Monday, January 9, 2012

Envisioning That Better Future -- Two: Debt Crisis

Everyone knows the horrors of The Debt Crisis -- because everyone is exposed to the caterwauling of the media about it every day.

But it is a curious thing. Nearly all the caterwauling is about Government Debt. "Saddling our grandchildren, yadda yadda. Must cut Social Security, must privatize Medicare!!! Debt!!!!"

Yet household debt in the United States is enormous -- what passed for "economic growth" prior to the crash was all fueled with mountains of debt. But we're led to believe that nothing at all can be done to relieve household debt, in fact, in order to revive a consumer economy, personal and household debt would have to increase substantially -- because employers cannot raise wages (perish the thought) to create demand and thus revive the economy.

Households actually have a much greater debt burden than they realize. Not only do they have their mortgage and credit card and vehicle debts (as well as a host of other debts, like student loans and so on) to deal with, they are also saddled with the entire debt burden of government's guarantees to financiers that their gambling debts will also be paid off, in many cases, paid off multiple times.

By you and by me.

Government debt pales by comparison.

While the banksters and financiers have a free ride at your expense and mine -- and keep right on gambling with the proceeds -- American households get buried under even more debt to satisfy the insatiable maw of the vampire squid. Even as they try to get away...

Years ago, at the outset of this Endless Recession, I proposed Household Debt Relief as the primary tool to deal with the economic crash. I suggest that each household be provided with $80,000 to $100,000 for the specific purpose of paying down debt, energy saving home improvements and/or the purchase of a new energy responsible vehicle.

At the time, the idea was greeted with shock bordering on horror. Moral hazard! You can't do that! When I pointed out that Debt Relief for the High and Mighty was the current policy, but none for the ordinary folks, and that policy would ensure the perpetuation of the Recession, the outrage at the very idea of interfering in the marketplace at the household level was ratcheted up. This was even before Santelli's rant -- over the idea of providing a "bail out" to home owners.

Many more now seem to realize that unless there is substantial household debt relief, this Recession really will be Endless. Providing so much relief at the top and nothing at the bottom ("You can declare bankruptcy!" And in many cases, that won't discharge or mitigate debt at all; thanks Joe Biden!) means that the economy simply can't recover. The High and the Mighty hoard their wealth and demand ever more -- and gamble with the rest. Even the normal economy -- at ground level -- is stalled, and yet the high flyers are gambling with abandon. Speculation (with all the 'free money' the financial class has been given) is driving up prices, wages and benfits are falling, debt among the Lesser People is growing, all is not right with the world.

I sometimes think there may be a moment of grace on the horizon when our rulers actually come to their senses and realize Household Debt Relief is a necessity, and they actually do it.

This being an election year, you would think so.

But so far...


So what do you do? The trick -- which is being recognized more and more widely -- is to Stop Paying.

Just stop.

If enough people do that, the effect on the financial exploitation system could be monumental and could easily lead to the kind of household debt relief that has been needed for many years.

Cindy Sheehan has made it something of a crusade to stop paying income tax, and the tax protest is a long American tradition. Author Nicholas Carroll has taken the debt bull by the horns full on with his book, "Walk Away From Debt for A Better Future", but that idea, too, of course has been around for a long time. Leaving debt behind was one of the major impetuses for Western Expansion, and debt was a major factor in driving millions out of Europe to come to America.

"Strategic Default/Bankruptcy" is one of the prime methods Our Betters have used for ages to ensure their debts never overwhelm them. They do it all the time in good times and bad; it is part of the process of doing business -- and when Our Betters do it, it is generally a deliberate form of screwing small fry creditors (sometimes big creditors, too) so as not to have to pay them in full.

It's been working for the Big Guys, so they see no reason not to do it.

When ordinary householders got into the game, however, with the real estate crash, that old "moral hazard" thing raised its wrinkly head. For ordinary people to do what the Big Guys have long depended on to cancel/restructure debts was loudly denounced as "immoral" and "evil," if not patently illegal.

I tended to share that point of view until I learned that many of the mortgages that were being foreclosed were being paid off multiple times, that in some places, even after the mortgage is paid through various means, the debtor can still be liable for the entire amount (thus paying off a mortgage that's already been paid off), that some student debt is not cancelable at all making the student debtor liable for the debt potentially for the rest of their lives and so on.

The issue is straightforward: Americans are being ripped off and enserfed by debt, in some cases by debt that cannot be discharged. Furthermore, the only way American consumers have been able to prop up the economy is through boatloads of debt, piled upon more debt, all of which enriches the Highest of the Mighty, while the ordinary schlubb is lucky to be able to maintain a modest lifestyle.

It's insane.

Unless the household debt crisis is addressed, the real economy is going to continue to falter and in many places decline while the false or financial economy is likely to continue to soar.

If public officials will not address the household debt crisis (I thought for a while they would as an election year bone) then people have to take matters into their own hands and stop paying.

It's risky to be sure, but if enough people stop paying simultaneously, there is literally nothing creditors can do about it; and if Authority tries to enforce creditor demands on tens or hundreds of millions of Americans all at once, "Revolution" is far too mild a word for what will happen.

So: get out from under the burden of debt -- yours and the gambling debts of the financial class -- by "walking away."

The model is somewhat like the Bank Funds Transfer last year on Guy Fawkes Day. Hundreds of millions of dollars were taken out of banks and put into credit unions on that day, and apparently the process is continuing -- if the flyers and inducements I get from my credit union are any indication. Take it a step farther and repudiate debt to the banksters as well.


  1. Not sure what the right income level would be for reparations, but I think the Fed should send out checks to every American making under X amount.

    Say, a check for 75K.

    We know the Fed gave out in the neighborhood of 16 trillion recently, but since it was handed over to banksters and the richest of the rich around the world, it had virtually no impact on the world economy where it really lives. In the trenches.

    (And, contra the Austrians, there was no increase in inflation.)

    They sat on it, from on high, and made more money for themselves on all of it, investing next to nothing in jobs, production, better pay and so on.

    If the Fed were to send about a quarter as much (total) to every American making, say, 60K or less (?), the economy would go gang busters, and the Treasury would receive so much in new tax revenues, we'd balance the budget in a couple of years.

    It would have enough impact to pull the entire world out of its endless funk, in fact.

    Seed the bottom, and trees will sprout in the billions. Seed the highest white capped mountains, and they'll die of greed and cold-heartedness.

    And it's really not as crazy as it might sound. Capitalism has long reached the stage of pure fiction, anyway. Any world with a 600 trillion dollar derivatives market has long since entered Murakami territory. So why not use that fiction to help real people live a better life, along with the macroeconomy?

    Of course, I'd much prefer to go even further, as I've mentioned before. No money, no profit, no private ownership of the means of production. Private ownership of your home. But the space between would then be the Commons.

    In lieu of that . . . we should utilize the current surreality of our capitalist system to benefit real human beings.

    End household debt, as you mentioned. The Fed could do it. And stoke the economy at the same time to make it rage against the dying of the light.

  2. You're exactly right.

    The breathtaking amounts that have been made available to -- or been outright given -- to the financial sector without strings boggle the mind. If equivalent -- or even much smaller -- amounts had been provided to households instead, there would have been an immediate economic recovery on the one hand, and there would have been the wherewithal to actually start a transition away from many of the perils that are strangling the masses -- and eventually will consume the elites as well.

    Instead, in an eerie recapitulation to the Hoover economic plan, money by the boxcarload was given away at the top, which covered the fincancial sector's gambling debts and left plenty more to hoard and... gamble with some more.

    So we're stuck now in an endless economic loop going round and round getting nowhere -- except that, of course, those on top are still making mountains of money.

    But even they in their more lucid moments are coming to recognize that their game is based on fictions, and all their money is ultimately worthless.

    They'll try to keep their merry-go-round going as long as they can but as it spins faster and faster, centrifugal force takes hold, and we know what the result is. That's the ride we're on.

    Moving out of our predicament takes bold action. Our Rulers simply cannot fathom the nature of what needs to be done, as they keep repeating the same mistakes over and over, with the same result: things are fine (getting better!) for them, deteriorating for everyone else, and the explosion is inevitable.

    It's almost as if they want their own demise.

    What could have been won't be. We have to come up with something else.

    But understanding the fictional nature of "all that money" is, I think, a key. Ultimately, for the greater good, it doesn't matter at all if "debts are paid" -- government or private sector... but it matters a great deal if peoples lives are destroyed in pursuit of payment.

  3. Your last paragraph wraps it up nicely, concisely.

    Again, I'd rather go full out real participatory, egalitarian democracy. No money, no profit, the entire nation as "the Commons" . . . outside one's home. But if we're stuck with capitalism, then let's at least apply common sense.

    Struggling for an analogy or metaphor here. But it's basically like this. We have a choice to distribute money to a few already rich people who will hoard it under their gold-plated beds, or, distribute it to people who will spend the vast majority of it in this economy. Here and now. America, being overly dependent on domestic consumption for 70% of its total economic output, should choose the latter.

    The above doesn't even include the higher rationale of human rights, dignity, fairness, etc. etc. But even in a purely cold-eyed view, it makes sense to pay reparations to those in need, to the working poor, the working and middle classes.

    They will spend the majority of it and set their own lives right side up, while kicking the entire economy into high gear.

    It's logical and rational and sensible, which means it will never happen.

  4. If there is a good side to the current situation it is this: more and more people are weaning themselves, slowly and somewhat painfully, from the unsustainable consumption economy of the past.

    We must, as a species, for survival's sake, transition from consumption to sustenance.

    An ideal sustenance economy would be much like your egalitarian -- and cash-less -- democratic vision. The notion that it can't be done is a crock; it can most definitely be accomplished, but not with the weight of the Overclass burden on top.

    That has to end.

    And that's why there is Revolution.

    The Overclass, it seems to me, could have saved itself had it had the insight and the human decency to spread rather than concentrate the wealth. Had they been driven by human decency rather than obdurate cruelty, we would already be in a much better world.

    But no.

    One way or another, the burden of the parasitical Overclass will be lifted...