UNSUSTAINABLE LEVELS OF DEBT
Excerpts from John Raulston Saul, The Doubter’s Companion: A Dictionary of Aggressive Common Sense.
National debts are treated today as if they were unforgiving gods with the power to control, alter and if necessary destroy a country. This financial trap is usually presented as if it were peculiar to our time, as well as being a profound comment on the profligate habits of the population. The reality may be less disturbing.
1. The building up of unsustainable debt loads is a commonplace in history. There are several standard means of resolving the problem: execute the lenders, exile them, default outright or simply renegotiate to achieve partial default and low interest rates.
2. There is no example of a nation become rich by paying its debts.
3. There are dozens of examples of nations becoming rich by defaulting or renegotiating. This begins formally in the sixth century BC with Solon taking power in debt-crippled Athens. His organization of general default – “the shaking off of the burdens” – set the city-state on its road to democracy and prosperity. The Athens which is still remembered as the central inspiration of WESTERN CIVILIZATION was the direct product of a national default. One way or another most Western countries, including the United States, have done the same thing at some point. Most national defaults lead to sustained periods of prosperity.
4. The non-payment of debts carried no moral weight. The only moral standards recognized in Western society as being relevant to lending are those which identify profit made from loans as a sin. Loans themselves are mere contracts and therefore cannot carry moral value.
5. As all businessmen know, contracts are to be respected whenever possible. When not possible, regulations exist to aid default or renegotiation. Businessmen regularly do both and happily walk away
7. The one major difference between private and public debt is that the public sore cannot be based upon real collateral. This makes default a more natural solution to unviable situations.
11. Civilizations which become obsessed by sustaining unsustainable debt-loads have forgotten the basic nature of money. Money is not real. It is a conscious agreement on measuring abstract value. Unhealthy societies often become mesmerized by money and treat it as if it were something concrete. The effect is to destroy the currency’s practical value.
we are imprisoned in a linear and managerial approach which denies reality, to say nothing of experience. Money is first a matter of imagination and second of fixed agreements on the willing suspension of disbelief.
In other words, it is possible to approach the debt problem in quite different ways.
15. Our central problem is one of approach. For two decades governments have been instructing economists and finance officials to come up with ways in which the debt can be paid down and interest payments maintained.
No one has instructed them to propose methods for not paying the debt and not maintaining interest payments. No one has asked them to use their creativity in place of a priori logic.
16. Were the members of the Group of Seven (G7) each to pool their economists and give them a month to come up with modern versions of default, we might be surprised by the ease with which practical proposals would appear.