According to Professor Philip Wade, a character of The Devils (again in the bookshop in the new Rizzoli edition on the occasion of the release of the TV series of the same name) and melancholic protagonist of La Fine del Tempo (The End of Time) by Guido Maria Brera, debt is and will remain an instrument of power and control. At least until a speck is thrown into the gear to jam it.
I cannot stop thinking about David Graeber, even though everything happens around us. The Currency War has begun. The central banks are playing the devaluation card to stimulate their economy.
Inflation is now a memory: the Fed states that it no longer takes inflation into account in monetary policy. This move, in essence, gives the Central Bank a free hand on monetary policy and at the same time reassures the markets. Europe has provided an unprecedented fiscal stimulus through the Recovery Fund, in the wake of which the individual members have developed expansive fiscal policies, supported by the ECB.
The Phillips curve is a thing of a distant past, just like me.
Everywhere in the world, fiscal policy and monetary policy form an alliance, unite for electoral purposes. The Phillips curve is a thing of the past, just like me. The new macroeconomic theory provides only a quick response to the mass of data in its possession: this is what real-time economics is now. I think it was Chris Anderson who said this, several years ago: theory is useless, one must react to data and nothing more, without ideological preclusions.
I cannot stop thinking about David Graeber. I read many things in memory of his recent death, and all of them seemed to me far too synthetic. Anthropologist, author of Debt: The first 5000 years, promoter of Occupy Wall Street. Yet it’s not enough, maybe nothing is enough to explain how much we will miss his intelligence. His intuitions.
Debt is an instrument of power.
For example: that the debt must be cancelled when it cannot be paid and becomes endemic. Debt in neoliberal governance is an instrument of power: a way of manoeuvring the masses, forced to make more or less intense sacrifices — according to the political situation — to repay it. It is a kind of leash that stretches and shortens according to needs, and is therefore never cancelled. Rather, subsidies are given to repay it under extreme conditions. All this, while state public debts are now waste paper and are bought by the central banks themselves.
The iron guest at the banquet is work, and its relationship with capital. The cost must remain low, in order to allow debt monetisation and to avoid ending up in Weimar suddenly. The inflation sought by the central banks is demand-driven, linked to a recovery in global consumption and certainly not an inflationary mechanism of supply, i.e., induced by an increase in labour costs.
The drive for cryptocurrencies, after all, can also be considered as the creation of a monetary base, just as alternative payment systems embedded in technology platforms are all stimulus to consumption, through the digitisation of currency and its ease of use.
Still, the cost of labour cannot rise by definition: the indebted individual is forced to work under any conditions, to pay off the debts he or she is forced to subscribe to in order to survive. The leash is shortened and stretched. And when it breaks, the indebted man becomes homeless — he enters the army of the useless, only suitable to sell his organs to the homo deus in search of earthly immortality. In an updated passage of The Grand Inquisitor of The Brothers Karamazov, Dostoevsky would put Debt in God’s place. If the Debt does not exist, then everything goes.
In an updated passage of The Grand Inquisitor of The Brothers Karamazov, Dostoevsky would put Debt in God’s place.
Monetised public debt forces investors to move into riskier assets. The Govies market, usually the “place to go” for prudent savings, has been stripped of its real value to move huge amounts of money on venture capital investments. This paradigm shift should create a driver for the real economy and stimulate employment. However, this is not the case. Capital flows only push equity values to uncharted lands: they keep insolvency companies alive, they jam the cycle of start-up mortality. As a result, we have a totally distorted reality of the financial ecosystem, which is now disconnected from the real economy.
The rift between Wall Street and High Street seems to me the perfect metaphor for the disconnection between financial casinos and the real circulation of wealth. A chasm separates them. Shops deserted for months, and stock exchanges grinding new records — almost a reverse correlation: the worse the situation gets, the more the markets inflate thanks to State Aid. Which end up inflating financial assets, as happened in the 2008 Global Financial Crisis.
In the devastation of the real economy, technology platforms take the lion’s share. They become natural oligopolists in almost all economic ganglia. The monetisation of public debt secures the financial system so that private debt becomes perpetual, instead of being used to write off private debts that are about to explode. So, as soon as someone becomes insolvent, here are the vultures, ready to absorb their bankrupt business or house, mortgaged at bargain prices.
I cannot stop thinking about David Graeber. And everything that happens, probably, makes me go back to his considerations instead of distracting me.
The right to bankruptcy no longer exists, because debt is the lintel of neoliberalism. Even bankruptcy has been reduced to an almost impossible event. Insolvent Greece was not allowed to go bankrupt, because it would have given a bad signal to the collective consciousness: better to keep it alive in a fictitious way, by means of further debts equally impossible to be repaid. The right to bankruptcy has been cancelled, except for the pariahs of society or those nations that fail cyclically, like Argentina.
The right to bankruptcy no longer exists, because debt is the lintel of neoliberalism.
The right to bankruptcy is also denied at the individual level, and this is the capitalist realism Mark Fisher speaks of in a more intimate dimension. The only granted bankruptcy occurs when an debt-related asset which can be reinserted in the financial circuit of leverage is concerned. A house, for instance. But the individual must always have the capability to take on new debts: otherwise, the consumer society would collapse instantly, the constant overproduction of goods would find no outlet. The drive for cryptocurrencies is also monetary creation, and the same goes for alternative payment systems within platforms.
The “COVID finance” goes in the same direction. Keeping the debt cycle alive through a subsidy mechanism that keeps the machine alive. Subsidies to pay debts and make new ones, because equity is held by 1% while debt is well distributed within 99%. And the more the debt increases, the more the equity value increases. The larger the number of indebted people, the more the 1% equity grows. They are almost perfect communicating vessels, the risks are asymmetrical. The Shock Doctrine has eliminated the fragility of the system, the house always wins.
The future, however, is not written. All systems break down sooner or later — this is what history says, not my desire.
The apex of the debt distortion coincides with the student loans, the securitisation of future student salaries. This hurts me particularly. Because students are thrown into the world of work with a limited spectrum of choices, powerless: accepting jobs that pay immediately and not chasing anything that needs longer. Loans limit young graduates to a way pre-established by the market, from which they will never get out. This also limits progress, because very often innovation comes from a gap — off the rails. Saying that this is a practice of the US system, which is not very widespread here, is no consolation to me: as with health and welfare, I fear that Europe will be the one moving towards America.
Never before as in 2020 has there been such a sidereal distance between 99% of the population and 1% of the population that continues to grow richer. Naomi Klein’s Shock Economy sheds its skin, but keeps racing towards a polarisation that has become paradoxical.
As with health and welfare, I fear that Europe will be the one moving towards America.
The American streets are on fire with class conflict. The management of the pandemic has traced the governance of the Global Financial Crisis and of the period following 9/11, which had already dealt fatal blows to the middle class. COVID-19 is hitting even harder.
There is a sort of suspension of time, in the hope of a vaccine or a scientific solution. The messianic wait for a return to a normality which is already compromised though. But the awakening will be worse than a nightmare: when the pandemic is over, and the impoverished middle class finds itself inundated with debts impossible to be repaid.
The global drive to create debt and keep wages and labour costs low is to explode. It will explode, like a huge bubble.