The looming defaults in the so-called European debt crisis are constantly represented as a threat to civilisation; in reality, they are a threat to the financial parasites who oppress us all.
Too big to fail, too big to save was the verdict of a financial correspondent on the “problem” of Italy, the latest European nation set to default on its international debt. She was commenting on the BBC Breakfast news programme this morning, and like other commentators, her voice had a sense of urgency about it.
Writing on the same topic yesterday, the BBC’s Rome correspondent said the basic problems were: “Italy’s towering 120% of GDP national debt, and an extremely poor growth record” which means “The debt mountain is a heavy economic burden which threatens to become potentially suffocating as the government's borrowing costs increase day by day.”
The solution proposed for this problem, for Italy and other nations, is more austerity and greater productivity. In other words, work till you drop to service the debt.
This scenario is reminiscent of a recent story line in one of Britain’s soap operas, Coronation Street. In this, the ill-fated character, Joe, took out a relatively small loan for his business. Then he injured his back and had to take some time off work. He had other problems too, which need not concern us here, but he was unable to repay the debt on time, and his problems grew worse when the person who had originally loaned him the money, sold this debt to another loan shark, who also happened to be a thug. Joe struggled and struggled, and by artifice – conning four thousand pounds out of his future father-in-law - he managed to repay both the original debt and the outstanding interest, which was considerably less than four thousand pounds. But, realising his victim had no spine, Joe’s creditor pressurised him for yet more money, threatening violence against his daughter if he didn’t comply.
Joe could have gone to the police, but by this time he was in far too deep, and cooked up an insane scheme to fake his own death, and after his new wife collected the insurance, they would all live happily ever after in exile. Unfortunately, he faked it a bit too good! and ended up drowning when he fell overboard.
The first moral of this story is that Joe should have bitten the bullet. He was paying and repaying an imaginary debt over and over again. His creditor, the thug, had done absolutely nothing to warrant any sort of payment, he had bought a zombie debt - a debt the original lender considers to be as good as dead. A zombie debt is sold for a fraction of the original value; it is then up to the new creditor to resurrect it if he can.
The second moral of this story is that some people are never satisfied. Joe was working like a dog, and living like one. His money was not being spent on his family or being invested for his future; it was being used to fund a parasite whose only contribution – if one may use that word – was to buy a piece of paper from a stranger – and to use that piece of paper – that one-time legitimate debt, as a meal ticket.
There is a charming little tale currently going the rounds in certain political circles, the aim of which appears to be to illustrate the decline of the United States, and the reason for that decline:
Four men were shipwrecked on an island: a Chinaman, a Frenchman, an Indian and an American.
Every day they had dinner, and everyone was assigned his own job:
The Chinaman had to catch fish.
The Indian had to collect fruits and vegetables.
The Frenchman had to cook the meal.
The American’s job was to eat as much as he could, leaving only some crumbs and fish heads for the other three.
When asked, the American said he had the most important job of all, because if he didn't eat that much, the Chinaman wouldn't have to fish so much, the Indian wouldn’t have to gather as much, and the Frenchman wouldn't have to cook as much.
Without him they would all be unemployed.
They went along with this, until one of them had a brainwave; they kicked the American off the island, and discovered that suddenly they had ten times as much to eat, and only had to work half as hard.
This story sounds like a modern if somewhat reworked version of the 1933 fable Salvation Island, in which the villain of the piece is not an American but a banker. Whatever concerns the modern author of this new anecdote may have for the future of the American economy, the story still works much better when the banker rather than the American is the villain of the piece, because ordinary Americans are doing their best to make a living the same as ordinary Italians, ordinary Greeks, and ordinary people everywhere. But what are the bankers doing?
Although banks carry out all sorts of functions in the modern world: selling insurance, changing currencies, etc, the common or garden bank has two broad purposes, to act as a strongroom, and as a bookkeeper.
When economists and the people from the European Central Bank, the IMF, etc, talk about rescheduling the Greek debt or restructuring the Italian debt, or putting together a “rescue package” for some country or other, all that is involved, from the banks’ point of view, is book-keeping, moving figures from one column to another in an accounts book, or as nowadays, in cyber-space. This is all the banks actually do, they juggle figures. But what do the Italian, Greek, British and other governments do? They cut services, throw people out of work, starve manufacturers of capital, and local authorities of the resources they need to run libraries, old people’s centres, nurseries, and even hospitals. These goods and services constitute the real wealth of the community, and it is on these that the credit and indeed the wealth of nations, is based.
The solution for the Italian debt crisis as for the Greek debt crisis is for these countries to default on their imaginary debts, to withdraw from the Treaty of Maastricht, and to create their own credit backed by the wealth of the community. This is what the Island of Guernsey did in the 19th Century when there was no money in its coffers, and it could borrow only at exorbitant interest.
The current financial crisis has been caused by a glut of cheap money – cheap for speculators, but not for governments. A government that takes control of its own financial system does not need to pay interest in perpetuity on money created ex nihilo with the stroke of a pen, nor does it need to resort to oppressive taxation, indeed a nation that creates its own credit needs little if anything in the way of taxation.
The alternative for Italy, for Greece, and even for the Promised Land itself, America, is to keep borrowing money at interest from the privately owned banking cartel, and to pile debt upon debt while public services are slashed, and while even in the United States, tent cities have sprung up all over the place.
We have to grasp this nettle now; Italy must default, as must Greece, otherwise, like the sad character from that British soap opera, they and their people will end up drowning in debt. As will the rest of us.
[The above op-ed was first published July 13, 2011.]
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