“Let Them Eat Debt!”

By David Malone, author of the The Debt Generation, and cross-posted from his blog, Golem XIV

On March 4 1933 FDR in his inaugural address to the American people said,

“…the only thing we have to fear is…fear itself….”

And it’s true. It is fear more than anything else that prevents people from turning away from what has failed them and stays their hand from picking up the tools which would allow them to build what would work better.  And precisely because it is true, every politician, banker, judge and general has realised that if they wished to stop change from weakening their grip on power and wealth, then what they need above all else is …more fear.

As FDR went on to say, it is

“…nameless, unreasoning, unjustified terror which paralyzes….”

So if you want to control a people and contain their desire to replace the system which benefits you, with one that benefits them, then you need to feed them fear and the more of it and the more slippery and inscrutable it seems to them, the better.

A looming, shadowy foreign power lurking just beyond the borders is always good.  Russia, China, Communists in general, or if they are too far away, then any kind of socialist will do at a pinch.  In 1983 Margaret Thatcher famously branded British miners and their union as  ‘The enemy within.”  Terrorists are a wonderful new fear.  They are everywhere, much like Red’s used to be under every bed.

All these are good and have been used, still are used, to good effect. But there is a new fear, one closer to the fear FDR was talking about. And the currency of that fear is Debt.  Here is a very short history, in just a few sentences, of how debt became the currency of fear.

In the era of Clinton in the US and Blair/Brown in the UK there was a sea change in the ‘left’. I think Clinton, Blair and Brown had all decided that the traditional left dream of redistributing wealth from the richest to the less well off, was no longer politically viable. Reagan and Thatcher, they felt, really had shifted the political ground.  What to do? The answer, I think, was fed to them precisely by those whose wealth the left had traditionally been trying to ‘redistribute’. Why try to prise wealth from us, the wealthy, they whispered,  when instead we wealthy people will be delighted to give the poor debt instead? Instead of being at war with the wealthy and the managers of our wealth, why not work with us? Leave wealth with those who ‘have earned it’ they would say. Leave it with those who know how to manage it, how to make it grow and give a healthy return. Instead, give the poor debt.  Or to paraphrase the obvious, “Let them eat debt.”

And so Clinton and Blair and Brown re-launched the left, or murdered it, depending on your point of view, with their new idea. Leave wealth with the wealthy and give the poor debt.  Free the financial world from silly FDR-era restraints and irksome, stupid regulations and allow a rising tide of debt to float all boats.

And so long as  you could convince others, and believe yourself, as that arch fool Brown declared, that he had left behind boom and bust, then all was good. The rich were no longer assailed for being rich nor asked to give any of it up, to those less well off. In fact the new politics needed their wealth and was in fact tailor made for them to become much more wealthy. The poor would be given debt as a substitute for wealth. They would feel wealthier, and would indeed have more to spend. And as long as house prices grew faster than their debt payments, and the stock market made every GDP figure larger and more endlessly fabulous than the last, then the debt machine would churn on and on.  Debt was sugar without the calories. You could gorge without getting fat. What could go wrong? House prices were never going to go down again! Remember that?

And then it popped and fear bloomed…

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