The idea that lenders will stop lending to poorer people seems very popular, but can someone explain why this situation will remain immune from market effects?
Markets are not an exercise in rationality, they are an exercise in making a return on investment, and, investment will occur where people think they can make a return, almost irrespective of the existence of crashes (in this case, government cancelling debts). I really don't see why people won't invest under the belief that they will be smart enough to pull out in time, just as they do in lots of other markets such as housing and shares.
It seems to me that this "no lending to the poor" argument is popular more because it fits with a particular set of politics, and is justified only by an appeal to its rationality as an idea, rather than to whether or not it might actually obtain.
Markets are not an exercise in rationality, they are an exercise in making a return on investment, and, investment will occur where people think they can make a return, almost irrespective of the existence of crashes (in this case, government cancelling debts). I really don't see why people won't invest under the belief that they will be smart enough to pull out in time, just as they do in lots of other markets such as housing and shares.
It seems to me that this "no lending to the poor" argument is popular more because it fits with a particular set of politics, and is justified only by an appeal to its rationality as an idea, rather than to whether or not it might actually obtain.