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A good interview popped up on infoshop news the other day, with David Graeber, a popular anarchist scholar, about his most recent book, “Debt: The First 5000 Years”. In light of the American debt crisis, he’s been getting a lot of attention lately. Intrigued, I tracked down a few more interviews, as well as an article he wrote, and now I think I’m going to have to track down a copy of the book.

Graeber’s perspective is interesting for a lot of reasons. First, because it’s based in history and anthropology, and demolishes a lot of the popular myths on the subject. For instance, the idea that money grew out of barter economies and later evolved into complex systems of credit. These ideas were popular with thinkers like Adam Smith, but after two centuries of archaeology in the “cradles of civilization”, it just doesn’t hold up. All of the first forms of money were based on credit, with coinage arising hundreds or thousands years later. Second, he draws a lot of important links between the evolution of this system and the military and political systems of the time. Coins tended to arise as a way to pay soldiers and finance wars of conquest. Debt, in general, became a basis for the legitimacy of taxes and slavery. And since ancient times, from the Jubilees (debt forgiveness) of the ancient Middle East to the texts of the great religions, there’s been a lot of resistance to these systems.

The analysis of the relationship between “virtual money” (credit) and coinage/metals addresses a question which has come to the forefront in recent years, particularly with some free market-ers and the anti-Federal Reserve crowd. Graeber’s work shatters the notion that money must be based on gold or silver reserves, but not without investigating the question deeply. Virtual money tends to arise in eras of peace (where central authorities can enforce it), and coinage in wars (plunder). “Epochs” using one or the other often last centuries, and as Graeber notes, one just ended in the 1970s when Nixon took America (and by extension, the world) off the gold standard.In many ways, it’s too early to tell what this will mean in the long run.

The problems we’re witnessing today are not new. Debt-based economics are as old as money itself, as are the problems associated with them. There’s nothing inherently “free” about these kinds of systems, and they almost always come associated with slavery, conquest or other forms of exploitation. This was well-enough recognized in the times of Buddha, Jesus or Mohammed. In ancient Sumerian, the word for “freedom” (the first we know of) literally translates to “return to mother”. As the kings of Babylon periodically wiped out everyone’s debts to keep the system from spiralling completely out of control, family members sold into debt-slavery would be freed and households could re-unite. Strange, isn’t it, that in the world’s first market economy, “freedom” wasn’t a term used to describe trade, but an escape from it?

An Interview With David Graeber: Debt’s History, Implications, and Critical Perspective Infoshop News
Debt: The First Five Thousand Years Excerpt, by David Graeber (Mute Magazine)
Another Interview via New Significance (allegedly from CNN originally)
9 Things You Didn’t Know About The History Of Debt Slideshow from Huffington Post
Debt: The First 5000 Years @

A new report from the Vanier institute in Ottawa has found that the average familiy debt in Canada has now passed $100 000. This represents, on average, 150% of what this “average” family makes in a year. And the trend is still getting worse.

This research paints a stark picture of financial life for the average working Canadian. With stagnating wages, rapidly rising costs and diminishing savings, it’s getting harder and harder for even “successful” people to make ends meet.

“No one has pensions anymore, mortgages are bigger than ever, there’s just more things tugging at our money,” he said. “Putting your kid through university is a six-figure price tag and no one is ready for it.”

-Kurt Rosentreter, “Family CFO”

“Experts” are quick to blame this all on a lack of “financial planning” knowledge among the public. And with the explosion of consumer debt among young people, it’s hard not to believe that plays a role. But “better financial planning” doesn’t make up for losing your job, pension, or having expenses like education and housing double in price. The cost of living is going up and that’s not something that can happen to millions of people without consequences.

These kinds of financial pressures are not sustainable. Socially, they put us on a path straight for the kind of revolt and unrest seen so recently in Africa, Europe and the Middle East, where pensions, unemployment, tuitions and other basic cost-of-living issues have destabilized entire regions. Economically, these are the same pressures which recently sent the global economy into a nosedive. Another such crash (suspected by many to be on its way), would hit far harder than the last – all the easy credit solutions have already been tried and now are yet more liabilities. Unless these debts are dealt with, like our booming national debts and those of others, we will all be doomed to suffer an increasingly unaffordable cost of money.

Money as Debt(google Video, 47 minutes) is an interesting documentary about the source of money in our modern financial system. While I don’t agree with everything it says, I think it’s really important to listen to and learn about the wide range of populist economic critiques which are coming out today.

I’ve been following a lot of this for the last decade, and it ranges from very insightful to a little wacky. Zietgeist would be a good example of the latter. While I agree wholeheartedly that we need to critically evaluate things like our money system, religions and the official story of 9/11, there are a lot of risks of being labelled as a part of the lunatic fringe. And as someone who’s worked with a lot of conspiracy theorists before, I can tell you there’s some good reasons people shy away from them. Worse yet, I’m troubled by the underlying message of many of these groups that we just need to get “back to America, how it was supposed to be”. There are very basic problems with both the basic legal framework of Canada and the US and our constitutions. Getting rid of the Federal Reserve won’t change that, and neither will granting government more powers to police banks (which they keep giving up). We need a much more fundamental, radical change.

That being said, our current systems of banking, money and credit are incredibly flawed. Between the radicals and the conspiracy folks, the warnings about an apocalyptic failure of the mortgage-backed security markets and imminent peak in oil supplies were coming out within days of the towers falling. As the film demonstrates, and as most people have no trouble believing, banks are just creating the money they lend us on paper and inside computers. There is no real-world basis to over 90% of it, other than the banks themselves. To put people through this meat-grinder in order to own a home (or by proxy, renting one) is a complete and total scam. If the banks are simply creating the money we use to own our homes, then why must we pay it back two, three or more times over in typical mortgages? Worse yet, why does it usually cost more to rent a home or appartment than its mortgage would cost (paying back double money which was invented out of thin air), when renters usually have less money than owners, and don’t get any equity out of it?

The problem with too much money is that it generates inflation – the more money is around, the less it’s worth. And that’s why new money must be carefully monitored – unless it comes with real-world value (such as financing homebuilding), it only increases the money supply. This puzzled me for a very long time – how could so much money be created, but not simply tank in value like the Zimbabwe currency crisis? Then it hit me – every time we borrow money – cars, credit cards, mortgages, student loans etc – we’re working to pay them off. And as we work, we create fantastic amounts of value (much more than we’re paid for) that helps the other side of the equation stay balanced – at least to a degree.

This also brings into serious question the “ownership” of enormous majorities of our homes, busiensses and public spaces. If the money which bought them is not legitimate, then why are we still paying for them? Doesn’t living or working someone for years on end give us rights that trump arbitrary access to made up money?

Chris Wilson at Slate Magazine has put together a beautiful animated map which depicts the economic crisis. Where jobs are gained, he puts a blue dot, and a red one where they’re lost. The bigger the dot, the bigger the loss. The animation runs month-by month, and by the end of the three years (the present), it looks like America has been bombed from space.

How many of these job losses hit people with dependants? How many cut off benefits to a family? And how many of these people will ever be able to get jobs like these again. This isn’t just about boom-and-bust economic cycles, the fabric of our Continent’s economy is changing before our eyes. Manufacturing is disappearing, big industries are consolidating and major resources like oil and fish are vanishing.

What this most recent global meltdown shows is a “perfect storm” where all the factors lined up. It wasn’t just mischievous bankers. It was a world system which has been stretched to the breaking point. And it isn’t over. We may have put seven trillion dollars worth of duct tape on it. Not only did this piss away any savings we might have had, but it only made the basic problem – trillions in bad loans – worse. And it isn’t just money – in real economic situations – production, fishing or farming, one can often pull a lot of money out in the short term by making awful decisions in the long run (like not spending money repairing them), and live-or-die recession situations bring that out. Notice how quickly renewables spending started to dry up when auto companies needed bailing out?

Ten years from now there will be far less oil left. There will be less farmland, less trees, less fish, less ores and coal veins, much less fresh water and far more people. National debts, bolstered by the bailout, will be far more taxing on every dollar we spend. Whether the next “bubble” will “burst” because of high fuel costs, risky investing or the high cost of responding to natural and industrial disasters, it cannot be far off. If there’s one thing that went through my head while visiting New Orleans after Hurricane Katrina, it’s that there’s no way even America’s economy could take that kind of damage more than a handful of times. It isn’t just the cost of responding, or even the repair bill. It’s the fact that the economic systems which support such things have been levelled. To quote one guy on the Greyhound Bus going through Biloxi, “I haven’t seen anything like this since Vietnam”.

Like Katrina, and like the last recession, the worst of this will fall on ordinary people.

I’ve seen lots of charts like these before, and they’ve all been getting a lot worse since I started looking at them in the late 1990s. What I didn’t expect is for the business press to start getting worried about it.

Business Insider – 15 Mind-Blowing Facts About Wealth And Inequality In America

Oh, and the picture in Canada isn’t any better. Statscan.

This is scary for two reasons. First, it means far less money for most of the population – particularly the parts who tend to spend it, rather than hoard or invest it. Giving money to people who live paycheque-to-paycheque means it gets re-spent immediately. And making them poorer only drives everyone they spend money with into ruin as well. but the scarier reason is that the more money hoarded by a tiny elite who loans it back to the rest of us, the worse this will get.

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