Do we all really understand how debt impacts us ? And I am not talking about the borrowing a Rs. 1000 from a friend or colleague. But the debt of companies, corporations, countries and all those world beuraucratic entities.
Here I wish to relate three events Greece. Student loans. Mortgages.
The forces of debt are reshaping the world, creating dislocations and crises on a regular basis. And yet, few of us really understand how debt works.
What’s debt, really? What is money, and which came first?
Debt is older than money, and money was probably invented not to help the imaginary harried merchant who is struggling with barter (what? you want to trade your sheep for my grains? but I don’t need sheep!) but instead to enable nation states to feed their armies, and for individuals to trade debts with one another. It is a powerful instrument to create the inequities by the World Bank and the IMF.
If the purpose of inter-country loans is to foster growth as well as international relations and trade, how does bankrupting and isolating an entire country when they can’t pay accomplish this?
If a mortgage is overdue, is it better to kick people out of the house and watch the neighborhood descend into rubble?
If more than a lakh of our students are overwhelmed with student debt they can’t repay, what should we do then?
A key tenet of our culture is, “you must pay your debts.” Debt makes us think about what this simple sentence means. Even if your instinct is to answer with, “of course everyone should pay their debts,” the next question is obvious: How should we deal with nations and peoples who can’t? How far do we go?
Well I ain’t a Economist but what I want to point it out to anyone who wants to understand the acceptance and future of bitcoin, the changing wealth of nations or why countries still own tons and tons of gold. Mostly, knowing how we got here makes it a lot easier to figure out where we might head next.