Money For Nothing But Debt
How American creditors are trying to defy the laws of thermodynamics. They can’t if we save our money.
I’ve been thinking for a long time about debt and debt collectors. I used to work for a debt collection company as their IT guy. Every Monday morning, the owner of the company held a staff meeting to review the laws that regulate debt collection. I was fascinated by his dedication to the federal debt collection laws. I loved how he highlighted the preamble to the Fair Debt Collection Practices Act, zeroing in on 15 USC 1692 (e):
It is the purpose of this subchapter to eliminate abusive debt collection practices by debt collectors, to insure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged, and to promote consistent State action to protect consumers against debt collection abuses.
I agreed with his philosophy aimed at reducing abusive debt collection practices by just following the law. He had been in the business for a long time and he knew the laws well. He had written scripts for the staff to use when talking with debtors on the phone, and his scripts were vetted by attorneys to ensure compliance with the law. His motto was, “follow the script”.
According to a report released in April of this year from the Insitute for International Finance:
Global debt across all sectors rose by over $10 trillion in 2019, topping $255 trillion. At over 322% of GDP, global debt is now 40 percentage points ($87 trillion) higher than at the onset of the 2008 financial crisis — a sobering realization as governments worldwide gear up to fight the pandemic.
World GDP is now $87 trillion, but the world owes a small minority of creditors some $255 trillion. Will that debt ever be paid off? I don’t think it will and I think that is by design. The last thing that creditors would ever want to see is that the world would get out of debt and stay out of debt, and live prosperously without them. Creditors are the most dependent people in the world for a reason.
Creditors don’t loan their money out to be paid back. They loan their money out to be paid back with interest. That $255 trillion in debt that is owed to someone by the world and its dog, is a gravy train for someone. That’s guaranteed income for someone, somewhere.
Most of us are in debt to someone. If we own a house, we’re in debt. If we have a car, we’re in debt if we have not paid off the car. If we’re renting, we’re paying money to use someone else’s property, who will, in turn, use that money to pay down a 30-year mortgage with payments that are the same over 30 years, while the rent keeps going up every year. Every government in the world owes money to someone else. All public infrastructures are financed with private debt in America.
Now take a look at China. The savings rate in China is 44%. In the United States, the savings rate is -15%. China is a communist country. The United States is supposed to be a capitalist country. Something tells me that capitalism can’t really function unless most of the people living under it are in debt to those who aren’t in debt.
There is a faction of the United States that promotes the rugged individual, an independent, free agent in a bag of skin, as the ideal. A high savings rate would be indicative of a nation of self-sufficient people. Considering the agony that many American’s are going through right now during a historic pandemic, I’d say that we’re not even close to that rugged individual ideal. In fact, I don’t think our system of governance was designed to produce that kind of people.
The fact that millions of people (and many state governments) are clamoring for economic relief from the federal government makes clear that the economic philosophy of the United States is not one of economic independence, but one of brutal dependence. Abuse breeds dependence, and to the extent that people are dependent on the government for economic relief, is the extent to which the people are being abused.
The casual observer may note that the present trajectory is unsustainable. In a very literal sense, the vast majority of people are supporting the people who have loaned them money to get by during the pandemic, and this has been the case even before the pandemic. As I look around, this system is built by design to keep wages stagnant while inflation marches on, depleting the purchasing power of the people, and enticing them into debts they cannot pay off. Everywhere I look, I am encouraged to spend money to the point of indebtedness. The service payments of personal and consumer debt often include annual interest rates of 27–30% even though interest rates for home loans are at an all-time low.
None of those people who loan money at such rates have any desire for consumers to pay off those loans. They fervently hope that people will just make the minimum payment year upon year, compounding the amount of interest paid to them. And if the debts are not paid, they have a multitude of laws that creditors wrote to compel payment of usurious loans.
The laws of thermodynamics come into play here.
Zeroth: You must play the game.
First: You can’t win.
Second: You can’t break even.
Third: You can’t quit the game.
Like the debtors, the creditors are trying to get something for nothing. They both must play the game of life. You can’t win the game, for if you do somehow manage to acquire and assert an unassailable advantage, someday everyone else will begin to question how you managed it. If you can’t answer that question, the pitchforks may be in the offing.
You can’t break even. No system, however ingeniously devised, will produce more energy than what you put in, fusion fans might take note. But I think that assumes an isolated system, and there are no isolated systems. Everything is connected.
The last law is that you can’t quit the game. I think this is the hint we should take that there are no isolated systems. I am as much a part of the universe as it is of me. There is no real separation between me and the universe, in fact, I think it is rather challenging to make any distinction between the universe and me. But there is more.
The creditors, seeking the fruits of the work of others since ancient history, have been trying to separate their fates from that of the debtors. Both derive their sustenance from the same ecosystem. Both can destroy the same ecosystem. Both lack empathy for each other.
To solve the problem of dependence is, I think, a simple matter to solve, but difficult to practice only because we have not been practiced in the art of saving. The practice of saving money rather than going into debt for it doesn’t seem to be taught in our schools or we would not see so many people clamoring for relief from the government during a pandemic. If anyone has learned how to save money, it must be the creditor class because no other class of people is doing it.
The creditors believing themselves to be independent of the debtor, and even having control over the debtors, have used their enormous piles of money to influence the government (made up of people who are dependent upon creditors) to enhance and increase the dependence of everyone else around them upon the creditors. Just think home loan interest deduction on the 1040 tax form. The bankruptcy laws have been fashioned in such a way that in only the most extreme cases do ordinary people find relief from the creditor. They are asking for something for nothing.
While it is true that the creditor takes a risk when he loans money to a debtor, he is taking a risk that is calculated in the context of an economy and system of laws that is totally pro-creditor. There is hardly ever a recognition that a debt that cannot be paid will not be paid. While some may talk of amnesty, those who oppose amnesty express a serious belief that a contract is more valuable than life. These are the people we call “conservative”.
So while it may be fashionable for conservatives to impose their ideas of personal and financial responsibilities upon others, they seem rather loathe to teach those ideas to anyone other than their own kin, friends, or associates. I would believe them in their zeal, except for the fact that I don’t see any of them promoting the idea of teaching real thrift in public schools. I don't see any politicians, conservative or liberal, teaching kids, that the ideal we should aspire to, is to save one year of expenses so that when we have a pandemic, you don’t come to the government’s door, asking for money.
Imagine what our lives would be like if it were common practice for every single American adult to have a year of expenses saved up. And I mean a year of expenses saved up in a consumer bank account after all taxes have been paid, and after all deductions for health care, and retirement has been taken.
A country with a year of expenses saved could easily handle most medical emergencies and still, have something to spare. Down goes the cost of health care insurance. A country with a year of expenses saved would be filled with people who could take a job or leave it, and negotiate a higher wage. A country of savers could buy another car with ease if needed, and negotiate a lower price. A country of savers would by definition, create a buyers market.
But there is no conservative in favor of such a feat as far as I know. No liberal wants this either, for both parties are concerned with maintaining the present Skinner Box filled with a captive audience of voters watching Fox And Friends or Rachel Maddow, ready to change their minds at the first political hit job advertisement they see. Neither party, as far as I can tell, wants the voter to be independent of their whims or desires.
I see savings as a national priority. I see savings as a personal priority. I see savings as a way to keep politicians dependent on the people, not the other way around. Madison would like that. I can see a national program with a singular purpose: that every American, rich or poor, have one year of expenses saved up. This program is not just to ensure that Americans are independent for their own sake.
When every American has a year of expenses saved up, they will have security that no creditor will ever offer. They will have security that no employer will ever want to offer. They will have self-sufficiency in spades. They will have the peace of mind that no government, no politician has ever been willing to offer them before.
This idea of personal savings may seem to be at odds with the laws of thermodynamics, but a casual observer will also note that all animals conserve energy. All animals take naps, they sleep, they rest. The present system we endure in the United States is designed to keep us busy, busy, busy. This system keeps us apart from our civic duties. When we have a year of expenses saved up, we can be fully engaged in civics when we want to, independent of the creditor, the employer, and the politician.
I have considered alternatives and I see no better way out of the extreme inequality, and polarization of our country. An America filled with people who have a year of expenses saved up will allow the peace of mind required to create an economy that works for all of us, because when we have money saved up, we’re not thinking fight or flight, we’re thinking to solve the problem of how all of us can prosper together.