$1.6 trillion student loan forgiveness impacts Bitcoin prices, and why it matters

Experts are NOT convinced that student loan forgiveness will boost the economy of the US. They have also questioned the constitutionality of such a move and see it as the government going back on its contract commitment.

Tackling student loans has become a center stage and a talking point by Democratic presidential hopefuls. Senator Bernie Sanders (I-VT) and Senator Elizabeth Warren (D-MA) have already indicated that they will implement a student loan forgiveness program if elected as president.

According to these presidential candidates, the plan would significantly increase the amount of money available for spending by young people. It would also ensure that the cash strapped young people are involving in boosting economic growth. But what would all this money increase in the hands of young people mean for Bitcoin?

The downside of student loan forgiveness

Experts are not convinced enough with the arguments put forward by Bernie and Elizabeth Warren. The risk involved in such an endeavor is huge and the process may also be unconstitutional. This could spell a disaster for the economy of the US.

The idea that young people will have more money to spend sounds plausible, but it might also backfire and destroy the economy.

Many of these student loans are privately held. If the government wants to forgive this loan, they have to transfer the risks from the private entities to service the debts. This would add to the already exploding national debt, weakening the dollar and its position in the global markets.

Such a move would also infringe on constitutional contract protection, according to experts. It could begin a slippery slope where no contract would be protected and increase the risk of contracts going unhonored in the future.

Bitcoin alternative

This increased risk may lead to people looking for alternative financial models that are not controlled by the government. Bitcoin would be a good choice for people looking to protect their investments from a falling dollar and the uncertainty of the policies.

The increase in investment in Bitcoin would be because bitcoin is not based on contractual obligations. It is built as a trustless environment that would protect it from government control. This would make it the best alternative to invest in if the government start dishonoring their contract obligations.

Student loan forgiveness would have a dramatic increase in Bitcoin prices as more investors flee from the government-oriented financial system. Thus, forgiveness may end up hurting the economy of the US, but for Bitcoin owners, they would see substantial investment returns.

 

Featured image by Pixabay