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I don’t deny that TPTB have policy levers to Goodhart metrics like nominal GDP—for instance the classic Keynesian “pay workers to dig ditches and then fill them up again”—but this particular one doesn’t seem especially plausible, unless the government bails out the creditors, in which case the situation you are describing is just stimulus checks with extra steps.
On some level, it must be the case that the expected present value of credit card payments (adjusted for default risk) is positive, or else credit card companies wouldn’t be able to raise money (relevant xkcd)
Now, it’s entirely possible that everyone is wrong about these expected value calculations and in fact the rate of default is (or will be) so high that the credit issuers will lose money—in other words, that we are in a consumer credit bubble. If you really think so, then post stock portfolio or gtfo. Less snarkily, what’s your explanation for why, of the big bubbles of late 20th and 21st century history, none of them were primarily about consumer credit card debt?
I saw a peak behind the curtain when a buddy of mine negotiated with his credit card to forgive his debt.
It turns out, when the CC company forgives your debt, they get to write it off, and it gets put on you as income. So, to give you an idea of how it worked out for my buddy. He lived his best life in his 20's, struggled to pay off his credit cards, got it negotiated, and had probably low 6 to mid 5 figures "forgiven". A sum of money which after 10 years of struggling with the debt, and generally making payments, probably bore no relationship to the amount he actually borrowed. He was then hit with a tax bill on that "income" so high he had to sell his jeep and cash out his 401k to pay it off.
I can only imagine how phenomenal this is for the companies bottom line, and all their shareholders. They get to generate virtually unlimited tax write offs. Every bullshit fee they ever stick you with is win/win for them. Either you pay it, or they write it off in which case you pay the government ~25% of it.
So, in a way, the tax code is the government bailing out the creditors. They get to make up an outrageous almost nonsensical amount of money you owe, forgive it, and then push the tax burden onto you adding insult to injury.
>Lend $100,000
>Know chud can't pay it back
>I have a plan though
>Forgive the debt
>He won't know what hit him
>Write it off and get a reduction in tax liability of $21,000
>All it cost me was $100,000
>What morons, heh
That would be after collecting monthly payments for a long time. Turning a profit in aggregate for a large pool of lenders.
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Doesn't work that way. The credit card company can only write off the amount they paid, and any interest they recognized but didn't actually receive. The debtor, on the other hand, has to report all principal, interest, and fees as income. The IRS is the only winner.
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