Forgive the Student Debt!!! (Or Not?)

There are loud and numerous calls for forgiving the student debt. We've duped the poor (former) students into buying a worthless higher education on time, and dumped them into an economy where it is really hard to pay that debt back.

(Pardon me? I did not sell that snake oil. On either end.)

Well, there would be valid reasons for helping them get out from under that burden.

But.

"We" can't exactly forgive that debt. We don't own it. That is, we don't own the burden of guaranteeing it. At least, not at this time.

Who owns the guarantees on that debt?

Well, it's difficult to untangle. The government that demands business be transparent has serious difficulties making its own operations transparent. 

We hear China owns no small part of it. We can be fairly sure that most of the several thousand billionaires and millions of other high-net-worth-individuals all over the world also own no small part of it.

If we could get them all to forgive the student debt in all countries, I'm not sure that would be a bad thing. 

But what is being called for is something else entirely -- for the US government to buy that burden back from those who bought the bonds. 

So here's how it works. Get people to borrow money from you. Some time later, sell the burden of final guarantee for the burden to the government. That means, if the people who borrowed the money can't or don't repay it, the government has to pay you. Sometime later, get the government to "forgive the debt" by paying it off to you. And you get both the interest and the principle.

Here's what is not being told: "Forgiving the debt" ultimately means paying it off -- making those who are already rich all that much richer.

Those rich people were the ones who set the rules up to demand higher education, you see. "Our worker pool needs more training!" they said. (Who gave them permission to call us "their worker pool", anyway?)

So, as I said, if we could get them, not the government, to forgive the debt for student loans, that might not be such a bad thing. 

Except, there are reasons that's not such a good idea, either. Debt is never a simple thing. Those individuals of high-personal-worth actually serve to focus our economic activities on specific business. If they suddenly lose their wealth and somebody is not ready to step in with more money, businesses fail. Jobs disappear. Etc. Economic depression.

That was the excuse for bailing out the banks about ten years back, and it is real. Uhm, well, it isn't exactly entirely the stuff of the imagination of ambitious money-grubbers. It's real enough to cause ordinary people serious harm.

 Why? is a very good question.

If you don't understand why, it's time for you to learn what money means. 

None of the popular explanations you can find in books or on the web have it right. What does

Money is a proxy for value.

even mean? 

Okay, how about something that is often claimed,

Money is value.

Really? Bits of paper and metal, ink in a ledger, charge domains in some storage medium. But it took, for instance, Ms. Rowling a long time of working hard to convert the value in her first stories into enough money to continue writing without working a day job. 

At any rate,

Money is not raw value.

So, once again, how about 

Money is a proxy for value.

Money is not a very good proxy for value. The things that are of most value to you, you wouldn't want to trade for money. (Well, you shouldn't.) And usually, if someone wants to trade you money for them, it's less for the thing it is than for the control they hope to gain over you in the trade. So,

Money is power.

Yet it isn't power to do the most important things. If I mention the power to breathe, you may counter with the idea that money can buy doctors to fix your inability to breathe, but I already have the ability to breathe. Without money.

And a man who has ruined his ability to breath is often unable, even with billions of dollars, to hire enough medical expertise to fix his lungs before he dies. So, again, something money is not:

Money is not unlimited power.

Debt actually is more powerful than money, if you simply want to control people. Is it surprising that people buy and sell debt?

How about this one?

Money is freedom.

Rich people (and many wannebee rich people) write books detailing how they had to live according to very strict daily routines to get their wealth. You have to sacrifice for that freedom.

And, once they have it, they have to keep up the routine, because with the money came responsibility to manage a company or some such thing. 

Ask them if they are really free, and they say, they are free to hire a limousine to take them somewhere. But they are not free to walk there on their own. Free to buy expensive clothes, but not to wear comfortable clothes -- unless they have enough cachet to turn their comfortable clothes into a fashion statement. 

And money doesn't buy the cachet -- not on a long-term basis. Show your money and you get attention, but the minute you put your money away, the attention dries up. Real cachet takes more work.

Money is only temporary cachet.

In Hello Dolly, Horace says something like 

Money is like manure. It should be spread about making little green things grow. 

(US currency being printed with green ink added a certain overloaded semantic -- pun -- to that quote.)

My response when I first heard that was a bit pithy --

Money is like pus. It tends to gather where the wounds in society are.

Okay, I'll skip forward a bit. Money is a fairly good proxy for apparent value, much of the time. Thus, sales campaigns are battles to drive your own products' apparent value up in the market.

Money is an imperfect proxy, or exchange medium, for value. 

What happens when we forgive a debt -- assuming that the debt is truly forgiven and not just transferred to a new owner?

The money has already been plowed into the economy. And the former debt-owners lose the power that owning the debt gave them. But it does give the former debtor a bit more room to make more value to bring back into the economy.

I suppose I could wrap this rant up by offering one or more opinions, either on student debt or on something really abstract like the lack of dimensionality in current financial instruments, but I want to leave a certain question dangling:

The question is not why we shouldn't give the former students a little more breathing room. 

The real question is what do we keep doing wrong with money, so that it keeps ending up getting in the way when people want to do good things?

Universal Basic Income? I've got a better idea.

I was mucking around in slashdot last night for no particular good reason. I think it has been at least a year since I last took a real look over there.

There was quite a bit of discussion of the concept of Universal Basic Income, and at least one article on some overly wealthy entrepreneurs deciding to try to test the concept.

Before I dig into this subject, I need to explain the concept of value that underlies my ideas about economy. I wrote a long general rant on the subject some time ago, and wrote a shorter rant on value in relation to commercial activities some time after that. Last March or so, I started work on an excessively extended rant trying to establish a simple economic system in which economic interactions would become easy to talk about and agree on. I don't think I succeeded. At least I did not succeed well enough to be able to justify continuing at this time.

Well, the short version is this.

By nature, people work. That's part of the definition of humanity. Healthy, functional human beings will work if they have the option.

I'm not saying they work for pay. I'm not saying they do the work that others demand of them. In fact, there is much activity that people pay others to do that would be hard to call work, and there is much that people don't get paid for that very much is useful and meaningful work. Likewise for things people demand others should do regardless of pay.

Work creates value. It may be value only for the individual doing the work. Or it may be something that another person values. It may be both. But it does create value.

Actually, this is a tautology, because I define work as an activity that creates value.

Value is very hard to convert to money.

This is not what you were expecting to hear, I suppose. We use money as a proxy for value. We use it as a communication medium to communicate about value, and we try very hard to communicate real value with money. We get into the habit of talking about money as if it were equivalent to value, and it is not.

Money is only a very poor proxy for value.

But it is the best general proxy we have for value in a pluralistic world.

Think about that. Pluralism means different strokes for different folks.

Pluralism is how we get along when your football is round and my football is shaped sort-of like an egg and my wife thinks football is a lot of bother.

Pluralism says I can be Mormon, you can be not really sure what you believe, your friend can be Catholic, my friend can be atheistically inclined, another, mutual friend can adher to principles of Islam, and getting together in the marketplace doesn't lead us to war.

Pluralism says I can spend my money building a room where I can dance and you can build a swimming pool, if we both have enough money.

Nobody values things quite the same, but money allows us to pretend our value systems are somewhat compatible -- even when they are not all that compatible.

That's how money is a proxy for value.

But money only tells us how much, roughly, at the moment the transaction occurs. No fine distinctions as to what induces the sense of value or in what context the value is established.

Maybe a pizza is worth fifteen dollars. But we don't know whether that is for Saturday night when we're watching football, or for Monday's lunch.

Maybe a twelve-pack of beer is worth fifteen dollars to you. It ain't worth fifteen dollars to me, even as a shampoo substitute.

Maybe a notebook PC can be sold for $1,500 because it has 16GB of RAM and 2TB of hard disk and 128GB of high-speed SD for the OS, 8 cores, etc. But if it has an Intel processor, I'd rather pay the $1,500 for a quarter the RAM and persistent store and an ARM processor, even with just 4 cores. And I'd pay easily more than twice that for a PC with a 2-core 33209 CPU. If I had the money. If the 33209 actually existed in real hardware according to the spec in my dreams.

My wife will pay twice the price for silk, because cotton is hard on her skin. I'll take cotton any day because silk is hard on mine.

On the one hand, the ambiguous nature of money as a proxy for value allows us to go to market without going to war.

On the other, it leaves a lot of important stories untold when it's time for the accounting.

So we get in the bad habit of conflating money with value, when it barely tells us the bare minimum about value.

We live in an entropic world. 

That means that the total available value decreases. This is the Malthusian argument, and is the excuse for inventing economics based on scarcity.

How does the world keep from running down?

We have a source of something that gives us value for free. It seems to reverse entropy. It's called the Sun.

The sun is the huge gravity sink, and we tend to misunderstand gravity. We think it accelerates entropy. (This is wrong, but that's what we think.)

But the sun is actually a huge source of free available energy. That energy can offset the entropic nature of our world -- more than offset it.

Uhm, did I forget to mention that energy is the physical equivalent of value? Not money, value. Trust me. Energy does a much beter job as an exchange medium than money does.

Some people want to imitate that free source of available value by having our governments hand out a Universal Basic Income.

Huge logical errors. Governments are not God, and they are not natural. Man-made (artificial), often in the extreme. Money is not value.

Handing out money tends to inflate prices. Why? Because money is not value. It's a proxy for value, and when we pump more of the proxy in, we just inflate the prices of things that have real value.

How do we add value to the world? 

Work creates value. (Converts bound value to available value, actually.)

Does that excuse slave economics? Force people to work? 

That's the scarcity economics argument again. We want to think that only our allies can properly judge value, and we want to hope our allies will be in charge. But that's backwards. The more people we allow to judge value, the more of the available value there is that can be accessed. Variety increases value, especially variety in work.

What other things create value?

Entertainment creates a value substitute. Kind of like sweeteners are an energy substitute. A little bit is useful. A lot, not so much.

Education often converts bound value to available value. (Does that excuse enforced education?)

Religion sometimes gives people a reason for living. False religion produces false value. (That's a definition of false religion for you.) Religion is not a good universal source of available value, either.

What is the real purpose of this world?

I'll present this as a naked assertion, a proposed axiom:

Observe a junior high school class. Now go observe some company at work.

This world is here for us to gain an education. Not the artificial education dreamed up by our national education associations and such, real education. We are not here to just exist, we are here to learn.

If you have money to give away and Universal Basic Income was an interesting idea to you, I have a better proposition. 

Invent jobs. Well, no, don't just arbitrarily invent jobs. Look for jobs that aren't getting done because nobody seems to want to pay for them to be done right now with the current artificial fads of what's important and what isn't. Look at the work that your accountants won't let you account for, but you know deep inside that it's work that needs to be done. 

If people are doing those jobs anyway, leave them alone. Don't spoil work with money when you can avoid it.

But if nobody is doing the jobs, go hire someone to do those jobs. 

Don't give them money, give them jobs. Help them do the work they want to do, to create available value. 

Yeah, it takes more effort, more follow-up, especially when someone wants to do a particular kind of work but doesn't know how without creating a mess. But that effort you put in is work for you, your opportunity to add to the available value in the economy.