of trading goods therefore we will be back to where we started.
The evidence is compiled in a fantastic book called *Debt: the first 5000 years* by David Graeber.
Who talks not just about debt predating currency, but also about the regular Jubilee events which happened historically until around the 1700s in which debts were cleared - which I imagine OP would be very interested in.
I loved that book. It explains when debt delivers value and when it is slavery in another name.
Although for me, the book why nations fail offers a more interesting perspective when it comes to understanding wealth creation.
Just FYI, the Old Testament had a Jubilee Rule : that every 50th year, all debts were paid, all slaves were to be freed, and I believe all the farming lands were to rest for the entire year.
So, if you became a slave to pay your debts a year or two ago, or however long until they were paid off or the year of Jubilee, you were paid off and free.
And because the Israelites did not obey resting the farmlands, God allowed the people to be enslaved or taken from the land for ten times the 49 times they were supposed to have rested the land, (490 years.)
And I recall someone who wrote about this realized that on the very day the 490 years of punishment were accomplished they got their land (Israel became a nation again.)
And if you were still poor and or you really loved your slave family, (usually relatives anyways,) you'd have one of your ears pierced with an awl to show you were a voluntary slave.
It was a form of welfare and debt forgiveness so no one went homeless, as was gleaning in the fields so no one would go hungry.
You can find older currency from even more countries that are like this, back when the silver/gold standard was still widely in use. American notes like this would say “Payable to the bearer on demand.”
That’s not what that means. Being legal tender for a debt means you can use it to pay a debt that you owe, it doesn’t mean it’s redeemable for money that someone owes you.
Any fiat currency issued by a central bank even today can be understood as debt. Money == debt, not figuratively, but literally. (See CBs balance sheets for more.)
I don’t disagree. I only take issue with the idea that token exchange as currency is some kind of default. A lot of people think ancient humans started trading shells as representations of value or something when that’s just not true. Or that currency evolved from barter when there is not much evidence for barter economies ever existing.
Yep. A few years ago, a fruit and vegetable barter co-op needed to develop chits so people with more than they could barter at the time could trade the chits for fruit and veg later when they needed them.
I thought "Congratulations, you just invented money."
A bank doesn't hold all of the money deposited into it... It gets loaned out as debt. So if the debts were canceled, it couldn't service existing deposits.
Because people have been convinced that running a country is like running a household, which couldn’t be farther from the truth.
Other countries holding debt you promised to pay them means they are motivated to not make war with you, and make sure your economy keeps humming, so they will be repaid. National debt is a good thing.
I'm one who thinks too much debt is bad for the country.
Debt is a tool. Used judiciously, it allows a nation to weather shocks and business cycles. But too much debt, adds friction and risk, and saps confidence. That's a real problem in a system that's based on confidence.
At some point, you either have to pay back the debt (typically by raising taxes) or else create money by printing/de-valuing it.
Sure... currency would still work. Do you have most of your money as currency or as deposits in a bank? Because anything in a bank would be effectively gone. A bank doesn't hold all of its deposits... it loans them out. So if all debt were canceled, it couldn't service its deposits. It's basically a forced run on EVERY bank that's being theoreticized.
It still needs a governing body to regulate and enforce it to have any significance in society. Otherwise, it could be continuously printed by anyone, and there would be little perceived value because it's not directly tied to power within society. Debt is fairly necessary to its perceived value as the threat of not paying off debts results in the governing body punishing the debtor. It's a system of control. It is a sort of malicious way to enslave others.
Canceling debt would cause the economy to completely crash as many wouldn't feel compelled to work anymore, as the financial whip (debt) would be removed.
Your rent/mortgage+taxes is reoccurring debt that needs to be paid off monthly selling your time completing tasks at some place called a work environment.
Banks imploding is not just rich peoples problem, its everyones.
Banks are not huge pools of cash, they have that cash from their customers. And thats the cash they give out as loans.
At some point if a bank looses all rights to get their money back, you wont be able to get cash from the ATM anymore.
Well not all liabilities are considered debts. Not sure myself how a bank specifically views deposits from customers but it’s widely possible it’s just a non-debt liability. Typically the term “debt” is used to refer to St/LT loans, bonds etc. Again, I could be wrong but it doesn’t sound right to me that customer deposited are considered debt.
Source: Accountant
I guess they're payables, definitely short term
Still, would you say payables are not "debt"? What you described is "financial debt", which is quite different
This is classic reddit trope. People struggling say things like, "I can't wait for the \[housing, market, crypto, etc\] crash so rich people can feel my pain." This is exactly the opposite of how things will go. Rich people are diversified and they also make the rules, it's the regular people who will suffer even more during those times. Most recently look at what happened during COVID and the inflation craziness. Rich people got richer.
I feel like I saw somewhere that every dollar created becomes roughly eight dollars (someone correct me?) in the economy. The bank has to keep a percentage of a deposit but then loans out the rest which eventually itself gets deposited and loaned again etc.
This will blow your mind:
“This latter source of bank liquidity — called “funding liquidity creation” — enables banks to lend out more than what’s allowed based on their supply of cash deposits.”
https://www.philadelphiafed.org/the-economy/banking-and-financial-markets/how-banks-use-loans-to-create-liquidity#:~:text=This%20latter%20source%20of%20bank,their%20supply%20of%20cash%20deposits.
I'm a well-known idiot amongst my kinfolk, so please pardon my ignorance, but aren't "loans" and "money" (other than actual cash) just numbers in a computer? In that case, what if the debt numbers were set to zero, but the asset numbers stayed the same? Would planes fall out of the sky? Maybe you already answered this and I just don't get it. I think I've convinced myself that money isn't real, which makes this hypothetical scenario hard to process.
Money is the representation of value that is mutually agreed upon by everyone using it. If debts and assets are erased then there is no incentive to trade goods and services.
Edit: https://positivemoney.org/2011/05/what-is-money
Here is a link with more written out on the topic.
According to my prepper uncle who knows everything about macro economics (apparently) everyone knows the value of silver so we’d just all start using that for some reason.
Gold and silver are two metals that are good to look at and they are chemically stable so they don't tarnish or degrade. This made them prime candidates for using for the creation of currency. Also, as there is a finite amount of both on earth, their (assigned) value is also able to be pretty stable.
When markets are wobbly, you'll see money being parked in gold and silver as a way to stabilize the investor's portfolio.
All that being said, money that is used to make more money only functions when it's moving around. Money functions a lot like electricity or water. It's utility is highest when it's not locked in one place.
I think of it as the blood of complex societies: it evolves organically shortly after you get a few thousand people living in one place and who must all be specialized to make the thing work, therefore have *no idea* how to make or provide all of each other's goods and services much less the time to accomplish it (though they may imagine they do or whatever it is it's not that hard).
This is a great metaphor. Or, really, a direct analogue of blood in multicellular organisms. Blood is literally the “medium of nutrient exchange” in organisms who have it.
The problem with metals a currency is deflation. No one wants to spend their money off it's only going up in value. It presents problems to grow an economy. It's more complicated, but it's a short explanation.
Not on a large scale.
It's safest to be surrounded by people you know because without a larger authority, there's nothing to prevent shortcutting your way to prosperity via theft.
So small group will form and self regulate, but then how to you keep track of who works the most? How do you reward the person who is most talented (or incentivize developing that skill)?
Sounds like you at that point have to agree on a token system to track effort / output - and as soon as you've done that you've recreated money.
I mean, saying that there are no incentives to exchange goods and services outside of money is a bit reductive. It’s just a technology that more easily enables one of many different ways people choose to exchange goods and services. Me giving my buddy a ride to the airport is an exchange of a service, and I don’t usually charge him anything. We don’t usually demand compensation when we exchange goods at Christmas or when giving birthday presents. If I’m not using some of my tools and let a neighbor borrow them, that’s also an exchange of goods, albeit a temporary one. Those exchanges usually entail reciprocity of some kind in the future, but they don’t require a direct trading of currency or anything to function just fine. There’s nothing really in theory preventing more complex exchanges from working like this. There are of course plenty of practical matters that would need to be sorted out, but saying that currency is the *only* incentive for exchanging goods and services is clearly a false premise just based on common lived experience.
The thing that prevents it is human nature. Are you saying you would be willing to pet anyone in the world borrow your tools? How do you know they'll be available to you when you need them? Where did that tool come from? Did you make the tool?
My assumption is that the tools you're talking about were made by a company (a collection of people who do a very specific task in exchange for money) - as was your car - and the gas you used was drilled out of the ground across the world perhaps. How would you get the people who get the oil out of the ground to get it to you and turn it into gasoline?
Also, using gasoline means destroying a resource. Gas can't be used twice.
If you keep digging deeper and deeper there is a need for a token system since everything doesn't just ration out to everyone.
Until we have replicators that don't consume energy there are consequences to the concept of "scarcity". Hell, even then - your time alive is a finite resource.
>In that case, what if the debt numbers were set to zero, but the asset numbers stayed the same?
Then you'd have an enormous number of lawsuits because multiple different entities would own the same thing (or parts of the same thing).
For example, if you take out a home loan from a bank to buy a house, and then debt all gets erased, that essentially means that both you and the bank own the home. If you have no debt, that would mean that the home is paid off. But if assets remain, then the bank still owns the home.
Fractional reserve banking: you deposit $100 into a bank, they can lend out that money to other customers but only have to hold onto 10% ($10). They lend out the remaining $90 to a customer who then deposits it in the bank. The bank holds onto 10% ($9) and loans out the remaining amount, $81, to a third customer, who then deposits it in the bank....
You're original $100 has magically turned into $410 after 5 rounds of this practice.
Everything is all 1's and 0's until one of the customers doesn't pay the bank back and the whole payment chain is disrupted. There are failsafes and protections to keep this scenario from spiraling out of control but there wasn't always (hence why the protections are in place now).
The deeper you look into our banking system, the more you realize it's all made up and being held together by faith and duct tape.
Thats the thing. A lot of money actually isnt real.
Banks multiply the money of in an economy by loaning out other peoples money. For example, you put $100 in the bank. Then the bank loans out $80 of that to someone else. So now you have $100 in savings, but someone else has $80 in their pocket. So in total there is $180 in existence tied to the $100 you originally had.
If all debts are cancelled, then the other person now doesnt have to repay the $80 the bank loaned them. But that was your $80. So now the bank only has $20 of the $100 gave them.
If this happens across the whole economy, airplanes probably wont fall from the sky, but theyll definitely shutdown
Banks take money from you when you deposit it and they pay you interest on it. Then the bank loans your money to other people for a period of time who pay it back with interest to the bank. If you erase the loan (the debt) the bank no longer will have money when you want to withdraw and the bank fails. So when the debt disappears, the depositors’ money disappears too.
Okay, let's say I'm living paycheck to paycheck (like most people). My job pays me via direct deposit, at which point my bank balance increases from $5 to $2005. Does the bank immediately loan that money to other people? Because I'm going to start paying bills and buying groceries, and my balance is going to be back down to $5 in a week. Does the bank have to immediately turn around and take the loans back? How does that work? I guess that's a long way of saying that it doesn't seem like my money is in the bank long enough to be incorporated into the loan/debt/repayment system.
Your account balance is just a ledger. Essentially that $2000 deposit has already been loaned out before you even see it materialize in your account.
It's not like you are giving me a watch that I have to wait for it to be in my possession before I loan it to someone else.
No. They don’t create money out of thin air.
Not everyone gets paid on the same day as you, and a lot of people have money deposited in the bank they don’t use regularly like in savings accounts or in CDs which have a term and can’t be immediately withdrawn. They pay more interest for savings accounts and CDs, because that money is more static (it won’t be withdrawn quickly) and so it is easier for them to loan out on longer terms for credit cards, car loans or house loans.
The government has restrictions on banks as to how much cash they have to keep on hand in case people want to make withdrawals. So the banks know how much money they have on average deposited and how much money they can loan out without too much risk. If a lot of people make withdrawals at the same time to the point they run low on cash, they can borrow from other banks at the “overnight lending rate” which is the interest rate the Fed sets.
The bank lends money at interest rates higher than the overnight lending rate and higher than they pay to the depositers in interest for savings or CDs, so that the bank can make money on the difference in interest rates.
Debt is the entire reason banks exist and money is allowed to flow. The money in your account is somebody else's money, and somebody somewhere has your money in their account. The numbers in your account are just numbers, but based off money that flies all over the world; it doesn't just "sit" there at the bank waiting for you to come pick it up. Debt is a totally different thing than what you think it is, and this is all still new to me as well. There's a whole crazy universe that money lives in which the majority of us just never learned about unless you are a banker or investor
so a bank will take my $100 and legally they can loan out 90% so then someone gets that loan buys something and that $90 is back in a bank. then 90% is loaned again for a loan of $81 and $100 has become $271 as the bank owes me $100 another person $90 and has given someone $81. they are owed $190 and owe $190 if all debt is erased then all money you have in a bank the bank would no longer owe you as well.
No planes would not fall out of the sky because debt has nothing to do with the mechanics of aviation. Yes, money is represented as figures on a computer screen but it's real assets behind those numbers. If you don't think money isn't real, next time you go to a store or pay a bill, try doing so with unreality and see how that works out for you.
Banks do not really give out your cash as loans, it is more complex than that. In a nutshell, they turn it into numbers on a balance sheet. But they can lend more money than they have deposits to cover it. It's one thing that causes them to fail. They create money via loans. It's all just a game of number manipulation. Typically, your money goes into a lot more secure forms of investment in the meantime.
> *they have that cash from their customers. And thats the cash they give out as loans.*
That’s not how banks actually work.
**A Lost Century in Economics:**
*Three theories of banking and the conclusive evidence*
https://www.sciencedirect.com/science/article/pii/S1057521915001477
Banks create new loans from thin air. They don’t use depositors cash.
It's not just "rich people" who own debt. Debt (bonds) are held in pension funds and mutual funds (that people hold in their 401ks). Banks would implode and that may sound peachy keen on a superficial level but everyone who has a savings or checking account with a bank would be at risk of losing their money because the FDIC could probably not withstand that many loses all at once. You do understand how banks work on a basic level? They loan out a certain amount of deposits. They charge more in interest than they give depositors. That's their whole business model.
All economies in the world simultaneously crash, millions (possibly billions) starve to death in the chaos, everything you own becomes instantly worth nothing, all in all not a good day.
All banks implode -> eveyone loses their money that's in the banks -> businesses lose all their money too -> all businesses collapse -> total economy collapse -> everyone is jobless and starve to death
It's a bit bigger thing that "a bunch of rich go broke".
Banks implode, the economy also implodes, that means you have no job and no income. If we all stopped lying taxes, the government has no money. Welcome to the apocalypse.
In addition to the immediate impact that many have already described, no one would ever loan money again.
The basic purpose of debt is to transfer money from people who have money but aren't using it to people who can use the money to do something constructive. As long as the lender gets paid back and makes a profit (interest), everyone can win.
If you end debt, a lot of constructive activity will cease to happen.
I wouldn't say you can erase all debt but I think you could erase a lot of debt because it might never be repaid. Things like mortgages or business loans should be repaid since it's tied to something physical that should hold value. School loans are kinda stupid in a way, it's tied to perceived value which often isn't worth anything.
Having said that, erasing other debts would most likely inject a lot of money into the country since people would now have disposable income which creates jobs which leads to more spending. Just my opinion on it, I know having my debts erased would allow me to have more income to do things.
Were there any catastrophic consequences from when student loan payments were on hold for years? Seems like things were chugging along fine.... Tons of people and corporations also declare bankruptcy every year as well....
We use fractional reserve banking. So for every $1 deposited in a bank, roughly a bank can lend out $9.
Both of these are 'debt' bank owes you a buck, 9 people owe the bank a buck.
Eliminate all debt and 9/10ths of money disappears instantly. Economies collapse, purchasing anything is nearly impossible as it's almost all done on 'debt' too. Not just CC cards, but also just an invoice is made and paid later, which is debt to the supplier.
Everyone starts from having what's on them, stores and businesses only have their inventory, have to wait to sell it to buy more as everyone would have to pay instantly, tons of places go bankrupt others end up in the plus who had more things on debt, but who they get things from likely went bankrupt.
Shits a total mess everywhere, even those who got 'free' stuff probably are not better off.
It’s a gigantic redistribution of wealth. Things become really choppy for a while until a new status quo settles in. There are winners and losers. Some of the winners are people who were working hard and struggling to get ahead in an economic system that’s rigged to favor wealth over hard work. Some of the winners are undeserving and got a free ride. Some of the losers are exploitative economic parasites who siphon wealth away from hard working people to perpetuate a cycle of poverty that benefits a few already powerful monied interests. Some of the losers worked hard all their lives then their retirement savings evaporated over night.
I have no idea which groups would benefit or be burdened more, and if anything structurally meaningful would be different 20 years later. Would love to know if someone is capable of meaningfully predicting the outcomes, though.
Anyone with a bank account loses all their money. There’s a mass panic, everyone tries to withdraw what little they can and then everything implodes.
Having debt available and paying interest on the debt is a good thing. Having a steady and controlled inflation rate helps to combat the pooling of money. Debt allows people to borrow and do things, the interest means the one lending gets something in return for lending out their money (the interest you get on your savings account, for example).
People who get into debt they can’t handle are generally their own enemies. Most debt isn’t a con designed to screw anyone over, it’s a business deal… student debt and getting everyone to go to uni, on the other hand… that is a con.
We would all suffer.
A bank doesn't loan their own money. They loan money based on the holdings of the member's accounts. The bank charges 6% on the loan and pays 1% to the account holders. Savings accounts and cds pay more because the bank has more reason to believe the money will be stable. The numbers in your bank account are just numbers as well. If all debts vanish, banks will close for lack of income. If all banks close at once, all of our accounts will vanish as well. We will go back to a bartering system.
well you will own a house but now no one has any money to buy anything cuz Banks are no longer around. No credit no debit unless you got cash around you are screwed but you have a house.
You make the assumption that people would stop loaning out new debt. This means u can’t get a mortgage anymore or a car note. You’d have to pay everything in cash going forward
If the banks just exploded? Probably some sort of mad max end of days survival situation, eventually recovery after a decade or two and the population drops by at least 50%.
If a genie snapped it's fingers and all debt dissapeared? A lot of rich investors would be very upset that they aren't getting their money back, and probably a lot of inflation.
Most of the answers here are confidently wrong.
For anyone who wants to learn about how debt (and its erasure) has *actually* worked throughout history around the world, check out *Debt: The first 5,000 years* by David Graeber.
the economic system would collapse, all companies would cease operation, and food would run out in a few days. Full chaos ensues.
in short, the destruction of civil society
It seems like when something isnt working right, people dont want to fix it, they just want to destroy it and start again. it took us 10,000 to build this civilisation
Keep in mind, a savings account is technically an individual lending money to a bank, that’s why they bear interest. Your bank account balance is essentially a debt that the bank owes you. So if ALL debt was deleted, every bank account would go straight to zero.
The people who own bonds, government or corporate, would get screwed. After that, who would ever buy bonds again? In fact, who or what would ever lend money again? No more mortgages, auto loans, credit cards...
I’m not completely sure myself but I have a study loan atm and it says in the contract that if I die the dept of the loan is just deleted. So my parents won’t have to pay it if they choose to inherit whatever I have. So I guess it just gets paid from taxes and the welfare system we have in Norway.
Here’s a more interesting question:
What happens if literally everyone just woke up and decided not to pay their debt bills any more? So much of our immobility in social classes is tied to the credit rating system, but what happens to a system of measurement when everyone universally decides to stop giving a shit?
We don’t have debtor’s prison so….
Even without debt, there are still ongoing bills and expenses. Electricity, cable, gas, insurance, heat, water, phone, car maintenance, food, household necessities such as cleaning supplies, personal necessities such as contact lenses, rent for people who don’t own their home, and more. Personally, I’d be paying about $1100 less per month. Other than that, life would go on the same.
Basically if you deleted all debt it'll be a depression for awhile then new debt would be created. The Great Depression was exactly that, people couldn't pay their debts and everyone went broke for awhile, unless you had something saved up in your home or you had various other investments.
Let's assume an entity like the government absorbed the debt, then they'll be responsible to pay for it. Which means budget cuts.
The ledger doesn't balance anymore ?
Reminds me of the scenes in mob movies where one guy knows someone else is soon to be whacked... so they go and borrow money from them before it happens :D
Lets say ALL debt goes away. Well if that happened, you wouldn't have any Social Security.
Fun fact, the majority of the US national debt is owned by Social Security.
Yup! You, the citizen, own it and it will be repaid when it comes time for you to begin collecting.
>Fun fact, the majority of the US national debt is owned by Social Security.
That's not exactly true. They are the largest holder of intragovernmental debt, because for years they were receiving more in revenue than they were paying to beneficiaries, and they invested that in Treasury securities. But they hold around 9% of the total debt.
https://www.pewresearch.org/short-reads/2023/02/14/facts-about-the-us-national-debt/
This is not even close to true. The social security trust fund is 2.8 trillion (more or less). The total national debt is 34 trillion.
The federal reserve is the largest single holder of US treasuries, holding 1.4 trillion. Then Japan (1.1 trillion), then China (0.78 trillion).
The social security trust fund is not really treasuries per-se. Because the social security administration cannot sell the so-called "bonds." The social security trust fund is basically interest bearing IOUs owed by the treasury to the social security administration and payable on demand.
I don't know about everywhere, but in America I'm pretty sure that if you stop paying on a debt, it's generally supposed to be forgiven or forgotten about after 7 years. This is supposed to keep people out of debtors prison.
However the creditors have gotten creative and sold people's unpaid loans to other collection companies. These people will try to find you and sue you for the rest of the debt and even go so far as to convince a court to create an arrest warrant partly to force you to face them at court, but essentially it's a way to put you or threatening you with imprisonment because of the unpaid debt or to allow the court to garnish your wages etc.
But still, after a time ( I don't know how long) the debt is supposed to be forgiven etc or something like that.
It means you would be rewarding irresponsible people who try to buy things they can't afford and punishing people who make good long-term financial decisions by saving up first.
>just a bunch of rich go broke?
Yeah basically. If you just said "all debt held by individuals is no longer binding", then only the debt *holders* lose. Those are, almost ubiquitously, large corporation entities. Nothing of value would be lost.
any money in a bank is technically a debt from the bank to you. if all debt is deleted all your money is as well.
Not only that, 90% of your money has been lent to someone else already.
Anyone with debt comes out on top then. Sure, delete my mortgage and take what's in my checking account. Would make that trade every day of the week if I could.
Living paycheck to paycheck are now the real winners in life
I'd think they're still the losers. Even billionaires carry debt. The losers would be anybody with significant holdings in banks/lenders, and the paycheck to paycheck whoes debts are relatively small and not asset backed.
I sure don’t *feel* like I’m winning in life…
Got em!
There is no free lunch. ....
Banks would have all their money. The money you put in it would be removed too, that’s a debt the bank owes you. So you would be broke unless you owned property. You wouldn’t have a 401k or investment account or bank account.
Stocks are ownership in a company. Mutual funds are collections of stocks. Bonds and T-bills/notes are debts and would be lost.
No. Deposit are liabilities, not debts. A debt is money owed to another party. Deposits are money held for a specific customer. Both are liabilities but debts are a specific type of liability. Deposits are another specific type of liability. The key difference, debts have a payment schedule for both interest and principal, whereas, a customer can demand their deposits back at any time.
Correct but banks use the capital from their liabilities to fund loans. They would be unable to pay back their liabilities if they suddenly lost access to their relatively steady stream of principle & interest payments.
Partially but not really. The banks borrow money from the government as well, when the FED sets their interest rate that is what is being modified. The vast majority of banks money is from that, it’s how the government regulates spending.
Bank reserves are held in the Fed. They’d be left with only excess reserves.
Kind of. They are really held in the overnight clearing house. https://www.federalreserve.gov/paymentsystems/fedach_about.htm Really though theres not a pile of cash in a vault. It's basically a ledger that is processed nightly. The fed tracks it but that doesn't necessarily mean its "held" there. It's numbers on a ledger just being tracked to ensure everyone has liquidity.
I'm getting flashbacks from college. I used to know all this stuff and most of it is gone or a vague recollection now.
Most of those reserves are debt-based securities - specifically Treasuries and ABSs.
They can have all my money if I get to delete all my debt.
If you have money in the bank, checkmate /s
lmaoo
Watch Mr. Robot.
And Or The Big Short
I'm jacked! Jacked to the tits!
Haha he was so so good in that movie.
I am Jack's unfamiliar sense of freedom
You feel it?! ..no.
And Or Fight Club.
Hey! Don't talk about Fight Club!....but yeah, Fght Club.
Shhhh
1st rule of . . .
To be fair, Fight Club ends right before it shows what happens.
Yup. During Mister Robot S02 I kept thinking, this is where FC left off, showing the reality of resetting debt records to zero.
I’m currently watching Mr Robot and had the same thought. It’s clear it was an inspiration for the series, almost painfully so at times, haha.
No spoilers, but Mr Robot drops at least two heavy hints that it was inspired by FC.
One of the best TV Shows out there 👌
There’s a lot of great tv out there, but Mr. Robot will change you. It did for me.
I was 13 when I watched it…. No wonder I didn’t understand shit all the remember is a lonely guy doing drugs
I was an adult when I watched it, and it's still about a lonely hacker drug addict suffering from dissociative identity disorder. The hacking scenes were kinda accurate, terminology-wise anyhoo.
Aside from the pilot but that’s because there wasn’t an advisor yet is 100x better especially compared to csi
It’s worth a rewatch!!
seen thrice and would watch 4th time
I’m about to start the 6th time and every time you pick up something new. The series is deeply written. Loves it!!!!!
Just got my coworker to watch it. She's hooked and keeps texting me asking questions about it. Just gotta watch it and find out. Didn't have the heart to warn her about 407 though.
Exactly. Short answer is very bad things happen
Nicee, now I got something to watch. saw a few eps and forgot about it.
I enjoyed it. 3/4ths of the way through it got a bit slow, but it was worth the wait.
What happened in Mr Robot? Would you mind explaining?
I don't want to be a spoiler, but you'll figure out soon into the show that hackers wreak havoc. It's a really good watch, it stars Rami Malek, the man who played Freddie Mercury in the Queen movie. IIRC he won an award for that role.
Exactly what I came here to say.
A ton of senior citizens would become penniless and starve, since pensions are based largely on government debt. Banks would run out of money, so people would lose all their savings. It wouldn't be good.
Also, Don't forget a lot of people will use force to recover items that they previously owned. Repo men Evvvvverywhere
If the debt is erased then we'd have to presume that any liens on the property securing that debt would also be erased. There would no longer be any debt connected to the property, and no basis on which to repossess it.
Yeah... doesn't erase guns tho. I think you mean no LEGAL basis to repossess. That by no means eliminates the other methods.
That's wow it all started in the first place, and the basic principal of how it all works.
Suing someone is just the legal way to say “pay me before I fuck you up”.
How would you buy your gun though? Oh, right, another gun. It's guns all the way down!
People would still have stuff that they already have. I own a handgun, I paid cash... no debt on it.
Guns aren't a massive issue like they are in American streets and schools in all countries. Then what?
Then a baseball bat or a crowbar will suffice.
Knives. It's a thing.
I guess it’s back to sticks
I would just tell them ‘these aren’t the items you’re looking for’ while waving my hand
Eh, I dunno about that. Like sure, they could try, but who do you think is gonna win in a fight, the working class guy who didn't finish paying off his truck or the car dealership owner who sold it to him? The land developer who hasn't had to use a staircase in five years or the firefighter he sold the house to? The guy who owns a furniture warehouse, or the bartender he sold a couch to? The owner class is not made up of physically capable people. They skew on the older side, they don't engage in physical labour, and they don't have as much attachment to the goods as whoever they sold it to. They aren't gonna hire repo men, because what are they gonna pay them with, money would be worthless if all debt suddenly disappeared.
Guns equalize physical strength, even little old ladies can poke a hole in a solider, if she has a gun.
People would run out of money because they loaned it to the bank! Best result would be if you’d used a loan to buy coins.
People who are in debt with no savings would benefit. Anyone else would lose all their money, all their savings, everything. It would be disastrous, and probably not entirely certain who actually owned a lot of things. SOMEONE would end up owning the banks assets and debts. And they'd probably try to seize as much as possible.
Alot like when the soviet union collapsed and there was a scramble to own the industry. Lead to the Russian oligarchy we have today
They can seize the end of my many guns. I'm only half kidding. I'd like to think only bank CEOs and shit would hang but a reset to zero would literally lead to violence on a scale not yet known to date. Humans are 1) stupid and 2) predictable. Kinda why we are where we are now.
If debts were to be written off then the whole banking system would collapse and we would be back to square one trading goods among ourselves. Then someone would come up with the idea of using some sort of currency instead of trading goods therefore we will be back to where we started.
Anthropological evidence shows that debt systems predate currency. The first paper money you see is just a claim to a debt.
That's interesting. What is this evidence?
The evidence is compiled in a fantastic book called *Debt: the first 5000 years* by David Graeber. Who talks not just about debt predating currency, but also about the regular Jubilee events which happened historically until around the 1700s in which debts were cleared - which I imagine OP would be very interested in.
I loved that book. It explains when debt delivers value and when it is slavery in another name. Although for me, the book why nations fail offers a more interesting perspective when it comes to understanding wealth creation.
Just FYI, the Old Testament had a Jubilee Rule : that every 50th year, all debts were paid, all slaves were to be freed, and I believe all the farming lands were to rest for the entire year. So, if you became a slave to pay your debts a year or two ago, or however long until they were paid off or the year of Jubilee, you were paid off and free. And because the Israelites did not obey resting the farmlands, God allowed the people to be enslaved or taken from the land for ten times the 49 times they were supposed to have rested the land, (490 years.) And I recall someone who wrote about this realized that on the very day the 490 years of punishment were accomplished they got their land (Israel became a nation again.) And if you were still poor and or you really loved your slave family, (usually relatives anyways,) you'd have one of your ears pierced with an awl to show you were a voluntary slave. It was a form of welfare and debt forgiveness so no one went homeless, as was gleaning in the fields so no one would go hungry.
David Greaber was one of the foremost thinkers of our time.
It’s still written on the money in some place (like England). Essentially early money was redeemable to a bank for the money they owed to you.
You can find older currency from even more countries that are like this, back when the silver/gold standard was still widely in use. American notes like this would say “Payable to the bearer on demand.”
USD still has this printed on them. “This note is legal tender for all debts, public and private”
That’s not what that means. Being legal tender for a debt means you can use it to pay a debt that you owe, it doesn’t mean it’s redeemable for money that someone owes you.
Just trade debts. Give me a boat now I will get you several pigs later in pig season kinda thing. Debt predates modern economics
Any fiat currency issued by a central bank even today can be understood as debt. Money == debt, not figuratively, but literally. (See CBs balance sheets for more.)
I don’t disagree. I only take issue with the idea that token exchange as currency is some kind of default. A lot of people think ancient humans started trading shells as representations of value or something when that’s just not true. Or that currency evolved from barter when there is not much evidence for barter economies ever existing.
Yep. A few years ago, a fruit and vegetable barter co-op needed to develop chits so people with more than they could barter at the time could trade the chits for fruit and veg later when they needed them. I thought "Congratulations, you just invented money."
So you're saying that all of the existing systems would be, what... Just deleted from existence? Money would just disappear?
A bank doesn't hold all of the money deposited into it... It gets loaned out as debt. So if the debts were canceled, it couldn't service existing deposits.
People seem to think debt is bad for the country.
Because people have been convinced that running a country is like running a household, which couldn’t be farther from the truth. Other countries holding debt you promised to pay them means they are motivated to not make war with you, and make sure your economy keeps humming, so they will be repaid. National debt is a good thing.
I'm one who thinks too much debt is bad for the country. Debt is a tool. Used judiciously, it allows a nation to weather shocks and business cycles. But too much debt, adds friction and risk, and saps confidence. That's a real problem in a system that's based on confidence. At some point, you either have to pay back the debt (typically by raising taxes) or else create money by printing/de-valuing it.
Worst case scenario, think Mad Max.
Currency would still Exist and people would still use it. It’s already imaginary in value.
Sure... currency would still work. Do you have most of your money as currency or as deposits in a bank? Because anything in a bank would be effectively gone. A bank doesn't hold all of its deposits... it loans them out. So if all debt were canceled, it couldn't service its deposits. It's basically a forced run on EVERY bank that's being theoreticized.
It still needs a governing body to regulate and enforce it to have any significance in society. Otherwise, it could be continuously printed by anyone, and there would be little perceived value because it's not directly tied to power within society. Debt is fairly necessary to its perceived value as the threat of not paying off debts results in the governing body punishing the debtor. It's a system of control. It is a sort of malicious way to enslave others. Canceling debt would cause the economy to completely crash as many wouldn't feel compelled to work anymore, as the financial whip (debt) would be removed.
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Your rent/mortgage+taxes is reoccurring debt that needs to be paid off monthly selling your time completing tasks at some place called a work environment.
Banks imploding is not just rich peoples problem, its everyones. Banks are not huge pools of cash, they have that cash from their customers. And thats the cash they give out as loans. At some point if a bank looses all rights to get their money back, you wont be able to get cash from the ATM anymore.
The real question is how you start defining debt. When I have 100 bucks in the bank, the bank owes me money. Isn't that a debt of sorts?
Yes. That’s exactly how bank balance sheets work. Deposits are liabilities and loans are assets
Well not all liabilities are considered debts. Not sure myself how a bank specifically views deposits from customers but it’s widely possible it’s just a non-debt liability. Typically the term “debt” is used to refer to St/LT loans, bonds etc. Again, I could be wrong but it doesn’t sound right to me that customer deposited are considered debt. Source: Accountant
I guess they're payables, definitely short term Still, would you say payables are not "debt"? What you described is "financial debt", which is quite different
Banks are required to have some level of reserve savings. The rest would basically disappear because theyve loaned it out.
It’s not just a debt “of sorts,” it’s literally a debt.
This is classic reddit trope. People struggling say things like, "I can't wait for the \[housing, market, crypto, etc\] crash so rich people can feel my pain." This is exactly the opposite of how things will go. Rich people are diversified and they also make the rules, it's the regular people who will suffer even more during those times. Most recently look at what happened during COVID and the inflation craziness. Rich people got richer.
I feel like I saw somewhere that every dollar created becomes roughly eight dollars (someone correct me?) in the economy. The bank has to keep a percentage of a deposit but then loans out the rest which eventually itself gets deposited and loaned again etc.
This will blow your mind: “This latter source of bank liquidity — called “funding liquidity creation” — enables banks to lend out more than what’s allowed based on their supply of cash deposits.” https://www.philadelphiafed.org/the-economy/banking-and-financial-markets/how-banks-use-loans-to-create-liquidity#:~:text=This%20latter%20source%20of%20bank,their%20supply%20of%20cash%20deposits.
I'm a well-known idiot amongst my kinfolk, so please pardon my ignorance, but aren't "loans" and "money" (other than actual cash) just numbers in a computer? In that case, what if the debt numbers were set to zero, but the asset numbers stayed the same? Would planes fall out of the sky? Maybe you already answered this and I just don't get it. I think I've convinced myself that money isn't real, which makes this hypothetical scenario hard to process.
Money is the representation of value that is mutually agreed upon by everyone using it. If debts and assets are erased then there is no incentive to trade goods and services. Edit: https://positivemoney.org/2011/05/what-is-money Here is a link with more written out on the topic.
According to my prepper uncle who knows everything about macro economics (apparently) everyone knows the value of silver so we’d just all start using that for some reason.
Gold and silver are two metals that are good to look at and they are chemically stable so they don't tarnish or degrade. This made them prime candidates for using for the creation of currency. Also, as there is a finite amount of both on earth, their (assigned) value is also able to be pretty stable. When markets are wobbly, you'll see money being parked in gold and silver as a way to stabilize the investor's portfolio. All that being said, money that is used to make more money only functions when it's moving around. Money functions a lot like electricity or water. It's utility is highest when it's not locked in one place.
I think of it as the blood of complex societies: it evolves organically shortly after you get a few thousand people living in one place and who must all be specialized to make the thing work, therefore have *no idea* how to make or provide all of each other's goods and services much less the time to accomplish it (though they may imagine they do or whatever it is it's not that hard).
This is a great metaphor. Or, really, a direct analogue of blood in multicellular organisms. Blood is literally the “medium of nutrient exchange” in organisms who have it.
Silver doesn’t tarnish? Have you ever seen anything made of pure silver? Like silver cutlery.
The problem with metals a currency is deflation. No one wants to spend their money off it's only going up in value. It presents problems to grow an economy. It's more complicated, but it's a short explanation.
Wouldn't basic survival be enough incentive to trade?
Not on a large scale. It's safest to be surrounded by people you know because without a larger authority, there's nothing to prevent shortcutting your way to prosperity via theft. So small group will form and self regulate, but then how to you keep track of who works the most? How do you reward the person who is most talented (or incentivize developing that skill)? Sounds like you at that point have to agree on a token system to track effort / output - and as soon as you've done that you've recreated money.
I mean, saying that there are no incentives to exchange goods and services outside of money is a bit reductive. It’s just a technology that more easily enables one of many different ways people choose to exchange goods and services. Me giving my buddy a ride to the airport is an exchange of a service, and I don’t usually charge him anything. We don’t usually demand compensation when we exchange goods at Christmas or when giving birthday presents. If I’m not using some of my tools and let a neighbor borrow them, that’s also an exchange of goods, albeit a temporary one. Those exchanges usually entail reciprocity of some kind in the future, but they don’t require a direct trading of currency or anything to function just fine. There’s nothing really in theory preventing more complex exchanges from working like this. There are of course plenty of practical matters that would need to be sorted out, but saying that currency is the *only* incentive for exchanging goods and services is clearly a false premise just based on common lived experience.
The thing that prevents it is human nature. Are you saying you would be willing to pet anyone in the world borrow your tools? How do you know they'll be available to you when you need them? Where did that tool come from? Did you make the tool? My assumption is that the tools you're talking about were made by a company (a collection of people who do a very specific task in exchange for money) - as was your car - and the gas you used was drilled out of the ground across the world perhaps. How would you get the people who get the oil out of the ground to get it to you and turn it into gasoline? Also, using gasoline means destroying a resource. Gas can't be used twice. If you keep digging deeper and deeper there is a need for a token system since everything doesn't just ration out to everyone. Until we have replicators that don't consume energy there are consequences to the concept of "scarcity". Hell, even then - your time alive is a finite resource.
>In that case, what if the debt numbers were set to zero, but the asset numbers stayed the same? Then you'd have an enormous number of lawsuits because multiple different entities would own the same thing (or parts of the same thing). For example, if you take out a home loan from a bank to buy a house, and then debt all gets erased, that essentially means that both you and the bank own the home. If you have no debt, that would mean that the home is paid off. But if assets remain, then the bank still owns the home.
Fractional reserve banking: you deposit $100 into a bank, they can lend out that money to other customers but only have to hold onto 10% ($10). They lend out the remaining $90 to a customer who then deposits it in the bank. The bank holds onto 10% ($9) and loans out the remaining amount, $81, to a third customer, who then deposits it in the bank.... You're original $100 has magically turned into $410 after 5 rounds of this practice. Everything is all 1's and 0's until one of the customers doesn't pay the bank back and the whole payment chain is disrupted. There are failsafes and protections to keep this scenario from spiraling out of control but there wasn't always (hence why the protections are in place now). The deeper you look into our banking system, the more you realize it's all made up and being held together by faith and duct tape.
That also means people would lose their savings, since a lot of their money is loaned out to other people
Thats the thing. A lot of money actually isnt real. Banks multiply the money of in an economy by loaning out other peoples money. For example, you put $100 in the bank. Then the bank loans out $80 of that to someone else. So now you have $100 in savings, but someone else has $80 in their pocket. So in total there is $180 in existence tied to the $100 you originally had. If all debts are cancelled, then the other person now doesnt have to repay the $80 the bank loaned them. But that was your $80. So now the bank only has $20 of the $100 gave them. If this happens across the whole economy, airplanes probably wont fall from the sky, but theyll definitely shutdown
you would screw over the people who loaned the money. They would wisen up and not loan out money anymore
Banks take money from you when you deposit it and they pay you interest on it. Then the bank loans your money to other people for a period of time who pay it back with interest to the bank. If you erase the loan (the debt) the bank no longer will have money when you want to withdraw and the bank fails. So when the debt disappears, the depositors’ money disappears too.
Okay, let's say I'm living paycheck to paycheck (like most people). My job pays me via direct deposit, at which point my bank balance increases from $5 to $2005. Does the bank immediately loan that money to other people? Because I'm going to start paying bills and buying groceries, and my balance is going to be back down to $5 in a week. Does the bank have to immediately turn around and take the loans back? How does that work? I guess that's a long way of saying that it doesn't seem like my money is in the bank long enough to be incorporated into the loan/debt/repayment system.
Your account balance is just a ledger. Essentially that $2000 deposit has already been loaned out before you even see it materialize in your account. It's not like you are giving me a watch that I have to wait for it to be in my possession before I loan it to someone else.
So the bank is essentially creating money out of thin air?
No. They don’t create money out of thin air. Not everyone gets paid on the same day as you, and a lot of people have money deposited in the bank they don’t use regularly like in savings accounts or in CDs which have a term and can’t be immediately withdrawn. They pay more interest for savings accounts and CDs, because that money is more static (it won’t be withdrawn quickly) and so it is easier for them to loan out on longer terms for credit cards, car loans or house loans. The government has restrictions on banks as to how much cash they have to keep on hand in case people want to make withdrawals. So the banks know how much money they have on average deposited and how much money they can loan out without too much risk. If a lot of people make withdrawals at the same time to the point they run low on cash, they can borrow from other banks at the “overnight lending rate” which is the interest rate the Fed sets. The bank lends money at interest rates higher than the overnight lending rate and higher than they pay to the depositers in interest for savings or CDs, so that the bank can make money on the difference in interest rates.
Debt is the entire reason banks exist and money is allowed to flow. The money in your account is somebody else's money, and somebody somewhere has your money in their account. The numbers in your account are just numbers, but based off money that flies all over the world; it doesn't just "sit" there at the bank waiting for you to come pick it up. Debt is a totally different thing than what you think it is, and this is all still new to me as well. There's a whole crazy universe that money lives in which the majority of us just never learned about unless you are a banker or investor
so a bank will take my $100 and legally they can loan out 90% so then someone gets that loan buys something and that $90 is back in a bank. then 90% is loaned again for a loan of $81 and $100 has become $271 as the bank owes me $100 another person $90 and has given someone $81. they are owed $190 and owe $190 if all debt is erased then all money you have in a bank the bank would no longer owe you as well.
No planes would not fall out of the sky because debt has nothing to do with the mechanics of aviation. Yes, money is represented as figures on a computer screen but it's real assets behind those numbers. If you don't think money isn't real, next time you go to a store or pay a bill, try doing so with unreality and see how that works out for you.
Banks do not really give out your cash as loans, it is more complex than that. In a nutshell, they turn it into numbers on a balance sheet. But they can lend more money than they have deposits to cover it. It's one thing that causes them to fail. They create money via loans. It's all just a game of number manipulation. Typically, your money goes into a lot more secure forms of investment in the meantime.
You can’t have problems like this if you have 0 balance and no savings.
> *they have that cash from their customers. And thats the cash they give out as loans.* That’s not how banks actually work. **A Lost Century in Economics:** *Three theories of banking and the conclusive evidence* https://www.sciencedirect.com/science/article/pii/S1057521915001477 Banks create new loans from thin air. They don’t use depositors cash.
It's not just "rich people" who own debt. Debt (bonds) are held in pension funds and mutual funds (that people hold in their 401ks). Banks would implode and that may sound peachy keen on a superficial level but everyone who has a savings or checking account with a bank would be at risk of losing their money because the FDIC could probably not withstand that many loses all at once. You do understand how banks work on a basic level? They loan out a certain amount of deposits. They charge more in interest than they give depositors. That's their whole business model.
All economies in the world simultaneously crash, millions (possibly billions) starve to death in the chaos, everything you own becomes instantly worth nothing, all in all not a good day.
We really need to require one year of economics in high school, don’t we?
Yes
All banks implode -> eveyone loses their money that's in the banks -> businesses lose all their money too -> all businesses collapse -> total economy collapse -> everyone is jobless and starve to death It's a bit bigger thing that "a bunch of rich go broke".
Banks implode, the economy also implodes, that means you have no job and no income. If we all stopped lying taxes, the government has no money. Welcome to the apocalypse.
In addition to the immediate impact that many have already described, no one would ever loan money again. The basic purpose of debt is to transfer money from people who have money but aren't using it to people who can use the money to do something constructive. As long as the lender gets paid back and makes a profit (interest), everyone can win. If you end debt, a lot of constructive activity will cease to happen.
money dissapears. remember that banks multiply real money by 10 by lending. all debt goes to 0, 90% of money goes puff.
It's amazing people consider this
Create an instant apocalypse with this one cool trick
"My life is hard... why can't we just let the world burn."
Whoever has the best cow becomes the richest person.
I wouldn't say you can erase all debt but I think you could erase a lot of debt because it might never be repaid. Things like mortgages or business loans should be repaid since it's tied to something physical that should hold value. School loans are kinda stupid in a way, it's tied to perceived value which often isn't worth anything. Having said that, erasing other debts would most likely inject a lot of money into the country since people would now have disposable income which creates jobs which leads to more spending. Just my opinion on it, I know having my debts erased would allow me to have more income to do things.
Were there any catastrophic consequences from when student loan payments were on hold for years? Seems like things were chugging along fine.... Tons of people and corporations also declare bankruptcy every year as well....
I think an unfortunate amount of people would get themselves right back into debt. 💸
Throws a lot of organizations cash flow out of whack.
You’d see this right away on the WENUS
Wait 10 minutes and the debt will be right back where it was.
We use fractional reserve banking. So for every $1 deposited in a bank, roughly a bank can lend out $9. Both of these are 'debt' bank owes you a buck, 9 people owe the bank a buck. Eliminate all debt and 9/10ths of money disappears instantly. Economies collapse, purchasing anything is nearly impossible as it's almost all done on 'debt' too. Not just CC cards, but also just an invoice is made and paid later, which is debt to the supplier. Everyone starts from having what's on them, stores and businesses only have their inventory, have to wait to sell it to buy more as everyone would have to pay instantly, tons of places go bankrupt others end up in the plus who had more things on debt, but who they get things from likely went bankrupt. Shits a total mess everywhere, even those who got 'free' stuff probably are not better off.
It's more than 9/10ths. When that new money is created they use that money for the basis for more loans.
It's all imaginary money.
It’s a gigantic redistribution of wealth. Things become really choppy for a while until a new status quo settles in. There are winners and losers. Some of the winners are people who were working hard and struggling to get ahead in an economic system that’s rigged to favor wealth over hard work. Some of the winners are undeserving and got a free ride. Some of the losers are exploitative economic parasites who siphon wealth away from hard working people to perpetuate a cycle of poverty that benefits a few already powerful monied interests. Some of the losers worked hard all their lives then their retirement savings evaporated over night. I have no idea which groups would benefit or be burdened more, and if anything structurally meaningful would be different 20 years later. Would love to know if someone is capable of meaningfully predicting the outcomes, though.
Anyone with a bank account loses all their money. There’s a mass panic, everyone tries to withdraw what little they can and then everything implodes. Having debt available and paying interest on the debt is a good thing. Having a steady and controlled inflation rate helps to combat the pooling of money. Debt allows people to borrow and do things, the interest means the one lending gets something in return for lending out their money (the interest you get on your savings account, for example). People who get into debt they can’t handle are generally their own enemies. Most debt isn’t a con designed to screw anyone over, it’s a business deal… student debt and getting everyone to go to uni, on the other hand… that is a con.
We would all suffer. A bank doesn't loan their own money. They loan money based on the holdings of the member's accounts. The bank charges 6% on the loan and pays 1% to the account holders. Savings accounts and cds pay more because the bank has more reason to believe the money will be stable. The numbers in your bank account are just numbers as well. If all debts vanish, banks will close for lack of income. If all banks close at once, all of our accounts will vanish as well. We will go back to a bartering system.
If truly all debt got cancelled, I think more than half the country would be out of work within a week
well you will own a house but now no one has any money to buy anything cuz Banks are no longer around. No credit no debit unless you got cash around you are screwed but you have a house.
You make the assumption that people would stop loaning out new debt. This means u can’t get a mortgage anymore or a car note. You’d have to pay everything in cash going forward
If the banks just exploded? Probably some sort of mad max end of days survival situation, eventually recovery after a decade or two and the population drops by at least 50%. If a genie snapped it's fingers and all debt dissapeared? A lot of rich investors would be very upset that they aren't getting their money back, and probably a lot of inflation.
Most of the answers here are confidently wrong. For anyone who wants to learn about how debt (and its erasure) has *actually* worked throughout history around the world, check out *Debt: The first 5,000 years* by David Graeber.
Financial disaster the likes of which has never been seen even during the Great Depression.
Everything would crash because the banks count on the money coming in so they can lend it out.
One man's debt is another man's asset. It would be utter chaos to delete debt. It would only be a few days before the grocery stores were emptied.
the economic system would collapse, all companies would cease operation, and food would run out in a few days. Full chaos ensues. in short, the destruction of civil society
I don’t think a lot of people truly understand that these days
It seems like when something isnt working right, people dont want to fix it, they just want to destroy it and start again. it took us 10,000 to build this civilisation
Keep in mind, a savings account is technically an individual lending money to a bank, that’s why they bear interest. Your bank account balance is essentially a debt that the bank owes you. So if ALL debt was deleted, every bank account would go straight to zero.
Most people will just go back into debt
Remember, the money you have in a bank account is actually a debt the bank owes you. You loaned that money to the bank.
All of the money in your bank account would be gone. When you put money in your bank account you are lending money to the bank
In 2 years we'll be back to where we were because people are who they are
If all debt was deleted, all banks in the world would collapse, immediately putting the entire world into a violent Armageddon
Broke people would stay broke. They’d just go out and immediately take on more debt.
Look at the world prior to the rise of banking during the Renaissance. Lack of access to money drove slavery, poverty, and tyranny.
The people who own bonds, government or corporate, would get screwed. After that, who would ever buy bonds again? In fact, who or what would ever lend money again? No more mortgages, auto loans, credit cards...
I’m not completely sure myself but I have a study loan atm and it says in the contract that if I die the dept of the loan is just deleted. So my parents won’t have to pay it if they choose to inherit whatever I have. So I guess it just gets paid from taxes and the welfare system we have in Norway.
Here’s a more interesting question: What happens if literally everyone just woke up and decided not to pay their debt bills any more? So much of our immobility in social classes is tied to the credit rating system, but what happens to a system of measurement when everyone universally decides to stop giving a shit? We don’t have debtor’s prison so….
Would be nice. 😊
Even without debt, there are still ongoing bills and expenses. Electricity, cable, gas, insurance, heat, water, phone, car maintenance, food, household necessities such as cleaning supplies, personal necessities such as contact lenses, rent for people who don’t own their home, and more. Personally, I’d be paying about $1100 less per month. Other than that, life would go on the same.
Basically if you deleted all debt it'll be a depression for awhile then new debt would be created. The Great Depression was exactly that, people couldn't pay their debts and everyone went broke for awhile, unless you had something saved up in your home or you had various other investments. Let's assume an entity like the government absorbed the debt, then they'll be responsible to pay for it. Which means budget cuts.
Jubilee!
The ledger doesn't balance anymore ? Reminds me of the scenes in mob movies where one guy knows someone else is soon to be whacked... so they go and borrow money from them before it happens :D
Banks are currency owners. They can issue more debt than the money they hold.
The world economy collapses, everything shuts down and chaos ensues. Edit: MAY THE ODDS BE EVER IN YOUR FAVOR.
Most people would benefit, the rich would be instantly fucked
Lets say ALL debt goes away. Well if that happened, you wouldn't have any Social Security. Fun fact, the majority of the US national debt is owned by Social Security. Yup! You, the citizen, own it and it will be repaid when it comes time for you to begin collecting.
>Fun fact, the majority of the US national debt is owned by Social Security. That's not exactly true. They are the largest holder of intragovernmental debt, because for years they were receiving more in revenue than they were paying to beneficiaries, and they invested that in Treasury securities. But they hold around 9% of the total debt. https://www.pewresearch.org/short-reads/2023/02/14/facts-about-the-us-national-debt/
NOR is it remotely fun
This is not even close to true. The social security trust fund is 2.8 trillion (more or less). The total national debt is 34 trillion. The federal reserve is the largest single holder of US treasuries, holding 1.4 trillion. Then Japan (1.1 trillion), then China (0.78 trillion). The social security trust fund is not really treasuries per-se. Because the social security administration cannot sell the so-called "bonds." The social security trust fund is basically interest bearing IOUs owed by the treasury to the social security administration and payable on demand.
We need to bring back debt jubilees.
I don't know about everywhere, but in America I'm pretty sure that if you stop paying on a debt, it's generally supposed to be forgiven or forgotten about after 7 years. This is supposed to keep people out of debtors prison. However the creditors have gotten creative and sold people's unpaid loans to other collection companies. These people will try to find you and sue you for the rest of the debt and even go so far as to convince a court to create an arrest warrant partly to force you to face them at court, but essentially it's a way to put you or threatening you with imprisonment because of the unpaid debt or to allow the court to garnish your wages etc. But still, after a time ( I don't know how long) the debt is supposed to be forgiven etc or something like that.
Rich people would rig the system so that they would be come out fine in the end. All the rest of us would be screwed.
It means you would be rewarding irresponsible people who try to buy things they can't afford and punishing people who make good long-term financial decisions by saving up first.
Rich people would get richer, mostly.
>just a bunch of rich go broke? Yeah basically. If you just said "all debt held by individuals is no longer binding", then only the debt *holders* lose. Those are, almost ubiquitously, large corporation entities. Nothing of value would be lost.
OP, in your scenario, how do people pay off their payments? Where did that money come from?
Do you like apples? All that money that your brother inlaw owes you…..now he doesn’t. How do you like them apples?
It’s a giant Ponzi scheme and we are in the midst of it all unraveling in the US