I don’t think that people who have spent a lifetime believing that doing the right thing pays off – or at least, pays off enough – will all change their behaviors overnight. But as they plan and make their moves over the next 10-20 years, they will remember who got massive breaks, and who paid for those breaks.
It will take quite a bit of time, though, for all that to play out, and for people to change habits of a lifetime in response. People who borrowed vast amounts of money and didn’t repay their loans got massive breaks, but the investment losses from the failure to repay haven’t been felt by the ultimate beneficiaries of those investments. Current and future pensioners relying on pension funds that invested in mortgages have yet to feel the losses. Owners of life insurance policies and annuities from companies that invested in mortgages have yet to feel the pain. To the extent that mortgage loan forgiveness will be engineered by inflation, then all those who saved more in dollars than they borrowed will be hurt. To the extent that bailouts are granted, future individual taxpayers will pay.
Few of these effects have been felt yet by individuals, much less reflected on. So far, only some intermediary institutions that invest our money have felt much impact. But the real impact will be on individuals, and it will be felt for many years. When that impact has been fully absorbed, I think you will see significant changes in behavior. So far, all we’ve seen are the giveaways. When we feel the takeaways, people will change.
