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For some reason, all the world's big news stories revolve around debt: U. S. federal debt, state debt, personal debt, European debt. It's all anybody seems to talk about.

While each of those stories has its individual nuances and details, there's also One Big Story there, a story that's hard to think about because it's so big.

Two recent articles and a book can help us get a handle on the big picture: Adam Haslett's This Is Our New Normal, Michael Hudson's Debt Slavery, and the book Debt: The First 5000 Years by fellow Kossack David Graeber.

They all agree on one thing: The debt issue is not just about economics, it's about democracy.

[from The Weekly Sift]

Haslett. Writing for Salon, Adam Haslett says we can't get into a normal recovery because we aren't in a normal recession. Instead,

In many countries, the fundamental political and economic bargain of postwar society is in the process of coming apart.

The West's rapid economic recovery from World War II made that bargain work for about a quarter century. Wages could rise without hurting profits or causing unemployment. The poor could be lifted up and middle class could achieve a new level of prosperity without dragging down the rich.

But growth slowed down in the 1970s, and Haslett retells economic history since then as a series of lesser problems caused by our evasion of the larger problem: What should a slow-growth social contract look like? Basically, inflation and debt are two ways to hide lackluster growth. So we had inflation in the 70s, government budget deficits in the 80s, and multiple cycles of private-investment-bubble/debt-crisis from the 1990s on.

Such growth as we have seen in the last four decades is increasingly based on finance rather than manufacturing, and concentrated on the already rich. These opportunities are not only out of most people's reach, but beyond their understanding.

Most people can understand what political forces are at play when a union demands higher wages and a company resists, citing foreign competition. ... But what happens when a politician says we must lend billions of dollars to undercapitalized banks or indebted countries in order to provide liquidity to the financial system, and if we don’t we will enter a depression or blow up the euro? The content, let alone the truth, of such a proposition is hard for most people to assess.

The result is an across-the-board loss of faith in democracy: Big-money interests are unwilling to leave their fate in the hands of the ignorant masses, while the average citizen wants to believe that somebody somewhere understands this stuff and can manage it properly. And so
the key decisions are made without democratic consultation by financial bureaucrats working with private bankers. ... Financial policy becomes more like foreign policy, conducted by an executive strong-arming a parliament or legislature under conditions of emergency.

But without democratic process, public debts start to lose their legitimacy. Why shouldn't the People simply repudiate debts that have been thrust upon them by technocrats? And if they do, will creditors absorb the loss? Mount a coup? What? Haslett has no answer, but believes that even framing that question advances the needed discussion.

Hudson. An even-higher-altitude view comes from economist Michael Hudson's article Debt Slavery in the current issue of Counterpunch. Hudson observes that ancient societies regularly ran into trouble when creditors gained too much power.

The general pattern went like this: During droughts and other natural disasters, small landholders would need more help that they could pay for and so would be forced to borrow on the lender's terms. (As Marx put it, "A hungry man is not free.") Eventually the lenders would end up owning the land, turning the original owners into serfs, slaves, or criminals.

Since small landowners were the core of effective ancient armies, this gradual reduction to slavery was a disaster from a king's point-of-view. So mass cancellation of debts was a frequent feature of ancient imperial governance, and got instituted in the Torah as the Jubilee Year.

If creditors became too powerful for the king to cancel debts, the empire usually fell. That is Hudson's explanation for the fall of Rome, which lost its ability to raise an army of native landowners and had to rely instead on foreign mercenaries, who eventually over-ran the empire.

"Creditor power and stable growth rarely have gone together," Hudson writes.

The rise of democracy in the 1600s meant that debts could be owed by the People as a whole, rather than by individuals or kings who might be overthrown. However, eventually the ancient problem re-appears:

The tendency for debts to grow faster than the population’s ability to pay has been a basic constant throughout all recorded history. Debts mount up exponentially, absorbing the surplus and reducing much of the population to the equivalent of debt peonage.

Modern democracies don't have jubilee years, but they achieve the same purpose by progressive taxation financing a social safety net, plus government control of central banks and regulation of banking in general. In recent years, though, the creditor class has gained enough political power that it can lower its own tax rates, cut the safety net, and deregulate. Hence the current global crisis.
When banks are permitted to be self-regulating and given veto power over government regulators, the economy is distorted to permit creditors to indulge in the speculative gambles and outright fraud that have marked the past decade.

The result is the kind of tension Haslett noted: Creditors want economic decisions taken away from elected officials and turned over to technocrats. But the bankers have lost sight of the big picture: Technocratic management causes the People to lose commitment to "their" public debt, which they will eventually repudiate, as has already happened in Argentina and Iceland.

Graeber. According to an old saying, you can't tell a fish that it swims in water. That's a good way to think of anthropologists: They're fish who study the water the rest of us take for granted. David Graeber's recent book Debt: The First 5,000 Years is an anthropologist's take on economics. And so, mixing my animal metaphors, it is the highest-flying bird of all.

Graeber is writing this book to answer the question: Why do people have to pay their debts? It's an almost universal moral principle, but its applications are perverse. He notes what he saw while studying the highland peoples of Madagascar: IMF-imposed austerity killed the mosquito eradication program. Predictably, malaria returned, killing thousands of poor children.

Now, few people would knowingly make the moral choice "Children should die so that Madagascar can give money to Citibank", especially since the country's indebtedness is all bound up in its colonial history. But once expressed as debt, the logic somehow seems obvious.

There is no better way to justify relations founded on violence, to make such relations seem moral, than by reframing them in the language of debt -- above all, because it makes it seem that it's the victim who's doing something wrong.

Banks can and have, for example, lent irrational sums of money to countries whose corrupt dictators stole it. Should the People have to repay those loans? The logic of this isn't even good capitalism. Graeber imagines asking the Royal Bank of Scotland for a million-pound loan to bet on a horserace. Good bankers would wisely turn him down.
But, imagine there was some law that said they were guaranteed to get their money back no matter what happens, even if that meant, I don't know, selling my daughter into slavery or harvesting my organs or something. Well, in that case, why not? Why bother waiting for someone to walk in who has a viable plan to set up a laundromat or some such?

Good capitalism, in other words, depends on foolish loans not being repaid.

Moral framing. The rest of the book is a long historical/anthropological meditation on how repaying debts came to seem like the bedrock of morality. The answer is surprisingly deep and bizarre: Our language for framing moral questions has come to be based on the metaphor of debt. Moral obligations of all sorts are expressed as what we "owe". It's baked into the language: ought and owe come from the same root; should comes from the German schuld, meaning debt.

Even God is pictured as maintaining a ledger of our good and bad deeds, which will be read at a Day of Reckoning -- a term that comes from accounting. Afterward, some will be dragged away to an eternal debtors prison, while others will see their slates wiped clean in a massive Jubilee.

As George Lakoff teaches, "common sense" is nothing more than what is implied by the unexamined assumptions contained in our framing metaphors. Consequently, "people have to pay their debts" is common sense, even though it's actually fairly dubious.

The net effect of Graeber's book is to de-mystify debt, and to strip it of its undeserved moral trappings. If you're killing children to enrich bankers, the morality of that has to stand on its own.

The hidden history of money. Graeber can't cover debt without re-examining money, whose history has largely been hidden behind myths.

Econ 101 teaches that primitive barter economies developed money to make trade more efficient. In fact, anthropologists know that there has never been a primitive barter economy. Economies based on trade develop after money, not before. (Pre-monetary economies are like families or mafias -- based on relationships of mutual obligation, not trade of goods and services.) Economists hide the history of money out of shame, because it is all bound up with slavery. It's only a slight exaggeration to say that money developed in order to buy people.

A personal relationship is a long series of inexact exchanges of favors. Money introduces the idea that indebtedness can be precisely quantified and that the account can be settled, allowing both parties to walk away from the relationship clean. (That, Graeber explains, is why we instinctively rebel at mixing money and friendship. Settling accounts is preparation for ending the relationship.)

The true history of money shows why it has destabilized the moral structure of one traditional society after another. Money distances people from each other, and reduces everything to the status of a commodity. And so we are distanced from the consequences of our demands: I don't want parents to starve their children or old people to go without health care -- I just want a good return on my money.

Summing up. Debt and its repayment is not some technical issue to be worked out by economic experts. Ultimately, a country's debt is only meaningful in two situations: If the People are committed to repaying it, or if the country has an undemocratic government strong enough to force repayment against the People's will. "Technocratic" solutions start us down the second path.

And finally, what a country does with its resources is a moral choice. The morality of that choice can be hidden by the language of debt, but not forever. The sooner we see through our illusions about debt, the better.

Originally posted to Pericles on Mon Dec 05, 2011 at 11:55 AM PST.

Also republished by Anti-Capitalist Chat, The Royal Manticoran Rangers, and Community Spotlight.

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Comment Preferences

  •  Very interesting points... (13+ / 0-)

    good sources and good analysis, thank you.

  •  Thom Hartmann Is Calling for a US Jubilee. (20+ / 0-)

    He's mentioned student loans specifically, which some others are also calling for. I'm pretty sure he's for extending it to some degree to other kinds of debt.

    We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy.... --ML King "Beyond Vietnam"

    by Gooserock on Mon Dec 05, 2011 at 12:06:51 PM PST

    •  Steve Keen's Modern Debt Jubilee..... (8+ / 0-)

      give every adult x amount of money.  Those with debt must use that money to pay off/down their debt.

      His conception is a little more complicated, but that's the gist.

      •  It's what should have been done (7+ / 0-)

        with the 7.7 trillion the Fed handed the banksters. Oh, I know I'll be told: "Silly girl, you just don't understand.That sort of money could only be held by banks, not by average people." Well, that's what I would have done with it: give the full amount of the mortgages in danger of defaulting to the banks holding them. Let people stay in their houses, and let the banksters have their funds to pat themselves on their collective backs for being oh, so clever. Only, since the banksters had sliced and diced the mortgages into tiny pieces, mixed them all up, and regifted them to each other, there was no telling to whom the money could have been given to settle the original debt.

        Again, It must be that I'm just a silly girl, with no understanding of high finance. Sigh.


        •  Maybe I'm just a silly girl, too, but I agree with (6+ / 0-)

          you. The trillions that went to the banks could have paid off every first mortgage in the country. Imagine if they'd done that instead of handing it to the banks. A nice little side perk would be the banks losing decades worth of interest in the deal, call it a penalty for criminal/negligant lending.

          People keep their homes, debt free, which in turn would free up lots and lots of money for consuming, starting businesses, etc. Instead, it went to the banks, which in turn tightened lending while conducting business as usual in the forms of obscene salaries and bonuses.

        •  7.7 trillion (1+ / 0-)
          Recommended by:

          Is just over 8 times the total US consumer credit card debt:

          "As of March 2009, U.S. revolving consumer debt, made up almost entirely of credit card debt, was about $950 Billion"

          With the back door bailout alone, we could have paid off every single credit card in the US, and had 6.75 trillion left over - which would be enough to pay off half of all mortgages in the US.

          Imagine what the economy would look like if that much debt had been eliminated. Imagine how much more expendable cash people would have if we cut their debt to less than half the current debt levels. The demand side of the economy would skyrocket.

        •  One trillion, more or less would wipe off the (0+ / 0-)

          student debt which is now higher than credit card debt in the USA. another couple of trillion could have eliminated all the underwater debt, the write down needed to keep people paying their mortgages in their own homes.

          Another couple of trillion could be pump priming, green jobs, infrastructure and putting 15 million people back to work full time, if they are able.  That would have restored the economy right there.

          Nationalizing the biggest banks would have saved  the trillions given away to wealthy stockholders who didn't need it, are just sitting on it with their accounts swollen with the giveaway.  Yes, the 2.2 trillion given to B of A, Citi, etc.

            Now that is a real program for a real political party that wants to fix the problem, not pleasure the rich and be a servant to the very richest  tenth of the 1%.  Which is both parties now competing for electoral supremacy.

          If you think that you and a bunch of other people can just show up on Wall St, camp out and have any effect whatsoever, you're dreaming. *YUP!* h/t Hamden Rice

          by BeeDeeS on Sun Dec 11, 2011 at 05:45:34 PM PST

          [ Parent ]

    •  How about taking that $25,000 for each (4+ / 0-)

      person that Kristoff mentioned in his column the other day (accounting for the total bailout figure) and apply it to each person's debt load, whether student loan or underwater mortgage.  For those poorest of the poor who have neither student loans, car loans or mortgages, give them the cash.

      The reason the rich don't want loan forgiveness is that it "robs" them of what they feel is their due and it benefits unduly those on the bottom rungs.  I say this makes it the best of both worlds.  Bring it on!

      •  Keen has suggested giving all adults the cash.... (1+ / 0-)
        Recommended by:
        Regina in a Sears Kit House

        for a variety of very good reasons, not least of which are both fairness in not punishing savers and also as a way to increase aggregate demand.  

        Not sure he'd include billionaires in his "every adult", though doubt he would.

        Personally, I'd favor every adult making less than something like 100 thousand to 250,000 cuz the reason to be so generous is the overall way in which would help the entire economy.

        Including de-leveraging in a more controlled way.

        Further, I'd support giving money to even higher incomes if the prove they cannot meet their debt obligation.

    •  I agree. I admit I did not understand the (3+ / 0-)

      motivation behind protesting the student loans, simply because I don't have one.  But I now view it as nothing more than an organized shake-down:  fear was put into kids that they needed the most expensive education possible (gotta compete!) and endless funding was channelled to private industry to bait them.  It is a sick society that feeds so ruthlessly on its young.

    •  A Jubilee would be fair (1+ / 0-)
      Recommended by:

      Considering the crooked ways the 1% put us into this debt.

  •  great diary! (9+ / 0-)

    for some reason this quote came to mind while i was reading:

    Give me control of a nation's money and I care not who makes her laws.

    -- Mayer Amschel Rothschild

    i'm part of the 99% - america's largest minority

    by joe shikspack on Mon Dec 05, 2011 at 01:20:03 PM PST

  •  "A hungry man is not a free man" -Adlai Stevenson (10+ / 0-)

    (not, apparently Marx).

    "I was a big supporter of waterboarding" - Dick Cheney 2/14/10

    by Bob Love on Mon Dec 05, 2011 at 02:15:14 PM PST

  •  social contracts abound (15+ / 0-)

    but it is an interesting exercise to note which groups of people invest their weightiest moral power behind which sets of social contracts.

    the social contract of obligation between those with wealth and those without seems to the only one to matter these days.

    Thank you for the very thoughtful piece.

    Words can sometimes, in moments of grace, attain the quality of deeds. --Elie Wiesel

    by a gilas girl on Mon Dec 05, 2011 at 02:22:17 PM PST

  •  All this talk of debt is an attempt (4+ / 0-)

    to keep the discussion off of economic equity.. we must continue to link the two. As they are inseparable.

    "I refuse to eat Satan sandwiches or wraps."

    by hangingchad on Mon Dec 05, 2011 at 03:35:18 PM PST

  •  if 50 to 70 percent of debt with a limit on usury (4+ / 0-)

    was done globally we would be in much better shape.

    "I refuse to eat Satan sandwiches or wraps."

    by hangingchad on Mon Dec 05, 2011 at 03:38:06 PM PST

  •  Great diary..... (8+ / 0-)

    I really hope you republish in the near future as more eyes are important, and think the diary is being overshadowed today.

    Thanks again for summarizing so well some of my favorite economic writers.

  •  Slavery, Money, and the Talmud (11+ / 0-)

    When the Talmud gets into personal injury law the rabbis are faced with a challenge - if I injure your hand permanently, what should I owe you for the hand?

    Interestingly enough, they had the language and practices of slavery to go by. You take what the person would be worth on the slave market before the injury, subtract what they are now worth after the injury, and that is the value of a hand.

    This is what came to mind when I read:

    Economists hide the history of money out of shame, because it is all bound up with slavery.
  •  Biblical Jubilee year not about debts - land! (11+ / 0-)

    Jubilee is from the Hebrew word יובל (pronounced Yovel. In the Yovel year (a) all indentured servants were freed and (b) all land within the Land of Israel was returned to the family that first owned it under Jewish sovereignty. While the Bible attributes the land return to the fact that the land is not owned by the people, but by God, I have always thought of it as a method to make sure no one farmer/family/tribe collected too much power. It also probably served to regulate land values at least a bit.

    Interestingly enough, housing in walled cities was exempted from the land return.

    Shmita, or the Sabbatical Year, was the one about debts. Debts were forgiven at the end of every seventh year according to the Bible. Here the rabbis had to step in. What we usually teach in the Jewish community is that Israelites could not get long-term loans at all, and there was virtually no lending in the year before the sabbatical. Therefore, the rabbis introduced the idea of a "Prosbol" whereby the rabbinic court would become the lender temporarily and then return the loan to the original holder. The lender would have to petition the court for this arrangement, and I am not certain if every request was granted.

    Wikipedia has good info on both:
    Jubilee or "Yovel"
    Shmita or Sabbatical Year

    •  "therefore" (2+ / 0-)

      of course in this case seems to mean "five or six hundred years later" - since it was Hillel who is said to have introduced the prosbol in the time of Herod, long, long after such laws were first instituted.

    •  That's fine (0+ / 0-)

      Let them give the land back to the people from whence it was stolen!

      That includes those of us with mortgages underwater through no fault of our own... who just happen to live in a neighborhood where there is a high foreclosure rate dragging property values down.

      Why would anyone buy my home for the $285k I still owe when they can buy one just like mine for $180K?  

  •  thank you for this diary. a few of us touched (8+ / 0-)

    on the subject of debt forgivness or "jubilee" in another diary today. i think the subject needs a wider audience and needs to be taken as seriously, as keens does.

    i believe his interest in debt forgiveness stems from his analysis of our current economic condition, which is not a pretty picture.

    he states that our economy is in a protracted state of de-leveraging. this means people and businesses are using their own resources to pay down debt, which takes excess money out of the real economy and is responsible for the lack of demand.

    his analysis states that our debt to gdp ratio in 2008, at the height of the crises, was 300% and it is now, 3 years later, only 250% to gdp. he goes on to state, that a comfortable ratio historically, that would enable the economy to grow and add jobs, is about 50% of debt to gdp. we're not even half way there. unfortunately, he concludes that we have many years ahead of weak growth, lack of demand and high unemployment. pretty depressing.

    so if we believe this scenario, what are we to do about it. one could argue, as he does, that if individuals were given a certain amount of money, that specified it would only be used to pay down that persons' debt, that our economic recovery would be much more robust given the fact that this immediate cash infusion would simultaneously reset peoples' finances and stimulate demand thereby adding jobs.

    of course, in todays political climate, that pig just won't fly for many reasons but i think the argument needs to be made, nonetheless. do we really want to have an economy for the forseeable future with unemployment at these levels? the populist argument could be made that the banks got bailed out for engaging in risky and fraudulant behavior while the rest of us suffer the consequences. it certainly puts some theoretical meat on the bones of the "banks got bailed out-we got sold out" slogan.

    There is a crime here that goes beyond denunciation. There is a sorrow here that weeping cannot symbolize. There is a failure here that topples all our success. Grapes of Wrath, John Steinbeck

    by dear occupant on Mon Dec 05, 2011 at 05:00:05 PM PST

  •  Fiction (12+ / 0-)

    Our entire economy and banking system is a fiction, it is a story created by human beings and as such, can be rewritten. Instead of understanding the plot of the current failing story, let's write a new story with a more balanced and equitable story-line that puts human beings above wealth and power.

    "Political ends as sad remains will die." - YES 'And You and I' ; -8.88, -9.54

    by US Blues on Mon Dec 05, 2011 at 05:05:37 PM PST

  •  Odious Debt (9+ / 0-)

    That's the technical term for when a government (often a dictatorship) accumulates debt against the interest of its people. Yes, when the dictator is overthrown, a country should be allowed to default on odious debt.

  •  Very interesting and thought provoking article! (1+ / 0-)
    Recommended by:
    Regina in a Sears Kit House

    Tipped and rec'd.

    Eric Stetson -- Author, Speaker, Visionary.

    by Eric Stetson on Mon Dec 05, 2011 at 06:16:14 PM PST

  •  great job (1+ / 0-)
    Recommended by:
    Regina in a Sears Kit House

    "Mankind is our business"   Happy Holidays, debt free.

  •  Iceland refused to bail out their banksters (5+ / 0-)

    ...and they forgave much of the public's debt and refinanced their mortgages at current market prices. So, what happened?

    Standard & Poor’s raised the outlook on Iceland’s credit rating to stable from negative as the island’s economy returns to growth after emerging from its 2008 bank industry meltdown.

    “Iceland’s economy is recovering from the systemic failure of its three largest banks, and has returned to positive economic growth after two years of severe contraction,” S&P said in the statement.

    Iceland last week announced the economy is stable enough to allow the central bank to proceed with the next step in easing capital controls, in place since the island’s three biggest banks defaulted on $85 billion three years ago. The island will grow faster than the euro area this year, the International Monetary Fund estimates, while the cost of insuring against an Icelandic default is lower than the average for the euro region.

    Iceland’s economy will grow 2.5 percent this year and next, versus 1.6 percent in the euro area this year and 1.1 percent in 2012, the IMF said Sept. 20. Next year, Iceland’s current account surplus will widen to 3.2 percent of the economy and unemployment will be 6 percent, versus 9.9 percent in the euro area, the fund said.

    Had the US put a floor under the real estate market by extending the length of mortgages, the entire Global financial crisis would not have happened.

    Give a man a gun and he can rob a bank. Give a man a bank and he can rob the world. Save the lives of the people and the future of the planet. Nationalize the banks.

    by Pluto on Mon Dec 05, 2011 at 06:33:10 PM PST

  •  I recommend also The Big Short (2+ / 0-)

    which narrates the financial crash

    via the stories of the few who actually saw it coming, warned about it, bet on it and made millions.

    The incomprehensibility of the the money-making schemes, even to those who were creating them, is a key point of the book, and dovetails with your point that, more and more, we are forced to trust that someone both knows what is going on and has our best interests in mind when, often, those running the show do neither.

    Michael Lewis (who also wrote Moneyball, Liars' Poker and Panic, among others) makes understandable the mind-bending combination of greed, incompetence and influence that got us where we are, and will do it again unless stopped. Link here. See Michael Lewis.

    Politics is the entertainment branch of industry. -Frank Zappa

    by TheGrandWazoo on Mon Dec 05, 2011 at 07:19:19 PM PST

  •  One of the best diaries I've read here (9+ / 0-)

    and I've read many great diaries!

    I agree with the analyses.  Few realize that in the bible, some of the greatest condemnations of the prophets are to creditors who seize the property of the poor and sell them into slavery, or who clean their fields to the very corners, leaving nothing for the landless to glean along the edges, or who buy or grab land until the fields touch one another with nothing left over for others.

    I believe we've reached that point.  Nothing is left for the rest of us to live on--not enough breathing room to survive and the scraps as well are being gathered in the "landowners".  

    Jubilee time!

    "Because inside every old person is a young person wondering what happened." -Terry Pratchett

    by revsue on Mon Dec 05, 2011 at 07:24:59 PM PST

  •  Good stuff. I would add... (4+ / 0-)
    Modern democracies don't have jubilee years

    It seems to me, that bankruptcy can serve a similar purpose like jubilee years but on a case by case basis, so to speak. Of course recently the creditor class had government so restrict bankruptcy for ordinary citizens as to be unavailable today (and contrary to the Constitution.)

    Another interesting take on this is Robert Kutter's article, "Debtors' Prison" in the American Prospect.

  •  Absolutely fascinating and wonderful diary (1+ / 0-)
    Recommended by:
    Regina in a Sears Kit House

    Part of human nature, I think, is to sometimes be unable to see the forest for the trees. And my reading on the financial crisis makes me think there were many who could not see the trees for the one little branch they spent their time on, or the one little leaf.

    BTW, have you read Shock Doctrine? I haven't been able to bring myself too but wonder how it relates to these books.

    Thanks for taking the time to write this. I will be reading it again (BTW - how do I save a diary to do that?)

  •  Debt = Loss of sovereignty (1+ / 0-)
    Recommended by:
    Regina in a Sears Kit House

    One of the primary privileges of sovereignty is issuance of currency.

    We sold ourselves into slavery in 1913.  For no reason I can think of, other than ignorance.

    Quite the swindle!

    Nationalize the banks.

    The Fail will continue until actual torches and pitchforks are set in motion. -

    by No one gets out alive on Tue Dec 06, 2011 at 07:13:47 AM PST

  •  This is painful. (2+ / 0-)

    It is hard to face the kind of truth you are pointing to, but I am coming, slowly, to believe that some kind of massive debt forgiveness is the only way out of this mess.  It is a mess of such huge and insurmountable proportions, that I believe we really are only seeing the tip of the iceberg.  There are just too many people making good money who can not keep up with their debt payments and too many empty homes that the inhabitants have either stopped paying on or have walked away from that the lenders are also ignoring.  Meanwhile, some huge number of homeowners are ridiculously underwater.  I don't see how this resolves in a good way.

    Your scenario with lenders owning everything and impoverishing the small-timers seems all too realistic.  We had better get a handle on this before it gets completely out of control. Right now, the fig leaf is still on and everyone seems to be mostly pretending that this is a manageable situation.  But once some unseen threshhold is crossed, the dominoes will start collapsing and nothing will be able to stop it.  Our government leaders should be ashamed, not to mention all those private and public bureaucrats who looked the other way or actively participated in creating this situation.

  •  Recommend The Real News interview with.... (1+ / 0-)
    Recommended by:
    Regina in a Sears Kit House

    John Weeks.  He is very concise in his analysis of how economic tyranny transforms into political dictatorship.
    His ideas overlap with the ideas expressed in this very wonderful diary.

  •  The banks got the jubilee this go-around (2+ / 0-)

    Just think what would have happened had even a tenth of the money funneled to the banks via the Feds gone to average American families to retire the debt created through the bankers greed?  I think we would not have seen a recession as deep as we have.

    Occupy is not fighting for the rights of a few to sleep outdoors, but for the right of millions to sleep indoors. (VanJones - I think from a tweet).

    by Actbriniel on Tue Dec 06, 2011 at 09:09:12 AM PST

    •  Printing money = Inflation (1+ / 0-)
      Recommended by:
      Regina in a Sears Kit House

      If I understand this properly, the money forwarded to the banks represented an increase in liquidity, not a forgiveness.  The banks owe the money to the Fed.  And the Fed owes the money to Treasury. Is that correct?

      If so then it is not 'debt' per se.  We haven't changed the net debt within the system, only provided additional liquidity so that the banks could continue to finance the economy, such as it is.

      It is a confusing scenario to most (including me, at times).

      We can always pay off the debt by printing dollars, at the expense of inflation and it's "cruelest tax".

      Sovereign debt is a funny concept.  In a business, a debt restructuring can occur with an equity swap.  In a sovereign state, there is no 'equity', just a ratio (debt to GDP vs debt to equity).  Debt restructuring results in different debt, not equity.

      The reason Greece has a problem is the Euro.  If it still had the drachma, things would have worked out already with a devaluation of the drachma.  Perhaps that would have been a hardship on the population, but it probably would have been more acceptable to ordinary Greeks.  

      I'm generally amazed that people worry about the Dow averages. They have little actual effect on most of the populace other than a psychological baton.  We feel good when the Dow advances...but what is really happening is that the 1% are doing better.  Yet, people feel good about the advance, as if it meant a general improvement in the state of affairs for all.

      Ultimately, if our economy cannot expand, the dollar will devalue, inflation will increase and the population will have higher prices to look forward to.  We don't have a debt problem, we have a GDP problem.

      The Dude abides, now get off my lawn.

      by Boris49 on Tue Dec 06, 2011 at 09:50:14 AM PST

      [ Parent ]

      •  One of the thigs I see happening, is that (0+ / 0-)

        sovereign debt isn't always increasing, but the interest charged by the lenders is.  When a nation can make payments on its debt, at a low interest, but gets a down rating resulting in an interest increase, then it spirals out of control.

        Germany's Merkle is not addressing this, but insisting that austerity measures be put in place to repay lenders who are often international financial companies.  

        The central problem of financial institutions needing to be in control and out of control on monetary extraction is constantly brushed under the rug.

        It is creeping upward from southern European countries to Merkle's own Germany.  Unbelievably short sighted.

        One other point I have heard only in passing: was that Credit Default Swaps and Mortgage Backed Securities were actively pushed to countries like Greece as a "good bet". Boy were they lead down the primrose path.

        I am still amazed we as a nation, and a people who headquarter many of the financial institutions which promoted these huge bets, are not vilified by other countries. (We the 99% did not have a say in this matter, but we are citizens of this country.)

        And who are these rating agencies anyway?

        Science is hell bent on consensus. Dr. Michael Crichton said “Let’s be clear: The work of science has nothing to do with consensus... which is the business of politics. Science, on the contrary, requires only one investigator who happens to be right,”

        by Regina in a Sears Kit House on Tue Dec 06, 2011 at 10:38:35 AM PST

        [ Parent ]

        •  I'm not sure that MBS', in and of themselves, are (1+ / 0-)
          Recommended by:

          responsible for the crisis. The problem was cheap money.  There was a tremendous amount of investable funds available from the economic expansion and sovereign interest rates were accordingly low.  That allowed governments to increase spending in a manner that was ordinarily not possible if interest rates were higher.  Also, the Euro provided a sense of broad stability that was unwarranted.

          The PIIGS got in trouble for differing reasons.  The recession highlighted what those problems were...they might have been able to leap over the problems if economic expansion had continued for a few more years.

          There was a lot of talk above about Iceland.  I feel their pain, but my heart is in Ireland and their problems will continue long after Iceland recovers.

          Germany and France know they have a gun to their respective temples.  They hold quite a bit of PIGS debt, (in addition to the crap that Goldman sold them).  Push too hard, Greece leaves the EC and the PIGS follow shortly thereafter.

          I never had much use for the Euro.  It's was easier to deal with drachmas and lire.

          I wonder what those old notes and coins will be worth in 2012 when the Euro collapses?

          The Dude abides, now get off my lawn.

          by Boris49 on Tue Dec 06, 2011 at 11:19:20 AM PST

          [ Parent ]

  •  The Walk Away (2+ / 0-)

    I live in underwater Sacramento where people are walking away.  We began the steep decline in housing prices in 2006.  Once underwater the banks would force foreclosure even if the need was for an interest-rate adjustment.  Then they dumped the house as low as 70% off the top value often to friends of the loan servicing company.  Now the banks have empty houses that have not sold in years.  When there is nothing to lose, people walk away.  The house next to me was a trashed walk-away.  The bank has done all the cosmetic work and still has to price it low to try to sell.  This "walk away" attitude could extend to all the predatory lending done in the last decade.  The loans to governments in Europe were predatory.  The loans/bonds  to my County of Sacramento were predatory.  No one could believe they could be repaid.  My county was trying to give our parks to their cronies cheap, but we resisted.  Do we think Spain and Italy will let France and Germany decide their budgets?  They will walk away.  I would have preferred a "law and order" society, but the crime was not done by the people.  Bring our money as close to home as possible and keep our finance system under our own "regulation".

  •  What I want to know is — (1+ / 0-)
    Recommended by:

    given that We the People have already shelled out trillions in secret "loans" to the banks...

    Why haven't the banks been nationalized?

    We have in essence bought them, and they should belong to us. Instead, we are still in their thrall.

    (And don't get me started on changes bankruptcy laws that require people to still pay off home loans and student loans... grüß Gott in Himmel.)

    Just because it's made up doesn't mean it isn't true.—Plan 10 from Outer Space

    by mofembot on Tue Dec 06, 2011 at 10:30:44 AM PST

  •  outstanding diary - share this widely (0+ / 0-)

    especially with any Christian family and friends you have. Especially if they happen to believe that they are "Conservative".  

    I've been thinking that we should start leaving pamphlets everywhere (1/2 of an 8x11 sheet of paper for example) that give people snippets of information such as this and website / article links to give people more info.

    Airports, bus stations, grocery stores bulletin boards, etc. are all good places to put down a few pamphlets.

    In spite of the pop-culture vampire revival, we're still missing the underlying social metaphor of the original Dracula: Those exotically beguiling aristocrats are sucking our blood. - Pericles

    by citizendane on Tue Dec 06, 2011 at 10:35:11 AM PST

  •  Republished to Anti-Capitalist Chat nt (2+ / 0-)
    Recommended by:
    joe wobblie, katiec
  •  bankruptcy laws (0+ / 0-)

    Seems like bankruptcy laws were, until recently, a modern equivalent to the jubilee year, albeit on an individual basis. These laws, like Glass-Steagal and other regulations, have been greatly altered in recent years to comply more directly with the needs of banks, rather than debtors.

    If a bank is willing to offer my brother cash without any collateral, in the form of a credit card, despite the fact that he has no obvious means to repay the loan, who is at fault?

    This is more than hypothetical. I have two brothers: one works for B of A, the other lives a "carefree lifestyle" and works occasionally. We have very interesting family conversations!

  •  I would take issue with the claim that (0+ / 0-)

    economists hide the history of money out of shame. It's more of a case of a lack of inquiry: The argument that barter directly develops into a monetary market because it's annoying to have to simultaneourly find someone who wants your arrows (if you're a fletcher) and who just happens to have a cow for trade (because you need a cow for milk or whatever) was first made by Adam Smith, was intuitively understandable (though wrong), especially since modern economies which regress to barter do function in the way Smith described (a point Graber makes), and wasn't too important, given what most economists focus on.

    In fact, it is the spectral connection of debt with favours which Graber describes that best explains the resistance to debt relief. If I remember correctly, anthropologists found that money first developed because the old system of informal favours fell apart when societies grew large enough that complex governance emerged. Suddenly, it became necessary to precisely express A's obligation to B, instead of relying on "you owe me." If you think of debt as a favour given and not yet called in, default does take on a moral repugnance.

    Of course, times are different, and debt has little if any actual moral component. But old prejudice dies hard, and may simply lurk, not quite dead, until the proper time to emerge (such as German's position vis-a-vis Spain).

    Iuris praecepta sunt haec: Honeste vivere, alterum non laedere, suum cuique tribuere. - Ulpian, Digestae 1, 3

    by Dauphin on Tue Dec 06, 2011 at 01:36:22 PM PST

  •  German (0+ / 0-)
    should comes from the German schuld, meaning debt.

    As any fan of Johann Sebastian Bach can tell you, the word "schuld" crops up repeatedly in his vocal music* and in that context, it isn't translated as debt; it means guilt.

    All the emotional baggage a bankster could wish for, no?

    *here, for example.

  •  Debt is the new gold standard (0+ / 0-)

    Once upon a time (before the Nixon Surprise of 1970), our money was backed by gold.  Now it is backed by IOUs of various sorts.  That's not a metaphor.

    Most all money is in the form of credit in bank accounts.  Such credit can be transferred either directly from other  bank accouts or indirectly  by exchanging credit for cash and depositing that cash into another account.  But deposits are initially created when someone gives a bank an IOU.  That's the only way their books can balance.  To them the credit in an account is a liability and the asset that makes their books balance is that IOU, e.g., a home mortgage, a government bond, or a car loan collateralized via the deed to that car.

    I highly recommend the full-length animated video "Money as Debt II":

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