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Debt = Serfdom
By Charles Hugh-Smith
April 02, 2013 "Information Clearing House" -"TwoMinds" -- Debt-serfdom and the dominance of Financial Power are two sides of the same coin.
Let's be clear about three things:
1. Too Big to Fail financialization is the metastasizing cancer that has crippled democracy and capitalism.
2. Financialization feeds on expanding debt and cannot survive without it.
3. Debt is serfdom. I have covered this in depth for years:
There are three key dynamics to debt-serfdom:
A. The serf is never free of debt, i.e. he/she is programmed to being indebted for life.
B. Most of the serf's income is devoted to servicing debt.
C. Most of the debt is unproductive: marginal-utility college education, needless auto loan, leveraged McMansion that loses value in the inevitable speculative bust, and so on.
There are many ways to state these fundamentals and shelfloads of books have been written to describe the many mechanisms of financialization and serfdom, but we can summarize the dynamics in a few additional points:
4. Financialization requires a corruptible, highly centralized State that enables the extreme concentration of financial assets and power. Recall that debt is the banks' primary asset; every loan a debt-serf takes adds to the banks' wealth and power:
5. This creates a feedback loop: the more concentrated the financial wealth and power, the more readily it can corrupt/influence the Central State to grant it quasi-monopolies and the privileges needed to gather even more concentrated power. This additional power makes it even easier to buy control of the State machinery. Democracy is reduced to a PR facade.
6. The Financial Powers need the Central State to encourage debt, which is the lifeblood of financialization. Without the State enabling and pushing debt (student loans, subsidized mortgages, mortgage interest deductions, Federal deficit spending funded by Treasury debt, etc.), the Financial Powers (i.e. the Dark Side) would be unable to continue concentrating wealth and power via metastasizing financialization, i.e. the dependence on ever-greater debt and leverage to generate profits, growth and taxes.
7. The Federal Reserve is the "ultimate power" in this financial universe. Hiding behind its PR "dual mandate" of "stabilizing inflation and employment," the Fed's real raison d'etre is to stabilize the economy so the Financial Powers' parasitic pillaging and plundering won't be disrupted by a financial crisis or depression.
The same can be said of the parasitic State, which lives off the taxes skimmed from the expansion of debt-based growth.
8. Not that the Fed cares about the "little people" hurt in a depression; what the Fed worries about is the result of depression, which is debt-serfs defaulting on their debts and refusing to take on more debt.
This leads to an inescapable conclusion: the only way to kill the metastasizing cancer of financialization is to "starve the Beast" of debt. This is akin to starving a tumor by cutting off its blood supply--in the case of financialization, that means reducing debt to a trickle.
With democracy crippled by an ever-rising tide of dirty money, the only way to destroy the Death Star (the Fed and the Too Big to Fail/Prosecute/Control banks) is to stop borrowing.
Pleading with the President or Congress is like asking a cancer to please stop growing. Don't waste your breath. Talking isn't going to fix anything.
Debt is the mechanism of the Financial Powers' dominance and the chains of our serfdom. Eliminate debt and you eliminate the foundation of banks' power and the financial bondage of serfdom. This mechanism of neofeudal dominance is not unique to the U.S.: 500 Million Debt-Serfs: The European Union Is a Neo-Feudal Kleptocracy (July 22, 2011)
The only way to restore democracy is to cut off the blood flow of the financializing cancer, i.e. cut off debt. We have been programmed to view debt as necessary as air--it is impossible to go to college, start a business, own a vehicle or buy a house without massive debt.
It is not ordained that any of these requires a lifetime of debt. Our acceptance of debt is a programmed but still voluntary acceptance of serfdom.
It is possible to earn a university degree without going into debt, but it requires embracing an entirely unconventional approach based on sustained, goal-oriented frugality, thrift and outside-the-box thinking. The Nearly-Free University (November 15, 2012)
How Frugal Are You? (August 7, 2010)
Debt-Free U: How I Paid for an Outstanding College Education Without Loans, Scholarships, or Mooching off My Parents by Zac Bissonnette.
If an entrepreneur absolutely needs $20,000 to start his/her enterprise, then raise the money via crowdsourcing. If you must borrow money, only do so if you have a credible plan to pay it all off in the first year. If you cannot expect to do so, then your proposed enterprise simply isn't profitable enough to invest in.
If you must borrow money to buy a used vehicle, then put down $5,000 in cash and pay off the $5,000 balance within a year. Get a loan from a local credit union rather than from a TBTF bank.
If you must buy a house, then go in with others and buy a multi-unit building or a McMansion that can be shared, and only buy if you can pay off the entire mortgage with your current income in 3-5 years.
We cannot expect to control the vast derivatives trade in credit default swaps and synthetic collateral, but we can remove the real-world collateral of debt from the leveraging machine. With few mortgages, auto loans, student loans, etc. to securitize and leverage, the Financialization cancer will slowly die of starvation. Once its ability to spread is halted and its profits plummet, its political clout will decline in equal measure.
Though it would dearly love to, the State cannot force anyone to take on debt except as taxpayers. We do not have to remain debt-serfs, nor accept our servitude as unavoidable or fated.
Debt = serfdom. There is another way to live, frugally, with only short-term debts that are paid off in a few short years. We either accept the consumerist-narcissist debt-serf programming or reject it. We are neither victims nor bystanders. The choice is ours.
Narcissism, Consumerism and the End of Growth (October 19, 2012)
Narcissistic Consumerism and Self-Destruction (October 20, 2012)
A MARKET CLEARING EVENT: The Global End Game - Part II: CHS and Gordon T. Long discuss the cycle of deflation and the endgame of leverage, credit and phantom collateral:
The New Road to Serfdom: A Negative-Equity Mortgage (May 9, 2006)
The Company Store, Debt and Serfdom (October 24, 2008)
Debt-Serfdom Is Now the New American Norm (October 18, 2011)
The Origins of American Debt-Serfdom (October 19, 2011)
EU Fiscal Union = EU Debt Serfdom (December 7, 2011)
Debt Serfdom in One Chart (May 4, 2012)
By Incentivizing Debt, We've Guaranteed Debt-Serfdom and Stagnation (June 12, 2012)
The Road to Debt-Serfdom (January 25, 2013)
What's your response? - Scroll down to add / read comments
http://www.informationclearinghouse.info/article34487.htm
The Road to Debt-Serfdom (January 25, 2013)
Ours is a dysfunctional debt-based Empire that buys the complicity of its debt-serfs with entitlement bread and circuses.
The road to debt-serfdom is paved by the banks and enforced by the Central State. If there is any point that is lost on ideologues, Progressive and Conservative alike, it is this: the first-order servitude and second-order tyranny of debt-serfdom can only occur if the banks' power is extended and protected by an expansive Central State.
Progressives are blind to the State's essential role in creating and empowering a parasitic financial Aristocracy, and Conservatives are blind to the tyranny of debt-serfdom imposed by the private-sector financial Aristocracy, i.e. the banking sector.
Answer these questions before reaching for your ideological blanket:
1. How many banks would loan penniless, near-zero-income students $100,000 if the State did not backstop and ruthlessly enforce its parasitic, exploitive "student loan" programs? Answer: none.
The consequence if the tyrannical State ceased to enforce the debt-serfdom of Student Loans: the Education Cartel would collapse in a odoriferous heap, and the banking Aristocracy would be stripped of a highly profitable State-run business.
2. Under what conditions would banks originate mortgages if the State did not guarantee mortgages via FHA and the other socialized-mortgage agencies? Answer: 30% to 35% down, hefty points and a higher rate of interest than FHA loans.
We can find the answer by examining the conditions banks demand for non-State backed loans. If the State wasn't backstopping the risk, what bank would be insane enough to originate a 30-year fixed mortgage at 1 point over official inflation and a negative rate when measured in real inflation? It makes no sense without State subsidies and guarantees.
What percentage of the mortgage market is purely private, i.e. not backstopped by FHA et al.? About 5%, and the terms of these private loans are considerably stiffer than those originated under the taxpayer-funded umbrella of FHA.
In other words, debt-serfdom is not possible without the State enabling and enforcing the banks' power. Blaming the banks for imposing debt-serfdom is like blaming the junkie for picking up a free bag of smack or a shark for wolfing down a seal: the banks will pursue the fattest, easiest profits out of basic self-interest, just like the rest of us.
If the banks can capture the State's regulatory and political machinery for a modest investment in bribery (oops, I mean political contributions, lobbying and revolving-door positions), then why wouldn't they do so?
The problem is thus not the banks' power, it is the State's power, as the State confers and enforces the banks' power.
There is precious little evidence that anyone in the current political Aristocracy has read the Federalist Papers, other than to pass an exam, and more's the pity. That a State run by people whose grasp of American history extends all the way back to the previous election cycle (or in extreme cases, to the Reagan era that began in 1981) is dysfunctional is unsurprising.
Madison feared both a central bank and a presidency that morphed into a functional monarchy. Madison's fears of a central bank were shared by his decidedly non-Federalist friend Thomas Jefferson, whose vision of a rural, localized America generally ran counter to the Federalists' keen awareness that a strong central state was necessary to provide for a defense of the nation and to act as an impartial enforcer of transparent markets and a prudent money/credit system.
(I say generally, as Jefferson was persuaded to execute the Louisiana Purchase, a decidedly Federal project of expansion, and he kept the Bank of the United States intact under his able Secretary of the Treasury, Albert Gallatin.)
The proper role of the Federal government in Madison's view was to act as a "disinterested and dispassionate umpire between different passions and interests."
In my analysis, the political Aristocracy running the U.S. has fulfilled Madison's nightmare, as it effectively operates a monarchical Empire on the Roman model. Though Louis XIV of France famously held that "L'etat, c'est moi"-- the state, it is me-- in the Roman and British empires, the monarchy/emperor system was a functional oligarchy in which the supposedly absolute monarchy/emperor had to consider the views and interests of the aristocracy.
A monarchical Empire is thus operated by a small aristocracy with a shared world view (i.e. Empire) and a very limited spectrum of opinions: that is the American Central State in a nutshell.
Alexander Hamilton, also a Federalist, understood the critical role of credit in fueling innovation, expansion and trade. He favored a central bank that issued sound money and prudent credit, on the 1780s Bank of England model. That the central bank would become the subservient handmaiden of private investment and commercial banks was incomprehensible.
Here is what has been lost in the debt-serf America we now inhabit: Albert Gallatin observed that America's rapid, diversified economic development resulted from "the absence of those systems of internal restrictions and monopoly which continue to disfigure the state of society in other countries."
If only our "leaders" read or understood Madison, Hamilton and Gallatin. But alas, they are supremely ignorant Oligarchs through and through, pleased to enforce debt-serfdom and then buy the complicity of the serfs with Federal entitlements and subsidies.
That too is the Roman model: a dysfunctional debt-based Empire ruled by a self-serving Elite which buys the complicity of its serfs with bread and circuses.
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