The real solution to the economic crisis
by Cain

At the end of every seven years you shall grant a remission of debts.  This is how it is to be done: Every creditor shall cancel the loan he has made to his fellow Israelite.  He shall not require payment from his fellow Israelite or brother, because the LORD’s time for cancelling debts has been proclaimed.
- Deuteronomy 15:1-2

I brought again to Athens; yea, and some,
Exiles from home through debt's oppressive load,
Speaking no more the dear ATHENIAN tongue,
But wandering far and wide, I brought again;
And those that here in vilest slavery
Crouched 'neath a master's frown, I set them free.
- Solon

The IBBC is a bank. Their objective isn't to control the conflict, it's to control the debt that the conflict produces. You see, the real value of a conflict, the true value, is in the debt that it creates. You control the debt, you control everything. You find this upsetting, yes? But this is the very essence of the banking industry, to make us all, whether we be nations or individuals, slaves to debt.
- Umberto Calvini, The International

So, it seems at least, a consensus on the solution to the economic crisis has been reached.  After the shameful, naked theft that was the “bailouts” for the banks, principle agents in causing the crisis, it has been decided everyone else is going to be punished with austerity measures – cuts in government spending.  You may have noticed a double standard here.

However, it is not entirely unexpected.  Like chimpanzees transfixed by fire, our leaders ascribe magical properties to money, both fearing and revering it.  However, unlike our primate relatives, our leaders think they are sufficiently smart to control and use money, through certain ritual actions and intentions.  Which I suppose makes them more akin to medieval alchemists, a slight improvement.

These rituals usually have something to do with the illusion that cutting spending and paying off the national debt will spontaneously result in an economic recovery.  A few minutes thought will show how utterly ludicrous this belief actually is.  This false belief is usually accompanied by the equally false one that national debt is a vengeful and godlike being, with the power to utterly destroy a country if not appeased.

The truth is much less disturbing in many ways, but more in others.  For example, no nation has ever become rich through paying off it’s debts.

Contrary to this, defaulting or renegotiating on one’s debt has often been the start of a remarkable economic recovery.  The most remarkable of these is Athens.  You know, the cradle of democracy, the great Classical influence on western civilization.  Athens, in 6th century, was a mess.  The Eupatridae, powerful aristocratic oligarchs, were running the city into the ground through their short-sighted and oppressive economic practices.  Using debt as a weapon, they disenfranchised large numbers of the Athenian population, where political representation was based on ownership, as in many ancient cultures.  Many citizens were enslaved, and those who were not had no way to reverse this trend.

In such a situation, civil war was a likely result.  The poor are pissed and have nothing to lose, and massively outnumber the ruling Eupatridae.  The situation was very unstable, and the city was in poverty, the aristocratic class aside.

In this situation, a reformist aristocrat with democratic inclinations, Solon, was made archon and awarded temporary dictatorial powers to deal with the crisis.  His actions were to cancel all the debt, break up the power of the Eupatridae by giving out land to the disenfranchised and reforming the Athenian political system so people of every class (except women, slaves and foreigners, naturally) would have a say.  And soon afterwards, Athens entered what is commonly considered it’s Classical period, where it became the central power of Attica, a rich, prosperous, powerful and culturally and intellectually rich nation which stood as an inspiration to the Ionian Greeks, Romans and, eventually, Enlightenment era political philosophers such as those who justified the French Revolution and helped found America.

Other examples exist, including Henry IV of France and, more currently, Mexico in 1982.  Last time I checked, Mexico is not an international pariah in the eyes of international finance and investment.  It does have problems, but these come from another source, mainly being the transit route for almost all drugs from central and South America.

If a businessman cannot pay a debt, there are regulations to help them renegotiate or default.  Yet the debts of nations are treated as sacrosanct contracts, despite the fact that in the case of nations, the only regulatory authority that exists are nations themselves.

This debt threatens to become crippling when the borrower’s cash flow can no longer pay off the interest on the loans.  When that has happened, the point of no return has been reached.  As such, when that state is reached, cutting costs to pay for the debt will only provide marginal returns.  But these are savings, not cash flow, and so not a viable solution.  Furthermore, paying off the debt is not an economically productive activity.  It makes the lender richer, to be true, but the lenders are already very rich and, especially in the current political climate, restricting the loans they are making for various reasons (mainly blackmail against central banks and governments).  In fact, the more successful a nation is at paying off it’s debts, the more damaged it’s economy is going to be, as those are payments which are not going into education, relief programs, maintaining infrastructure and other activities which produce economic value.

A good example of what happens when one attempts this ritual austerity cure is the end result of Thatcher’s Britain.  Endemic unemployment, economic stagnation and a stunted industrial sector are the end product, along with an artificially inflated financial services sector.

Furthermore, international debt has the effect of making us all poorer.  Debt to the third world prevents the growth of third world economies and the necessity of various aid packages and foreign aid to countries which are in fact very resource rich and, on paper, quite capable of feeding and looking after their own population.  The vast majority of the Third World is therefore a cash-flow dead zone, dead weight on the global economy.

Debt is a form of control.  If the ancient Greeks and Israelites, to speak nothing of various Enlightenment philosophers who our pundits pay facile lip service to, were able to understand the basic nature of debt, why is that realization impossible now?  Debt is useful, in controlled scenarios, but when it gets out of control, as it clearly has done and threatens to engulf us all, then it should be treated in the way it has in the past – by dismissing it entirely.  A clean slate, which unlocks the real wealth of the people, allows for spending and creates the kind of commercial culture I’m sure many of us here prefer to the crushing grind of poverty and disconnect between the average person in the street and the ultra-rich modern day oligarchs who run the show.

Of course, I don’t expect this to be implemented anytime soon.  The ideological indoctrination of the last thirty or so years have been highly effective, more so than I ever expected.  And there are too many vested interests who would lose a lot of power in any such reformation of the global financial system.

But that’s OK.  Indoctrination only works so far and everyone has a breaking point.  If they aren’t willing to negotiate now, they’ll be trying it later with angry mobs who, I believe, are not known for their rational and reasonable approach to such disagreements.