Central Perk: Seth's Blog : Debt

joi, 9 iulie 2015

Debt

Greece. Puerto Rico. Student loans. Mortgages.

The forces of debt are reshaping the world, creating dislocations and crises on a regular basis. And yet, few of us really understand how debt works.

Not the debt of, "can I borrow five dollars?" but the debt of corporations, nations and bureaucratic bodies. What's debt, really? What is money, and which came first?

The most fascinating book I've read all year is Debt, by David Graeber. (The audio is highly recommended).

Debt is older than money, and money was probably invented not to help the imaginary harried merchant who is struggling with barter (what? you want to trade your sheep for my muffins? but I don't need sheep!) but instead to enable nation states to feed their armies, and for individuals to trade debts with one another.

[His army insight: The easiest way to feed an army is to invent a coin, then require all your citizens to pay taxes in that coin, a coin they can only get by trading. Then give a bunch of coins to your soldiers. Bingo.]

From this surprising beginning, Graeber takes us on a tour that covers 10,000 years. He talks about the origins of slavery as well as the inequities caused by the World Bank and the IMF. One simple example: If a dictator runs up a huge debt and then absconds with the money, are the citizens of that nation responsible? For how much? For how long? Should they be put into peonage, they and their children and all of their descendants?

If a mortgage is overdue, is it better to kick people out of the house and watch the neighborhood descend into rubble?

If 10 million Americans are overwhelmed with student debt they can't repay, what should we do then?

If the purpose of inter-country loans is to foster growth as well as international relations and trade, how does bankrupting and isolating an entire country when they can't pay accomplish this?

Or consider a much smaller example of how the world's most profitable profession can change even simple elements of user experience and customer satisfaction: Every time I pay for something with Paypal, I'm interrupted by a window insisting that I should pay for this item on credit, instead of using my balance. And every time, I close this window. Paypal knows this. And yet, they continue to interrupt millions of people a day, intentionally breaking their already weak user experience, because the idea of putting more people into more credit card debt is so financially seductive.

A key tenet of our culture is, "you must pay your debts." Debt makes us think about what this simple sentence means. Even if your instinct is to answer with, "of course everyone should pay their debts," the next question is obvious: How should we deal with nations and peoples who can't? How far do we go?

I can't do Graeber's book justice in a blog post, but I want to point it out to anyone who wants to understand the acceptance and future of bitcoin, the changing wealth of nations or why countries still own tons and tons of gold. Mostly, knowing how we got here makes it a lot easier to figure out where we might head next.