The Seductive and Destructive Power of Debt

A hallmark of our dark current times is debt. More and more people are drowning in debt while banks get bailed out and bankster CEOs ride into the sunset with huge bonuses even after crashing the world economy. People often think that a system of credit and debt is the latest in economic developments, but in reality debt has a long and interesting history which explains why our almost religious worship of debt can lead to dreadful human suffering.

You have the option of listening to the following 1 hour and 21 minutes-long talk by David Graeber or read my short 598-word summary below:

(Note: if the video linked above gets deleted, you may search the Internet for the title: »David Graeber: “DEBT: The First 5,000 Years” | Talks at Google«)

Summary: Debt started, and is apparently inborn in us, as a way of social cohesion. Example: I gave you, my neighbor, a cow. So, some day, you help me build a new barn. Another neighbor gave me a bunch of chicken to start my chicken coup, and next year, when he has had a bad harvest, I give him and his hungry family several sacks of potatoes… 

Since humans tend to depend on one another for survival and a good life, debt thus assumes a moral dimension.

The old debts, like those I just described, were not measured in exact terms of value or repaid in exact equivalence. In fact, in at least some cultures, it was (and still is) almost an insult to repay a debt exactly, because that cuts the social ties created through mutual indebtedness. Because of this imprecise accounting of exchanged favors, money didn’t use to be necessary. Exact accounting only appeared whenever people were angry with one another (say, after an injurious fight). Then people demanded exact restitution: en eye for an eye, a tooth for a tooth, or a specific, legally codified amount of grain for 20 chickens. In contrast to friendly casual gifting, on-the-spot barter happened mostly between strangers, which people didn’t meet very often in olden times. So, there was little pressure to invent money to grease the economic wheels.

Money came into existence not really for exact accounting or facilitated exchange of goods and services — in other words, to replace barter. Rather it appeared out of military activities since troops were otherwise difficult to supply and they couldn’t make credit arrangements with the rest of the population. So, warmongering kings would issue metallic coins and give them to their armies. The soldiers could then buy the things they needed with those coins as long as people wanted the coins. To make sure the people would want the coins, the kings would tax their subjects in coins, taking back the money so their subjects would value the money and readily accept money as payment for their goods and services, thus making sure that the soldiers could buy them and were thus supplied.

Also, historically, debtors were often protected from excessive debt and usury (with things like the Hebraic Jubilee or modern bankruptcy laws), so that the beneficial system of mutual support could remain intact, instead of running off the rails creating rich masters (creditors) and destitute slaves (debtors) in a land spiraling into poverty. We now have such a big debt crisis because our bought governments are now exclusively protecting the creditors instead. The obvious problem: debtors lack money and assets and can be driven over the cliff. Creditors, on the other hand, have plenty. They probably didn’t lend away everything they have, so – if they don’t get their loans back – it’ll hurt but not destroy them. Besides, creditor’s risk incentivizes responsible lending whereas bailing out and protecting the creditors incentivizes irresponsible lending and slave-seeking.

Our current system of heartless exploitation (that essentially enslaves ever more of us ever more brutally) oddly tends to pass our moral compass rather than driving us instantly on the barricades, because we instinctively feel a moral need to pay back all debt — as the old-style debt once held society together and enabled human survival, so that debt-honoring instincts developed. However, when the principle of credit and debt is being abused like it is today, we need to surmount our instincts and put on our thinking caps, so we can see that the wealth-grabbing and hoarding that is currently going on is neither ethical nor sustainable.

For more Beanstock’s World pieces featuring David Graeber click here.

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2 thoughts on “The Seductive and Destructive Power of Debt

  1. First, the king or ruler would impose a tax that was payable only in the currency of the realm and a severe penalty for non-payment. Since all living under that rule did not have that currency that could only be issued by the ruler (otherwise, illegal counterfeiting) the citizens asked how they could obtain the currency in order to lawfully pay their obligation. The ruler, in need of goods and services with which to provision itself, bought those goods and services needed and determined the price that would be paid. Even today, the government sets the prices for its purchases. Those who did not have a product needed by the ruler wondered how they might be able to obtain the currency for their tax debt. It was suggested that they get their share of currency by selling their products to those doing business with the government and pricing their products in the currency needed. It is the same in today’s world. Each monetarily sovereign nation that issues its own free-floating, inconvertible fiat currency, like the US dollar, the Australian dollar, the Japanese Yen, and the Pound Sterling, to name a few, follows the same process. Being the monopoly issuer of the US dollar, for example, means that the US Gov’t can never run out of dollars, can never “go broke,” and can pay any bill in any amount that is denominated in its own currency. For any monetary sovereign Nation, sovereignty is never an issue. If it is achievable, it is affordable. Using double-entry accounting, government spending is profit for the non-governmental sector, of which we currency users belong. Taxes are removed (and destroyed) primarily to drive the value of the currency as explained earlier, as well as control inflation. There are a few other purposes for federal taxation, but there is no mechanism for collected taxes to be re-spent to fund other purchases. Okay, I’m getting to the part about the current debt crisis. When the monopoly issuer of the currency cuts spending, especially to socially benefitting programs, we in the non-governmental sector find fewer dollars in the economy. In fact, the US has only had a balanced or surplus budget seven times in its history and each was followed within a couple of years by recessions. The economy cannot sustain itself without the constant injection of dollars from the source, the US Government. When cuts to the federal budget are made it creates an income gap that is eagerly filled by private banks who loan with interest to those trying to keep their heads above water or maintain a personal status quo. Perfect Neoliberal agenda. Profit from the pain and suffering created by Neoliberal decisions in Congress. We are frightened into false beliefs that the Nation is broke and can’t afford to spend for public purposes while Congress spends trillions on Corporate welfare. We are taught that deficit spending is a burden we put on our grandchildren and, because of our collective ignorance, we nod our heads in agreement as Congress kills more citizens by denying healthcare as a right of citizenship. The deficit is a scorecard. It tallies every dollar spent into existence from day one, less every dollar removed from the economy by taxation. That deficit so feared by all is, in reality, every dollar, to the penny, that we of the non-governmental sector have realized as profit. It isn’t a debt, it’s our “National Asset.” To conclude, it is easy to look around us and see that Congress is not spending nearly enough. Our disgrace of a national infrastructure and the amount of involuntary unemployment bear that out. But, the rising amount of debt by the average citizen is disgraceful, unsustainable, and caused by cutting federal spending. It has been recently estimated by a host of academic economists that almost $2 Trillion dollars of policy space exist before federal spending would become inflationary. TWO. TRILLION. DOLLARS. Clearly, we are not hearing the correct discussion. It isn’t the number of dollars being spent that is the only concern. Our focus must be on what those dollars are being spent and how they will benefit society, as a whole

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