Modern Class Warfare Is About Debts And Who Pays Who
Forget about political parties and candidates. The entire economic struggle of American life is about debt.
The struggle between us is simply one between creditor and debtor. The creditors want to keep us forever in debt. The debtors want to avoid incurring debt. The public policy outcomes that have succeeded in the last 40 years have resulted in stagnating wages, giant and still growing deficits and increased borrowing all around. The bankers and their shareholders watch the checks roll in while the rest of us work. They are one of the most powerful lobbies in the country, and they are an invisible lobby. So if we have a $1 trillion federal budget deficit this year, you can rest assured that the laws promoted by the bankers brought this on.
Politicians like to talk as if the struggle is about cutting the deficit. But someone is paying the public debt with taxes. And someone is buying the T-bills, the bonds sold by the Treasury to finance the debt, and collecting interest on that debt. Public policy outcomes made the federal deficit possible. If the most powerful people in the country want to get rid of the federal deficit, they will find a way to do it. That the deficit continues to grow is a testament to their power.
When politicians cut social safety net benefits, the beneficiaries of that safety net often find themselves in front of the thick bullet-proof glass to get their payday loan. The rest of us are so scared of losing what we have that we go to work every day, even when we’re sick, to pay down the credit card debt, the mortgage, and the student loans with no real hope of paying all of them off in our lifetime.
We live in an age of austerity, an age of limits. I remember how Ronald Reagan ran against Jimmy Carter, saying back then that we were living in an age of limits. Only now, the Republicans are trying to cut government spending saying that we need to cut the deficit by lowering taxes and cutting spending. It is the conservatives telling us now that we live in an age of limits.
Yet, every major study that I’ve ever seen that compares tax cuts to government spending shows that government spending returns more money to the economy than tax cuts. In general, government spending returns about $1.67 per dollar spent compared to less than a dollar for a tax cut. There is empirical evidence to show that government spending does more to grow the economy than tax cuts.
Between 1940 and 1973, productivity growth was greater than 3.0%. The economy grew consistently and predictably. During that time, the government was more focused on manipulating spending and building infrastructure. According to this article in The Conversation:
For decades, from the 1940s through the 1970s, the U.S. mainly relied on manipulating government expenditures rather than tax cuts to goose the economy. Many politicians and academics interpreted Keynes to favor government spending as the best way to right the economic ship, but he also suggested tax policy could do the job of boosting demand.
During that period, tax rates were much higher than they are now, and that tax-cutting trend started with Ronald Reagan in 1981. Since then, we’ve never been the same. If Trump wants to Make America Great Again, he has to admit that long before Reagan’s tax cuts, the American economy worked just fine, providing a distribution of wealth that benefited the middle class, not just the top one percent.
So when I see clowns like Joe Biden talking about cutting spending, cutting Social Security, cutting social benefit programs, I see someone who is a Republican pretending to be a Democrat. The same goes for Mayor Pete. Along with Trump, they both owe allegiance to the creditor class, and they want to keep those debt service payments coming, they want to see the rest of us in debt bondage.
There is one other interesting aspect of debt service that few if any talk about. I found the following passage on the Wikipedia page concerning the topic of Money Creation:
The amount of money that is created in this way when a loan is issued is equal to the principal of the loan, but the money needed for paying the compound interest of the loan has not been created. As a consequence of this process, the amount of debt in the world exceeds the total money supply. Critics of the current banking system are calling for monetary reform for this reason.(emphasis mine)
Banks loan money based on fractional reserves, usually around 10% reserves. That means they can “create” and loan about 10 times the money they have on deposit. When the loan is issued, only the money for the principle is created, not for the interest. If the money supply is less than the value of all outstanding loans plus interest, there is no way they can ever be paid back.
In the book, “…and Forgive Them Their Debts”, economist and historian, Michael Hudson recounts the history of the debt jubilee. For 3 millennia, the Sumerian and Babylonian rulers saw that their people were susceptible to debt bondage. They saw then, as we’re seeing now, that the debts were so high that they would never be paid back. It was a common practice back then, to cancel all debts to release the people from debt bondage so that they could work for the kingdom again. So that they could be free. So that balance in society could be restored.
But in modern times, we have no reset. We have no pressure release. Debt is everywhere, and as in the past, the primary reason for debt is not to goose the economy, it is to restrain the people with debt bondage. The privileged class is the one that is collecting all this debt with interest, and the interest money will never be found. It is not possible to pay all debts. That’s the “forever” part. That is class warfare.
That the debts cannot be repaid is a feature, not a bug. Ancient history shows us that the bankers have killed many leaders who promoted debt jubilees. They have fought hard to change the narrative to keep the bankers looking innocent. They have bought politicians to ensure that the laws favor the creditor.
Both major political parties in the United States have this blind spot. They never talk about how banks create and loan money at interest, but do not create enough money to pay the interest. They never suggest that there is not enough money in circulation to pay all debts, principal and interest.
The silence of our leaders on this topic is one of the reasons why I don’t believe in identity politics. I vote for the candidate that promotes the policies that keep the money moving, not stashed away offshore or in stocks and bonds. Slavery is still rampant, it’s just debt slavery now. So if you’re going to vote for Trump or one of the Democrats just remember that although this is a class struggle, it is not between rich or poor, not even between political parties. The struggle between us is between creditor and debtor.