Home > political-economy > The Golden Grimace (Part Eleven: Debt)

The Golden Grimace (Part Eleven: Debt)

Matt Burch from Operation Repo

I owe my soul to the company store.

–Tennessee Ernie Ford

As we have seen, fiat results from the separation of money as measure of value from money as simple means of facilitating transactions. Once the separation has been achieved, a torrent of this fiat now floods the society constantly filling every sector of the economy, driving prices to absurd levels, and producing the relentless expansion of superfluous labor time.

We now have to consider the means by which this ever increasing volume of useless electronic digits expands.

Since, fiat money owes its existence to government decree – Washington decrees what is to serve as money and imposes this decree on society as law – its existence appears to be a historical accident – the act of the FDR administration. But, so soon as we peer into the nature of this fiat money, the hidden hand of the gang of sociopaths, who dominate society, and have always dominated society, and who have tightened their suffocating grip on money because it is the material form that their domination of society takes, the very idea that fiat is a mere offspring of some administration, rather than the necessary result of the domination of society by these sociopaths, dissolves.

Historically, fiat money comes onto the scene as government issued means for facilitating transactions, and with the accompanying decree that this means be accepted as money in place of gold money. To the libertarian, or the idiot proponents of Modern Monetary Theory, therefore, the introduction of fiat appears as what it really is: a political act of some definite historical figure; in this case, President Roosevelt. For this reason, they either damn it as an act of expropriation by Washington of the property of individuals, or praise it as the brilliant solution to a dire economic calamity.

In either case, they miss the point of the exercise: the introduction of fiat money is the culmination of a process wherein the great mass of society, working people, are reduced to conditions of absolute servitude to a handful of sociopaths. A condition of servitude so complete, so absolute, and so universal, dancing electrons alone sufficed to reflect it – the incessant reproduction of this slavery on an ever expanding basis alone is condition for its continuation.

The further examination of this process, unfortunately, requires us to descend into the ugly world of deadbeats, stiffs, and various schemers as we might encounter among African-American sub-prime defaulters, scum who deliberately run up credit card debt they have no hope of servicing, and assorted gutter trash one might find on any episode of Operation Repo.

We find these lowlifes either as they enter Best Buy, or  as they drive onto the local Ford dealership, or as they wander into the local real estate office, with that same stupid look on their face – a look that says to the entire world,

“I want something for nothing. The whole world of material wealth is out here, and I want some of it!”

Later, we see them, coming out of Best Buy with that brand new Xbox, or driving off the lot with that new Ford F250 (with the universal symbol of white trash – the Confederate flag – affixed to the rear window), or moving their Bob’s Discount Furniture sofa into that newly purchased raised ranch in some seedy suburb just outside of Akron, Ohio. We shake our heads in disgust: surely this is a disaster waiting to happen, and, no doubt, Washington will make good on their extravagant purchases by bailing out their too big to fail creditor institutions at our expense.

But, is our observation flawed? You decide as we replay in slow motion the entire sequence by which our rebel makes his purchase of the new Ford F250:

He enters the showroom with no cash and an intense longing for a pickup – he must, therefore, borrow the entire sum. This sum of money, the dealer is only too happy to advance if the wannabe rebel signs a contract pledging to return the money with interest – but only after the dealer verifies that our wannabe rebel has a job.

But, what does the rebel get for this pledge? If you said he received the money he needed to buy the truck, you are wrong. The rebel never sees the money. If you said, he receives ownership of the truck, you are wrong again. The bank retains ownership of the truck until the rebel has made good on his pledge.

All that happened here was an entry on the books of the bank ledger that the rebel owes so many dollars to the bank and must pay it with interest over five years. He can use the truck only so long as he fulfills this pledge.

This pledged-money or credit money, however, which is only imaginary money, until it has been replaced by actual payments on the auto loan, and which actually only exists in the form of a promise to pay, nevertheless, immediately appears in the bank account of the dealer and now exists in the dealer’s account as actual money.

Money has been created out of thin air. Our rebel, who only wanted to buy the Ford F250, has set off a chain of events that resulted in the appearance of the same money in two different places: as a pledge on the books of the bank, and as newly created money in the account of the dealer.

The dollars that are now in the account of the dealer did not exist before our rebel precipitated them into existence with his pledge to repay them.  They were created out of thin air by the bank on the basis of the rebel’s pledge to repay them. Just as our rebel lives a double existence – free white person of age, and, simultaneously, mere container for his decidedly colorless labor power – so his debt now has a double existence of its own as money the dealer can spend and as an asset carried on the bank’s books.

When the dealer later goes to the grocery store to make his purchases, the cashier has no way of telling that the money the dealer is using to purchase his groceries only exist as a pledge made by the rebel to replace them with debt service in the future, a pledge that simultaneously exists on the bank’s books as an asset.

If the rebel had paid cash, the money would have been transferred from his bank account to the bank account of the dealer and would exist in only one place at any time. Buying the truck on credit, however, the same transaction produces the bizarre situation that the same money exists in two places at the same time.

Moreover, in exchange for this pile of worthless fiat, which now exists in two places simultaneously, our rebel signed a financing contract – a pledge to pay out some portion of his wages to the bank for two, three or even five years. What is the basis for this pledge? The rebel has nothing with which to make good on this pledge but the sale of his labor power for those wages.

This capacity to work is, in reality, worthless to him and only exists for him as something to sell despite the fact that it is this capacity that made the F250 possible. If he did not contribute directly to the production of the truck, his labor nevertheless contributed to the total sum of social labor that, in one way or another, led to the truck’s production.

Thus, before our rebel redneck signed his name on the promise to deliver a portion of his wages to the bank for two, three or five years in return for a sum of worthless dancing electrons, he had to prove that he had an existing contract to deliver his labor power to his employer.

So what are the terms of this contract?

Anyone who has ever held a job knows that the employer does not pay up front for labor power. The hiring agreement explicitly states that the rebel will be paid the money price of his labor power only after it has already been consumed by his employer. This payment – his wage – is not to be delivered until he has already performed some amount of actual labor – a week, two weeks, etc.

This also is a form of credit money: the rebel was only hired on the assumption that he advanced to his employer the entire value of the only thing he has to sell, his labor power. In other words, he sells this labor power on the same condition as he buys the truck: on the basis of a pledge that the money price of the item will be transferred to the creditor within a given period of time.

In the case of the truck, he is the debtor to the bank; in the case of his labor power, he is the creditor financing his employer.

So, like the dealer, our rebel takes his pledged money to the grocery store and attempts to use it to purchase his groceries. The cashier looks at him like he is a lunatic. How could this fool imagine that he can fill his belly today with a contract promising he will be paid the value of his commodity in the future?

The terms of the two transactions are entirely different. His labor power has long since been consumed before the money promised to him has been paid, yet his belly remains empty until he is paid. The ownership of the truck, however, is transferred to him only after he makes good on his pledge to the bank, yet this pledge immediately circulates in the form of fiat money demand. On the basis of his pledge, the bank created the full amount of his pledge in the account of the dealer.

In this way, no matter how much his wages increase, a new flood of fiat is released into circulation by the debt he incurs, raising the cost of living still more rapidly.

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