The news that 2020 presidential hopeful Elizabeth Warren wants to forgive up to $1.46 trillion of student loan debt was hailed by some as groundbreaking.
Seen as an anchor to economic growth, student debt forgiveness would put up to $5,000 per year back in the pocket of younger Americans.
However, not all economists are for the proposal. What’s more, a substantial number of banks and other institutions are facing what appears to be an unconstitutional violation of their rights to private property. Taken together, the move could rapidly devalue the dollar — leaving the economy in shambles.
Give it away, give it away, give it away, now!
Warren’s suggestion is garnering substantial support from many young Americans. The idea of suddenly having no student loans sounds like something from a dream to many. With plenty of individuals paying $400 per month, the forgiveness would theoretically function like an immediate economic stimulus.
The goal of the program would be to free up spendable income for this swath of American society. This, in turn, would open doors for earlier home ownership, increased consumer spending, and better and more entrenched investment options. So what’s not to like?
Is Student Loan Debt Forgiveness Overreaching?
The simple answer lies in the constitution.
Most student debt is held privately, having been purchased by banks and other lending institutions in bulk. Warren’s proposal would essentially allow the government to reach into the coffers of banks and investors and extract $1.46 trillion — a clear violation of the right to private property.
Secondly, the potential policy has been criticized on the grounds that it is unfair at best. Only Americans with current outstanding student debt would benefit. For those who worked hard and paid their debt off, their work would feel cheapened. Those who didn’t go to college in the first place would feel robbed.
What’s more, the program would not be as helpful for the economy as many think. Simply injecting more than $1 trillion into the US economy without basis does not, in itself, promise economic stability. With increased capital injected into the market, the cost of goods and services would drastically increase, based on the new disposable income for these Americans.
In other words, some other institution would be there to take those funds away — and the inflation would have dramatic effects.
Dollar Down, Bitcoin Up
Should Warren get elected and the federal government chooses to enact a policy of this nature, the damage could be dramatic. Once the government takes the right to confiscate private property, trust in government fiscal proposals would plummet. The result would be a massive loss in value for the US dollar.
In response, private funds that are decentralized and cannot be confiscated should find increased support. Cryptocurrencies — and Bitcoin (BTC), particularly — offer this type of financial freedom from state oppression.
While Warren may get her way, the result for the Bitcoin market would be extremely bullish. Investors would seek financial vehicles that are not subject to arbitrary confiscation, and Bitcoin is there to meet the need.
Do you think Warren’s policy will actually cripple the economy and drive investors into decentralized vehicles, or will her policy stimulate the economy? Let us know in the comments below!
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