Owe a man ten pounds and he has power over you. Owe him ten thousand pounds and he has a lot of power over you. But owe him ten million or ten billion and YOU have power over HIM.
Debt is more fickle and slippery than money or direct wealth but it still has power. It is imperative that we – you and I and our fellow citizens – come to understand this power: how it works and THAT WE HAVE IT. We must learn how to use it against those who are already using it against us.
It’s always good to start with practical concrete details. So here is a quote from an article about Dubai and it’s need to restructure‘ its debts.
“Dubai World has basically floated the idea that it may go to tribunal to force creditors to accept their terms. But this is unlikely to happen since many creditors don’t have many options but to accept the terms,” said one banker who attended Thursday’s meeting.”
The most interesting thing about the quote and the article is how much the bankers don’t like what Dubai is doing but how they “…don’t have many options….” It’s worth noting that many of their bankers are our banks. RBS for example.
The point is Dubai might be the debtor but is still in the more powerful position. The usual story one is told in the press about nations owing money to banks or the bond market is that if the nations should default or re-structure with too severe losses for the creditors – then the nation involved will become an outcast, not be able to access debt markets in future and generally have the cooties. What doesn’t get said so often is that if the debts are large enough the banks involved might not be around to enjoy any revenge. And if the debts involved are really large then neither the banks nor the bond market itself can afford to let it come to that.
The nation will survive the cataclysm. But its creditors WON’T. That is the power of debt. It is a desperate sort of power. But then most power is.
Dubai’s bankers are furious. They are going to be TOLD, not asked, how much of their money they are not going to get back and how much longer than originally agreed it is now going to be before they do get back what will be a much reduced amount. According to one of the bankers, “..We are not happy.” They are losing money and they are having the terms of their mistreatment dictated to them. For a debtor you have to say Dubai is calling the shots here.
Now compare that to Greece. Greece owed much more to many more banks and nations. Their demise would set off a chain reaction across Europe. So why does Dubai get to dictate terms it likes while Greece is held to the fire by the IMF? The obvious difference, of course, is that Dubai is oil rich while Greece isn’t. But is that what makes the difference here? I don’t think so.
The banks are being forced to take losses and are accepting. The fact that Dubai has oil revenue and could pay only makes it more strange. Are the banks being accommodating, albeit grudgingly, because Dubai is a valued customer while Greece isn’t? Doesn’t make sense. Actually the banks have all made more money from Greece than Dubai. Dubai just hasn’t needed that many loans. Greece is on the hook for paying off hundred of billions.
If anything Greece’s far larger debts should have given Greece more leverage. Greece should have been able to say to the banks, you will just have to deal with us on our terms because if we go down you all go down with us. The real question is why Greece did not argue this while it is quite obvious that that is exactly what Dubai is doing and has the bankers nuts firmly in hand.
Dubai stood up to its creditors and is forcing them to eat losses. Greece bent over for those same bankers. If I was a Greek I’d be asking why?! If I was Hungary I’d be taking note also. If I was advising Mr Orban I would be saying to him, pay some money to get serious insight from those close to the Dubai deal. I think Mr Orban would find that there was no extra magic ingredient in the Dubai situation.
I would then look at who gave advice to Dubai and who to Greece. I think I would look very hard at the real allegiances of all involved in both deals. I think I would look very closely indeed at the allegiances of some involved in running Greek financial and debt affairs. I won’t say any more here but I would point you back to a post called Greece for Tragedy to Farce. I’m not trying to make you read more stuff. I just have the feeling I am treading on very thin ice. And feel like a tiny it of caution might be wise.
The larger point is that in a globalized world nations are not the only entities to which a person might chose to give their allegiance. Only a decade ago a traitor was someone who had given the allegiance to another nation. Today someone might chose to give their ultimate allegiance to a financial entity which is actually more powerful than the nation the person was born into.
I wonder how many nations have not really grasped this reality yet? Dubai has oil wealth and is a small close knit culturally bound society – at its highest levels at least. Not so Greece. Like most Western countries the wealthy are less concerned to be Greek than they are to be wealthy.
I think it high time we woke up to the fact that the global financial class IS a cohesive group. The fact that they compete amongst themselves for the wealth of nations shouldn’t blind us to the fact that they are loyal to the financial system which is responsible for and sustains their wealth, privilege and power. They are rich not because of the nation they reside in. They are wealthy because of the position they hold in the financial system. And that system is not loyal to, nor in need of any particular nation let alone the grubby people in it.
The financial class in any given nation do not fear the impoverishment of that nation or its people. What they fear is encapsulated in the phrase we have heard so often on the lips of bankers and their politicians – systemic risk – risk to the system. They system they are loyal to.
That is why the financial class of Greece, who run its government agreed to impoverish its people and hardly argued at all with whatever was deemed necessary for the Greek people to pay. No one was looking out for the Greek people. They were only looking out for the financial system. Greeks were betrayed by those they thought were loyal to their nation but who were and are only loyal to a global financial system.
Dubai’s leaders, for whatever reasons, are less pusillanimous or more loyal to Dubai.
What I would argue is that even a country like Hungary which is a financial minnow has potentially much more power in its debt if only they can learn how to use it. The IMF and the EU will try to make an example of Hungary. If Hungary stands firm they will, however, extract concessions from their creditors. If they do not stand firm they will be mangled.
A country like GB, Spain or Ireland, Italy or Portugal could make the financial world come to it as a supplicant. I think the only reason no country is doing so is because we are all being betrayed and sold out by our leaders. Take a look at those, in every country, who lead us. Are you sure their ultimate loyalty is to the nation they say they serve or to the global financial class whose gifts and power they covet, fear and envy?
We are betrayed at every turn. And will be. As people we must now look beyond those who claim to represent us. We must look to ourselves. We must find new leaders. We must recognise that our position is NOT as powerless and hopeless and we are constantly told. It will only be so if we continue to listen to those who benefit from us believing this lie.
Our debts give us immense power. We must take that power back into our hands and learn to use it, to defend ourselves, our nation and our children.
We can do this.
Those who tell us we can’t, are our enemies. On our televisions and newpapers everyday, they are the enemy within. We must learn to see them as such.
Ouch! Thin ice indeed!
The points regarding loyalty are too speculative for me, at the moment. However, I'll look and listen with renewed interest at the unpublished news behind ecopolitical items.
Many science fiction authors have wrote about businesses becoming anarcho-capitalistic nations, e.g. William Gibson, Max Barry, Robert Heinlein, Frank Herbert, etc.
With the majority of the world's wealth concentrated in large businesses, what's stopping them buying up their own islands and appealing for recognition by the UN?
Morning Rich,
Fair enough if you don't buy the loyalty argument. The more important point is about the power in debt. Maybe that's worth thinking on?
I think you do a good job of illustrating the power in debt and how we the supposedly powerless should look at it.
I would also support your idea about a transnational financial class and its ties of loyalty over nation. Ive done a fair amount of ethnographic work into such an idea in the Caribbean. What i found, and there is still much more to explore, is that wealth is a form and process of difference making just like race, gender, nation, class and many other categories have been and are.
Wealth is not a communal nationalistic activity. There are no ethics of redistribution. Maybe a redistribution of wealth from the poor and needy to the already economically secure classes but certainly not one in the other direction.
The Empire of Capitalism desires no such thing. Wealth in this sense is not just about individuals and transnational class power but also about states and institutions. About the developed world and debt. About the arms trade and war. About fixed groups and the capital interests they protect. Wealth is a mechanism for maintaining the present status quo and power structure of modern Western capitalist society. Loyalty is to this wealth first and the nation second.
Evening;
It's an interesting idea: the shifting of allegiance/power in historical terms from Church to State; and then from State to Global Financial Class.
How much do you see a resurgence of State power as part of the solution, Golem?
Dubai doesn't have oil wealth, Abu Dhabi does, and they funded Dubai. It is surely Abu Dhabi that is pulling the strings and showing the banks their power.
Otherwise I agree; this is all tribal now; and the tribe with the most cohesion up to now is the money tribe. Unfortunately for them, they don't have the mass numbers, the moral high ground, or the actual muscle. If their enemes ever wake up, then the devious money-tribe will not last 5 minutes.
Sorry for the delay. Our seeing publishers.
theprofromdover – thank you for the correction. I forget that Dubai itself doesn't have oil. Thanks again.
azizibsaud – interesting question. I think there has to be a rediscovery by people that they have power but onloy if they find a way to embody and express it in some collective way. I do ont belive Unions are going to be the way in the West. I do not think the polticial parties we have now are fit for that purpose.
Something has to come to be seen to embody a shared aspiration. It could be the state but only id the state is radically redefined. It could be religion or it could be an ethnic identity. Or, of course something we have not yet recognised. An idea or belief.
The State could be re-invented. If, it ceases to be identified so closely with the present aparatus of government. If the nation became onece more a cultural identity.
Each of these has its dangers. I know there are some you come here who see those dangers very clearly and worry about what would happen if such forces began to arise.
IO think they are very avlid worries. All I can say is I belive that a time of struggle is going to happen no matter what. In that time, and I belive we are already in its opening movements, all of the above will make an appearance.
We already have religions and ethnic idnetities offering seductively simple us and them 'solutions'. Those ideas never go away. Mosely and his Brown shirts were there right up to the moment CHurcill got the upper hand. SO were the white shirts who have been laegely written out of history.
I think it is up to us to fashion a new vision. One we feel we can explain to our hildren and the children of others. A vision to which we feel we can entrust their future.
Here is a nice discussion on debt from Mr Taleb (of black swan fame). It seems to fit in with this posting.
Taleb on debt
The second video is quite long, but well worth watching. Mr Taleb is convinced (as I am) that getting rid of the debt is the only way out. Getting rid of the debts is absolutely against what the financial class stand for.
One of the features of this blog is the prolific updates, which we all enjoy. But, as soon as you turn your back for one moment Golem, a thread builds up; which, is also very good.
Sigh! If only both were possible.
The idea that a 'financial class' exists makes a great deal of sense. These are the new barons, and if only their lives had not impinged on ours' they could have kept on going. Their mistake wasn't just their greed, it was also their audacity to interfere with democratic processes. The people don't like that! History is littered with tales of how 'the people' made corrections to the System, some with velvet, others with the guillotine.
What kind of revolution do we want? There will always be people lacking in finesse and more at home with a stick than a pen. But, we are the thinkers and have a potentially devastating weapon in our hands. It's called the Internet.
Rob,
I agree that getting rid of the debt – making those who made the debts take their loss – is what has to happen. But it is not the only solution. The other way is what is being tried. To maintian the debts but get other people to pay them off slowly.
I have said that I don't think this solution will work but it could if people everywhere are brainwashed or cowed enough.
My point is that if you see how debt is a potent form of power then saying that the debt must be cleared ceases to be a policy decision nad is revealed as a struggle for raw power.
I am suggesting that not only does the financial class not want to pay its own debts, it may not want to have them paid off too quickly by anyone. Those debts give them power.
The financial class will not pay their own debts unless forced. They may not want them paid off too soon by anyone because those debts are now a ptoent form of power over us. Nations in debt are much less powerful than nations free of debt. If you were the financial class which state would you want nations to be in?
Rich,
I too love it when a thread springhs up. I am trying to see if I can change the form of the blog to include more firendly formats for threads to be created. But I am not very adept at computer things. So it may take a while.
As for your second point. There is the rub. If we don't want to continue on the current path of the evisceration of all democratic control and power then we will need to assert the will and power of the citizens of our nations. But that is fraught with danger.
As you say there are always those who will use any time of change to simply run riot. All I would say is that the financial class is runnning riot. Lives are being laid waste. So to think that we are avoiding suffering by 'not rocking the boat' is just cowardice in disguise. What we really mean when we talk about the 'dangers of times of change', is dangers migrating, from those who arecurrently suffering the raw edge of the status quo, to us.
So ultimately I am with you Rich. Either the financial class allow change to come about and their debts, wealth and therefore the power confered by those debts to be taken away by peaceful and democratic means OR we do it the hard way.
We must be willing to FIGHT for democracy. Because if we let it die, the fight necessary to save ourselves by non-democrtic means is much much worse.
I prefer the democratic route. But one route or another we cannot betray our children.
That's my position.
Golem, in short I agree with you totally, I just wish that I was good enough at writing to clearly express my own thoughts here, rather than relying on the words of others.
I just read a very thought provoking article my Michael Hudson (and others) on debt and entrepreneurship through the ages. This is a long article, it has taken me three evenings to read, but it is very good (in my opinion). What goes around comes around. If the financial class maintains its stranglehold on the world economy, then perhaps we are heading for another "dark age". Debt forgiveness was an important feature of the economy in the past – maybe we need this going forward.
But as you say, debt is power – in both directions. Debt greases the wheels of the modern financial system.
There seems to be a fine line between productive capitalism and extractive capitalism. The job of government regulation should be to keep things on the productive side. We are definitely on the extractive side of the line and the moment, and we need to get back on the productive side. I find it hard to know where the dividing line is, but the policies to get back on the productive side should be pretty clear.
Hi Rob,
I've just been skimming your suggested Michael Hudson article – it looks like we're making all the ancient mistakes again. Fascinating and horrifying! It's eerily similar to what has happened recently.
RichGB and Rob
I skimmed the article too, most interesting.Useful work by archaeologists anthropologists historians– all those people who the awful Charles Clarke as Min of Education thought were a waste of space !
Hi frog2
A few years ago I would have agreed with Charles Clarke – the result of learning nothing but science. With growing awareness of the liberal arts, and I hope some wisdom too, I can now see that true understanding of *anything* requires knowledge of where we came from.
History explains all the blithely accepted facts learnt by rote at school.
This sentence from the end of the article sums up my feelings
"The economic environment that most effectively contributes to prosperity is one that induces entrepreneurs to gain by investing in new means of production, not by rent-seeking, redistributive property expropriation, debt foreclosure and insider dealing."
RichGB — there was and is an artificial divide between the scientific culture and the rest, but that was always bullshit . Think of Benjamin Franklin !
frog2
Now I think about it, some of the most admired people in history were polymaths: Leonardo da Vinci, Richard Feynman, Thomas Young, Maria Agnesi, etc. Although, I'm using the term 'polymath' rather specifically here.
I respect those programme presenters who bridge the art and science worlds whilst treating both disciplines with equal respect. Good examples would be Melvyn Bragg, Stephen Fry and a bloke who goes by the alias Golem.
I despair when serious scientific or artistic topics are tagged on to the end of The Today programme as 'light entertainment'.
I'd say the most interesting polymaths still around today are probably Noam Chomsky, (who pretty much invented linguistics and has done a lot of interesting political analysis) Jared Diamond, (who knows about virtually EVERYTHING) and maybe Neal Stephenson (even though the only thing he does is write, he certainly knows a lot of fascinating stuff). Can't think of any current British ones in the same league though. Does that astronomer who used to be in D:REAM count?
For British contenders I would nominate –
Iain McGilchrist (History, neurology, consciousness and history)
Raymond Tallis ( Literature, philosophy, mind)
John Gray ( Economics, politics, philosophy)