§1. Def. “Usury” - the charging of interest on money, or “the abuse of the money system for personal gain, by charging interest on the use of money” (Stephen Zarlenga) If money is just a technology for trading, why is it destroying the world? “Usury is the very antithesis of the gift, for instead of giving to others when one has more than one needs, usury seeks to use the power of ownership to gain even more - to take from others rather than to give.” (Sacred Economic, p.94)
§2. Interest creates structural scarcity (artificial scarcity) in money supply
Money created as interest-bearing debt owed to a bank creates a chronic shortage of money in the economy since the money to service the interest was never created. Incentivizes “competition, insecurity and greed”and perpetual growth. (e.g. Bernard Lietaer’s parable “The Eleventh Round” in Eisenstein, p.95)
Three outcomes to the parable:
- default (transfer of wealth from debtors to creditors - “consolidation”
- growth in the money supply (via economic growth - new bank loans to wealth-generating activities) new debt to pay down old debt: “Any time money is created through debt, a need to create even more money in the future is also created. The amount of money must grow over time, which means that the volume of goods and services must grow over time as well.” How usury drives the extractive economy, requiring the transformation of natural, social, spiritual and cultural capital (The Commons) into financial capital.
- Redistribution of wealth (progressive tax, fiscal spending, debt jubilee, revolution - the 1930s New Deal as a compromise between the creditor and debtor classes to save the ‘system.’
§3. Imposes hidden tax on society
(a) “In 2013 this cost the US government $416 billion in interest charges on the national debt – about 11% of the annual federal budget. Not to mention the interest the banks also charge against all the private borrowings. So the banker creation of fiat money acts like a private tax on all of society, to the benefit of the banks with the privilege to create such money. This has spread poverty and has concentrated wealth to obscene levels.”
(b) “The U.S. federal debt has more than doubled since the 2008 financial crisis, shooting up from $9.4 trillion in mid-2008 to over $22 trillion in April 2019. The debt is never paid off. The government just keeps paying the interest on it, and interest rates are rising. Projections are that by 2027 U.S. taxpayers will owe $1 trillion annually just in interest on the federal debt. That is enough to fund President Donald Trump’s trillion-dollar infrastructure plan every year, and it is a direct transfer of wealth from the middle class to the wealthy investors holding most of the bonds.”
§4. Makes rich richer and poor poorer
If interest grows faster than economic growth, the wealth of the creditor class will grow faster than the debtor class, concentrating wealth at the top. Debt always grows faster because it grows exponentially (“hockey stick curve”) whereas economies grow linearly following an S-curve.
- Creates permanent debt peonage for the masses
- Debt servitude - a person's pledge of their labor or services as repayment for a loan or other debt.
- An effective way to enslave people by making them feel responsible for their own indebtedness.
§5. The 5,000 year history of debt peonage
“Debts that cannot be paid will not be paid. The only question is how they won’t be paid.” - Michael Hudson.
“A study of the long sweep of history reveals a universal principle to be at work: The burden of debt tends to expand in an agrarian society to the point where it exceeds the ability of debtors to pay. That has been the major cause of economic polarization from antiquity to modern times. The basic principle that should guide economic policy is recognition that debts which can’t be paid, won’t be. The great political question is, how won’t they be paid? There are two ways not to pay debts. Our economic mainstream still believes that all debts must be paid, leaving them on the books to continue accruing interest and fees – and to let creditors foreclose when they do not receive the scheduled interest and amortization payment. This is what the U.S. President Obama did after the 2008 crisis. Homeowners, credit-card customers and other debtors had to start paying down the debts they had run up. About 10 million families lost their homes to foreclosure. Leaving the debt overhead in place meant stifling and polarizing the economy by transferring property from debtors to creditors. Today’s legal system is based on the Roman Empire’s legal philosophy upholding the sanctity of debt, not its cancellation. Instead of protecting debtors from losing their property and status, the main concern is with saving creditors from loss, as if this is a prerequisite for economic stability and growth. Moral blame is placed on debtors, as if their arrears are a personal choice rather than stemming from economic strains that compel them to run into debt simply to survive.”
§6. “Mainstream economic models leave this problem to “the invisible hand of the market,” assuming trends will self-correct over time. But while the market may indeed correct, it does so at the expense of the debtors, who become progressively poorer as the rich become richer. Borrowers go bankrupt and banks foreclose on the collateral, dispossessing the debtors of their homes and their livelihoods. The houses are bought by the rich at distress prices and are rented back at inflated prices to the debtors, who are then forced into wage peonage to survive. When the banks themselves go bankrupt, the government bails them out. Thus the market corrects, but not without government intervention. That intervention just comes at the end of the cycle to rescue the creditors, whose ability to buy politicians gives them the upper hand.”
§7. Documented Periodic Debt Jubilees in the ancient Near East
“Sumerian kings solved the problem of “peak debt” by periodically declaring “clean slates,” in which agrarian debts were forgiven and debtors were released from servitude to work as tenants on their own plots of land. The land belonged to the gods under the stewardship of the temple and the palace and could not be sold, but farmers and their families maintained leaseholds to it in perpetuity by providing a share of their crops, service in the military and labor in building communal infrastructure. In this way, their homes and livelihoods were preserved, an arrangement that was mutually beneficial, since the kings needed their service.” (Ibid.)
§8. How do create a modern debt jubilee?
“One possibility is to nationalize … banks and sell their bad loans to the central bank, which can buy them with money created on its books. The loans can then be written down or voided out. Precedent for this policy was established with “QE1,” the Fed’s first round of quantitative easing, in which it bought unmarketable mortgage-backed securities from banks with liquidity problems…. “Another possibility would be to use money generated by the central bank to bail out debtors directly. This could be done selectively, by buying up student debt or credit card debt or car loans bundled as “asset-backed securities,” then writing the debts down or off, for example. Alternatively, debts could be relieved collectively with a periodic national dividend or universal basic income paid to everyone, again drawn from the deep pocket of the central bank.” (Ibid.)
§9. Won’t creating free money lead to inflation
“Critics will object that this would dangerously inflate the money supply and consumer prices, but that need not be the case. Today, virtually all money is created as bank debt, and it is extinguished when the debt is repaid. That means dividends used to pay this debt down would be extinguished, along with the debt itself, without adding to the money supply. For the 80% of the U.S. population now carrying debt, loan repayments from their national dividends could be made mandatory and automatic. The remaining 20% would be likely to save or invest the funds, so this money too would contribute little to consumer price inflation; and to the extent that it did go into the consumer market, it could help generate the demand needed to stimulate productivity and employment.” (Ibid.)
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