It is in this domain, of broken promises and broken people that you can establish what a society is really made of. Graeber's Debt is obligatory reading (alas not easy to read) if you want to dig into the painful history of debt relations between humans.
The post provides excellent insights into the odious side of consumer finance. It feels like a follow up with ideas about reform would not be wasted effort: Once this domain meets the odious side of tech (uncontrolled data collection, tracking etc) the toxicity will grow exponentially.
Some credit card companies - in the UK at least - specifically target people with poor credit scores with rates up to 99.9%(!)
And it's normal practice - but utterly perverse logic - to increase the rate of anyone who starts missing payments.
Debt collectors can get a court order to put a lien on property, and then get another court order to force sale of that property and repayment of the debt.
Of course the collectors bought the debt for some tiny percentage of its nominal value, so this is immensely profitable.
The outcome is that if you lend to poor people with poor credit scores there's an excellent chance you'll be able to secure a supposedly unsecured debt on their property and make them homeless, with a huge margin of profitability.
There are also ambiguous and murky connections between the debt collectors and the credit card companies which allow the latter to distance themselves from the harassment and aggression of the collection companies.
At the same time there's an incredibly toxic combination of wages decreasing in real terms, exploding property prices (both renting and buying), exploitative health care costs, constant ad noise promoting pointless lifestyle spending, and constant reinforcement of the belief that if you're in debt in a glorious economy of freedom and opportunity it's entirely your own fault.
It's a perfect storm of financial servitude. The credit industry is just one part of it.
I am far from religious, but one thing most religious traditions have common is how they ban usury/interest which would make much of global finance we have today “haram”.
You can see the reverse effect too not only at an individual but collective level. Once the religious ethos disappears from a sect, widespread adoption of debt becomes the norm.
Whether or not it happened exactly as described within the Torah/Bible, we have plenty of records to indicate ancient societies regularly overturned debts.
... Unless you're making a joke that it happened but was not "celebrated" because most people didn't like it.
> one thing most religious traditions have common is how they ban usury/interest which would make much of global finance we have today “haram”.
The way Islamic finance avoids interest [1] - the bank buys a property and sells/leases it back to the borrower at a slightly higher price, paid in installments - sounds more like semantics than actually avoiding interest altogether.
It seems to rely on a belief that there is a fundamental difference between rent paid on borrowed money (AKA interest), and rent paid borrow the use of real property.
The virtue in Islamic banking seems to be that it has a healthy skepticism of financial derivative products, preferring to invest directly in physical assets and businesses. This probably avoids a great deal of risk (trading off the upside too).
But debt and interest are both sound concepts, and both are critical towards building an advanced society. Being able to borrow money from the future is enormously powerful.
...but it's not exploitation. Your head is thinking about bad debt, but bad debt is only a tiny fraction of total debt. It certainly makes for excellent highly memorable emotionally charged stories, which is why we are here, but the fact of that matter is that overwhelming majority of debt is paid off and bears actual fruit.
Even debt like student loans, which gets almost universally panned, is still good debt. The ROI on a collage education is ~1000% (amount borrowed/paid off vs. increased lifetime earnings). On paper your are still dumb to not take out student loans to get a degree.
No I was pointing out that simply because something is beneficial for some people doesn't mean we should want it to exist, which is what I read your comment as saying. Please don't tell me what I am thinking.
You're making the argument that cars shouldn't exist because some people die because of them.
Like I said, debt is overwhelmingly useful to the vast majority of people who use it.
We're not gonna ban cars because a handful of highly emotional road tragedies. We're not gonna abolish debt because of a handful of deranged debt collector stories.
If you want to make an argument make one. "Some people like it" isn't a strong one but if that's all you got I guess.
"We're not going to" presupposed the outcome. I don't agree and won't contend it, since you're not willing to say anything that can be refuted. I'm not the author of the future I can't say what we're gonna. But then neither are you.
"Some people like it" isn't a strong one because it's a straw man of my argument.
"The overwhelming majority bear tangible benefit from it" is the actual argument.
Debt is a core instrument of modern first world society. Just think about how many people would own a car, much less a home, if you had to pay for it all up front.
While having a car today is necessary when living any place where a century of planning has assumed everyone who matters has a car, this state of affairs is not indisputably better than what might have happened otherwise.
Home mortgages are only a few hundred years old, and it's not like they started out as prevalent as they are today.
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Just because we find ourselves in a particular place today doesn't mean other options aren't feasible. Assuming no better options could have ever existed sounds depressing.
I don't think he needs excuses but his errors and political biases pale in comparison to the systemic hypocrisy and gross inadequacy of an entire profession. Somehow the astrologers advising the emperors du jour have managed to declare themselves scientists and even receive Nobel prizes [1].
The hope is that others will manage to pick up the thread of inquiry and somehow integrate his historical and anthropological observations into a more truthful type of economics.
[1] There are always exceptions. A tiny number of economists do seem to grasp the nature of debt and money better than the vast crowd regurgitating banalities.
Debt crisis followed by debt relief is historically normal. Prompting Graeber to wonder if capitalism is inherently unstable.
Maybe capitalism somehow requires debt relief (eg jubilees, bankruptcy). Then we should codify it. Instead of continuing to treat them as unanticipated, unfortunate one-offs.
Our recurring bubbles and bailouts seem to be keeping with Graeber's thesis.
It's more complicated than lenders opposing inflation but debtors favoring it. That only works if people are pure lenders or pure debtors.
In reality most people carrying significant debt are people who are strongly affected by inflation of the prices of goods and services, and most people and institutions who are in a position to lend are not as affected by such inflation.
The most at-risk people are those who are both in a lot of debt and also affected by the rising cost of goods in services. This can be anyone carrying a significant mortgage payment (as a % of income) and supporting a family simultaneously. High inflation hits these people especially hard because pay raises and real-debt-dilution often do not keep up with the rising costs of goods and services.
This can cause a great deal of financial fragility in the short term, even if the individual has good long term prospects due to inflation-based debt dilution.
I am quite rabid as far as libertarians go, but even I acknowledge the necessity of bankruptcy protection.
Without it, lenders can lend to anyone regardless of whether it's likely to be paid back, or even whether or not it's possible for them to pay it back. Then those lenders turn around, and demand that all of society pays for debt enforcement through the court system (or in extreme scenarios, through punishment).
Lenders have a responsibility to only extend credit in narrow circumstances, or they need to lose protection for it. The easiest way to do that is with bankruptcy. Borrowers are still discouraged from using it (it's limited to once every 7 years, and punishes besides), so there's little moral hazard there.
Lenders that are businessmen rather than scammers are more than capable of the diligence necessary to avoid bad loans (and the few that are inevitable are a cost of doing business). Lazy, incompetent, or unethical lenders deserve the losses incurred from those practices.
I don't think any of this is a mark against capitalism.
Of course it requires debt relief, things go _wrong_ all the time, that’s just life and how the world works.
Debt relief is also necessary for a peaceful society. If you can’t legally discharge debt in some manner we’d have companies hiring enforcers like a shark loan would.
It’s not a problem of capitalism, it’s a problem of reality.
> It’s not a problem of capitalism, it’s a problem of reality.
I'm really not sure about that.
> Of course it requires debt relief, things go _wrong_ all the time, that’s just life and how the world works.
Yet funnily enough the people on top of all these vast structures sail away from their sinking ships on parachutes of gold (if they're even sinking: a lot of times they just sit and collect vast sums of unearned wealth because they had a lot of wealth already).
If debt is such a bad business why are so many massive institutions in it, not discharging debt, and raking in the profits by the shovelful?
> Debt relief is also necessary for a peaceful society. If you can’t legally discharge debt in some manner we’d have companies hiring enforcers like a shark loan would.
This however we can agree on. As the amount of debts that can be accrued and not discharged (student loans being the biggest) goes up, the economy seems ever more unstable and unsustainable. As it turns out when you strip mine your consumers wallets from every angle, eventually they seem to be unable to buy things for some reason. Then demand craters and your economy stalls.
And just to head off this reply I always get in these discussions about useless degrees and STEM and etc. etc., I think to be frank, if indeed we're only interested in financing "worthwhile" educations, then that should be enforced by the financier, no? A bank wouldn't loan you $200,000 to buy a single-wide trailer on rented land, the asset is not now nor would it ever be worth that, so why is a student able to borrow six figures for a again in quotes, "worthless" literature degree, and be strapped to that one decision they made for life?
I think you mistook my comment as a defense of capitalism. Although I do believe a system based on private property and individual freedom is superior to the alternative, I wasn’t making that statement. I was just pointing out something at a much lower level: we need debt relief because we don’t live in a perfect world, things go south and we need for people to be able to move on. That’s it.
We could talk about the inequalities built into the system, but that would be a different conversation.
Yes and: As an anthropologist, Graeber details historical examples of capital, markets, debt, currency, etc.
TLDR: They're all ancient.
Graeber doesn't try to define capitalism much less Capitalism. He cares about social structures and relations, not finance and monetary policy.
But absolutely do not take me as an authority on Graeber or these subjects. He spent decades researching and refining. I'm just relating my noob understanding of his writing.
The post provides excellent insights into the odious side of consumer finance. It feels like a follow up with ideas about reform would not be wasted effort: Once this domain meets the odious side of tech (uncontrolled data collection, tracking etc) the toxicity will grow exponentially.