CapitalistImperialistPig

I have been mostly raving about David Graeber's new book, Debt: The First 5000 years recently. Business Week has a long, interesting article on the author and on his seminal role in the Occupy Wall Street Protests . I recommend all of it, but here is just one facet that summarizes one of the main arguments of his book. Graeber’s problem with debt is not just that having too much of it is bad. More fundamental, he writes in his book, is debt’s perversion of the natural instinct for humans to help each other. Economics textbooks tell a story in which money and markets arise out of the human tendency to “truck and barter,” as Adam Smith put it. Before there was money, Smith argued, people would trade seven chickens for a goat, or a bag of grain for a pair of sandals. Then some enterprising merchant realized it would be easier to just price all of them in a common medium of exchange, like silver or wampum. The problem with this story, anthropologists have been arguing for decades...

Italy is under financial attack . And, oh yeah, France. So yesterday we were all digesting the information that Greece was going to hold a referendum: meaning that the last deal didn’t even last a week. Today it gets much more exciting. As Paul Krugman notes, the yield on Italian debt is now over 6%. This is the sort of level where even if Italy wasn’t in trouble it would be, will be, simply because yields are over 6%. But our day’s excitement doesn’t end there at all. We also see that French bond yields are rising strongly and that the EFSF has had to pull a bond issue. We all really should have paid more attention to Polonius.

Kevin Drum has another elegant column on the Greek alternatives (all bad). Highly recommended, but what caught my eye was this unsourced comment by g.powell : The really weird thing was that Greece replaced all the top brass in the military today. Seems like something is up.

Via Tyler Cowen, a must read from Paul Mason : What caused Mr Papandreou's sudden move? Even some of the MPs closest to him had no idea it was going to happen. Many of my Twitter correspondents suggest it was the vehemence of "Oxi Day" last week, leading to clashes between parading soldiers and protesters and local Pasok politicians getting hounded off the parades. Pasok remains a very well rooted social democratic party, with multi-generational networks inside every village. If the village guys start ringing up and saying - there is no way we can hold it - Mr Papandreou is politician enough to hear this. Another potential reason is capital flight. Anecdotal evidence suggests that the Greek elite are buying up property in London just as fast as they can find berths in Poole for their yachts. They are voting with their spinnakers, on the basis that the game is up. In any future Greece on offer, they will have to start paying taxes and they do not want to.

Jon "MF" Corzine Or two, Herman "Wrath of" Cain And that's not even counting Yurp.

Tyler Cowen : Greece’s prime minister unexpectedly announced a referendum to approve a second EU bail-out deal for his austerity-hit country, less than a week after it was agreed with international creditors at a European Union summit. More here, and here, but that’s all you really need to know. The so-called eurozone deal didn’t last a week, not that there was ever a deal in the first place. p.s. they’re not going to vote yes on the referendum! Interesting times.

On the Euro debt debacle : Nobody should be surprised that this is such a hard problem, of course. Fundamentally, someone is going to lose absolutely gigantic sums of money, and figuring out who that someone is going to be was always going to be a fraught affair. As near as I can tell, though, each rescue effort seems to advance asymptotically toward honesty about the scale of the losses, realism about the need to allocate those losses among the non-broke members of the EU, and acceptance among the broke members that they're going to be required to suffer fairly harshly in return for being bailed out. We obviously haven't gotten to the really truly final resolution yet — that won't happen until the European public truly accepts that they're screwed and they can't do much about it — but I suspect that last week's deal is one more step along the path of recognizing the grim reality of the situation. Either that or Europe is going to implode

So why have lenders been willing to lend to those who cannot pay?  The key reason, I think, is that they believed that they would be able thereby to enslave the peoples of the nations defaulting - or even whole continents.  Thus, the citizens of all of Europe and the United States are be dragged through economic disaster in order to payoff unsuccessful bankers -those who lent the money - and successful gamblers who made winning bets on credit default swaps. The stock markets took a big uptick last week in the belief that Europe had contained its monster debt problem. There is reason to suspect that that belief was erroneous and we might traverse the same territory in reverse next week, but in any case the underlying problems remain.  Is there any way to cure reckless governments and banks of their bad behavior? Slavery didn't work for individuals, so there isn't much reason to be optimistic, but the credit default swap, at least in its present form, sure looks like a ...

I continue to be fascinated with how debt has managed to repeatedly get us in trouble, ever since its invention 5000 or so years ago.  As usual, these ruminations are inspired mainly by David Graeber's Debt: The First 5000 Years. Great philosophers from Plato and Aristotle have weighed in, as have most of the world's major religions, but we keep on making the same mistakes.  Ultimately, I think, the blame must lie with human nature. We are incorrigible and unreasonable optimists.  Study after study shows that humans overestimate their skill and talent in almost every aspect (see, e.g., Daniel Kahneman's new  book: Thinking, Fast ans Slow).  Consequently, it is completely natural that for all of human history, optimistic borrowers have borrowed more than they can afford to pay and optimistic lenders have lent to those who can't repay. The fact that we have made it more difficult to sell the wives and children of defaulting debtors has made some of the more ...

Nietzsche's philological researches led him to a theory that associated good with a conquering aristocratic class, and evil with the downtrodden masses.  It was good to be a Superman - Clark Kent, not so much. David Graeber reports more recent philology.  In all Indo-European languages, it seems, debt is synonymous with sin.  The earliest known literature on the subject seems to be certain Vedic scriptures which posit a central moral role for debt in our relations with Gods, man, and scripture. So, Nietzsche revised goes more like this:  Good = moneylender, Evil = debtor.  I wonder how the old rascal would have liked that?