Debt of Society

Everybody but everybody likes to freak out about the national debt. My liberal friends, conservatives who aren't my friends, my anarchist friends, my semi-apocalyptic cult friends. "OMG THE DEBT, something-something CHINA!" has been a popular discussion topic for awhile.

Naturally, a lot of this distrust of the debt is stemming from a distrust of LARGE, CENTRALIZED AUTHORITY, and our mutual fear of the ILLUMINATI. Which is, of course, something to fear, and I would never begrudge people to give up their healthy conspiracy theories (not an ironic statement at all... conspiracy theories are healthy. In science they call these 'new hypotheses').

But, all the same, these are people with credit cards, who use currency, and who have no problem owing someone a 10 spot or a favor.

Debt is a quantification of guilt, and important to all of our relationships. It is the placeholder for value. The ability to have an economy is to be able to exchange things not only through space, but through time. e.g. I will gladly pay you Tuesday for a hamburger today. Without the ability to "pay on Tuesday", there would be no sense of value, because exchange would be limited to what we currently have in our possession. Whether it is a household economy, a political economy, a sexual economy, or monetary policy.

But rather than go on about that, I'll just point you towards Nietzsche's Genealogy of Morality. There are very few "must read/watch/listen" items of culture in my estimation. But this should be required reading for the human race. Or at least those who claim to be educated. It's not the answers to the way the world works, but it is such a good push away from everything we think we know about the reasons we do things, you'll never look at the world the same way.

Instead, I just want to share a little fact of monetary data with you. To put things in perspective.

Here is some data on US debt, from The Financial Times' Alphaville blog. Though of course, this is data available to anyone. If they were curious.

At the end of 2009, the US gov't debt was $10.3 trillion. Whoa, right?

But at the end of 2009 the total of ALL US DEBT was $50.9 trillion. This means that gov't debt, while a seemingly huge figure, was only 20% of all US debt.

So where is the rest of the debt coming from? Well, from you, me, our liberal and conservative friends and non-friends, our anarchist and cult friends.

$2.2 trillion was from financial companies alone.

$13.9 trillion was household debt. That's right: our mortgages, credit cards, student loans, and whatever else is more debt that the combined state and federal deficit.

And the rest of it? The debt owned by businesses, large and small. Banks, stores, farms, gas stations, private schools, car companies, whatever.

Government debt, which fundamentally exists to not simply balance the budget, but to continue to provide the monetary policy support which makes US currency VALUABLE, is only 20% of all of US debt. The rest of the debt, is, as they say, the price of doing business. How would you get credit to buy raw materials for your business without a line of credit at the bank? How would you pay your bills on time if you didn't have a credit card? How would anybody invest in anything if they could only do it with the cash they had on hand?

The entire US economy, at $14.1 trillion dollars, is leveraged to the tune of 359%. The FT blog posting notes the interesting fact that only recently has American leveraging begun to shrink FOR THE FIRST TIME in the 50 year history of the recorded statistics, down to 345% percent.

Now, I'm not any sort of expert that could comment on what the optimal level of leveraging for the US economy. But, I can tell you that the Ron Paul types who think it is feasible that the government balance the budget every year are completely out of whack. This is not a matter of "belt-tightening" or "proper accounting" or reigning in "out-of-control spending". An American economy without any sort of rolling debt would be absolutely, fundamentally incongruous with the American economy we all know (and supposedly, love). The fact that US leveraging has been increasing for every year of the past fifty years shows that an increase in debt is part of the "growing economy" we consider the norm. The fact that only this year has leveraging decreased does not show that all of a sudden we have all "come to our senses" and decided to pay off our debt. It shows that there has been a sudden collapse of available credit, which we were using as the coal-snorting steam engine driving our so-called "prosperity". Otherwise, you can be sure we would have kept swiping that credit card. What changed? Did our consumer appetites diminish, so we were content with the amount of money we made last year? Did we strike gold somewhere, so that now we have enough "real capital" to assuage our need for debt? Or did our consumer society stumble, and a massive investment sector driving our economy's growth for the last nine years suddenly and cataclysmically collapse?

Currency is only as valuable as the indications and perception that it will be valuable in the future. Offering to pay debts in US dollars is one way of maintaining that value. Another way is by finding or producing an excess of capital. I don't see anybody spinning straw into gold.

We've been riding the wave of debt for fifty years. And still our schools and highways are falling apart. I'd like to say, along with everyone else, that this is unsustainable to continue with debt like this. Maybe increasing the debt forever is sustainable, maybe it's not. But if trailing the pack of currencies heading off to slow, inflationary infinity isn't sustainable, then that means that anything familiar, anything we would like to think of as economically positive, good in society, part of our American status quo, would also turn out to be not sustainable.

Of course, we friends of the anarchist persuasion have known this for a long time. You might say we're ready for it, and have been looking forward to capitalism and the credit market's collapse for some two hundred years now. The contradictions of debt and capital have been visible to some for a while now. There may always be some form of conscious debt, as the antithesis to value. But building an entire economy on currency, quantitative value and debt seemed a bit... reckless, maybe?

And the benefit of this history is that we've already thought ahead to a life without debt. Maybe in a utopian way, maybe in a primitive way, or maybe in a downright sci-fi way. But at least we've thought about it. We know it would be a major cultural shift, and there would be fundamental changes in a society without a debt-based economy, either good or ill, that would make it unrecognizable from the way it is now.

But those tacking Ron Paul signs next to the freeway and complaining about the deficit while in the car on the way to the mall, have not. They see the system of capitalism as a giant checkbook. It must be that straight-forward, and that logical, if it is the status quo, right? The debt, for them, is as much a matter of honor, as it is not paying taxes. Because capitalism, after all, is as simple as working hard and pursuing the American dream, is it not? You shop the bargains, while you raise your own prices to afford the remodel on the house. You get the good deal, while sticking it to the other guy. It's called profit. Profit makes itself, as long as you don't have to look at the debt that pays for it. We've built an entire culture founded on this concept.

You buy into the culture, you gotta pay the price.