Podcast: Play in new window | Download
Subscribe: RSS
[This is the first of a series of essays on debt, prompted by recent revelations about how the issue was handled in ancient Mesopotamia.]
Debt is a growing cancer on our private lives, our governments and corporations, on civilization itself. It is as implacable as it is insidious, offering us the Faustian bargain of immediate pleasures in exchange for eternally increasing pain. Let us examine and define this problem, and then take a look at it from the perspective of a brand new discovery about our ancient past — one that offers a solution, one that has been proven to work, but has been suppressed by 28 centuries of fake news.
A friend of mine once defined state-run lotteries as “a tax on the mathematically illiterate.” Debt is like that, except that it is a far more onerous burden. Buying too many lottery tickets may deprive you of a few pricey coffees, or a pack of cigarettes, or whatever your discretionary spending includes. But debt will deprive you of your freedom. One sees frequent references in the media to today’s “debt slaves,” and we understand that to be figurative, but for much of human history, debt has led quickly and surely to literal slavery. [More on that later in this series.]
The theoretical reason for this is apparent to those who believe in mathematics. Paying off an interest-bearing loan can require many times the amount of the loan. While the interest accrues relentlessly, without pause, the ability of the debtor to repay almost always varies with any number of variables — the job market, the economy at large, the individual’s health. But compound interest always wins, and the debtor always loses.
I once knew a man, a laborer, who had a wife, two children, an invalid mother, and MS, and lived barely hanging on to the bottom rung of the ladder of prosperity. His only luxury was a 60-inch flat-screen TV (hung on the wall of their apartment’s tiny dining room because the living room was Momma’s bedroom) which he had bought from a rent-to-own outlet. He was proud that he had paid it off. “I got to wondering the other day,” he told me once, “how much I actually paid for that thing. I kept all the receipts and I added them up. I paid $5,000 for that damned TV.” That’s a lesson in how debt works, and why it’s so expensive to be poor.
The debt picture in America today, on every level from personal credit cards to corporate bonds, is universally grim:
Household debt — including mortgages, credit cards, auto loans, student loans, and revolving debt, is at an all-time record high of $13.5 trillion, having increased in just the third quarter of 2018 by 219 billion dollars. In that three-month period, mortgage debt increased by $141 billion, student debt by $37 billion, auto loans by $27 bilionand credit card debt by $15 billion. The previous recorded high for household debt was recorded the quarter before the beginning of the Great Recession, in 2008.
Corporate debt — according to Forbes magazine, which ought to know, “The U.S. Is Experiencing a Dangerous Corporate Debt Bubble.” Just like households, American corporations owe more money than they ever have, fully 40% more than they owed in — did you guess it? — 2008, just before the Great Recession. Corporate managers have been using the money to buy their own companies’ shares, to buy other companies, and otherwise enrich corporate managers and shareholders without actually increasing sales or profits.
National Debt — the government of the United States is on track to spend, in the current fiscal year, one trillion dollars more than it takes in. At the end of the last fiscal year the national debt reached $21 trillion — and passed it with the trajectory of a Space X rocket headed for Mars. As with corporate and personal debt, this is huge, as we have not seen huge before.
That this kind of debt is unsustainable and is making a major contribution to the crash of the Industrial Age is self evident, unless of course you do not believe in mathematics, in which case you should stop reading this and go buy some more lottery tickets.
The business-as-usual types tell us that there’s nothing to be done about this, we have to keep going, only faster. The human-nature cynics tell us that there’s nothing to be done about this because, you know, human nature.
But a new discovery about the history of western civilization tells us that there is a road not recently traveled here, one that successfully dealt with the intractable problem of debt for many thousands of years. There’s no way it can save us from the crash already in progress, but it certainly is worth knowing about when we start over.
[Next: A cradle of civilization — and debt.]
I am guessing that you will be discussing the ancient tradition of the Jubilee year.
Spoiler alert – sort of. New information that was apparently vigorously suppressed by the compilers of the Bible.
Well then, I await the next installment with bated breath. :-)
Michael Hudson (U of Missouri) maintains that the Bible is mostly a handbook of financial expectations. Evidently Biblical scholars agree with him. Example: In the 10 Commandments we’re told not to “covet thy neighbor’s wife”. This does not address sexual attraction, but rather Forced Prostitution, which was commonly used to pay off debts.
Yes. It is Hudson’s work that stimulated this series of essays. I swear, this site has the smartest commenters in the freaking world.
It’s true that monetary matters are addressed in the Bible; after all, writing was invented by accountants. But “mostly a handbook of financial expectations” might be a bridge too far. The OT, especially, is incredibly complex and deals with a plethora of issues faced by the ancients – dilemmas unknown to pre-civilized humans. It’s an astounding anthology that can be viewed in any number of ways. A poet would see it one way, an accountant another way, a philosopher still another. Then there are historians, cultural anthropologists, clerics of various stripes…well, the list goes on. Verily I say unto you, It’s a helluva read! I strongly recommend it.
I might have liked it (the OT) better, if not for the frank moral ineptitude (by my standards anyway) of its central protagonist.
I said it before but I’ll say it again: there’s frankly something to be said about the Abrahamic religions.
The Jubilee Year may be a genuinely good thing that the Abrahamic tradition produced, but what I’d like to know is whether this good thing could stand on its own or whether it requires the said tradition to serve as an intellectual or cultural basis for it. And the trouble with this tradition is that, while it may have indeed come up with this one good thing, it has also come up with more than a few very bad things.
All I can answer is that a functioning religious tradition that traces it roots back some four thousand years has much to say about the way the human creature operates.
I admit I’m one of those human nature cynics.
I know.
Queries…
Do the debt amounts you quote in the above article reflect ONLY the ORIGINATING amounts borrowed in any of the linked sources?
As a corollary, which, if any, of the linked sources INCLUDE amortized interest on the ORIGINATING amounts and is that interest calculated out to the maturity of the loans?
If the above questions are “unclear,” please, advise and I’ll try to rephrase them “better.”
As far as I know or can tell, the amounts are those due and payable at the time of reporting.
I was hoping you might have “insight” into these calculations but that hope appears to be mislaid. Your response is, as I actually expected it to be, a similar non-answer/side-step/evasion (but I don’t hold you at fault) as I’ve received from other sources at other times. Either no one “knows” how the debt numbers are ACTUALLY calculated or they are deliberately manipulated, like the “employment” numbers (and most, if not all, attorney “arguments” in court), for the express purpose of instilling a belief, facts and reality be damned. I think you’ll agree that there are significant differences in amounts if one just includes the principal amounts versus adding principal amounts and interest over any length of time. I find it highly amusing that “people” gladly and willingly make “bets” and “predictions” based on such fictitious inanity. It is this exact kind of “belief” and “faith” that WILL extinguish ALL life on this planet (except, perhaps, some species of microbes) much sooner than most can/will suspect.
Christ, this makes Brutus sound like an optimist!
Good point, although if measured the same way (whatever it is) over long periods of time, I still find there is value in looking at the trends in debt accumulation.
Debt free money and debt jubilees! Trumpets blaring bum de de bum bum buhh..hmm!
Gotta tread carefully though. That’s why they took out Jesus, Lincoln, JFK, Dr. King, and Richard Milhous Nixon.
Poor Tricky. He maybe got it the worst. No glorious martyrdom and immortality for him, just ignominious exilia to La Casa Pacifica.
I saw his motorcade, the day he left the White House. I waved him good-bye as he traveled down the San Diego Freeway.
Oh, I don’t think his exile was so bad. He had a clear view of the “free” beach at San Onofre (sp?). Even a cheap pair of binoculars would have given him an eye full. I often thought of him while I was lolling around on the sand. I’d give a wave, every once in awhile. Lew
“I don’t think his exile was so bad.”
No, it wasn’t. Nixon was a war criminal, he got off easy.
I threw his name in there because I am convinced “they” removed him, not over Watergate, which was a trifling affair in the grand scheme, but for openly advocating for Federal debt jubilees for states. and especially because he was beginning to question the origins of money itself.
Do that, when you are in position of power or great influence (like MLK), and you will be eliminated.
“I’d give a wave, every once in awhile.”
Did the Tricky one ever wave back?
I’m with Brutus.
Not because I like it that way, but it seems irrefutable.
Will we be discussing Solon The Lawgiver as well?
One of the great things about debt forgiveness is that it is also a great way to redistribute wealth.
Should we manage a Jubilee it would most effective if we also stop any further debt, as it has become the device by which we live beyond the planet’s means, not just our own.
This article about debt deals with the manipulation of an intangible quantity by decisions. It does not take into account the tangible reality of what the systems of industrialized civilization are unsustainably and irreversibly doing to the environment. So comments on future of debt are misleading as they are based on fallacious views.
My old pappy warned me about debt. But it took a while for that to sink in. Being a working man like your friend i eventually realized that debt come with whips and chains.Of course as we both know the end game of our present arrangements is at hand.We wont have a governmental decree proclaiming a debt jubilee it will happen simply as a result of universal insolvency.