To continue on the theme of debt, I’m reposting here a blog post by David Malone, author of the book The Debt Generation (2010). This is possibly the best description of the current debt crisis I’ve come across. Malone also has a simple solution to offer: a “people’s jubilee” where the people of Europe would simply refuse to pay any debts to the private banks. Of course, the ruling class will never allow something like this to go through so what we need is a pan-European insurrection to end the rule of the bankers. This is an evermore pressing issue now that the Eurozone leaders are once again planning huge bailouts for the banks. Time to put an end to the madness!
This wonderful image by Escher of two hands drawing each other is one of my favourite pieces of modern art.
For me, it is a brilliant visualization of the idea of bootstrapping. Or to put it more loosely, how you get something from nothing. Evolution is an example. From something simple you can get something complex. From chemistry you bootstrap life. From life you evolve consciousness and self awareness and finally Beethoven and Proust. In evolution there is no need for an outside artist. Species, just like the hands, draw each other in to existence.
I have no idea if Escher meant this when he drew the hands but his engraving captures it nevertheless.
The reason I mention this piece of art is because, if you are a particularly stupid species you can reverse this process. All you need do is replace the pencils with rubbers and you have the perfect image of what we are currently doing in our crisis of collective indebtedness.
So for example the Greeks, Spanish, Portuguese and Irish are all erasing themselves in an effort to pay off debt via austerity. Austerity which has so far, failed to reduced the debts but has erased the means by which they had hoped to pay the debts. In each of those countries the economy has shrunk faster than the burden of debts, leaving them worse off than before. Which is why each of them has suffered credit downgrades.
So far so stupid. What is worse, according to all our leaders and especially all our banks, there is no alternative, no other way out.
I do not think this is true. I suggest an alternative is what we might call a people’s debt jubilee. The idea of a debt jubilee is an old one. I think a collective pan-European, even global, jubilee is worth looking at.
At the moment we are in a funny situation where we may personally regard the situation in Greece, Ireland and Portugal as sad, but we are encouraged nevertheless to see it on a national level, as both just and inevitable because, so we are told, it is a simple story of debtor nations such as Greece, Spain, Ireland and Portugal, owing vast amounts to the creditor nations like France and Germany.
So, we have the Greeks being crucified by ‘austerity’ in order to pay debts their government owes. Their government owes vast amounts of money partly because of debts it incurred through its own borrowing for its own expenditures, but partly also because it took on the private debts incurred by Greek banks. The combination has proven to be unsupportable. Ditto for the Spanish, Irish and Portuguese. That’s the story of the ‘debtor’ nations.
But in the ‘creditor’ nations we find something at odds with the official debtor/creditor story. For here too, people, ordinary people, in France, Germany and the UK, are also suffering austerity measures. Here the austerity is blamed upon having to bail out the Greeks, or the Irish , Portuguese or Spanish.
The thing to remember here, is, to focus on the German/Greek example, that the German’s aren’t bailing out the Greeks because they love them so much. They are bailing out the Greeks in order that the Greeks can bail out the German banks. The German banks lent so much money to the Greek State (its various state enterprises) and Greek Banks, that if the Greeks don’t pay it all back – the private debts between private banks as well as State debts, then the German banks implode.
So the reality is the German’s aren’t bailing out ‘the Greeks’, they are bailing out private German banks and their private German debt agreements, The same is true of the Irish and British. The British recently ‘helped’ Ireland with a loan most of which will end up in British Banks. The Portuguese bail out will end up in France and Germany by one route or another.
So when we hear or use the phrase ‘German banks are exposed to Greek debt’ or ‘Greek losses’ what this means is that German banks lent money to Greek enterprises and banks and may now not get it back, if the Greeks default. Which at first hearing sounds like it’s the Greeks fault. They don’t pay. They are at fault. Fair enough.
The familiar charge is that the Greeks knowingly took on loans they could not pay back because they wanted a life style they could not afford. But if that is true, if the Greeks ‘knowingly’ took on loans they could not afford, then the bankers also must have known. Unless you are willing to believe that Greek or Portuguese or Irish, bureaucrats and businessmen – thousands of them across Europe – all managed to put, not one over, but hundreds of billions over, on those ‘smartest men in the room’, year after year, – unless you can believe that, then the much simpler alternative is that the bankers knew as well. If they knew then they too are guilty.
The bankers knowingly lent money to people who could not afford to pay it back. And we KNOW THIS IS TRUE. The various swaps contracts the Greek government entered into with Goldman Sachs and a whole host of the other Big Banks were specifically designed to hide the true extent of the indebtedness of the Greek government. The Banks KNEW, but lent anyway. And they lent to Spain and Portugal and Italy as well as Greece. This will become painfully clear shortly
Thus the real story is that the banks were delighted to lend to the Greek State, its state owned enterprises, its municipalities, its various private banks and its people, way beyond their ability to pay back. This was the bubble of lending, leverage and deferred payments. The bubble was NOT created by ordinary people, or even their national governments, hoodwinking the world’s banks. It was the world’s banks, those in Greece AND Germany and elsewhere, conniving together to lend and spend and lend some more, much more than was wise. The government’s got to strut on the world stage and talk about their economic brilliance and miracle working, the bankers got massive bonuses and the people made hay while the sun of their masters shone down on them.
So if the Greek state ‘should have known better’ and ‘been more prudent’ then so too should the German French, American and British banks who facilitated their profligacy. And yet all the banks in all the countries have shed their losses on to the public in all their countries. Not only are the Greek people having to suffer austerity to bail out German banks, so are the German people. The Greeks suffer to pay the Germans, while the Germans suffer to bail out the Greeks so they can pay the Germans. Two hands determindly erasing each other, and for what and whose benefit? The Greeks? The Germans? Or the Bankers?
And this is where the idea of a ‘People’s Debt Jubilee’ comes in. At the moment we are told debtor nations are paying creditor nations. Whereas in reality, the people in all nations are paying and suffering, in order to pay the debts of private banks in all the nations. The division isn’t between nation and nation but between the banks and the people of every nation. In every nation austerity is erasing the wealth, vitality and well-being of the people in large part to pay off the private debts incurred by private banks.
The vitality and hopes of people in Greece are being erased to pay German banks and so too are those of people in Germany. The hands are erasing each other.
But imagine if the German people and the Greek people both said we will not repay private debts of German or Greek or any other banks. The obvious objection is that the German banks would die. And so they would. But the German people would no longer have to pay the massive bail-outs THEY too have been paying. Let’s not forget that the German tax payer has so far payed hundreds of billions to bail out GERMAN banks dwarfing what they have so far paid to Greek banks. On top of which the money they will give to Greece is FOR THE GERMAN BANKS anyway.
If the German Banks were left to suffer their private losses then neither the Greeks NOR the German people would have to keep bailing them out. And all that public money from the German tax payer and the Greek taxpayer, currenlty being bled from the people of those nations into private banks would be freed to invest in real production and employment, in both countries. Rather than bail out our present, insolvent banks who remain insolvent even after being bailed out, we would all be better off letting them die, and then putting our bailout money in to new, clean and solvent banks.
At the moment two nations are being yoked to pay off the debts and stupid lending decisions of insolvent private German banks. The same is being done in every other nation to pay off someones banks. It is not nation against nation it is banks against people.
If there were a People’s Debt Jubilee, where BOTH the Greek and the German people refussed to pay the private debts of insolvent German banks, then those German banks would die, true enough. But would the German people be worse off than they will be if they continue, along side the Greeks, to bail out those banks? I don’t think we know the answer for sure. BUT we do have two and a half years of evidence that diverting public money from real investment in productive employment has not created a sustainable recovery. Our present ‘austerity to pay the banker’s debts’ policy is impoverishing us all. It has set the hands erasing each other. Whereas public money spent on investing in real growth and employment, instead of stuffing the bonus pot for a few thousand bankers, would set the hands drawing each other again and stop them from erasing each other.
At the very least I think we should explore the idea of a People’s Debt Jubilee. Not just defaulting on what we owe to others but declaring that those who owe us, are free of debt as well. I think we would find we would all be better off if we stopped making each other pay off some greedy bankers’ debts.