Commentator John Quinn @ marketoracle.uk.com posted these charts to show the massive transfer of debt that has taken place since 2007. Debt in the domestic financial sector has declined dramatically (black line) while household debt has increased despite what the talking heads on CMM say. Consumers have added $27 billion of credit card debt and $300 billion of additional student loans since 2008 (red line). Wall Street has dumped $4.3 trillion of toxic debt and $1 trillion of mortgage and credit card debt onto the taxpayers' back via the balance sheet of the Federal Reserve. Nevertheless, total debt has gone up, not down:
The global finance system no longer operates to allocate capital towards beneficial projects that enhance the world's standard of living; it operates as a self-serving casino that encourages speculation and rewards the greed of the world's six thousand or so plutocrats. (see Rothkopf's
"Superclass") This dysfunctional system in which capital is traded as a commodity and not used to produce social value is what Marx predicted as the "comodification of capital" in the decadent stages of capitalism. The truth is that markets are not infallible, nor guided by an "invisible hand" to be unerringly efficient because the
standard free-market economic model contains a fundamental misconception: humans are social animals not utterly rational, autonomous individuals making discrete decisions about utility. No wonder Allan Greenspan, himself not of the Christian evangelical tradition, had a crisis of faith!
That debt can become so onerous as to usurp democracy is not a new phenomenon in the world. Take the case of Newfoundland. The once independent island nation had the oldest parliament in the British Empire save Westminster, but in 1933 after the collapse of fish prices, debt servicing consumed 59% of the nation's revenues. The country defaulted on its external sovereign debt in 1936. The British government formed a commission to examine the status and future of tiny but independent Newfoundland. It recommended among other things that Newfoundland's government be suspended. And so 280,000 free, white, English-speaking people lost their sovereignty when Great Britain used its powers of the crown to federate Newfoundland with Canada. The United States used gunboats and the Monroe doctrine to impose a fiscal protectorate on the Dominican Republic, control its customs houses, and eventually occupy the country in 1916. Nicaragua and Haiti faced similar fates at the hands of Uncle Sam. In the most recent international financial crisis, only Iceland, having the advantage of a small, but politically active populace, has managed to hold on to control of it finances and thereby its sovereignty by showing the international banksters were to get off.
