Monday, November 7, 2011

Let's define some terms, shall we?

I've been AWOL again.  Seriously, some of you should probably try to tie me down and chip me or something.  But a thank you to PatriciaLynn for kicking my butt (gently, kindly).  =)

What have I been doing?  Mainly working, gardening, organizing a co-op, and Occupying.  Funny how in  my case, all of these are significantly interrelated.  Makes for a good life--nice and consistent.

Being that I've spent a fair amount of my recent life involved with the Occupy movement, I've heard a lot of the pros and cons about what we're doing.  Maybe as the days go on, I'll try to talk about them.  But there's one criticism of Occupy Wall Street in particular that I am really, really worried about, because it demonstrates how far down our cultural lack of understanding of our whole financial system goes.  The criticism goes something like this:

"It's not the financial institution's fault that the economy went ka-bloey a couple of years ago.  People took out loans that they couldn't handle.  If you take on a debt, it's your job to pay it off--it's not the fault of the banks that these people have no sense of personal responsibility.  You should either pay off your debts, or you shouldn't take on the debt."

Now, there's obviously a lot going on here, and many ways to unpack this criticism.  We could discuss fraudulent behavior on the part of both the borrowers and the banks, or the wonderful "exotic loan instruments" or the fact that even Dr. Nouriel Roubini (the nobel *ahem* prize winner in economics) said that he couldn't understand the loan documents for his own mortgage.  We could also discuss people who bought way more than they could afford, and who just didn't care or think about the consequences, and the relative lack of personal responsibility on the part of all participants.

But that's not where I want to go here.

The core problem I have with this argument--and I think that this problem is desperately important for everyone to understand--is that all of those loans made cannot be paid back without more debt.  Lemme repeat that:  all of those loans CANNOT be paid back without taking on more debt.  This isn't some deep social critique about the psychology of a borrower or the American point of view, this is a simple mathematical truth.  It is Not Possible for the current loans to be paid back, with interest, without more people taking on more debt, because there will not be enough money to do so without more debt.


Um.... what does someone else going into debt have to do with me having enough money to pay my loans off?


The monetary system we currently have is designed to ensure ever-increasing debt loads, and in the absence of this, ever-increasing defaults.  Or, to put it a different way, the system we have now is custom-designed to screw us all.  I am not exaggerating here.  This isn't a matter of personal responsibility, it's a matter of structural impossibility.  It's like demanding that someone draw a triangle that has 5 sides--it's not a criticism of the artist if she looks at you like you're a nutjob, it simply isn't a possibility.

I might be able to do a decent job of explaining why this is the case--I've got a pretty good handle on it--but other people have done a better job than me, and in video form!  Here's the shortest one I've seen so far, at ~20 minutes:

The Fractional Reserve System from Greg Stuessel on Vimeo.

This is the core of the story, though hardly all of it (and it's a little heavy on the scare-tactics, which I find wholly unnecessary--the system itself is scary enough).  For more context, check out the link to "Money as Debt" in the sidebar.  And for a very comprehensive, complete understanding of how this fits into our overall economic, energy and environmental system, watch "The Crash Course" also in my link-list on the right.

I wish I could make every person in America learn about this, somehow.  So please, please--if you were with me I would actually be begging you, possibly on my knees--you care enough about the things I do that you read this blog.  Take the next step--watch this video, it's only 20 minutes long.  If you hate it, disagree with it, or whatever else, fine, you're out 20 minutes.  But I'm betting you won't.  I'm betting that quite to the contrary, if you didn't already know what was in this video, you will be very shocked indeed.

Once you've watched this video, I invite you to think about a few things.  (I'm stealing this from the Crash Course.)  Did you know that for the first ~300 years of our country's history, from around 1660 to the mid-1900's, we had no inflation.  None.  Think about that.  Imagine saving $1,000, putting it in a box and burying it, and then your great grandchildren digging up that box and having the same purchasing power that you had when you buried it.  Inflation is not a law of nature, it's a construction of our current monetary policy, which is in fact a very recent invention (broadly from 1913, more literally from 1973).  What does it mean that anything you save becomes worthless?  What does that do to our livelihoods?  Huh.


  1. Yay! A new post! AND I get to claim status as a butt-kicker? That makes me feel totally bad-*ss, I'm going to be strutting during my afternoon walk, I just know it ~grins~

    I am going to wait a bit on watching the video though...mainly because my husband minored in economics in college, so I want to watch it with him so he can explain any difficult parts (he's working a 24 hour shift right now, he'll be home in the morning).

    Right now I feel torn, because we need a bit more income to get out of our debt and to be able to save to buy a home...but lately, I've been wondering if it's worth it to buy at all.

  2. I see what you mean by scare tactics in the vid. Honestly, it makes me a little nervous that he quotes Ron Paul as I know that he's a crazy Tea Partier and that makes me nervous...

    I'm definitely going to have my guy watch this and let me know what he thinks to get some more views.

    Honestly, my only problem with the Occupy movement is a lack of focus. If they were a little more unified and had actual goals I think it'd be easier to understand. But I think the majority of the people out there are more lost than not.

    I want this movement to make a difference. I want it to change things. I want us to be like Iceland. But I don't know as it's possible to unseat what needs to be.

  3. @Patricialynn: very glad to be of service. =) I'm interested to see what your SO says about the video. I've run the basic content of the video (though not this video in particular) by a number of economists, who either said "Yeah, that's pretty much right" or "Huh? That's how our monetary system works?" Some would probably look askance at the slavery claims, but I'd love to hear the counter arguments. =)

    @Dea-chan: Yeah, I wasn't real comfortable with the Ron Paul clips, either. I thought about saying something, but decided to just let it ride and let others make their own decisions. I will say that I've been aware of the info in this video for way longer than I've been aware of Ron Paul, so it's not terribly swaying to me. I've seen it replicated by avowed Libertarians and Socialists, so I just don't see a political motivation overall. That said, I think the fact that Paul did call this out on the floor of Congress is the only thing that has ever endeared me to him. So there is that.

    You're concern about Occupy being unfocused is, I think, both important and incorrect, but the whys are complicated. I'd actually like to do a whole separate post on this, because I think it's important, and there aren't many venues out there to have this discussion (certainly it doesn't condense into the required 10 second soundbite, so the news options don't care). So if I can beg your patience, I'll get to it soon!