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I've been unsettled by the household debt load in the U.S., not because it affects me personally (I went into debt at 28 with clear eyes, kind of quixotically, and have an extraordinarily high standard of living as an indirect result), but because it reminds me powerfully of indentured servitude and serfdom. "17-year-old child, you must now commit to pay tens of thousands of dollars to do the work of training yourself if you ever hope for a job that doesn't put you at monthly risk of starvation (there may be other jobs, but we have never told you about them if so)." "30-year-old with children, you must purchase this house now because there are literally no places you can afford to rent that would allow as many people as are in your family to live there, and if not you will be homeless."
I think we're setting ourselves up for the worst elder poverty we've seen in generations. Nobody has pensions. Thanks to the unemployment rate, people are out of the workforce for long enough or entering the workforce late enough that their social security payments are going to take a big hit. I'm certainly not putting money into a 401K, because I'm paying down debt at 7% and the best return I'd get from a CD or another stable form of savings is around 2%. (Tax breaks do not matter to me. I am already in an extremely low bracket.)
It is assumed that what is most important is making investors whole, and this is ahistorical; bankruptcy is part of capitalism, and that risk is why we pay investors a dividend in the first place. They're expected to do their research; they chose to enter this bargain as much as the borrower did. Usually, there winds up being some kind of settlement, and everybody moves on. It is identical to producing a play that flops. It is why capitalism works; it is the reason capitalism is preferable to feudalism and produces both greater wealth and greater innovation. Under current law, not so much. I can't discharge this debt through a bankruptcy proceeding, so there is no incentive for the lender to negotiate with me, even though my credit history is such that I don't profile as a 7% risk.
I am not alone in saying this, but the media narrative has been . . . odd. Not so much taking the side of the investors as assuming there is not another side. When, for instance, a 24-year-old says "I am crushed under this student debt," it is presented as sympathetic, but sympathetic in the same way as the horrors of a war zone or the struggles of a cancer patient. It's not presented as though there is an alternative. "Debt forgiveness," when floated, is like "I want a pony," not a suggestion of something practical. It has literally replaced "I'm going to Disneyland" and "I'm buying my mom a house" as the most common answer to "what will you do if you win this fabulous prize/the lottery?"
The fact that media companies are owned by investors is not lost on me, but doesn't explain things, really. Journalists regularly take positions counter to what ownership might do on their own, and ownership cares about circulation or viewership numbers, which would decline if the reportage began to be seen as counterfactual. This narrative can keep going because we have collectively agreed that people in debt, including us, are morally guilty and should be ashamed.
You of course want people in debt to feel obligated to pay back their debt. Contracts would be absurd if there were no pressure to fulfill the contract. But you don't want people to feel disproportionately guilty to the point where they cannot possibly atone. That would be maladaptive and damaging to society, not to mention individuals in that society. The polar opposite of risk is not safety; it's stagnation.
A word that doesn't show up in the media is "usury," a legal and moral concept which has guided western society for at least 4000 years. Charging a punishing interest rate has been criminal in societies in which slavery, rape, and stoning people to death were not. I present this not because I think usury is worse than vigilante stonings, but because I don't understand how the pendulum has swung so far in the other direction. The staunch pro-investor camp is dominated by "traditional values" voters of the religious persuasion; the pro-debtor camp is a hodgepodge of mostly anti-relgion young liberals. I suspect this has something to do with a theological shift toward a prosperity gospel, the notion of earthly rewards rather than "life is horribly unfair, but eventually there is heaven."* I suspect it also has to do with the phrase "godless Communism."**
I would think we would all agree that it is one thing to pay back your debt, and it is another thing to pay back many times your debt. (If I pay back my student loans through regular payments over ten years, which not many people do, I will have paid more in interest than the principal; I will have paid back more than twice what I borrowed. Remember that I have what is considered a good interest rate and that nobody is getting a return on their savings account.)
How much are investors owed? is a worthy question. Given that the system is distorted and there were unsustainable risks, how do we spread the damage in a way that is least damaging? What was everyone's share of the moral hazard? How much did asymmetric knowledge play into these risks? These are important difficult questions I look to the government to mediate. And it isn't. It just isn't. Our entire system, courts and legislature, is built on argument, and nobody wants to argue the part of the indebted, because we have decided indebtedness is shameful and embarrassing but greed isn't. To attack greed is to attack ambition and attainment. There's not a word anymore for a person who has $10 million but wants your lunch money. You can't mediate when there's only one point of view being voiced.
I heard an advertisement for a Charlie Rose episode in which the guest said something to the effect that "the moral power of debt" is distorting the dialogue and prompting people to agree to things they would find absurd otherwise, and figured out that person was anthropologist*** Dave Graeber****, who has a book which looks like it might actually answer my "how has this happened" bafflement. Thank God. Thank god someone with influence. (Although how much influence, given how quickly the Occupy and 99% narratives were shuffled into the old "hippies vs squares" rubric, is hard to say.) Anyway, there is someone to explain it to me. Thank god for teachers.
Meanwhile, research from Stanford by Laura Stokes looks promising, and has reminded me of sumptuary laws, which I always forget about but find fascinating.
* Often, when people make fervent assertions, I look for the shadow meaning, something which may have to do with early exposure to the "hopes and fears" position in a tarot card spread. These meanings can be very close together; for instance, if I'm saying "I believe I have a responsibility to create meaning in my life," I'm also saying I think life is mostly pointless, which is essentially identical but less comforting. However, the meanings can also be quite far apart, and consequently give rise to what I would consider bizarre or inconsistent behavior.
In this case, the relevant statement I often hear to mean its opposite is "You/I deserve this money," which frequently shows up in anti-tax debates. I would only be afraid of losing my money if I thought I had come to it by luck; if I think I got it exclusively through talent and work, I would be guaranteed to get it back again. Perversely "I deserve this money and shouldn't have to share it" thus has the shadow meaning of "I don't deserve this money and need to defend it as mine."
This notion of shadow meanings may or may not be psychobabble; it's hard to say, because I am an insightful councilor but also a reasonably good fabulist.
** Leading to a dialectic where to be the most religious, one must be the least communist, despite the largely communist teachings of Jesus Christ.
*** I could alternately say journalist or activist or philosopher, but I suspect he is more what I would think of as an economist, using the old definition of economist that described people like Adam Smith, Thorstein Veblen, Jeremy Bentham, John Stuart Mill, and yes Malthus, people also called Worldly Philosophers, and not for instance Freakonomics columnists and people who work for banks.
**** In this interview, when he is described as an Anarchist, these are academics using Immanuel Kant's definition of "Law And Freedom without Violence" and not talking about guys in black masks throwing things through windows (who would be Kantian Barbarians).
I think we're setting ourselves up for the worst elder poverty we've seen in generations. Nobody has pensions. Thanks to the unemployment rate, people are out of the workforce for long enough or entering the workforce late enough that their social security payments are going to take a big hit. I'm certainly not putting money into a 401K, because I'm paying down debt at 7% and the best return I'd get from a CD or another stable form of savings is around 2%. (Tax breaks do not matter to me. I am already in an extremely low bracket.)
It is assumed that what is most important is making investors whole, and this is ahistorical; bankruptcy is part of capitalism, and that risk is why we pay investors a dividend in the first place. They're expected to do their research; they chose to enter this bargain as much as the borrower did. Usually, there winds up being some kind of settlement, and everybody moves on. It is identical to producing a play that flops. It is why capitalism works; it is the reason capitalism is preferable to feudalism and produces both greater wealth and greater innovation. Under current law, not so much. I can't discharge this debt through a bankruptcy proceeding, so there is no incentive for the lender to negotiate with me, even though my credit history is such that I don't profile as a 7% risk.
I am not alone in saying this, but the media narrative has been . . . odd. Not so much taking the side of the investors as assuming there is not another side. When, for instance, a 24-year-old says "I am crushed under this student debt," it is presented as sympathetic, but sympathetic in the same way as the horrors of a war zone or the struggles of a cancer patient. It's not presented as though there is an alternative. "Debt forgiveness," when floated, is like "I want a pony," not a suggestion of something practical. It has literally replaced "I'm going to Disneyland" and "I'm buying my mom a house" as the most common answer to "what will you do if you win this fabulous prize/the lottery?"
The fact that media companies are owned by investors is not lost on me, but doesn't explain things, really. Journalists regularly take positions counter to what ownership might do on their own, and ownership cares about circulation or viewership numbers, which would decline if the reportage began to be seen as counterfactual. This narrative can keep going because we have collectively agreed that people in debt, including us, are morally guilty and should be ashamed.
You of course want people in debt to feel obligated to pay back their debt. Contracts would be absurd if there were no pressure to fulfill the contract. But you don't want people to feel disproportionately guilty to the point where they cannot possibly atone. That would be maladaptive and damaging to society, not to mention individuals in that society. The polar opposite of risk is not safety; it's stagnation.
A word that doesn't show up in the media is "usury," a legal and moral concept which has guided western society for at least 4000 years. Charging a punishing interest rate has been criminal in societies in which slavery, rape, and stoning people to death were not. I present this not because I think usury is worse than vigilante stonings, but because I don't understand how the pendulum has swung so far in the other direction. The staunch pro-investor camp is dominated by "traditional values" voters of the religious persuasion; the pro-debtor camp is a hodgepodge of mostly anti-relgion young liberals. I suspect this has something to do with a theological shift toward a prosperity gospel, the notion of earthly rewards rather than "life is horribly unfair, but eventually there is heaven."* I suspect it also has to do with the phrase "godless Communism."**
I would think we would all agree that it is one thing to pay back your debt, and it is another thing to pay back many times your debt. (If I pay back my student loans through regular payments over ten years, which not many people do, I will have paid more in interest than the principal; I will have paid back more than twice what I borrowed. Remember that I have what is considered a good interest rate and that nobody is getting a return on their savings account.)
How much are investors owed? is a worthy question. Given that the system is distorted and there were unsustainable risks, how do we spread the damage in a way that is least damaging? What was everyone's share of the moral hazard? How much did asymmetric knowledge play into these risks? These are important difficult questions I look to the government to mediate. And it isn't. It just isn't. Our entire system, courts and legislature, is built on argument, and nobody wants to argue the part of the indebted, because we have decided indebtedness is shameful and embarrassing but greed isn't. To attack greed is to attack ambition and attainment. There's not a word anymore for a person who has $10 million but wants your lunch money. You can't mediate when there's only one point of view being voiced.
I heard an advertisement for a Charlie Rose episode in which the guest said something to the effect that "the moral power of debt" is distorting the dialogue and prompting people to agree to things they would find absurd otherwise, and figured out that person was anthropologist*** Dave Graeber****, who has a book which looks like it might actually answer my "how has this happened" bafflement. Thank God. Thank god someone with influence. (Although how much influence, given how quickly the Occupy and 99% narratives were shuffled into the old "hippies vs squares" rubric, is hard to say.) Anyway, there is someone to explain it to me. Thank god for teachers.
Meanwhile, research from Stanford by Laura Stokes looks promising, and has reminded me of sumptuary laws, which I always forget about but find fascinating.
* Often, when people make fervent assertions, I look for the shadow meaning, something which may have to do with early exposure to the "hopes and fears" position in a tarot card spread. These meanings can be very close together; for instance, if I'm saying "I believe I have a responsibility to create meaning in my life," I'm also saying I think life is mostly pointless, which is essentially identical but less comforting. However, the meanings can also be quite far apart, and consequently give rise to what I would consider bizarre or inconsistent behavior.
In this case, the relevant statement I often hear to mean its opposite is "You/I deserve this money," which frequently shows up in anti-tax debates. I would only be afraid of losing my money if I thought I had come to it by luck; if I think I got it exclusively through talent and work, I would be guaranteed to get it back again. Perversely "I deserve this money and shouldn't have to share it" thus has the shadow meaning of "I don't deserve this money and need to defend it as mine."
This notion of shadow meanings may or may not be psychobabble; it's hard to say, because I am an insightful councilor but also a reasonably good fabulist.
** Leading to a dialectic where to be the most religious, one must be the least communist, despite the largely communist teachings of Jesus Christ.
*** I could alternately say journalist or activist or philosopher, but I suspect he is more what I would think of as an economist, using the old definition of economist that described people like Adam Smith, Thorstein Veblen, Jeremy Bentham, John Stuart Mill, and yes Malthus, people also called Worldly Philosophers, and not for instance Freakonomics columnists and people who work for banks.
**** In this interview, when he is described as an Anarchist, these are academics using Immanuel Kant's definition of "Law And Freedom without Violence" and not talking about guys in black masks throwing things through windows (who would be Kantian Barbarians).
