[anigbrowl]

One big issue is that there are other people on the other side of those debt cancellations that would get hurt.

A risk they assumed when they decided to put their capital to work. I don't actually have any debt myself so I don't have a dog in this fight, but if you have the money to purchase risky assets in expectations of earning a coupon then your necessities are already covered. Between people who don't have enough to live with dignity and people whose investments don't pan out, most of my sympathy goes to the first group.

[roymurdock]

I don't think you understand...normal people are both the creditors and the debtors. Banks are just the intermediaries that take a cut from the normal people on both ends for "efficiently allocating assets that would otherwise accrue suboptimal rates of interest."

The real problem is that the banks are allowed to take risks without paying the price for these risks when they do not pan out. We have set a precedent that the large financial institutions are too big and too important to fail, and thus they may operate with quasi-impunity knowing that they might have to cut some junior employees/restructure/spin off some divisions in the event of a downturn, but that the revolving door between the public and private realms will always be open, through which both taxpayer money/credibility and new jobs will always flow to those at the top. Nobody will go to jail for being a self-interest optimizing sociopath because our legal and economic system is set up to favor corporations and those with the money to thoroughly defend themselves rather than society as a whole.

[anigbrowl]

I understand fine. I just don't fully agree with your point of view.

[roymurdock]

Fair enough.

Perhaps we can agree that there isn't enough transparency on the creditor side. You and I are creditors in that we have 401ks or money in pension funds. Do we know what is happening with that money? Not really.

Is it then fair that we have to take a haircut on our (guaranteed safe) savings if a bank screws up our investments?

[SilasX]

No, they didn't assume a risk of "oh, let's just forget the whole debt thing, who cares about that stuff anyway".

[anigbrowl]

Yes they did. Default is a real thing and that's the risk you earn a premium for taking. On equity the price of the asset can change, on debt you either secure it or charge a rate of interest that reflects your assessment of the risk. Hence the shitty rate of interest on savings accounts - your principal is guaranteed up to a fairly large amount so you earn less.

[SilasX]

There's a big difference between default (one party not paying because of difficulty or choice not to) and a deliberate mass social decision to say "oh, let's just forget the whole debt thing" across the entire economy.

Lumping the two cases together is an unjustified equivocation.