Tuesday, October 5, 2010

The Debt Dodge

Unless politicians are prepared to dig into the pockets of middle- and upper-income families, experts say, the demands from bond market investors to get government finances under control can be satisfied only by cutting back even further on benefits for the poor and needy.

Nobody’s perfect. That’s why the truth accidentally pops out of our kept media from time to time. The truth revealed in the above quote from the NY Times is that bond investors own the world and that we are in their thrall.
The richies and the righties have successfully sold the stupidos on the notion that debt will be the death of us. Everyone and their tea-brained uncle is shrieking and hollering about how our engorging arrears means the ball and chain for future generations. Our kids’ kids and their kids will have to feed on gruel and sleep on stones, in the words of Emerson, “to pay every debt as if God wrote the bill.”
But, of course, the creator is not our creditor. Our debt is owed to bond investors. They trade in that debt in order to profit by it. Some hold it for years and some for months or days. Some hold it for mere microseconds. We no more know who owns our debt at any given moment than we know how many grains of sand our feet kick up when we walk on a beach.
What we should know, but are rarely told, is that credit and debt have replaced the mass production of goods as the chief means of taking money from everyone and giving it to the wealthy. In fact, we should no longer call ourselves capitalist because ever more of what we once called capital has been turned into debt. The French have a fine old word known to all economists for people who live off the interest from debt: they call them rentiers.
Our rentier, nee capitalist, class has two great fears common to its ilk everywhere. The first is inflation. Their ultimate nightmare is a repeat of Germany in the 1920s when people needed a wheel barrow full of bills to buy a crust of bread. If the value of the dollar falls to, say, a penny, debtors will pay off their loans with near worthless bucks. At that point, the creditor class will start driving their Maseratis into abutments.
Their other nightmare is repudiation. What if debtors just refused to pay up? It’s happened recently with sovereign debt. Argentina and Ecuador repudiated part of their paper, the latter when it was discovered by the new reform government that certain loans the country had taken out were illegally drawn. The Ecuadorans saved themselves $3 billion.
On the Daily Show the other night, Jon Stewart, a cretin when it comes to matters foreign, mocked Europeans for their massive demonstrations in opposition to government austerity programs. Why, he asked, weren’t those crazy furriners modeling themselves on the Tea Baggers and protesting public spending instead?
Despite being a smart as well as smart alecky bunch, it has apparently never occurred to Stewart and his writers that not every middle class in the world is as stupid and suicidal as ours. The millions who marched in Europe understand perfectly well that the debit crisis is really a trick to make the rich richer at our expense. Unlike us, they are prepared to repudiate the righties and the richies. They're already fighting back. Ten million marched in Spain the other day. In U.S. terms, that was 100 million people. If we could turn out one-tenth that number, the bond traders would go into another business.

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