The Specter of Debt

October 2007

To paraphrase an old idol, a specter is haunting the United States -- the specter of debt. All the powers of old and new wealth have entered into a holy alliance to exorcise this specter: federal bureaucrats and private bankers, politicians and pundits, activists and autocrats.

While intellectual and ideological exorcisms drip from newspapers and ripple through street demonstrations, the financial elites of private and public wealth are meeting behind closed doors, deliberating their common interests.

Three weeks ago, the secretary of the US Treasury called a meeting in Washington with the chief executives of the most powerful banking firms, among them Citigroup, JP Morgan and Bank of America. This was to be the first in a series of meetings between the super rich representatives of public and private wealth. They come in the wake of the recent financial crises that have frightened investors and driven the majority of Americans deeper into debt. The common interest that these representatives share: the maintenance of an economic system which privileges their position as financial elites.

To this end, under their discussion is the creation of a $75 billion “backup fund” to buy up risky assets in the event of a run on the market. Translation: If the bubbles of financial speculation that these executives have collectively crafted begin to burst, the pooled resources of public and private wealth will pump more air (money) into the bubbles to keep the party going.

This move of consolidation between public and private money lenders reveals the magnitude of the impending financial crisis that lurks outside the burgeoning bubble of sub-prime loans and leveraged buyouts. While the formation of this group has not received much attention in mainstream media, to those who are watching the markets it cuts like a hot tip through the rhapsodic liquidity with which expert sycophants eulogize the boom and bust of progress.

Such eulogizing is in high demand and there is no shortage in supply of economists and politicians who are eager to tote the party line in exchange for the spotlight. With their help, the gravity of the debt that haunts the US economy is camouflaged in an oppressively complex network of specificities.

The housing crisis, inflation, the devaluation of the dollar, mortgage foreclosures and more, are all intentionally expressed in language designed to confuse and alienate us into subservience. Complexity is used as a tool to leverage compliance. The emphasis on specific crises is used to sanitize the dirty secret -- that really things are not so complex; that all these smaller crises are symptoms of a systemic structure that underlies the US economy from the stock exchange to the supermarket.

This kind of clarity is submerged in an ocean of political argumentation and microeconomic analysis that borders on advertising. However, the current of consistency in this propaganda is clear: that these innumerable economic crises are in the long run nothing to worry about -- just keep investing and everything will be fine. All is well.

But all is most certainly not well. Need we reference the statistics that every American feels in her back pocket? Unprecedented budget deficits and unprecedented levels of public and private debt shape the “nonnegotiable” terrain of the US economy -- America’s average per capita debt now meditates at $160,000 for every man woman and child.

The harbingers of the impending crisis are hedge funds. Since 1990 these profiteers of market failure have grown from 500 companies handling $38 billion in assets to more than 6,000 firms that manage over a trillion dollars. Hedge funds are the modern day economic vultures that circle over the smoke of burning markets, sifting through smoldering credit corpses in search of any residual liquidity. These institutions that prosper in crisis are canaries that thrive in the fumes of the coal mine, and their rapid growth in recent years should clue us in that there is something desperately wrong with our economic system.

There is a tragic irony in all of this. The crises that should reveal the self-interest, illegitimacy and incompetence of the financial elites are used by these same elites to legitimize their roles in maintaining the economic order. The axle that the whole swindle revolves around lies in making us believe that we aren’t competent enough to figure out the complexities of crisis for ourselves.

There is no transparency or oversight over the CEOs and federal bureaucrats that are working to salvage this debt economy with bailouts. At the heart of accepted economic policy there is an unspoken contempt for democracy. The executives of Citigroup and JP Morgan are unaccountable to the public whose tenuous indebtedness they seek to sustainably perpetuate. There is no public debate about the long term viability of the debt and credit-industrial complex which fills the vacuum of our outsourced manufacturing economy.

The solution is to recuperate the economic decisions that we have relinquished, and to cultivate an understanding of the economy that will allow us to change our reality. The only real alternative to this courage is to submit to the reign of debt, which forms the systemic backbone of the economic order and its recurring structural crises.

Really, this debt is no specter, and no amount of proselytizing by no number of priests will be able to exorcise it. Only the mobilized power of the public can root out the origins of our haunting. Debtors of the world unite! We have nothing to lose but our debt.