OT: Student Loan Debt

[Guest]

@StickyBun said:

@medaille said:
There are a lot of systems in our society where the model is
fundamentally that the citizen has to use imaginary money (debt, insurance,
etc.) to pay for something they need (a house, education, health care) and
because it’s imaginary money and the numbers are so large, the supplier can
pretty much charge whatever they want, and we end up paying for it later in
time.  I think this is most easy to see
with housing where everyone needs a house. 
Everyone before you has driven up the price of housing such that you
need a 30 year mortgage to even afford a house, so you can either choose a slum
house for 30 years or a nicer house for 35 years or whatever.  The numbers are so daunting that it becomes,
what’s another 5 years.


The root of this is fractional reserve banking, where banks
can lend you an infinite amount of money that they don’t have and you have to
pay them back, but they get to keep the interest payments.  You should read up on fractional reserve
banking, because we’re going to have to replace our financial system in the
near future because of it.  One of the
problems with fractional reserve banking, is that most of the money is created
by people taking on debt, which gets destroyed when the debt is payed off,
there is never enough money to pay off the interest of the debt.  This means that people have to take on a new
debt to pay off the interest.  In
practice, it seems that each new generation is more indebted than the last.  Mortgages used to be 10 years, then 15, then
30.  You payed off your mortgage and are
debt free, but the money you used to pay off the interest payments was created
by the debt taken out by other people.


Fractional reserve banking is a toxic system, that siphons
money from the working class into the pockets of bankers, who can buy
governments via lobbying and give money to their friends.  It's designed to keep us perpetually indebted.

Fractional reserve banking is nothing new, its idea goes back a long way. Almost every banking institution in the world uses it. It predates the existence of governmental monetary authorities. I mean its genesis is simple: bankers realized a long time ago that generally, not every depositor is going to withdraw their money at the same time. Trust me, we won't be replacing our financial system any time soon because of it.

The problem, or potential problem, is one of a centralized banking system and all that entails. That's why there's bitcoin now, an alternative but we can all see their gigantic issues and they'll need some kind of regulation to ever be stable (which goes against their fundamental tenets). Governments combat the basic worry of fractional reserve banking by regulating and overseeing commercial banks, provide deposit insurance and act as lender of last resort to commercial banks. Banks are setup really for the wealthy anyhow, as generally their practices are predatory.

100% right that fractional banking is super old.  The oversight of the fractional reserve system
is primarily run by the private banking portion of the fed not the government,
furthermore the banking industry is among the largest lobbyist / campaign
donors for most candidates, so they are pretty influential in shaping the laws
that govern them, but who’s regulating them is less of a concern here.  The fundamental issue is that money is
created whenever money is loaned out, but there is never enough money to pay
back the interest without someone taking on more debt, so the debt burden of
society grows over time.  No amount of
regulation, oversight, or management can change that.  It’s mathematically impossible.  All they can do from within the system is to
keep ramping up debt creation, so that there’s always new debt to pay off the
old debt payments, or they raise interest rates, cut off the access to debt and
let the people fight it out and see who can get enough of the money in
circulation to pay off their debt and who goes bankrupt.


I don’t think a centralized system is the problem, just that
our current centralized system is controlled by people who are using it to
control us and keep us indebted.  I think
most people are perfectly content as long as the system works.  We just have to ensure that it works for us
and not the few.  I think the blockchain
aspect of bitcoin is great, as it removes the need to have a bank keep track of
the ledger, and eliminates the interest payment portion of the money creation
process, which eliminates the wheel of debt. 
I think you’re totally right that bitcoin type currencies will have a
lot of issues to work through.  I think
we’ll probably move towards a system of government controlled or regulated,
blockchain based currency that is not debt based.