It's important to remember that student loan money didn't "come from" anywhere

[Recursion]

Here's the fun bit about fractional reserve banking. It's not like It's a Wonderful Life, where George Bailey takes people's deposits and prudently lends them out. That's how a Thrift or a Savings and Loan work. That's not how a bank works. When a bank originates a loan, it literally creates the money out of nothing, and then destroys the principal payments as they are received, keeping the interest. There's no account somewhere that your student loan was subtracted from when the check was cut; that was literally money out of thin air.

[Thomas Hurt]

1. Taxes have the same vaporous nature...

The right in particular loves to whine about how their taxes are going to this or that thing that mightily offends their fascist sensibilities but that is pure bee ess.

If you don't like where "your" taxes are going. Just think of your taxes going to something you do agree with, that is equally as true.

[Recursion]

3. Right: the US government can never "need" a dollar

Looking at taxation as "funding government spending" is completely missing how money actually works.

[Celerity]

20. 'The right in particular loves to whine about how their taxes are going to this or that thing'

THAT makes me wanna go radge

those fucking gits NEVER bitch about trillions that go to the war/security/surveillance state

[DetlefK]

2. I have a cousin who studied economics...

He once told me that there is 10 times more money in the world allocated in money and bonds and stocks than the whole world is actually worth at market-value.

90% of the money in the world is not backed up by real-world goods.

He told, if that system ever were to stumble, there would a world-wide economic crash the like of which we have never seen before.

Money is mutually-agreed-upon lie.

[Recursion]

4. Remember: it's not a Ponzi scheme if you have an army (nt)

[FakeNoose]

5. Sort of like a Ponzi scheme

[Recursion]

8. See just above (nt)

[SWBTATTReg]

13. A mutually agreed lie? What other medium do you propose that we use for purchasing stuff, ...

paying bills, etc.? Money has always been intrinsic in value, what people value it as (you're right, a mutually agreed value but a lie?). In a way this is why we have inflation...the value of some assets go through the roof and thus, increase in monetary value as more and more 'money' is required to purchase the asset.

[DetlefK]

14. The problem is that the creation of money is unregulated and left to unaccountable banks.

After the 2008/2009 recession it took an incredible amount of arm-twisting to force the investments-banks to make sure that at least 7% of the money they dole out as credits is backed up by real-world value.
Would you be willing to loan me 14 times as much money as I am worth? No? Then how come banks are allowed to conduct that kind of business?

And we see exactly the same thing happening with cryptocurrency.
CRYPTOCURRENCY IS UNREGULATED BANKING.
We are supposed to welcome cryptocurrency as a tool that will free us from the oppression of government-controlled money. Fantastic! Let's replace government-controlled money with money that's controlled by anonymous online-investors that are motivated by greed. What could go wrong?

[Recursion]

19. Oh yeah. Crypto is every bad part of a fiat currency with none of the good parts

It scares the hell out of me how many people seem to be considering it seriously.

[SWBTATTReg]

25. Me too. Being totally unregulated as such and no central authority to regulate it or protect it...

either are two of the big reasons I don't want to be involved in a digital currency yet. I think perhaps one day, yes, but not today. I still can't get over the fact that so much power is required to come up with bit coin mining, values, processing, etc.

With all of the digital break ins/password breaches we see almost on a daily basis? Heck, I rec'd something from my college about a break in w/ my personal info., which is 40 years old...why in the heck do they still have info. on me from over 40 years ago?

Some may think its the golden grail (bit coin, crypto, etc.), but I (imho) think they're mostly anti-govt, anti-fed, gold only folks, who have always been against any form of currency and/or controls such as the dollar etc. (gold based only)...problem with this is that there is only so much gold and yet vast amounts of economic activities as the human race expands.

I've heard of several big heists already on bit coin (wallets), and there is probably more that we don't know about it.

[Thomas Hurt]

17. Nothing has intrinsic value, things have value because humans give it value.

[DetlefK]

22. Yes, but there is more money circulating than we HAVE assigned value to goods.

90% of the money caught up in cash and accounts and investment-instruments is unspendable because the world does not have enough real-world goods to spend all this money.

Of course, the obvious solution would be to adjust the market-value of all the real-world goods: Make each and everything 10 times more expensive. Problem solved.

But who would be hit by such a market-correction? The people who are vulnerable when the price of food or any other commodity increases. The poor.

[smirkymonkey]

16. +1000

It's kind of frightening how fragile it all is.

[Celerity]

21. the total value of all equities, bonds, currencies, commodities, all combined, pales

in comparison to the total notional value of exchange-traded and OTC (over the counter ie. non exchange traded) derivatives plus swaps and other exotic financial instruments

probably over 2.5 thousand trillion USD (ie 2.5 quadrillion USD)

The BIS always undercounts the total notional valuation (I think due to the OTC part being so hard to calculate)

the total real, market value of the planet was estimated several years ago to be only 250 trillion

so your cousin is very close to being right, just perhaps did not pinpoint the true source of the financial giant artificial risk pool (unless he did mention derivatives and swaps, etc, as well, which he might have inferred)

[mahatmakanejeeves]

6. Deposits?

Yeah, I understand that if I go to the bank and ask to see my money, they won't have it there. Got it. But a bank has to have deposits before it can make loans. The denominator is not zero.

[Recursion]

7. A bank must have deposits with the Fed, sure

That's part of being a bank. And the Fed does set limits on how much money the bank can create out of thin air, which are based (among many other factors) on those deposits.

But when I got my $3000 student loan check for a semester, there was no account anywhere that had been debited by $3000. It was just money from nothing.

[mahatmakanejeeves]

9. Deposits with the Fed? NT

[Recursion]

11. No, they are not transferred during a loan origination

Fractional reserve banking: it's not a Ponzi scheme if you have an army.

[Hoyt]

10. In the end, the feds back most of that money the bank creates, including most student loans.

Wiping them out might be a good thing, but someone will pay.

I think Warren's proposal is a wealth tax of 2% or so annually. That's cool, except that wealth tax, and similar taxes, have been promoted to pay for healthcare, jobs, bolster Social Security, education, climate change, deficit reduction, debt reduction, infrastructure, and a bunch more. Sooner, rather than later, the taxes needed to do all this stuff are going to reach all of us.

[Turin_C3PO]

12. Yes.

We can’t keep promising middle class tax cuts. The truth is, we need to RAISE taxes on most people to pay for these good programs that are being proposed.

[customerserviceguy]

15. Raise taxes?

Why don't we just pick dollars off of that money tree that the OP was inferring? Toss out an undefined term like "fractional reserve banking" and you can get people to believe anything.

[Recursion]

18. That would be called monetization, and it has its proponents

You should learn more about FRB if you think I'm kidding; it's a fascinating topic. If you originate a loan and then forgive the principal you have increased the money supply, and you could in principle use that newly created money to pay for government programs. Expanding money supply comes with its own problems, though; that's why loan originators are supposed to destroy the principal as it is repaid.

[customerserviceguy]

26. Brought to us

by the folks who created "credit default swaps" and cryptocurrency, and everything else that has wrecked the economy. It's just a funny money game to them, to sucker in sheep.

[Recursion]

27. Brought to us by the 17th-century Dutch

It's a pretty old idea

[customerserviceguy]

28. Agreed

People have tried for centuries to con money out of other people.

[Sgent]

23. I own some of the student loans

so do most people. If you have any bond holdings (including mutual funds or ETFs) or a company pension they hold bonds issued by Sallie Mae or another lender, which in turn lent that money to students. Most banks only act as brokers.

We can talk about weather using taxpayer dollars to pay student loans off is a good use of funds vs other types of government spending, but it will cost the taxpayer since our constitution does not allow for expropriation.

[Recursion]

24. Banks absolutely do not act as brokers

Most banks only act as brokers.

No, that's what S&Ls do commercially, and what thrifts do on an individual level. Banks absolutely do not take money from investors or depositors and lend it out. When a loan is originated the money supply is increased by the amount of the principal. It's money from nowhere. If you get a $10,000 student loan, when the bank fills the account that check is drawn on the world monetary supply increases by $10,000.