Iceland made headlines in 2008 when they allowed their “too big to fail” banks to actually fail after they defaulted on $85 billion. Additionally, the small country opted for debt forgiveness of 13% of its GDP, affecting over a quarter of the island’s population. Since then, the country has begun prospering greatly causing other countries to take notice.
Most recently, Croatia followed Iceland’s example by cancelling debts of its 60,000 poorest citizens. Greece also made headlines by demanding the European Union to let it off the hook for debts owed. The move comes after increasingly extreme austerity measures set to address the runaway debt and financial disparity in the recent decade.
Debt is a Concept that Does Not Actually Exist, and Yet Billions of Lives Suffer From It
Each time a country forgives debts, it is a stark reminder of the invalidity of the “rules of the game.” The various financial shenanigans that banks get away with comprise an elaborate ruse which is only upheld by our ignorance of how things work.
This article is not going to break down Fractional Reserve Lending in its entirety, but a simple explanation that debt is not real is warranted. Money is a physical (or digital) representation of debt. Every dollar in circulation (principal) is ultimately owed to a bank by someone with interest attached. Since every dollar in circulation is accounted for, there is no money to pay the interest, which is why central banks are always forced to print more money.
Banks lend by creating credit. (ledger-entry credit, monetized debt) They create the means of payment out of nothing.
– Ralph M. Hawtrey, Secretary of the British Treasury
If all the bank loans were paid, no one could have a bank deposit, and there would not be a dollar of coin or currency in circulation. This is a staggering thought. We are completely dependent on the commercial Banks. Someone has to borrow every dollar we have in circulation, cash or credit. If the Banks create ample synthetic money we are prosperous; if not, we starve. We are absolutely without a permanent money system. When one gets a complete grasp of the picture, the tragic absurdity of our hopeless position is almost incredible, but there it is. It is the most important subject intelligent persons can investigate and reflect upon. It is so important that our present civilization may collapse unless it becomes widely understood and the defects remedied very soon.
– Robert Hemphill, Credit Manager of Federal Reserve Bank, Atlanta, Ga.
Bailouts for People, Not Banks
Explain banking to a child. “Well, you see, central banks print and hold money for people so that they can buy food, houses, and what they need to live. Man created banks to make finances simpler and safer.” Have banks really made our lives better?
People should control banks, not the other way around. They should serve us and make our lives better. Otherwise, why should they exist at all? To be the piggy banks of the über-wealthy and the wrecking ball of megalomaniacs? Indeed, banks have historically been the least safe place for the average person to store his savings. Statistically, you are better off stashing your savings at home or having your money tied up in real estate or precious metals.
The Cancer Stage of Capitalism
John McMurtry, in his 1999 social critique The Cancer Stage of Capitalism, assumed the role of a doctor diagnosing the spread of a systemic cancerous growth across the world. Amazon’s summary of the book states,
In this bold look at the uncontrolled spread of global capitalism, John McMurtry, professor of philosophy at the University of Guelph, develops the metaphor of modern capitalism as a cancer. Its invasive growth, he argues, threatens to break down our society’s immune system and–if not soon restrained–could reverse all the progress that has been made toward social equity and stability. John McMurtry traces the causes of this global disorder back to the mutating assumptions of market theory that now govern the world’s economy. He diagnoses the malaise as a pathologist would a biological cancer, tracking the delinked circuits of the global system’s monetised growth as a carcinogenic disorder at the social level of life-organization. In the wide-lensed tradition of Adam Smith, Marx and Keynes, McMurtry cuts across academic disciplines and boundaries to penetrate the inner logic of the system’s problems. Far from pessimistic, he argues that the way out of the global crisis is to be found in an evolving substructure of history which provides a common ground of resolution across ethnic and national divisions.
Scaffolding on a Broken System
All systems of life are in decline on this planet. This raises the question, is debt forgiveness dramatic enough to reverse current trends if humans continue business as usual? Perhaps it is time for society to recognize that in order to resolve our biggest issues we must reinvent the system, not patch it up every so often.
McMurtry diagnoses capitalism as carcinogenic. Of course, it is not limited only to capitalism, but as Peter Joseph points out, it is the entire monetary-market paradigm whose profit propulsion is detached from nature and the necessities of life. The 3 main vertebrae of any market system – be it socialism, marxism, capitalism, free market, fascism, or communism – are scarcity, inefficiency, and waste. These drive profits in an economy, for if there was true abundance, efficiency, and conservation, there would be less sales, less maintenance, less repair, and inevitably less profit.
“Am I the only one laughing at this fictional notion of debt that is like dominoes knocking down countries one by one?” asks Joseph in a TEDx talk he delivered in 2012. The presentation, featured below, might be the most provocative 10 minutes of video you watch all year.
Is this the best we can do? The monetary market system is a crumbling infrastructure built on a weak foundation. It is long overdue that we transcend this crippling, diseased system. When will America and the rest of the world forgive its debt?
No problem can be solved with the same level of consciousness that created it.
– Albert Einstein